FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM 

TO;. 

Through:: 

From IAlec 

Staff 

October 6.2017 

The C >mmission 

Palmer 

)irector 

Patric 

Chief 

aC.Orrock PCO 

[Compliance Officer 

Thomas E. Hintermister 

Assist mt Staff Director 

Audit Division 

Marty 

Audit 

By: 

Subject? 

Willia 

Lead 

Pursuant to COmmiss 

the Audit staff preser 

(see attachment). In 

reports and requestec 

TH 

Favin 

Manager 

m Antosz 

Auditor' 

WAA 

Audit Division Recommendation Memorandum on the Freedom's Defense 

Fund FDF)(AI3-I4) 

on Directive No. 70 (FEC Directive on Processing Audit Reports), 

ted the Draft Final Audit Report (DFAR) to FDF on June 8,2017 

esponse to the DFAR dated June 26,2017, FDF filed amended 

an audit hearing which occurred on September 14,2017. 

This memorandum pi 

the DFAR. The 

with the recommendations. 

rovides the Audit staffs recommendation for each finding outlined in 

Office of General Counsel has reviewed this memorandum and concurs 

Finding 1. Misstatement of Financiai Activity 

In response tc the Interim Audit Report (lAR), FDF stated that it would amend its 

reports to con ect the 2011 understatement of disbursements by $52,357, and the 

overstatement of ending cash by $62,220. In response to the DFAR, FDF filed 

amended repc rts that materially corrected the misstatements for 201 i. 

This matter was not addressed at the audit hearing; 

The Audit sta f recommends that the Commission find that FDF misstated its 

financial activity for calendar year 2011 as stated above. 
Finding 2. D sciosure of Occupation and Name of Empioyer 

In response to the lAR, PDF stated that it had maintained approximately 95% of 

the missing information and would amend its reports to include this information. 

In response to the DFAR, PDF filed amended reports that materially corrected the 

disclosure of occupation and name of employer. 

This matter wks not addressed at the audit hearing. 

The Audit staff recoirimends that the Commission find that PDF failed to disclose 

occupation an 

individuals to 

d name of employer information for 2,629 contributions from 

aling $351,798. 

Rsi 

beer 

Finding 3. 

The Audit staif 

$868,015 and 

should have 

PDF stated that 

since the 

also referred t 

expenditures 

response to thp 

disclosing the 

The Audit sta 

apparent indepi 

reports for thi 

Finding 4. 

In response to 

documentatioi 

the DFAR, FDl 

documentation, 

independent 

iporting of Apparent Independent Expenditures 

determined that PDF made media-reiated expenditures totaling 

disclosed them as operating expenditures when it appeared that they 

n reported as independent expenditures. In response to the lAR, 

the expenditures were properly reported as operating expenditures 

primjary purpose for the expenditures was to raise funds for PDF. PDF 

) similar mailings that were not considered to be independent 

I /hen the Audit staff audited PDF for the 2008 election cycle. In 

DFAR, PDF restated its position and filed amended reports 

expenditures in question as independent expenditures. 

At the audit hearing, the PDF Treasurer stated that since the audit of PDF from 

the 2008 elect on cycle did not result in recommendations that similar 

transactions b; reported as independent expenditures, PDF continued to report 

these items as operating expenditures. As a result, PDF believed that the apparent 

independent e cpenditures identified by the Audit staff totaling $868,015, should 

not be subject to a fine. 

f recommends that the Commission find that PDF failed to report 

endent expenditures totaling $868,015, and failed to file 24/48-hour 

lese apparent independent expenditures. 

Recordl keeping for Communications 

the lAR, PDF stated that it was attempting to obtain the missing 

, and that the expenditures were properly reported. In response to 

>F acknowledged that it was not able to obtain the necessary 

and filed amended reports disclosing the expenditures as 

ekpenditures. 

This matter wi s not addressed at the audit hearing. 

The Audit staff recommends that the Commission find that PDF did not provide 

the necessaiy ecords pertaining to 13 disbursements totaling $90,814. 

If this memorandum i i approved, a Proposed Final Audit Report will be prepared within 

30 days of the Comm ssion's vote. 
In case of an object 

Recommendation ^ 

session agenda. 

Documents related tc 

Should you have any 

Attachment: 

- Draft Final A 

cc: OfTice of Genera 

on. Directive No. 70 states that the Audit Division 

[emorandum will be placed on the next regularly scheduled open 

this audit report can be viewed in the Voting Ballot Matters folder, 

questions, please contact Bill Antosz or Marty Fayin at 694-1200. 

iidit Report of the Audit Division on the Freedom's Defense Fund 

Counsel 
Draft Final Audit Report of the 

Audit Division on the Freedom's 

Defense Fund 

(Januaiy 1, 2011 - December 31, 2012) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduc 

audits and field 

investigations of any 

political committee tha: 

required to file reports 

under the Federal 

Election Campaign Ad 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have me 

the threshold A 

requirements for 

substantial compliance 

with the Act^l-ThL^__ 

determine^whether the 

cominitf^ compliedw 

the Hmitetions, 

prohibition^and 

disclosure requirement 

of the Act. 

About the Committe^f^ 

The Freedom's Defense Fun^^a noiwconnected committee, 

headquartered in Arlingtoii/yii^ima. For more information, see 

the chart on Committee 

IS Finaui 

• Receipts 

o Contribution: 

oM^er Receipts 

T^lReceipts 

$3,626,052 

54,481 

$3,680,533 

$3,221,626 

\ 

Future Action^/ 

The Commission mi^y 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in thiS 

report. . 

Dlsbursin^nts 

. o Operating Expenditures 

\ 3 o Contributions to 

' Candid^e^Committees 107,900 

Indepe^^t Expenditures 376,492 

o Other'Disbursements 14,728 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Disclosure of Occupation and Name of Employer (Finding 2) 

• Reporting of Apparent Independent Expenditures (Finding 3) 

• Recordkeeping for Communications (Finding 4) 

' 52 U.S.C. §30111(b). 
Draft Final Audit Report of the 

Audit Division on the 

Freedom's Defense Fund 

(January 1, 2011 - December 31, 2012) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 

Scope of Audit 

Part II. Overview of Committee 
Parti 

Background 

Authority for Audit 

This report is based on 

Audit Division of the F 

an audit of the Freedom's Defense Fund (FDF), undertaken by the 

ederal Election Commission (the Commission) in accordance with 

the Federal Election Ci mpaign Act of 1971, as amended (the Act). The Audit Division 

'conducted the audit pu suant to 52 U.S.C. §30111 (b), which permits the Commission to 

conduct audits and fiel 1 investigations of any political committec'th^ is required to file a 

§30104. Prior to conducting any auditundw this subsection, the 

[prm an internal review of reports filedl^^splected committees to 

ommittee me^ tf 

report under 52 U.S.C. 

Commission must perf 

determine if the report: filed by a particular committee 

for substantial compliance with the Act. 52 U.S.C. 

Scope of Audit 

Following Commissioi 

factors and as a result, 

1. the disclosure of ind 

2. the disclosure of de 

3. the consistency bet 

4. the completeness o 

5. the disclosure of i 

6. other committee 

i-approved proceduresfthe Audit! 

this audit examined: 

ividual contributors' occupations 

bts and obligatii 

veen reported figu 

'disbursement recc 

endent expendi 

necessary 

in lepi 

sld requirements. 

\ 

aluated variousfrisk 

name of employer; 

ident expenditures; 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

Date of Registration June 7,2004 

Audit Coverage January 1,20UyDecember 31,2012 

Headquarters Arlington. yjrfeinK 

Bank Information 

Jh^ che<3cing accounts^ \ 

Bank Depositories 

Bank Accounts 

V V 

Sd0|t^Mac|(Dm^ie 

Treasurer 

Treasurer When Audit Was Conducted 

Treasurer During Period Covered by Audit Scott'^N^lcenzie 

Management Information 

Attended Commission Campaign Fir 

Seminar 

Who Handled Accounting and 

Recordkeeping Tasks 

Over^eWW Finw^ Activity 

:^Audit|^-A^ 

// \ \ \\ ^ 

Cash-onT-hand ® Januar^i, !2011 \ Z $46,043 

Receipts \ \ \ ^ 

o Contributions frqm Individui||ls 3,626,052 

o Other Receipts\ \ ; / 54.481 

Total Receipts \ ^ y' $3,680,533 /• 

Disbursements 

o Operating Expenditures 3,221,626 

o Contributions to Candidates/Committees 107,900 

o Independent Expenditures 376,492 

o Other Disbursements 14,728 

Total Disbursements $3,720,746 

Cash-on-hand ® December 31,2012 $5330 
Part III 

Summariei; 

Findings an 1 Recommendations 

Finding 1. Mis9tai 

The Audit staffs com] 

revealed that, for 2011, 

overstated its ending 

Report recommendation 

correct the discrepancies 

have been filed. 

(For more detail, see p 

ipm-i: 

:casl 

Finding 2. Disclosure of 

Employer 

During audit fieldwork 

itemization indicated tl 

disclosure of occupatio i and. name of 

to obtain, maintain and submit this inf( 

recommendation, the F 

and name of employer 

of the missing information 

tement of Financial Activity 

ison of FDF's reported financial activity with its bank records 

FDF understated its reported disbursemei^s^ $52,357, and 

ih-on-hand balance by $62,220. In i^spcfnse ro the Interim Audit 

I, the FDF Treasurer stated that FD^would amend its reports to 

;. However, as of the date of this^poivn^atnended reports 

5.) 

aM Name ol 

a review of all rantributions 

at 2,911 contritions totaling $3 

— ^ividuals requiring 

lacked adequate 

DF did ndtyd^ji^nstrate "best efforts" 

.V^In^sprase tp'fhe Interim Audit Report 

afscR(^ul^e confining missing occupation 

FDF^^ obtained approximately 95% 

^ ^ uld amend'hs reports to include this information. The 

Audit staff reviewed tlus^Khedul^ and concuit-Aat FDF has obtained more than 95% 

of the missing informal io^b^^^pfthe^te^this report, no amended reports have 

DF Treasurer provii 

ip^r^ion. He 

ion and..v 

been filed.^- ^ 

(For motq di^ir,~see^p. 

pparent Independent 

During audit Tiefdwork, the i 

independent expCnditi 

Expenditures) were irep i 

tudit staff reviewed disbursements to verify that the 

: FDF disclosed on Schedule E (Itemized Independent 

, .. 1 accurately. FDF disclosed independent expenditures 

totaling $385,619. '^e Audit staff identified additional disbursements disclosed as 

operating expenditures on Schedule B, Line 21b (Operating Expenditures) totaling 

$868,015 which appea^ to be independent expenditures and for which no 24/48 hour 

reports were filed. 

In response to the Interii 

these expenditures wer; 

purpose for the expend 

similar mailings that 

staff audited FDF for th( 

were 

im Audit Report recommendation, the FDF Treasurer stated that 

properly reported as operating expenditures since the primary 

tures was to raise funds for FDF. The Treasurer also referred to 

not considered to be independent expenditures when the Audit 

le 2008 election cycle. 
The Audit staff acknowledges that some of the 2008 election cycle mailers contained 

similar language to the language contained in mailers used during the 2012 election 

cycle. However, the 2008 election cycle mailers were not reviewed for potential 

independent expenditures; and therefore, were not included in a finding. 

(For more detail, see p. 8.) 

Finding 4. Recordkeeping for Communications 

During audit fieldwork, the Audit staff reviewed disbursements to verify the accuracy of 

the information and proper classification of transactions disclosed'bn reports. PDF 

reported 13 expenditures totaling $90,814 on Schedule B, Line'^T&^perating 

Expenditures) with purposes of "direct mail - creative" and-^direct mail - postage." 

Documentation that was provided by PDF was insufTicierivto make^a determination 

pertaining to the purpose for these expenditures and 

In response to the Interim Audit Report, the PDF 

to obtain the missing documentation from its 

expenses have been properly reported as 

records, the Audit staff considers the matter a viol 

requirements at 11 CFR §104.14(b)(1). 

(For more detail, see p. 13.) 

tioni 

stated thi 

however, it 

ndihires. Absent 

:mg expense, 

is attempting 

sse 

Swision of 
Part IV 

Findings and Recommendations 

Finding 1. Mia itatement of Financial Activity 

amended reports 

rand e^Wthe reportinLp'eriod; 

Hqdand'for the calendar year; 

The Audit staffs complarison of FDF's reported financial activity with its bank records 

revealed that, for 2011 FDF understated its reported disbursements by $S2,3S7, and 

overstated its ending cs sh-on-hand balance by $62,220. In respp^^.^ the Interim Audit 

Report recommendatio i, the FDF Treasurer stated that FDF;kVQuId amend its reports to 

correct the discrepancii ;s. However, as of the date of this i 

have been filed. 

Leggd Standard ' 

Contents of Reports. iEach report must disclc. .. 

• the amount of c ash-on-hand at the be^nhir 

• the total amount of receipts for the reporting 

• the total amounjt of disbursements for the repoitin^period and for the calendar 

year; and ^ ^ 

• certain transact ons that require if^mization on Schedule A^Itemized Receipts) or 

Schedule B (Itemized Disbursembnts)^S2 U:S.C. §3(U;04(b)(l), (2), (3), (4), and • • \ Facts and Analysis 

iled FDF's reported financial activity with 

2012. The reconciliation determined that 

ipg cash-on-hand for 2011. The following chart . 

discrepanc es.b^een'l^F's disclosure reports and its bank records. The 

A. Facts 

During au^t 

its bank.r9edi3~rfor 

FDF misstated disi 

outHnBs 

succeediiik.p^graphs explain wh^ the discrepancies occurred. 

2011 Committee'A^ 

V Reported Bank Records Discrepancy 

Beginning Cash-on-H 

January 1,2011 

md @ $43,781 $46,043 ($2,262) 

Understated 

Receipts $1,324,490 $1,312,365 $12,125 

Overstated 

Disbursements $1,293,431 $1,345,788 ($52,357) 

Understated 

Ending Cash-on-Ham 

@ December 31,201 

$74,840 $12,620 $62,220 

Overstated 
The understatement of disbursements resulted from the following differences: 

Contributions to candidates/committees not reported 

Vendor payment dot reported 

Unexplained differences 

Net Understatement of Disbnrsements 

The $62,220 overstatemi 

the misstatements dei escn 

would be filed to correct the misstatements. 

misstatements for 2011 

$ S1,6S0 

2,900 

(2.1931 

$ 52,357 

lent of the ending cash-on-hand balance primarily resulted from 

ibed above. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference. the Audit staff provided work papers an^diteussed d^us the reporting 

errors that caused the n lisstatements. ITie PDF Treasurer sfetedthat amended reports 

-"vV 

.<( \ .\ 

The Interim Audit Repbrt recommended that PDF ameM^K reports 

as noted above. 

C. Committee Response to Interim Audit Report, 

In response to the Interim Audit Report recommendatmn,;tne PE 

PDF would amend its rjeports to correct fee discrepancfeOUowei 

report, no amended re{^rts have been^filerhv^ 

PDF Treasurer stated that 

lowever, as of the date of this 

Finding 2. Dis^osura 

Employer 

of) i^ion^d Name of 

A -K V ! 

Summary 

During audi^fieldw^il4 ^i«^^~of4ilt-^ntrfeutions from individuals requiring 

itemizatip^jndicat^ tlim 2^9-1 remtributions totaling $378,639 lacked adequate 

disclosi^ of occuji^ion and narn^^jsmployer. PDF did not demonstrate "best efforts" 

to ojrairvinaintain andjsubrnit this information. In response to the Interim Audit Report 

recommeni^tion, the ppp\Ti^asurer provided a schedule containing missing occupation 

and name ^^ployer info'rmation. He stated feat PDF had obtained approximately 95% 

of the missing1nfermatioii.'Wd would amend its reports to include this information. The 

Audit staff reviewed fe^s^hedule and concurred that PDF has obtained more than 95% 

of the missing infbnh^ii 

been filed. ^ 

>n, but as of the date of this report, no amended reports have 

Legal Standard 

A. Itemization Reqni 

other than an authorized 

exceeds $200 per cal 

contributions from the 

"ed for Contribntions from Individuais. A political committee 

committee must itemize any Contribution from an individual if it 

year, either by itself or when combined with other 

same contributor. 52 U.S.C §30104(b)(3)(A). 

lendar 

B. Required Informa 

contribution from an i: iiild 

ion for Contributions from Individuais. For each itemized 

lividual, the committee must provide fee following information: 
the contributo 

the date of ret^i 

the amount of 

the calendar 

U.S.C. §301 

J es 

Be 

C. Best EfTorts Ensu 

shows that the commit 

the information requireid 

considered in complian 

the contributor's fiill name and address (including zip code); 

's occupation and the name of his or her employer; 

eipt (the date the committee received the contribution); 

the contribution; and 

:ar-to-date total of all contributions from the same individual. S2 

04(b) i)(3)(A) and 11 CFR §§ 100.12 and 104.3(aX4)(i). 

Compliance. When the treasurer of a political committee 

used best efforts (see below) to obtain, maintain, and submit 

by the Act, the committee's reports and records will be 

ce with the Act. 52 U.S.C. §30102(i). 

D. Definition of Best efforts. The treasurer and the commit^e.^ill be considered to 

have used "best efforts" if the committee satisfied,all ofthe following criteria. 

• All written solicitations for contributions i^ludbd: \ - \ 

o a clear request for the contributoi'^11 naiM, mailing add^ss,^^upation, 

and narne of employer; and \ 

o the statement that such reporting is'requ[^^b^Federal Xsm.V 

o Note: The request and statement must app^ in a clear and conspicuous 

manner on any response-tti^rial includ^ iii^a^solicitation. 

• Within 30 da)» of receipt of the^rantribution, thene^ujer made at least one 

effort to obtain the missing informatio^in,either a request or a 

^infor^tipn that, although not initially 

ned in a follow-up communication or was 

Facts 

documented oral request. 

The treasurer reported any contribii 

provided by foe'c5nh;ibutor, was ( 

containe^h the comifiittee's records^pr in prior reports that the committee filed 

during the sameWo-year election cyclep^ 1 CFR § 104.7(b). 

A. \ \ \ 

A review.^fall contribi itiqns.fromjindividuals requiring itemization indicated that 2,911 

contributions^rotaling S 378,639, or 41% of total contributions from individuals required 

to be itemized b^^DF, lacked disclosure of occupation and name of employer. The 

majority of the coiitnbi itp^entries (2,669 of 2,911) that lacked the required information 

were blank on the Sch^ules A (Itemized Receipts) filed with the Commission. 

X 

The Audit staff reviewed the contribution records provided by FDF to determine if it had 

utilized "best efforts" to obtain, maintain and submit the missing information. 

FDF did not pre 

282 contributioi 

vide documentation showing it made follow-up best efforts for 

ns totaling $26,841 ($378,639 - $351,798). 

FDF had the rer 

however, this ir 

disclosure repc 

uired information for 2,629 contributions totaling $351,798; 

formation was not subsequently disclosed on the Commission 

rts. 
A 

Finding 3. 

Enpenditures 

8 

B. Interim Audit Rei ort & Audit Division Recommendation 

At the exit conference, the Audit staff provided schedules and discussed the omission of 

occupation and name c f employer information froiii the disclosure reports. The FOF 

Treasurer commented hat he had obtained some of the missing occupation and name of 

employer information. In its response to the exit conference, FDF provided a work paper 

demonstrating that FD had obtained most of the missing occupation and name of 

employer information. FDF also provided copies of letters that it had sent to contributors 

to obtain the missing o xupation and name of employer information. This additional 

documentation demon: trated that FDF had obtained occupation uiU i^e of employer 

information for $256,4 S1 of the errors; however, amended disclo^i^ports were not 

2 'Tu: .: jji jijg $351 79g noted abo^^ 

The Interim Audit Rep )rt recommended that FDF d^qi^lrate tl^.ithomplied with the 

"best efforts" requirem ents by amending its reporte^t 

relating to the 2,629 cointributions totaling $351.,7^8 ($95 

C. Committee Response to Interim Audit Repdct > 

In response to the Intenm Audit Report recommendatiQn, 

FDF had obtained approximately 95%"of;foe missing ON 

information and would amend its repoit^^incjude this i 

attachment containing his information, fn^i 

concurred that FDF had obtained more than 95 

date of this report, no {rnended.^orts hav^bc 

+ $256,45 

le FDF Treasurer stated that 

ion and name of employer 

iqp. FDF provided an 

is schedule and 

information, but as of the 

iture: 

During -auqit fieldwork, 

independent 

Expenditures); 

totaling $385,6'!^. 

operating expendi 

$868,015 which appearl 

reports were filed. 

, the Audit steff reviewed disbursements to verify that the 

s\ht^ FDF' disclosed on Schedule E (Itemized Independent 

replortqd ^curately. FDF disclosed independent expenditures 

Au^it staff identified additional disbursements disclosed as 

o^i'Schedule B, Line 21b (Operating Expenditures) totaling 

'to be independent expenditures and for which no 24/48 hour 

In response to the Inter 

these expenditures wer; 

purpose for the expend 

similar mailings that 

staff audited FDF for 

^ FDF's database contained 

contributions totaling S92 

LAPl Independent 

m Audit Report recommendation, the FDF Treasurer stated that 

properly reported as operating expenditures since the primary 

itures was to raise funds for FDF. The Treasurer also referred to 

were not considered to be independent expenditures when the Audit 

the: 2008 election cycle. 

the occupation and name of employer information for an additional 420 

.347. 
The Audit staff acknov 1i 

similar language to the 

cycle. However, the 21 

independent expenditu 

ledges that some of the 2008 election cycle mailers contained 

language contained in mailers used during the 2012 election 

08 election cycle mailers were not reviewed for potential 

ires; and therefore, were not included in a finding. 

Legal Standard 

A. Definition of Independent Expenditures. The term "independent expenditure" 

means an expenditure by a person for a communication expres^y advocating the 

election or defeat of a clearly identified candidate that is not'ma^in coordination 

with any candidate lor authorized committee or agent of a-dwdidate. No expenditure 

shall be considered-independent if the person makingjthp e^^ijditure allows a 

candidate, a candidate's authorized committee or their agents^OT-a political party 

committee or its ag^tnts to become materially inv^^ ni decisibn^garding the 

communication as described in 11 CFR 109.21j^)^), or shares finahciaj 

responsibility for tli 

CFR §100.16. 

e cost of production o^dis 1 with any such,^ei^n. 11 

B. Disclosure Requirements - General Guldellne^Ahvindependent expenditure shall 

be reported on Schedule E if, when^tdded to other iime^ndent expenditures made to 

the same payee during the same calendv year, it exceeds $200? Independent 

expenditures made i(i.e., publicly dis\»mihat^)'pr4or to pa^'ent should be disclosed 

as memo entries on Schedule E and assa d^^on~S^eduje''D. Independent 

expenditures of $2( p-Of less need not bVitemized, thou^ the committee must report 

the total of those^eifpenditui^s^on line (bX^f Schedule E. 11 CFR §§104.3(b)(3)(vii), 

104.4(a) and 

C. Last-Mlnute.l! 

independent 

elTCtjon, and maii 

plecti'on, must be 

24 hbu^iifter the 

additional indc 

communicatio 

use to determ'ii 

aggregate, 

§§ 104.4(f) and 

IS 

eudra^xpenditare-Hxports (24-IIour Reports). Any 

{.aggregating SlfoOO or more,'with respect to any given 

^r the^2d*s^v but more than 24 hours before the day of an 

I and th^ i^ort must be received by the Commission within 

liture is'made. A 24-hour report is required each time 

t^penditures aggregate $1,000 or more. The date that a 

ibl.iciy disseminated serves as the date that the committee must 

~^er the total amount of independent expenditures has, in the 

• exceeded the threshold reporting amount of $1,000. 11 CFR 

i5(g)(2). 

D. Independent Expenditure Reports (48-Hour Reports). Any independent 

expenditures aggre^ting $10,000 or more for an election in any calendar year, up to 

and including the 2 )th day before an election, must be disclosed within 48 hours each 

time the expenditui ss aggregate $10,000 or more. The reports must be filed with the 

Commission withir 48 hours after the expenditure is made. A 48-hour report is 

required each time additional independent expenditures aggregate $10,000 or more. 

The date that a com munication is publicly disseminated serves as the date that the 

committee must use to determine whether the total amount of independent 
expenditures has, in 

amount of $10,000 

Uses phrases su 

"defeat" accom 

incumbent," or 

which in conte? 

or defeat of one 

. 10 

the aggregate, reached or exceeded the threshold reporting 

11 CFR §§104.4(f) and 104.S(g)(l). 

E. Definition of Exprbssiy Advocating. The term "expressly advocating" means any 

communication tha;; 

ch as "vote for the President," "re-elect your Congressman," 

)anied by a picture of one or more candidate(s), "reject the 

communications of campaign slogan(s) or individual word(s), 

t can have no other reasonable meaning than to urge the election 

or more clearly identified candidate(s), such as posters, bumper 

stickers, advertisements; or 

When taken as i whole and with limited reference 

proximity to th«: election, could only be ii 

containing advc cacy of the election or defeat 

candidate(s) because: 

o the electoral portion of the com: 

and suggestive of only one memiii^and 

reasona >le minds could not di^eI^^^whl 

elect or lefeat one or more clearly idehtr 

some other kind of retrc^pn. 11 CFR §1 

F. Formal Requirements Regarding 

committee shall maintf 

which shall provide in 

filed reports may be vi 

completeness. II CBL^ 

/x 

Facts and Analysis 

ingdf Appiii 

endu 

During audit field>^ 

indepeni 

independent 

made media-i 

expenditures on 

they should havi 

events, such as the 

inable person as 

_ ^^wly identified 

lotion is unmistakable^unambiguous, 

^t encouragej^dctions to 

candidate(s) or encourages 

fa) and (b). 

in records with re: 

sufficient detail thi 

lained 

^^Each political 

ired to be reported 

ion and data from which the 

ik for accuracy and 

penditnres 

le Audit staff reviewed disbursements to ensure that 

were disclosed correctly on Schedule E. FDF disclosed 

totaling $385,619 on Schedule E. However, FDF also 

itures totaling $868,015 and disclosed them as operating 

iedule B, Line 21b (Operating Expenditures), when it appears that 

reported as independent expenditures on Schedule E. 

According to venddr invoices, FDF was billed $868,015 for mailers. The invoices 

confined the mailejr identification codes, the quantity of pieces mailed, the date that 

the pieces were mailed, and the cost of each mailing. A review of the mailers that 

were made available indicated that they contained language expressly advocating the 

election or defeat o 

that is required to b: reported on Schedule E as defined under 11 CFR § 100.22(a). 

'a clearly identified candidate, which is Federal Election Activity 
II 

A breakdown of the analysis for these expenditures is as follows: 

Apparent Independent Expenditnres Reported as Operating Expenditures 

(Copy of Commnnication Made Available) 

FDF made 137 apparent independent expenditures totaling $868,015 for which it 

provided supporting documentation such as invoices and the associated mailers 

for each invoice. All of these communications contained language expressly 

advocating the election or defeat of a clearly identified candidate, as defined 

under 11 CFR § 100.22(a). 

The majority of the mailers advocated the defeat of Baracl^bama in the 2012 

general election. Some of the mailers included statements directly advocating 

defeat such as, "Barack Obama must be defeated<^t^s eoing to take a 

Herculean effort to defeat Barack Obama...this bully must b^exposed and 

defeated." Other mailers contained language^^h^, "we conservatives need to 

start attacking Barack Obama's re-elect efparts NOW...if we're^going to...do 

what's necessary to make Barack Hussein (^bamal^xone-term presideht^nd "It 

goes without saying that Barack Obama must-Ire de ^ ^ * 

must take Barack Obama and his liberal-pro^r^sp 

only way that they will be defeated!" 

2. Interim Audit Report & AuditHerabmendation 

...Together,.'you and I 

1 head-on." This is the 

At the exit conference, the Audit 

expenditure reporting errors. In res] 

stated that FDF's 

expenditures 

The Interim Audit 

evidence-that 

luld be 

It expendii 

;as 1 

tended thi 

i^ent expendii 

!expendi 

ule^oT apparent independent 

rence, the FDF Treasurer 

I expenditures were fundraising 

'T:; mend^ th^^FDF provide documentation and 

ent ejc^tditures totaling $868,015 did not require 

iditures. Absent such evidence, it was further 

to disclose these disbursements as 

lule E and submit revised procedures for reporting 

3. Committ^^Respp^M to Interim Audit Report 

In response to th^In^im Audit Report recommendation, the FDF Treasurer stated 

that these expenditures were properly reported as operating expenditures since the 

primary purpose^for the expenditures was to raise funds for FDF. The Treasurer 

explained that these direct mail pieces were sent to "like-minded individuals" who 

had previously contributed to FDF or another conservative committee and that the 

purpose of these mailings was not to influence their vote, as FDF already knew with 

nearly 100% certaiiity how these individuals would vote. FDF's goal was to solicit a 

contribution. The Treasurer acknowledged that the mailers may contain language 

such as "Barack Obama must be defeated," but stated that this language was used to 

touch a raw nerve in the reader to solicit a contribution and not to persuade them to 

vote FDF's way. 
12 

The Treasurer also referred to similar mailers that were not considered to be 

independent expenditures when the Audit staff audited PDF for the 2008 election 

cycle. The Treasurer claimed that since the Audit staff determined that the mailers 

were properly reported for the 2008 election cycle, the Audit staff should not 

determine that the similar 2012 mailers were reportable as independent expenditures. 

The Audit staff acknowledges that some of the 2008 election cycle mailers contained 

similar language to the language contained in mailers used during the 2012 election 

cycle. However, the 2008 election cycle mailers were not revu^ed for potential 

independent expenditures; and therefore, were not included^in.a-finding. 

B. Failure to File 24/48-Hour Reports for Independen ^ 

1. Facts 

During audit fieldwork, the Audit staff review^'independent ex] 

by PDF, as well as the apparent independent expenditures noted . 

whether additional reporting of24/48-hofir'reports wa^'t^uired.^ As n^d above, 

the Audit staff identified apparent independent tQtaling'$8^8,0 IS which'may also 

require filing of24/48-hour 

— reported 

e, to^determine 

v 

2. Interim Audit Report & Auditi_ 

At the exit conference, the Audit sta^l 

expenditure reporting errors. The FDpX. 

that these expenditureswgre^fiindraising ( 

expenditures. 

leudation^ 

[ledule^f independent 

^hs^that PDP's position would be 

iditur^-and not independent 

Absent documentatic^and;eViden.c^hat ap 

$868,0 l^-did-nqUiequire rej^rting^ im" 

the Ii ^ ^ 

independent expenditures totaling 

ident expenditures (per Part A above), 

im~Audif ^j)orf recbmmended that PDF provide documentation to support 

of publi^is^eminatiohv^r^he communications to determine whether a filing 

<#aj4/48-hour repOr^M req^ried. 

3. CoihiniftM RespouM to the Interim Audit Report 

In response^to the Intenm Audit Report recommendation, the PDF Treasurer stated 

that PDF has repoctpd^md filed 24/48-hour reports for expenditures for broadcast 

media and targeii^.Voter contact mail totaling $385,619. Further, the Treasurer stated 

that the expenditHures totaling $868,015 have been properly reported as as operating 

expenditures. 

Absent the provision of documentation to support the public dissemination of the 

mailers, the Audit staff maintains that 24/48-hour reports for apparent independent 

expenditures totaling $868,015 should have been filed. 

^ The date the expenditure is publiciy distributed serves as the date that the independent expenditure is 

made for purposes of the 24/48-hour reports. PDF provided a master list of all mailers that included the 

mail date for each mailer on the list. 
13 

I Finding 4. Recordkeeping for Commnnications 

Summaiy 

During audit fieldwork, the Audit staff reviewed disbursements to verify the accuracy of 

the information and proper classification of transactions disclosed on reports. PDF 

reported 13 expenditures totaling $90,814 on Schedule B, Line 21b (Operating 

Expenditures) with purposes of "direct mail - creative" and "direct mail - postage." 

Documentation that was provided by PDF was insufficient to makd^a determination 

pertaining to the purpose for these expenditures and verificatiomds^^operating expense. 

In response to the Interim Audit Report, the PDF Treasurerstated that PDF is attempting 

to obtain the missing documentation from its vendors, hovvever,'oit^sserts that these 

expenses have been properly reported as operating expenditures. X^ent the provision of 

records, the Audit staff considers the matter a violatiomofthe recordk^ping 

requirements at 11 CPR §104.14(b)(1). // 

Legal Standard 

A. Formal Requirements Regarding Reports and Stetements. Each political 

committee shall maintain records'with respect to the matters required to be reported 

which shall provide in sufficient ^ which 

the filed reports may be verified, ex; .. 

completeness. 11 CPR §104.14(b)(1)\^ 

B. Preserving Reco 

must preserve all 

52 U.S.C. §30'1?2(<^ 

Facts andi!^ 

for accuracy and 

The treasurer of a political committee 

for 3 years after the report is filed. 

A. \ \ 

During audlt/ieldwork, the Audit §taff reviewed disbursements to verify the accuracy of 

the information^d propef classification of transactions disclosed on reports. PDF 

reported expen^ures totaling $90,814 for which documentation was insufficient to make 

a determination^peraininpfto whether these disbursements were correctly reported on 

Schedule B, Line 21^'^perating Expenditures). 

The Audit staffs analysis resulted in the following: 

Disbursements - Invoices Provided - Not Able to Associate with Copies of 

Commnnications ($90,814) 

Disbursements totaling $90,814 were paid to two direct mail vendors and were 

disclosed on Schedule B with purposes of "direct mail - creative" and "direct 

mail - postage." For these disbursements, PDF provided invoices but did not 

provide information about the related mail communications. Without a copy of 

the associated communications, the Audit staff is unable to determine how PDF 
should have repoi 

requested copies 

been provided. 

B. Interim Audit Rdport 

At the exit conference, 

which further records 

Audit staff requested c 

he would contact the v 

invoices had incorrect 

documentation that was 

The Interim Audit Rep 

necessary information 

may be verified or exp 

• Copies of com/ni 

• Ifthecommur 

communicator 

14 

>rted these disbursements. During audit fieldwork, the Audit staff 

of the mail communications. To date these records have not 

& Audit Division Recommendation 

the Audit staff presented a schedule of the disbursements for 

were necessary to verify the accuracy of FDF's reporting. The 

jpies of the mail communications. The FDF Treasurer stated that 

mdors to find the missing mail communications, or find out if the 

nailer job identifiers, and would provide the^Audit staff with any 

obtained. 

Drt recommended that FDF provideurT^uimcient detail, the 

rom which the reported operating^expenditures^totaling $90,814 

ained. Such records should h^ve.4ncluded: 

unications that can be ass^'iated to the vendo^invoices, and 

ication has already been.proyided. Information associ^hfg each 

with an invoice(s). ^ 

C. Committee Response to Interim-^dit Report ^ 

In response to the Intenm Audit Report recommendation. 

FDF is attempting to o 

asserts that these exper 

Absent the provision o 

recordkeeping requi: 

^ j'^DF Treasurer stated that 

>tain the missing|ibcumbnt^ion ffoi^its vendors, however, it 

ses have been pro^erlyl^^ted>^opqkding expenditures. 

the Audit staffxi^iders the matter a violation of the