CONSERVATIVE 

J^ORITY FUND 

COilMtMWIWIHUUMTlfPUl 

INTERIM AUDIT RESPONSE 

Conservative Majorfty Fund 

DECEMBER 7,2016 

SCOTT B. MACKENZIE 

Treasurer 
1. AUnty 

Hie audit team reviewed the financial activity of Consereative Mqorily Fund, and compared the 

entries reported to the FEC with the bank reooids; and their findinga were as follows: 

2012ConmittecAc^^^^^^^^ 

Reported BankReeorda Diaerepmicy 

Bcgjuning Cash Balance @ 7/09/2012 SO $0 $0 

Receipts $2,814,767 $2,816,253 ($1^) 

Disbunements $2,745,851 $2,747337 ($1,486) 

Ending Cash Balance @ 12/31/2012 $68,916 $68,916 $0 

The discrepancy of $1,486 was a simple case of bank chnges mistakenly being reported as 

contrs-receipts (not-sufflcient-finids ^ccks or credit caid chargebacks, that reduce receipts) 

instead of as ba^ service charges. Yet the audhois assert that the oommittee misstated its 

disbursements by $2,163,830. 

The auditors noted that there were payments reported to sub-vendors of InibCision Management 

Corp. (IMC) when they should have been lepuled as disbursements to IMC. In addition, some of 

the disbursement dates were incorrectly reooided. The oommittee has amended hs 2012 reports 

to correct these errors. 

PW|1 CONSERyAlTVE MAIORITYFUND 
The audit team leviewed all oontiibiitioiis fiom individuals requiring itemization and found that 

five hundred ft twenty-seven (527) oonliibutiona totaling $86^745 lacked adequate disclosure of 

the contributor's occupation a^ name of employer. 

All written solicitation requests hy the —sttw* included a Reply Fonn containing the 

donor's foil name and mailing address. 

The reply fonn stated the following; Fedeni Law reqiifrva KS to otoaln and report the 

none, maUIng address, occi^ton and tnanetfen^ioyerqftnMdntde whose 

contrUmtlone aggregate in exceeeof$200 In a oidendaryeia. 

Space is affoided on the Reply Fonn for the donor to provide the occupation and 

employer infonnation. 

In the event the donor tails to oflcr the requested infbnnatioii, the committee, within 

thirty (30) days of receipt of the contribution, sends the donor a letter requesting the 

missing infbnnation. 

Once the donor infonnation is obtained the committee amends Hs reports to displiy the 

required intbimation. 

AKhough the commitlee obtained most of the missing infonnation, it had not am^'Mled its reports 

at the time the Interim Audit Report was issued. This has since been rectified and the committee 

has amended its reports. 

The amended reports disclose occupation and name ofemplpyer information for all but thirty 

(30) donors vrinse contributions totaled $8330. 

p_l2 jA^GONSERmiVE 

' ""^.MAJORITY FUND 
The audit atuffievieweddiabunementB to verify that the Independent Expendhuies were 

Kpoited acscurately. As part of lhat review, ihc auditors examhied 237 InfbCision invoices billed 

to Conservative Majority Fund (CMP). The audit staff determined that the oommitlBe's reporting 

of independerrtexpendituicstnlriing $1347,233 was under^reported and the actual figure should 

have bm $1316390. The committee has re-examined die independent expenditures repotted 

and determin^ that it has over-reported these expenditures and the actual figure is $833326 

related to UdC and another $79331 paid directly to Rapid Response Television. 

Ui 

The Conservative Mq'ority Fund filed its Statement of Organization on Jufy 2,2012 and it was 

received and processed at the FEC on July 9^*. While CMF was begging its program, a 527-

oiganization called New Conservative Coalition (NCC) was closinit The two organizations had 

Kellay Rogen involved as lYeasurer of NCC and Executive Director of CMF. 

Whereas InfbCision (IMC) sent invoices to Kelley Rogers eadi month as Treasurer of NCC, they 

also send him CMF invoices fbr approval. However, th^y mistakenly sent ten (10) NCC invoices 

to Kellay Rogers marked as CMF. 

266624 7/12/2012 6/15-6/21/2012 $24837 

266625 7/12/2012 6/15-6/21/2012 $2031131 

266626 7/12/2012 6/15-6/21/2012 $1333432 

266627 7/12/2012 6/15-6/21/2012 $12730 

266628 7/12/2012 6/15-6/21/20U $3348.76 

267114 7/12/2012 6/22-6/30/2012 $57834 

267115 7/12/2012 6/22-6/30/2012 $1&023.38 

267116 7/12/2012 6/22-6/30/2012 $17,l0a75 

267117 7/12/2012 6/22-6/30/2012 $9630 

267118 7/12/2012 6/22-6/30/2012 $2032039 

The audit staffcunently considers these invoices to be part of the CMF program, however these 

invoioes are related to NCC except for a TBkc2 Direct charge of $1,57933 that was included on 

Invoice #267118. 

Therefixe, it is the comminee's assertion that the above invoices totaling $93,990.02 arui paid by 

NCC on July 20; 2012 by dwck #5063 (see attachment) belong to NCC except for the TdGe2 

Direct diarge. Ibe committee is considering the Thke2 amount to be an In-Kind contribution 

with foe excessive porting ($57933) payable as a refund. 

Page|3 CONSERyATIVE MAlORrrYFUND 
CSeeipleted Calls 

Thecategoiy ofcompleled calls incliided Inbound and Outbound phone calls; list rentals and 

trainina. A completed call is any phone call that resuHs in a "Ves", or "maybe^ decision to 

contribute to the ofgpnization. 

Inbossd phone caDs occur ntai an individual sees one of the advertisements nm by CMF and 

calls the "SOtT number disphqped on the ad. When the call is received by IMC, the communicator 

hmnediately begins the process of convincing the caller to donate to CMF. Hierefbre;, CMF 

concludes these are enthely fimdiaising and not considered as independent expenditures 0E). 

• Inbound Calls billed hy IMC: SgSkl9t.l4 lEportkm: S-0-

Ontbonnd phone caDs are calls made by IMC conununicaton to prospects identified on specific 

caller lists. Hiese calls had a dual puipo8e:(l) To provide an anti-Obaina message to ibil his 

2012 re-election; and (2) To solicit fimds to continue contacting prospective voters to the dangeta 

of an Obama re-electi^ Outbound calls include a one-minute tiped anti-ObanuimessagB (IE); 

and tlw caUs giGiiecally avenge fWe (S) mimilBi in length. Therefore, the ooinmitlae has iUocaled 

SOMofthecostofthe call to fiindiabing and 20% to Independent Expenditures. Ail calls made 

afier the General Election are considered 100% fundraising. 

• Outbound Calls billed by IMC: $1,542,299.79 IE portion: S1S3,2S&23 

Rental Uats were procured by IMC to supplement then- in-house lists for outbound calls. Given 

that outbound had a dual purpose of ddivering a political message and soliciting 

contributions, the committee hu allocated 50% each to independent Expenditures and 

fimdraisin^ 

• Rental Lists billed by IMC: S10IMd5.13 IE portion: $50,222,57 

Tralal^ Hoars wero billed to train the communicators on soliciting contributions fiom 

prospective donois. In diis case^ a single training hour was billed and allocated to fimdndsmg. 

• IVaining Hours billed by IMC: $12,00 lEportlon: $-0-

Total Cempieted CaDs hMlad by IMC; $1,727J57J6 lEporfloa; $205,47M0 

D»ia ^tii^GONSERMmVE rage I* 
Per the agreement between IMC and CMP; th^ were fiee to utilize outside vendois at their 

discietion. Those outside services were billed acoofdingly. 

Take! Direct was hired by IMC and produced and aired Direct Response Television (KTV) 

ads. These ads contained an anti-Obama political message and the committee has allocated 100% 

of these billings to Independent Expenditures. 

• Tske2 Direct Services billed by IMC: $029«729M lEportkm: S629,729M 

Onliidc ServiecB is a line hem billed by IMC to cover the legal services of Bdcer Hostetler 

($80,294.55); the management services of Strategic Campaign Group ($40,001.00); commissions 

paid to Poiiti^ Media Company ($28,960.39) and Treaurei/Gompiiam services of Mackenzie 

A Company ($17,647.52). Ail of these servic^commisskxis are considered administrative and 

not allocated as Independent Expenditures. 

• Outside Services billed by IMC: $166,903.46 IBportion: $-0-

Proapeetlng-Other is a line item billed by IMC to cover a direct mail piece produced and 

malM by Lyimbum Communicatioiis inc. ($21,500.00); a check to open the escrow bank 

account ($100); and a payment to Authorizejiet ($57.65) to secure the domain name. The 

mailing produ^ by Lynnbum is a fimdrsising expense and the other two disbursements are 

administrative in nature. 

• Prospecting-Other billed by IMC: $21^657.65 lEpoitkm: S-0-

Craatlvc Servlecs were billed by IMC to create a CMP logo and to design die statioiiaiy and 

reply fixins to be utilized by the program. These are considered administiative expenses. 

• Prospectmg-Other billed by IMC: S637J0 IBportion: $-0-

TotM Other Vendors bmed by IMC; $818,92857 fEportion: $629,729.96 

15 CONSERVATIVE 

' ;MAJORnYFUND 
As port of the CMF prognm to dissemime polttkd mcwagps as mdependent expenditures and 

solicit fiinils to broadcast those messages, IMC would send fiilfillment and fbllowHip ietten to 

prospective donors. 

FhlfUiiMnt Letters are generated after the communicator receives a positiveor a "^ybe" 

to a solkilation request These letters (carrier envelope, postage^ letter addressed to the prospect, 

reply fbrm and return envelope) are dropped In the mail the morning after the completed calL 

The purpose of the letter is to retrieve the pledge made by the donor prospect and is tfaerefbre 

conridered a ftmdnising expense. 

• Fulfiilmeiit Letters billed hy IMC: S143,ddS42 IE portion: S-0-

FoUosrHip Letten are generated approximateiy two (2) weeks after the fulfillment letter 

reminding the prospective donor of the pledge made and attempting to collect that pledge. Just 

like fulfillment lett^ these are considered a fundraising expense. 

• FollowHip Letters billed by IMC: S57^6tMM lEporthm: S-6-

raHUment Materiali bi lied by IMC covered the costs of stationary, envelopes, pnrkaging 

materials, labels, etc. These costs are administrative in nature and not considered as independent 

expenditures. 

• Fulfillment Materials billed hy IMC: S543038 IBportion: $-0-

TottdLettersdtPnatagr billed by nUC: S20d,7S5J8 IE portion; $-0-

p_lfi CONSERVATIVE 

""^.MAJORIIYFUND 
IMC im t•d^ed with the reqKmsilrility of taldng credh caid infbnnatkMi fiom donon and 

imputing that data into the system whereby Ibe fimds would be processed by the credit card 

companies and deposited to the CMF escrow acoount 

Cradit Caid AcqnisltioB/PncMsliig is the eflbit to acquire and process credit card donations 

via dK iriione. This occun when die communicator is speaking diiecdy to (he donor and that 

penon is providing the necessaiy credit card infixmation. This is entirely a fimdiaising function. 

• Credit Card Acquisithm/Prooessing billed by IMC: $103«41dJd lEportion: $-0-

Cicdit Cud raflltanent/ProecasIng is (he act of acquiring and processing credit card donations 

via the mail. Hieae contributions occur when die donw sends back the FulfiUment/FoIlowHq) 

reply fixm and instead of including a check, has provided credit card infinmation. This also Is 

entirely a fundraisfng functkn. 

• Credit Card Fulfillment/Processing billed by IMC: S23d6.d5 lEportion: S-0-

Total Credit Caid Proceastag bIHed by IMC; SlddJTMl lEporden; S'O17 i CONSERMimVE 

' ^ tMAJOiUTfFUND 
One of the methods used to induce a pnMpcGt to donate is Ifae use of pianiums. CMF offtred two 

(2) pRmiums; a bumper sticker for tower level donstlons and an American Flag ibr high-dollar 

donDrs. 

Flagv and Mailing Costs were biiled by IMC for CMP high-dollar donors who requested and 

received an American Flag. The chaiges on IMG's invoices appeared as Flag Premium, Flag 

Postage and Product Cost These premiums and mailing coats are fondraising expenses. 

• Flags and Mailing Costs billed by IMC: SdlMI39.77 lEpoitton: $-0-

Bampcr Sttckan were offered to donors contributing $25 of more to CMF. Although premiums 

should be attributed to fondiaising, the bumper sticklers contained a political message end 

therefore are considered 10096 attributable as an independent expenditure. However, the costs 

incuned after the election to null bumper stickers are considered fimdiaising expenses. 

• Bumper Stickers billed by IMC: S2382jfil IE portion; $2^087.12 

Total Donor Freintuinsblllad by IMC: ltB2i422..99 Mportlon; S2jOB7.12 

I • . CONSEBVAnVE 

' ' ^MAJORTIYFUND 
IMC Dicuired costs of $22,780.95 relalsd to direct mall on CMF*s behalf and those costs 

included the following; 

• Direct M^l Postage 6,661^2 

• Lock Box Services 5,800.86 

• Direct Mail Labor 5,280.25 

• Direct Mail Materials 4,39SA7 

• PO Box Rental Fees 550.00 

• Miscellaneous 83 J7 

• Shipping Chaiges 9.28 

All the cost hems listed aibove and billed to CMF have ehher a fimdnlslng or administndive 

component and are not allocable In aqy way to Independent expenditures. 

TOM DlftrtMhUBdrted Costs MUed by IMC; $22,78058 lEportien; $-0-

PagejO GONSERMimVE 

MAIORmrFUND 
IVR itands for Interactive Voice Response. This was used on inbound lines the caller was 

responding to an automated operator and given options prior to being tiaiisfened to a live 

communkator. 

Primarily, this is used for people that call bade the phone number on their caller ID. The 

automated operator informs the caller that Conservative Majority Fund tried to reach them and 

the committee is kicatiiig people opposed to Banck Obama's reflection. They are provided 

the option of being tnnsfimd to a live communicator; entering their phone number to the Do 

Not Calllist; or thpy could just hang up. 

This program was also used as part of the DRTV campaigns. Once the person called the inbound 

number, they were sent to an IVR and adced to sign-up as an activist lliey were also provided 

with the option of being connected to a live operatof to donate. 

The IVR Program allowed the committee to screen people that didn't wish to donate, without 

utilizing a live communicalor. Given that the purpose of (he propam was to screen prospective 

donors, the committee views this solely as a fundraisbig function. 

TotallVRPrognunblBedbylMC; IE portion; $-0-

p_lin CONSERMOIVE 

"• • tMAJOIUlYFUND 
After pledgiQg to oootribute^ IMC placed thank you calls to confirm the doiudon and to express 

the committee's latitude tor the donor's generosity. Tlieae calls were billed at SO.SO each and 

are divided into the ftdlowing classifications: 

• Agreed to Dooale 

• Noto Donate 

• Hangup 

• Answering Machine 

In addition, IMC billed the comrniOee $121 fbrtnining. The thank you calls as well as the 

training are fiindraising expenses. 

Total Hank Yon CaDsbllled by IMC; $5^42450 lEportion: $«0-

111 CONSERVATIVE ' ;MA|ORIIYFUND 
IifoCUoB BUHi^ ID CMF 

CompletBd Cilb 

Other Veodon 

Letter and Postage 

Credit Cnd Prooesiing 

Donor nerelima 

Direct Mall Rehded 

IVRProgreni 

HiankYouCalb 

1,727,957^ 

818,928^7 

206^755.88 

106,272.81 

62^39 

22,780.95 

14,96738 

5J42430 

1324^7836 

189,198:61 

206,755.88 

10637231 

60,40537 

22,780.95 

14,96738 

532430 

20337830 

629,729.96 

2316.92 

77309.82 1305,16638 

- 818,92837 

935637 21531235 

4352.15 111,124.96 

35331 

714.95 

22430 

6232239 

23,134.16 

1538233 

534830 

IMC TOTALS 2,96530934 2,13038336 83532538 92310.70 3357.92034 

In addition to the independent expendituna made tfaiough IMC, there were two (2) payments 

made directly to Rapid Response Television totaling $79,63030 fiir TV Media. Thw pigments 

are considered 100% independent expenditiires. Total independent expenditures reportable by 

CMF total $9K856. 

Indcuendcnt Ezpcndtture Variance 

Audit Staff bidependeot Expenditures $1,816,390 

CMF Independent Eaqienditures (IMC) $835,226 

CMF Independent Esqienditures (RRTV) $79,631 

Total CMF Independent Expenditures $914,856 

FEC V. CMF Variance $901,534 

112 CONSERVATIVE 

MAJORTTYFUND 

CBiMnmMuamiMMM 
HK audit staff identified debts totaliiig S67,800 that were not disclosed on Schedule D as 

required on the committee's yearend disclosure report. 

CMF lepmled debts owed to IMC totaling $26(^450 on its year-end discloaure report. The 

$67,800 pertains to New Conservative Coalition (NCC) invoices enoneously billed to^ but not 

paid by CMF. These invoices were paid by NCC as demonstrated in the attachments. Therefore, 

it is the committee's conclusion that all debts and obligations owed to IMC have been properly 

reported. 

Pu. 113 itf^CONSElOraiVE 

""^.MAJORITY FUND 
The audhstaffievieweddisbufBenieiitB ID verily the accuracy of the inibnnation and proper 

classification ofttansaetions disclosed on reports. Hie audttors assert that $304^399 was 

disbursed fin* which sufficient recoids wero not provided. 

CMF made two (2) disbursements to RRTV totaling $79,630.60 for which no documentation 

was provided. Hie committee has been able to locate invoices ID support the RRTV payments 

and has provided copies in the attachments. 

Rapid Response Teievislon 

Invoioe #00133 - TV Media 10/17/2012 $30,429.49 

Invoice #00142 - TV Media 10/19/2012 $4931.11 

TOTAL $79,630.60 

The two disbursements are reported as mdependent expenditures on the amended FEC 

Disclosuie Report A copy of the barik statement disphtying these charges is provided in die 

attachments. 

Disbursements totaling $224,768 for television advertisements were paid to TskeRDirect LLC 

without providing copies of the commerciais. TBke2Diiect aired the following anti-Obama 

commerGials: 

• Shady Past; 

• Gun Rights; 

• ObemaCare; and 

• VoterFraud. 

Copies of the above commercials have been provided to the audit stadf. There was some 

confusion as to whether TBke2 had produced a pre and post 2012 election Gun Rights ad. 

However, Take2 has confirmed that there was only one gun rights advertisement produced. 

114 CONSERVATIVE 

MAIORnYFUND 
HW audh rtaif has identified five (S) areas of oonoeni and CMF has addressed each of these. 

r L' " • • • " • • • • • • • 

The oommhlee agrees wHh the audit staff that FiislMerit Bank chaiBBS of $1,486 were 

inoofrecdy reported as Scheduie A contmeceipts when they should have been identified 

as Scheduie B disbursements. CMF strongly disagrees with the assertion that the 

commitlee misstated its dirixnaemenls by $2,163,830 as the audhois themselves state that 

there is no discrepancy between what was reported and the bank statements^ aside fiom 

the FirstMerit Baiik charges. Any rqwrting errors (dates, names, etc.) are conected in the 

amended lepcfts. 

Ihe initifd disclosure reports filed by CMF identified 527 itemized contributions tDtaling 

$86,745 or 3096 of total itemized contributions, that lacked disclosure of the contributor's 

occupation and name ofempioyer. The commitlee utilized "best efiforts" procedures and 

recehred die missing data on 9096 of those prevknisiy missing the required information. 

The amended FEC Disclosure Reports ideii^ all but thirty (30) doiiors whose aggregate 

contributions total $8,330. 

This is where the committee and the audit staff have our greatest area of disagreement 

CMF iqxMled independent expenditures totaling $1^47,233 and the audit staff contends 

that $1,816,390 shrald have been reported. After reviewing the detail related to the 

disbursements reported, it is the committee's belief that $914^856 is the actual amount of 

independent exp^itures and this is reflected on the amended disclosure reports. 

The oonnnittee believes thet the $260^450 reported as owed to InfoCision at the end of 

2012 is an accurate refiection of the ov^ Therefore, CMF is not amending that 

portion of hs report 

Finding 5. Ramilkwlng frrCommunicatloM 

There were problems retrieving inftnnation from the media vendor hired by hfoCiskm, 

however CMF now believes diat all documentation needed Ity the audit staff has been 

provided. 

Finally, if there are any questions or clarifications needed, CMF is more than willing to do 

everything needed to satbty your requests. 

PMIIS jOS^cossEmKrm "TM^,MAJORnYFUND