Interim Report of the 

Audit Division on 

Harry Teague for Congress 

October 24, 2007 - December 31, 2008 

Why the Audit 

Was Done 

Federal law pennits the 

Commission to conduct 

audits and fleld 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial compliance 

with the Act.' The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

widi respect to any of the 

matters discussed in this 

report. 

About the Campaign (p. 2) 

Harry Teague for Congress is the principal campaign committee 

for Harry Teague, Democratic candidate for the U.S. House of 

Representatives from the state of New Mexico, 2°^ District, and is 

headquartered in Hobbs, New Mexico. For more infonnation, see 

the chart on the Campaign Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from hidividuals $ 1,349,867 

0 Loans from Candidate 1,764,573 

o Contributions from Other 

Political Committees 365,337 

o Other Receipts 56 

o Total Receipts $3,479,833 

Disbursements 

o Operating Expenditures $ 3,415,047 

o Loan Repayments 50,000 

o Contribution Refunds 2,250 

o Totai Disbursements $3,467,297 

Finding and Recommendation (p. 3) 

• Misstatement of Financial Activity 

2U.S.C. §438(b). 
Interim Report of the 

Audit Division on 

Harry Teague for Congress 

October 24, 2007 - December 31, 2008 
Table of Contents 

Page 

Part I. Backgroimd 

Authority for Audit 1 

Scope of Audit 1 

Part II. Overview of Campaign 

Campaign Organization 2 

Overview of Financial Activity 2 

Part III. Summary 

Finding and Recommendation 3 

Part IV. Finding and Recommendation 

Misstatement of Financial Activity 4 
Parti 

Background 

Authority for Audit 

This report is based on an audit of Harry Teague for Congress (HTFC), undertaken by the 

Audit Division of the Federal Election Commission (the Commission) in accordance with 

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

conducted the audit pursuant to 2 U.S.C. §438(b), which permits the Commission to 

conduct audits and field investigations of any political committee that is required to file a 

report under 2 U.S.C. §434. Prior to conducting any audit under this subsection, the 

Commission must perform an intemal review of reports filed by selected committees to 

determine if the reports filed by a particular committee meet the threshold requirements 

for substantial compliance with the Act. 2 U.S.C. §438(b). 

Scope of Audit 

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, the scope of this audit was limited to the following: 

1. The receipt and permissibility of loans. 

2. The consistency between reported figures and bank records. 

3. The disclosure of individual contributors* occupation and name of employer. 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates Harry Teague for Congress 

• Date of Registration November 5,2007 

• Audit Coverage October 24,2007 - December 31,2008 

Headquarters Hobbs, New Mexico 

Banic Information 

• Bank Depositories One 

• Bank Accounts One checking account 

Treasurer 

• Treasurer When Audit Was Conducted Teresa Arsiaga 

• Treasurer During Period Covered by Audit Carl Baldwin 

Management Information 

• Attended FEC Campaign Finance Seminar No 

• Used Commonly Available Campaign 

Management Software Package 

Yes 

• Who Handled Accounting and Recordkeeping 

Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand @ October 24,2007 $0 

Receipts 

o Contributions from Individuals $1,349,867 

0 Loans from Candidate 1,764,573 

o Contributions from Other Political 

Committees 365,337 

o Other Receipts 56 

Total Receipts $3,479,833 

Disbursements 

o Operating Expenditures $3,415,047 

o Loan Repayments 50,000 

o Contribution Refunds 2,250 

Total Disbursements $3,467,297 

Cash on hand @ December 31,2008 $ 12,536 
Part III 

Summary 

Finding and Recommendation 

Misstatement of Financial Activity 

A comparison of HTFC's reported financial activity to its bank records revealed that for 

calendar year 2008, HTFC understated disbursements by $58,472 and overstated its 

ending cash on hand by $91,555. It appears that the misstatement was due to the 

misreporting of disbursements and an inconect cash balance on the 2008 Pre-General 

report which was carried forward onto subsequent reports. HTFC filed amended reports 

during audit fieldwork that materially corrected these misstatements. The Audit staff 

recommends that HTFC provide any additional comments they may have on this matter. 

(For more detail, see p. 4) 
Part IV 

Finding and Reconmiendation 

Misstatement of Financial Activity 

Summary 

A comparison of HTFC's reported financial activity to its bank records revealed that for 

calendar year 2008, HTFC understated disbursements by $58,472 and overstated its 

ending cash on hand by $91,555. It appears that the misstatement was due to the 

misreporting of disbursements and an inconect cash balance on the 2008 Pre-General 

report which was canied forward onto subsequent reports. HTFC filed amended reports 

during audit fieldwork that materially conected these misstatements. The Audit staff 

recommends that HTFC provide any additional comments they may have on this matter. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• The amount of cash on hand at die beginning and end of the reporting period; 

• The total amount of receipts for the reporting period and for the election cycle; 

• The total amount of disbursements for the reporting period and for the election cycle; 

and 

• Certain transactions that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 2 U.S.C. §434(b) (1),(2),(3),(4) and (5). 

Reporting In-Kind Contributions. A gift, subscription, loan, advance, or deposit of 

money or anything of value made by any person for the purpose of influencing any 

election for Federal office is a contribution. The term "anydiing of value" includes all inkind contributions. Each in-kind contribution shall be reported as both a contribution and 

expenditure in accordance with 11 CFR 104.3. 11 CFR §§100.52 and 104.13. 

Facts and Analjrsis . 

The Audit staff reconciled HTFC's reported financial activity to the bank records for 

calendar years 2007 and 2008. The reconciliations were based on the latest amended 

reports filed prior to notification of the audit. The chart on the next page outlines the 

discrepancies for receipts, disbursements and ending cash balance for calendar year 2008. 
2008 Activity 

Reported^ Bank Records Discrepancy 

Opening Cash Balance 

©January 1,2008 

$362,386 $362,386 $0 

Receipts $3,071,899 $3,071,274 ($625) 

Overstated 

Disbursements $3,362,651 $3,421,123 $58,472 

Understated 

Ending Cash Balance 

@ December 31,2008 

$104,092 $12,537 ($91,555) 

Overstated 

The understatement of disbursements resulted from the following: 

• Unreported loan repayment to Candidate $50,000 

• In-kind contributions from Candidate, not reported 

as disbursements $ 9,573 

• Disbursement checks reported and subsequently 

voided with no adjustment made to reports ($ 1,045) 

• Unexplained difference ($ 56) 

Net understatement of disbursements $ 58.472 

The $91,555 overstatement of ending cash resulted primarily from the misstatement of 

disbursements noted above and a $32,458 overstatement of the ending cash balance on 

the 2008 Pre-General report that was canied forward onto subsequent reports. 

HTFC's representatives were informed of this matter at an exit conference held at the 

close of audit fieldwork and subsequently, schedules were provided detailing die 

discrepancies. In a written response to the exit conference, HTFC counsel (Counsel) 

noted that this was the Candidate's first run for office and that "[t]he Committee lacked 

access to an experienced practitioner to prepare the reports. Many of die initial enors 

made in die reports were due to the complexities of reponing transactions related to loans 

made to the campaign." 

Counsel commented that die casti on hand balance problem on the 2008 Pre-General 

report resulted from some timing issues relative to amendments filed in 2009. He added 

that there was some confusion in communications between the Reports Analysis Division 

staff and HTFC staff relative to die reporting of a $50,000 loan repayment to die 

Candidate which resulted in the transaction being improperly disclosed as a memo entry. 

Regarding the disciosure of in-kind contributions from the Candidate, Counsel provided 

additional documentation regarding loans made by the Candidate in die form of three 

credit card payments personally made by the Candidate on behalf of HTFC, totaling 

$9,573. On the original reports, these diree payments were disclosed as loans received 

^ This column does not total correctly due to HTFC overstating the ending cash on hand balance on its 

2008 Pre-General report by $32,458 and carrying forward the erroneous balance to subsequent reports. 
from the Candidate. Eventually, these loans were forgiven resulting in these items 

becoming in-kind contributions from die Candidate. Prior to audit fieldwork, HTFC filed 

amended reports disclosing the disbursements-side of these in-kind contributions as 

memo entries. The Audit staff notes diat it was necessary for equal amounts to be 

disclosed for bodi receipts and disbursements for these in-kind contributions and that by 

doing so would also result in a conect cash on hand. 

During audit fieldwork, HTFC filed amended disclosure reports that materially conected 

the misstatements noted above. These amendments also conected reported cash on hand 

which was then canied dirough to die most recendy filed report. 

Interim Audit Report Recommendation 

The Audit staff recommends diat, widiin 30 calendar days of receipt of this report, HTFC 

provide any additional comments diey may have on this matter.