Draft Final Audit Report of the 

Audit Division on John Kennedy 

for U.S. Senate, Inc. 

(January 1, 2007 - December 31, 2008) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

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 mej 

the threshold 

requirements for 

substantial compliance 

with the ALL' Tlic audit 

determines whether ilic 

cominiiice complied i\iili 

the liiniiuiiioiis, 

prohibitio:is uiid 

disclosure rctju Moments 

of the Act. 

Future Action 

The Commission ml?? 

initiate an enforcement 

action, at a later time, 

with respect to the matter 

discussed in this report. 

About the Campaign (p. 2) 

John Kennedy for U.S. Senate. Inc. (JKFS) is the principal 

campaign committee for Jofa^i Nccly Kennedy, Republican 

candidate for the United wtes Senate from Louisiana. JKFS is 

headquartered in Mcl.c|||^\irginia. i-or more information, see 

chart on the Campi|igii ^^anization, p. 2. 

Financial^tiyit3^[p. 2) 

• Receipts ^ 

o Contributions FrCini Individuals 

o CoiiirilnilioiisFniin Political 

Comiiiiiurcs ^ 

dffsi.M N Io Opcniiing ^ 

Ex&icIipiCN 

Oth^lKeipts „ 

$ 3,550,103 

1,201,190 

18,488 

23,677 

$4,793,458 

Isbursemcnts 

g Expenditures 

o LoafTKepayments 

ontribution Refimds 

Other Disbursements 

otal Disbursements 

$ 4,587,927 

37.500 

138.925 

440 

$4,764,792 

Finding and Recommendation (p. 3) 

• Receipt of Contributions that Exceed Limits 

2 U.S.C. §438(b). 
Draft Final Audit Report of the 

Audit Division on John Kennedy 

for U.S. Senate, Inc. 

(January 1, 2007 - December 31, 2008) 
Table of Contents 

Page 

Part I. Background 

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 A ^ ^ 

Part IV. Finding and Recomnju^dation 

Receipt of Contributions that Exceed Limits ^ ^ 
Parti 

Background 

Authority for Audit 

This report is based on an audit of John Kennedy for U.S. Senate, Inc. (JKFS), 

imdertaken by the Audit Division of the Federal Election Commission (the Commission) 

in accordance with the Federal Election Campaign Act of 1971, a^ amended (the Act). 

The Audit Division conducted the audit pursuant to 2 U.S.C. §J|8(l)^which permits the 

Commission to conduct audits and field investigations of an\ juilitical committee that is 

required to file a report under 2 U.S.C. §434. Prior to CGo^iciing any audit under this 

subsection, the Commission must perform an intemal remw of icpurls filed by selected 

committees to determine if the reports filed by a ps^cul^oommiiicc meet the threshold 

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

Scope of Audit ^ 

Following Commission-approved pn)cc(Iurcs, the Audit stuff evaluated various risk 

factors and as a result, this audit examined: 

1. the receipt of excessive contributinriN; ^ 

2. the receipt of contributions from pro^bitcd sources; 

3. the disclosure of contributions receivT _ 

4. the disclosure of indi\ iduul contributor occupiii ion !iu#name of employer; 

5. the consistency b^^cn rcpoi led figure!and bank records; 

6. the completeness ^records; and ,^ 

7. other committee operations necessary to tlie review. 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration February 9,2004 

• Audit Coverage January 1,2007 - December 31,2008 

Headquarters McLean, Virginia , 

Banlc Information 

• Bank Depositories Two . 

• Bank Accoimts ^ Two savi ^ and l\v|) checking accounts 

Treasurer 

• Treasurer When Audit Was Conducted I^n A. iJavis ^ 

• Treasurer During Period Covered by Audit ^ William Pdaer (January 1, 2007 -^May 5, 

2008). ^ . 

Keiili-A. D;'vis (May 6,2008 to Present) 

Management Information ^ 

_• _ Attended FEC Campaign Finance Seminar 

• Who Handled Accounting and 

Recordkeeping Tasks 

Overview of Fi; 

^ (Audited 

No _ 

"PidcTsi-rrf" 

I ^ 

cial Activity 

ounts) 

Cash-on^hand $5,820 

Receipts " ^ ^ 

o Cont^iiiii^s From Indiv^uuls 3,550,103 

o _Contribu£!^i^rom Politidil Comnuttees 1.201.190 

o onsets to Opi^ainig Expenditures ""l8,4b8 

o Other Receipts 23.677 

Total Receipts $ 4,793,458 

Disbursements 

o Operating Expenditures 4.587,927 

o Loan Repayments 37.500 

o Contribution Refunds 138.925 

o Other Disbursements 440 

Total Disbursements $4,764,792 

Cash-on-hand @ December 31,2008 $34,486 
Part III 

Summary 

Finding and Recommendation 

Receipt of Contributions that Exceed Limits 

A review of contributions from individuals indicated that JKFS received excessive 

contributions totaling $224,722. This; ^ount includes contribut]|^|^r which JKFS made 

an imtimely contribution refund, contributions for which JKF.S sent an imtimely 

redesignation and/or reattribution letter to the contributor and eonlributions for which JKFS 

made a payment to the U.S. Treasury. i 

t» ••• • 

In response to the Interim Audit Report, JKFS pro^ld c^ies of presmnpiive 

redesignation and/or reattribution letters, photocopies of neigotiated refuiui clieclc.s and a 

check to the U.S. Treasury. The Audit staff reviewed these materials and concluded that 

through these actions, JKFS had materially resolved all excess!^ contributi^s, albeit in an 

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

Finding and Reconrniendation 

I Receipt of Contributions that Exceed Liinits 

Summaiy 

A review of contributions from individuals indicated that JKFS received excessive 

contributions totaling $224,722. This amount includes contributions for which JKFS made 

an imtimely contribution refund, contributions for which JKFS^^t uil*>untimely 

redesignation and/or reattribution letter to the contributor and contributions for which JKFS 

made a payment to the U.S. Treasury. 

In response to the Interim Audit Report. JKFS provi^Plc^i^s of piCNum.jiiive 

redesignation and/or reattribution letters, photoc^^ of negotiated rehind checks and a 

check to the U.S. Treasury. The Audit staff re^d^ec! these^materials and ecu leaded that 

through these actions, JKFS had materially resolved all cxccssl;^ contributi^C albeit in an 

untimely manner. 

•ILegal Standard -

A. Authorized Committee Limits. For^iiie 2t)()h cicciion, an'Mforized committee could 

receive no more than a total of $2,300 per eleci:iip. iin)rn nny oueperson. 2 U.S.C. 

§441a(a)(l)(A), and (f); 11 CFK §§110.100 aiui ih) and I \0(a). 

B. Handling Con^Miulions Tliiil Appear Kx^ssive. If a committee receives a 

contribution that a^^ars to be excessive, the c^^ittee must: 

• retum the checic (o ilic ilonor; or 

• deposit ilic coniributioii and nuiiiiiiiin sufficient fimds to potentially make a refund 

untn the legiiliiy ol the conlribution is established; or 

•^sei:^ a reattribuiion ur a redcsijiitltion of the excessive portion, following the 

ii:«:iLUi'iionN provided ni the Commission regulations (see below for explanations of 

real tnbui ion and rctlcoignation), and, if the committee does not receive a proper 

reattrilmiitin or redesi«'.nation within 60 days of receiving the excessive 

contribiiiiciii. reiiindlEhe excessive portion to the donor. 11 CFR §103.3(b)(3), (4) 

and (5). ^ 

C. Joint Contributions. Any contribution made by more than one person (except for a 

contribution made by a partnership) must include the signature of each contributor on the 

check or in a separate writing. A joint contribution is attributed equally to each donor 

unless a statement indicates that the funds should be divided differently. 11 CFR 

§110.1(k)(l)and(2). 

D. Reattribution of Excessive Contributions. Commission regulations permit 

committees to ask donors of excessive contributions (or contributions that exceed the 

committee's net debts outstanding) whether they had intended their contribution to be a 
joint contribution from more than one person and whether they would like to reattribute the 

excess amount to the other contributor. The committee must inform the contributor that: 

1. both contributors must sign the reatoibution; 

2. the committee must receive the reattribution within 60 days of receiving the 

original contribution; and 

3. the contributor instead may request a refiind of the excessive amount. 11 CFR 

§110.1(k)(3). 

Within 60 days of receiving the excessive contribution, the committee must either receive 

the proper reattribution or refund the excessive portion to the donor. 11 CFR §§ 103.3(b)(3) 

and 110.1(k)(3)(ii)(B). Further, a political committee must retai|gu ril^n records 

conceming the reattribution in order for it to be effective. 11, CFR 110.1(1)(5). 

Notwithstanding the above, any excessive contribution made on a \M iiien instmment that is 

imprinted with the names of more than one individu^mf^He attriiMiied among the 

individuals listed unless the contributor(s) instmcy^erwise. The commili.cc must inform 

each contributor how the contribution was attributed and tl%the contribuiur in.'ti^ad may 

request a refimd of the excessive amount. 11 CFR § 110.1 (k)iP|(ii)(B). ^ 

£. Redesignation of Excessive Con^^tions. The committee may ask the contributor 

to redesignate the excessive portion ofTnc coniribution for U'«e in another election. The 

committee must inform the contributor iliiii: ^ 

1. the contributor must sign the rede^iKiiion: ^ 

2. the committee must receive the red^iyiiiii ion u iijiirf^ days of receiving the 

original contribiii ion: iiiiJ ^ 

3. the contributor may instead request a ^||uid of the excessive amount. 11 CFR 

§110.1(b)(f^iiKA). ^ 

Within 60 dayx tif recei\ iim ilic excess!x ej^l^bition. the committee must either receive 

the prop^l^deNienniiori or reiiirid llie excessive portion to the, donor. 11 CFR §103.3(b)(3) 

and 110. l(b)(5)(ii)(A). I-'uriiier, :i poliiiual committee must retain written records 

concdrniii|! i;:e ledesignai ion in order f or it to be effective. 11 CFR § 110.1(1)(5). 

When an ind!'- ulual makes flexcessive contribution to a candidate's authorized 

committee, the c:iiiip.iit,^ vmj presumptively redesignate the excessive portion to the 

general election if ihe coi^bution: 

1. is made beforethat candidate's primary election; 

2. is not designated in writing for a particular election; 

3. would be excessive if treated as a primary election contribution; and 

4. as redesignated, does not cause the contributor to exceed any other contribution 

limit. 

The committee is required to notify the contributor of the redesignation within 60 days of 

the treasurer's receipt of ttie contribution, and must offer the contributor the option to 

receive a refund instead. 11 CFR 110. l(b)(5)(ii)(B). 
Facts and Analjrsis 

A. Facts 

A review of contributions from individuals indicated that JKFS received excessive 

contributions totaling $224,722 that were resolved in an untimely manner or could still be 

resolved via presumptive reattribution or redesignation letters.^ Prior to receiving the 

Interim Audit Report, JKFS provided evidence that it sent untimely reattribution/ 

redesignation letters to contributors (conceming $62,700) and-made untimely refunds to 

contributors (conceming $30,900). The remaining contributions, totaling $131,122 

($224,722 - $62,700 - $30,900), had not been addressed by JKI'S^iri(*^to receiving the 

Interim Audit Report. 

Among the excessive contributions that JKFS resolved ii^g untimely manner were 12 

contribution checks totaling $36,800. written on a hiinlc^!ic(mnt of a limited liability 

company (LLC). One of three individuals associ^j^'ii wiiii the LLC sieneci.cach check. 

JKFS attributed these contributions to the eighi indi\ iduals^ose names were iiitprinted 

on die 12 checks. The contribution checks wdie coinjniter-^^^ted and semieniially 

numbered (except for one missing check number). ri\ e O\W^QIZ checks, totaling $9,200, 

were dated December 20,2007, and v^ t signed by one individual. Three checks, totaling 

$13,800, were dated March 13.2008 jncl were signed by a second individual. The 

remaining four checks, totaling $13,800. \ierc iiUo dated Murch^f2008 and were signed 

by a third individual. JKFS attributed $4^0 in cacli ol the ei^mdividuals. $2,300 each 

to the primary^ and general elections. The%iclii ^i.ifr :r.tribu^d these contributions to the 

three check-signers, resyliiiu! in excessive c%pbutions U) the primary election. For these 

12 checks, JKFS provwd photocopies of untmely presumptive redesignation letters, 

relating to the $18,400 in excessive contributions fiom the eight individuals. 

Also, the Audit >iaff asked lo pim ide lui^mation as to the permissibility of these 

contributi^. JKFS |)i-fi\ ideiHeriers from the eight individuals associated with the LLC, 

which aflirmcd that ilic conlrib!l!lon^ wore from their personal funds and not from the 

fimd^f the LLC or any oiiter entity. I lie letters from the three individuals who signed the 

checks also affirmed that the LLC ^as not an incorporated entity and did not file its tax 

retum as a corpoi.ition. 

B. Interim Aucfil Kcpor| & Audit Division Recommendation 

The Audit staff informed JKFS representatives of this matter at the exit conference held 

at the close of audit fiUdwork and in subsequent discussions. The Audit staff provided 

schedules of the contributions in question. The representatives stated that they would 

^ The $224,722 is comprised of $175,422, the projected dollar value of errors in the population, and $49,300 

from focused reviews of contributions not included in the sample population. The sample projection was 

made using a Monetary Unit Sample program with a 95 percent confidence level. The sample estimate of 

$173,422 could be as low as $119,124 or as high as $231,723. The $49,300 from two focused reviews 

resulted from a review of high-dollar contributions ($30,900) and a review of contributions from individuals 

associated with a limited liability company ($18,400). 

^ Date of the primary election was October 4,2008. 
take the necessary actions. In addition, JKFS representatives pointed out that the 

solicitation devices (reply cards) used during the campaign had specific instmctions on 

the contribution limits for the primary and general elections and the contributor filled 

them out. They added that these response devices included lines for spousal information. 

The Audit staff reviewed the solicitation devices and noted that, although they provided 

space for contributor information from more than one contributor, there is no evidence 

that more than one contributor completed the form(s). 

The Interim Audit Report recommended that JKFS provide evidence demonstrating that the 

contributions totaling $224,722 were not excessive or that they were resolved in a timely 

manner. Examples of such evidence given included: copies of tiiJiel}Spgotiated refimd 

checks; timely signed/dated reattribution/redesignation letters, ainl/or presumptive 

reattribution/ redesignation letters. The Interim Audit Repoi i nuied that the Audit staff 

would calculate a revised projected error amount if an^^such evidence was presented that 

demonstrated any of the sample exceptions were noj^xce^iVe contributions. 

Absent evidence that the contributions were not excessive ^yL^cre resolved in u timely 

manner, the Interim Audit Report fiirther recofinneiiileii th:ii||gFS review its contributions 

to determine which were excessive and how each a':.ld lie icsoRed. The In^rim Audit 

Report noted that JKFS could have resolved any excessive contributions by sending 

presumptive redesignation and/or reaimfiiiiion letters to infoim the contributors how the 

JKFS designated and/or reattributed the cniiiribtiiion along wiili an^ffer for a refund. For a 

reattribution, JKFS was to notify both th^»nii ilmior and the individual to whom a 

conb:ibution was reattributed. Absent a reftestj^r a refund by the contributors, these 

letters would obviate th| need lor contributi^Kfunds o^payment to the U.S. Treasury. 

For notifications seny^ontriiniiors, the AuAstaff requested that JKFS provide a copy of 

each notification and evidence that it was sent.^|ie»Audit staff noted that the appropriate 

reduction to the $131,122 iiuexccvNive contributjP^ not yet addressed as of the close of 

fieldwork would he made after a review of any additional letters submitted by JKFS in 

responseJg|flie fnierim .'\iiilii Report. ForlSfiefiind checks not negotiated by the 

contrihiiiors or for any coiiiribiiior JKI'^was unable to locate, the Interim Audit Report 

furth^- lecommended dial J Kl-S make fpayment to the U.S. Treasury. 

In addition, the hiierim Aiulii Report recommended that if funds were not available to 

make the necessary refund^^S should disclose die contiibutions requiring refunds on 

Schedule D (Debts and Opgations) until funds became available to make the refunds. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, JKFS provided copies of 

presumptive redesignation and/or reatb:ibution letters sent after it had received the Interim 

Audit Report. The Audit staff reviewed these letters along with die corresponding 

contributor checks/credit card documentation and concluded that $121,100 in excessive 

contributions were eligible for such action. As a result, the Audit Staff considered 

$121,100 as resolved but not in a timely manner. JKFS also provided photocopies of 

negotiated refund checks sent to diree individuals, totaling $6,900, which JKFS sent to die 

contributors subsequent to audit fieldwork but before transmittal of the Interim Audit 

Report. Finally, JKFS submitted a check to die U.S. Treasury in die amount of $22,600 for 
stale-dated refund checks, which included $4,500 in excessive errors from the Audit staffs 

sample review of contributions from individuals. 

In summary, the Audit staffs review of contributions from individuals indicated that 

JKFS received excessive contributions totaling $224,722 that were resolved, but not in a 

timely maimer. The Interim Audit Report recommended that JKFS address $131,122 in 

excessive contributions not yet addressed as of the close of fieldwork. JKFS's response 

provided evidence that resolved, albeit in an untimely manner, $132,500 ($121,100 + 

$6,900 + $4,500) in excessive contributions.^ 

i 

* The $132,500 resolved by JKFS's response exceeded the $131,122 the Audit staff recommended that JKFS 

address in the Interim Audit Report recommendation. This occurred because the $131,122 was partially 

based on a projected dollar value of excessive errors in the population and JKFS located a slightly larger 

dollar value of excessive contributions eligible for presumptive redesignation and/or reattribution treatment.