!^nal Aujdit Report of the 

Conimission on the Freedoin's 

Defense Fnnd 

(January 1, 2011 - December 31, 2012) 

Why the Audit 

Was Done 

Federal law permits th( i 

Commission to conduc 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Ac 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have me: 

the threshold 

requirements for 

substantial compliancei 

with the Act.' The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirement i 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of t|ie 

matters discussed in this 

report. 

About the Committee (p. 2) 

The Freedom's Defense Fund is a non-connected committee, 

headquartered in Arlington, Virginia. For more information, see 

the chart on Committee Organization, p.2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Other Receipts 

Total Receipts 

Disbursements 

o Operating Expenditures 

o Contributions to 

Candidates/Committees 

o Independent Expenditures 

o Other Disbursements 

Total Disbursements 

$3,626,052 

54,481 

S 3,680,533 

$2,353,611 

107,900 

1,244,507 

14,728 

$3,720,746 

Commission Findings (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). 
Final Auidit of tha 

Qoniiiiii^oa oa[ i^he 

Fraedom'a Pefenae Fund 

(January 1, 2011 - December 31, 2012) 
fable af CoHtesftts 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit i 

Audit Hearing 1 

Part n. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Part in. Summaries 

Commission Findings 3 

Part IV. Commission Findings 

Finding 1. Misstatement of Financial Activity 5 

Finding 2. Disclosure of Occupation and Name of Employer 7 

Findings. Reporting of Apparent Independent Expenditures 9 

Finding 4. Recordkeeping for Communications IS 
I 

Baek^x>niijd 

Authority for / udit 

This report is based oi 

Audit Division of the 

the Federal Election 

conducted the audit 

conduct audits and fie 

report under 52 U.S.C 

Commission must 

determine if the repor^ 

for substantial compli 

perform i 

Scope of Audit 

Following Commission 

factors and as a result, 

1. the disclosure of ir 

the disclosure of di 

the consistency 

the completeness df 

the disclosure of ir 

2. 

3. 

4. 

5. 

6. 

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

ederrd Election Commission (the Commission) in accordance with 

Cjampaign Act of 1971, as amended (the Act). The Audit Division 

pi rsuant to 52 U.S.C. §30111(b), which permits the Corxunission to 

d investigations of any political committee that is required to file a 

§30104. Prior to conducting any audit under this subsection, the 

an internal review of reports filed by selected committees to 

filed by a particular committee meet the threshold requirements 

liance with the Act. 52 U.S.C. §30111 (b). 

L-approved procedures, the Audit staff evaluated various risk 

this audit examined: 

dividual contributors' occupation and name of employer; 

1 ibts and obligations pertaining to independent expenditures; 

reported figures and bank records; 

disbursement records; 

dependent expenditures; and 

between 

other committee operations necessary to the review. 

Audit Hearing 

FDF requested a hearipg 

hearing was held on Si 

Reporting of Apparent 

before the Commission. The request was granted and the 

eptember 14,2017. At the hearing, FDF addressed one issue. 

Independent Expenditures. (For more detail, see Finding 3, p.l 1.) 
Part II 

Overview of Committee 

Committee Organization 

important Dates 

• DateofRegi'sjtiiition June 7.2004 

• Audit Coverage. January 1,2011 - December 31,2012 

Headquarters. Arlihgtori, Virgifiia 

Bank Information .. 

. • Bank Depositories One 

• Bank Accounts Three cheeking accounts 

Treasurer 

• Treasurer When Audit Was Conducted Scott Mackenzie 

• Treasurer Duruig..Period Covered by Audit Scott Mackenzie 

Management Information 

• Attended Conunission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Treasurer 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand January 1,2011 $ 45,043 

Receipts 

o Contributions from Individuals 3,626,052 

o Other Receipts 54,481 

Total Receipts S 3,680,533 

Disbursements 

"6 O^peirating Expenditifrc3 2.353,611 

o Contributions to Candidates/Committees 107,900 

o IndependiBnt ^penditures 1.244,507^ 

o Other Disbursements 14,728 

Total Disbursements . . $3,720,746 

Casb-on-band ^.December 31,2012 $5,830 

^ This amount, as well as the amount for operating expenditures, has been revised as a result of the Commission's 

final consideration of Finding 3. 
Part III 

Summaries 

Coatliiission Fiadings 

Finding 1. Misstatement of Financial Activity 

The Audit staffs comparison of PDF's reported financial activity with its bank records 

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

overstated its ending cash-on-hand balance by $62,220. In response to the Interim Audit 

Report recommendation, the PDF Treasurer stated that PDF would amend its reports to 

correct the discrepancies. In response to the Draft Pinal Audit Report, PDF filed 

amended reports that materially corrected the misstatements for 2011. 

The Commission approved a finding that PDF misstated its financial activity for calendar 

year 2011 as stated above. 

(For more detail, see p. S.) 

Finding 2. Disclosure of Occupation and Name of 

Employer 

During audit fieldwork, a review of all contributions from individuals requiring 

itemization indicated that 2,911 contributions totaling $378,639 lacked adequate 

disclosure of occupation and name of employer. PDF did not demonstrate "best efforts" 

to obtain, maintain and submit this infonnation. In response to the Interim Audit Report 

recommendation, the PDF Treasurer provided a schedule containing missing occupation 

and name of employer information. He stated that PDF had obtained approximately 9S% 

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

response to the Draft Pinal Audit Report, PDF filed amended reports that materially 

corrected the disclosure of occupation and name of employer information. 

The Commission approved a finding that PDF failed to disclose occupation and name of 

employer information for 2,629 contributions from individuals totaling $351,798. 

(For more detail, see p. 7.) 

Finding 3. Reporting of Apparent Independent 

Expenditures 

During audit fieldwork, the Audit staff reviewed disbursements to verify that the 

independent expenditures that PDF disclosed on Schedule E (Itemized Independent 

Expenditures) were reported accurately. PDF disclosed independent expenditures 

totaling $385,619. The Audit staff identified additional disbursements disclosed as 

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

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

reports were filed. 
In response to the Initerim. 

these expenditures 

purpose for the expem 

similar mailings that v 

staff audited FDF for thi 

FDF restated its positio 

independent expenditures. 

The Audit staff acknoyi 

similar language to the 

cycle. However, the 2 

independent expendii 

Audit Report reconunendation, the FDF Treasurer stated that 

were properly reported as operating expenditures since the primary 

iditures was to raise f\mds for FDF. The Treasurer also referred to 

ere not considered to be independent expenditures when the Audit 

le 2008 election cycle. In response to the Draft Final Audit Report, 

n and filed amended reports disclosing the expenditures in question as 

rledged 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 

itures: ;; and therefore, were not included in a finding. 

The Commission approved a finding that FDF failed to report apparent independent 

expenditures totaling $868,015, and failed to file 24/48-hour reports for these apparent 

independent expenditures. 

(For more detail, see pj. 9.) 

Finding 4. Recordkeeping for Communications 

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

iper classification of transactions disclosed on reports. FDF 

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

of "direct mail - creative" and "direct mail - postage." 

provided by FDF was insufficient to make a determination 

pertaining to the puipclse for these expenditures and verification as an operating expense. 

In response to the Interim Audit Report, the FDF Treasurer stated that FDF was 

attempting to obtain th s missing documentation from its vendors, however, it asserted 

that these expenses ha e been properly reported as operating expenditures. In response to 

the Draft Final Audit I .eport, FDF aclmowledged that it was not able to obtain the 

necessary documentati on, and filed amended reports disclosing the expenditures as 

independent expenditu res. Absent the provision of records, the Audit staff considered the 

matter a violation of the recordkeeping requirements at 11 CFR §104.14(b)(1). 

the information and 

reported 13 expend! 

Expenditures) with 

Documentation that 

The Commission appro 

pertaining to 13 disburs 

(For more detail, see p 

ived a finding that FDF did not provide the necessary records 

sments totaling $90,814. 

15.) 
Partly 

Commisslim findings 

[ Finding 1. Mil statement of Financial ActivHir 

Summaiy 

The Audit staffs comj 

revealed that, for 2011 

overstated its ending 

Report recommendati9i 

correct the discrepanci 

amended reports that 

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

, FDF understated its reported disbursements by $52,357, and 

c|ash-on-hand balance by $62,220. In response to the Interim Audit 

n, the FDF Treasurer stated that FDF would amend its reports to 

es. In response to the Draft Final Audit Report, FDF filed 

materially corrected the misstatements for 2011. 

The Commission appro 

year 2011 as stated al 

ived a finding that FDF misstated its financial activity for calendar 

ibbve. 

Legal Standard 

Contents of Reports. 

1* 

Each report must disclose: 

the amount of eash-on-hand at the beginning and end of the reporting period; 

the total amount of receipts for the reporting period and for the calendar year; 

'the total amount of disbursements for the reporting period and for the calendar 

year; and 

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

Schedule B (Itemized Disbursements). 52 U.S.C. §30104(b)(I), (2), (3), (4), and 

(5). 

Facts and Analys: 

A. Facts 

During audit fieldwork, 

its bank records for ca 

FDF misstated disburs sments 

outlines the discrepancii 

succeeding paragraphs 

the Audit staff reconciled FDF's reported financial activity with 

endar years 2011 and 2012. The reconciliation determined that 

and ending cash-on-hand for 2011. The following chart 

ies between FDF's disclosure reports and its bank records. The 

explain why the discrepancies occurred. 

2011 Committee Ac ivity 

Reported Bank Records ; Discrepancy 

Beginning Cash-on-F 

January 1,2011 

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

Understated 

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

Overstated 

Disbursements $1,293,431 $1,345,788' 

1 

($52,357) • 

Understated. 

Ending Cash-on-Han 

@ December 31,201 

1 $74,840 $12,620' $62,220 

Overstated. 
The understatement of disbursements resulted from the following differences: 

• Contributions to candidates/committees not reported $ 51,650 

• Vendor payment not reported 2,900 

.» Unexplained differences (2.1931 

Net Understatement of Disbursements $ 52357 

The $62,220 overstatement of the ending cash-on-hand balance primarily resulted from 

the misstatements described above. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided work papers and discussed the reporting 

errors that caused the misstatements. The FDF Treasurer stated that amended reports 

would be filed to correct the misstatements. 

The Interim Audit Report recommended that FDF amend its reports to correct the 

misstatements for 2011 as noted above. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, the FDF Treasurer stated that 

FDF would amend its reports to correct the discrepancies. However, as of the date of this 

report, no amended reports have been filed. 

D. Draft Final Audit Report 

The Draft Final Audit Report reiterated that FDF did not file amended reports to correct 

the misstatement of financial activity. 

E. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, FDF filed amended disclosure reports that 

materially corrected the misstatement of financial activity. 

F. Audit Hearing 

FDF did not address this finding during the Audit Hearing. 

Commission Conclusion 

On October 25,2017, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission adopt a 

finding that FDF misstated its financial activity for calendar year 2011 as stated above. 

The Commission approved the Audit staffs recommendation. 
Finding 2. Disclosure of Occupation and Name of 

Employer 

Summary 

During audit fieldwork, a review of all contributions from individuals requiring 

itemization indicated diat 2,911 contributions totaling $378,639 lacked adequate 

disclosure of occupation and name, of employer. FDF did not demonstrate "best efforts" 

to obtain, maintain and submit this information. In response to the Interim Audit Report 

recommendation, the FDF Treasurer provided a schedule containing missing occupation 

and name of employer information. He stated that FDF had obtained approximately 95% 

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

response to the Draft Final Audit Report, FDF filed amended reports that materially 

corrected the disclosure of occupation and name of employer information. 

The Commission approved a finding that FDF failed to disclose occupation and name of 

employer information for 2,629 contributions fix)m individuals totaling $351,798. 

Legal Standard 

A. Itemization Required for Contributions from Individuals. A political conunittee 

other than an authorized committee must itemize any contribution from an individual if it 

exceeds $200 per calendar year, either by itself or when combined with other 

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

B. Required Information for Contributions from Individuals. For each itemized 

contribution from an individual, the committee must provide the following information: 

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

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

• the date of receipt (the date the committee received the contribution); 

• the amount of the contribution; and 

• the calendar year-to-date total of all contributions from the same individual. 52 

U.S.C. §30104(b)(3)(A) and 11 CFR §§ 100.12 and 104.3(a)(4)(i). 

C. Best Efforts Ensures Compliance. When the treasurer of a political committee 

shows that the committee used best efforts (see below) to obtain, maintain, and submit 

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

considered in compliance with the Act. 52 U.S.C. §30102(i). 

D. Definition of Best Efforts. The treasurer and the conunittee will be considered to 

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

• All written solicitations for contributions included: 

o a clear request for the contributor's full name, mailing address, occupation, 

and name of employer; and 

o the smtement that such reporting is required by Federal law. 

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

manner on any response material included in a solicitation. 
• Within 30 da; rs of receipt of the contribution, the treasurer made at least one 

effort to obtain the missing information, in either a written request or a 

documented oral request. 

• The treasurer reported any contributor information that, although not initially 

provided by t le contributor, was obtained in a follow-up communication or was 

contained in 1 le committee's records or in prior reports that the committee filed 

during the sai le two-year election cycle. 11 CFR § 104.7(b). 

Facts and Analys s 

A. Facts 

A review of all contrib utions from individuals requiring itemization indicated that 2,911 

contributions totaling $378,639, or 41% of total contributions from individuals required 

to be itemized by FDFi lacked disclosure of occupation and name of employer. The 

majority of the contributor entries (2,669 of 2,911) that lacked the required information 

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

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

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

FDF did not provide documentation showing it made follow-up best efforts for 

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

• FDF had the r^uired information for 2,629 contributions totaling $351,798; 

however, this information was not subsequently disclosed on the Commission 

disclosure repc rts. 

B. Interim Audit Re| 

At the exit conference, 

occupation and name 

Treasurer conunented 

employer information, 

demonstrating that FDF 

employer information, 

to obtain the missing o 

documentation demoi 

information for $256,4 

filed.^ This amount is 

iport( 

The Interim Audit Rep 

relating to the 2,629 cc 

& Audit Division Recommendation 

the Audit staff provided schedules and discussed the omission of 

of employer information from the disclosure reports. The FDF 

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

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

had obtained most of the missing occupation and name of 

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

xupation and name of employer information. This additional 

m^rated that FDF had obtained occupation and name of employer 

>1 of the errors; however, amended disclosure reports were not 

ncluded in the $351,798 noted above. 

art recommended that FDF demonstrate that it complied with the 

'.'best efforts" requirements by amending its reports to disclose the missing information 

^ FDF's database containec 

contributions totaling S9! 

ntributions totaling $351,798 ($95,347 + $256,451). 

the occupation and name of employer information for an additional 420 

.347. 
C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, the PDF Treasurer stated that 

PDF had obtained approximately 95% of the missing occupation and name of employer 

information and would amend its reports to include this information. POP provided an 

attachment containing this information. The Audit staff reviewed this schedule and 

concurred that PDF had obtained more than 95% of the missing information, but as of the 

date of this report, no amended reports were filed. 

D. Draft Final Audit Report 

The Draft Pinal Audit Report reiterated that PDF had obtained more than 95% of the 

missing information, but PDF did not file amended reports to correct the disclosure of 

occupation and name of employer information. 

E. Committee Response to the Draft Final Audit Report 

In response to the Draft Pinal Audit Report, PDF filed amended disclosure reports that 

materially corrected the disclosure of occupation and name of employer information. 

F. Audit Hearing 

PDF did not address this finding during the Audit Hearing. 

Commission Conciusion 

On October 25,2017, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recorrtmended that fire Commission adopt a 

finding that PDF failed to disclose occupation and name of employer information for 

2,629 contributions from individuals totaling $351,798. 

The Corrmiission approved the Audit stafTs recommendation. 

Finding 3. Reporting of Apparent Independent 

Expenditures 

Summary 

During audit fieldwork, the Audit staff reviewed disbursements to verify that the 

independent expenditures that PDF disclosed on Schedule E (Itemized Independent 

Expenditures) were reported accurately. PDF disclosed independent expenditures 

totaling $385,619. The Audit staff identified additional disbursements disclosed as 

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

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

reports were filed. 

In response to the Interim Audit Report recommendation, the PDF Treasurer stated that 

these expenditures were properly reported as operating expenditures since the primary 

purpose for the expenditures was to raise fimds for PDF. The Treasurer also referred to 

similar mailings that were not considered to be independent expenditures when the Audit 

staff audited PDF for the 2008 election cycle. In response to the Draft Final Audit Report, 
10 

FDF restated its position and filed amended reports disclosing the expenditures in question as 

independent expenditures. 

The Audit staff acknowledged 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. 

The Commission approved a finding that FDF failed to report apparent independent 

expenditures totaling $868,015, and failed to file 24/48-hour reports for these apparent 

independent expenditures. 

Legal Standard 

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

means an expenditure by a person for a communication expressly advocating the 

election or defeat of a clearly identified candidate that is not made in coordination 

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

shall be considered independent if the person making the expenditure allows a 

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

committee or its agents to become materially involved in decisions regarding the 

communication as described in 11 CFR 109.21(d)(2), or shares financial 

responsibility for the cost of production or dissemination with any such person. 11 

CFR §100.16. 

B. Disclosure Requirements - General Guidelines. An independent expenditure shall 

be reported on Schedule E if, when added to other independent expenditures made to 

the same payee during the same calendar year, it exceeds $200. Independent 

expenditures made (i.e., publicly disseminated) prior to payment should be disclosed 

as memo entries on Schedule E and as a debt on Schedule D. Independent 

expenditures of $200 or less need not be itemized, though the committee must report 

the total of those expenditures on line (b) of Schedule E. 11 CFR §§ 104.3(b)(3)(vii), 

104.4(a) and 104.11. 

C. Last-Minute Indepeudent Expeuditure Reports (24-Hour Reports). Any 

independent expenditures aggregating $1,000 or more, with respect to any given 

election, and made after the 20"* day but more than 24 hours before the day of an 

electioii, must be reported and the report must be received by the Commission within 

24 hours after the expenditure is made. A 24-hour report is required each time 

additional independent expenditures aggregate $1,000 or more. The date that a 

communication is publicly disseminated serves as the date that the committee must 

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

aggregate, reached or exceeded the threshold reporting amount of $ 1,000. 11 CFR 

§§104.4(f) and 104.5(g)(2). 

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

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

and including the 20th day before an election, must be disclosed within 48 hours each 
time the expendiitures 

Commission within 

required each time 

The date that a coi 

committee must 

expenditures has, i 

amount of $10,00( 

US£ 

in 

"defeat" accon 

incumbent," or 

11 

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

48 hours after the expenditiw is made. A 48-hour report is 

additional independent expenditures aggregate $10,000 or more, 

mmunication is publicly disseminated serves as the date that the 

to determine whether the total amount of independent 

the aggregate, reached or exceeded the threshold reporting 

11 CFR §§104.4(f) and 104.5(g)(1). 

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

communication thi 

V Uses phrases s^ch as "vote for the President," "re-elect your Congressman," 

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

communications of campaign slogan(s) or individu^ word(s), 

which in content can have no other reasonable meaning than to urge the election 

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

stickers, advertisements; or 

When taken as ja whole and with limited reference to external events, such as the 

proximity to the election, could only be interpreted by a reasonable person as 

containing advocacy of the election or defeat of one or more clearly identified 

candidate(s) b«:ause: 

the elec oral portion of the communication is unmistakable, unambiguous, 

and sug festive of only one meaning; and 

reasona >le minds could not differ as to whether it encourages actions to 

elect or defeat one or more clearly identified candidate(s) or encourages 

some other kind of reaction. 11 CFR § 100.22(a) and (b). 

F. Formal Requiremi 

committee shall maintai; 

which shall provide in 

filed reports may be 

completeness. 11 CFR 

lents Regarding Reports and Statements. Each political 

in records with respect to the matters required to be reported 

sufficient detail the necessary information and data from which the 

ified, explained, clarified, and check for accuracy and 

§104.14(b)(l). 

ven: 

Facts and Analysi s 

A. Reporting of Apparent Independent Expenditures 

1. Facts 

During audit field\^ork, the Audit staff reviewed disbursements to ensure that 

independent expenditures were disclosed correctly on Schedule E. FDF disclosed 

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

made media-relatei expenditures totaling $868,015 and disclosed them as operating 

expenditures on Sc ledule B, Line 21b (Operating Expenditures), when it appears that 

they should have hi ;en reported as independent expenditures on Schedule E. 

According to vendor 

contained the mailer 

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

identification codes, the quantity of pieces mailed, the date that 
12 

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

were made availabjle indicated that they contained language expressly advocating the 

election or defeat of a clearly identified candidate, which is Federal Election Activity 

that is required to )e reported on Schedule E as defined under 1ICFR § 100.22(a). 

A breakdown of tfa B analysis for these expenditures is as follows:. 

Apparent Ind spendent Expenditures Reported as Operating Expenditures 

(Copy of Com munication 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 invoic^. All of these communications contained language expressly 

advocating thelelection or defeat of a clearly identified candidate, as defined 

under llCFR§100.22(a). 

The majority of the mailers advocated the defeat of Barack Obama in the 2012 

general election. Some of the mailers included statements directly advocating 

defeat such as, r'Barack Obama must be defeated," and "It's going to take a 

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

defeated." Other mailers contained language such as, "we conservatives need to 

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

what's necessary to make Barack Hussein Obama a one-term president." and "It 

goes without saying that Barack Obama must be defeated...Together, you and I 

must take Barack Obama and his liberal-progressive hacks head-on. This is the 

only way that tpey will be defeated!" 

2. Interim Audit jReport & Audit Recommendation 

At the exit conference, the Audit staff presented schedules of apparent independent 

expenditure reporting errors. In response to the exit conference, the FDF Treasurer 

stated that FDF's position would be that these expenditures were fundraising 

expenditures and not independent expenditures. 

The Interim Audit Report recommended that FDF provide documentation and 

evidence that apparent independent expenditures totaling $868,015 did not require 

reporting as independent expenditures. Absent such evidence, it was further 

recommended th^ FDF amend its reports to disclose these disbursements as 

independent expen(|itures on Schedule E and submit revised procedures for reporting 

independent expenditures. 

3. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, the FDF Treasurer stated 

that these expenditures were properly reported as operating expenditures since the 

primary purpose fo: 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 cont ributed to FDF or another conservative committee and that the 

purpose of these mailings was not to influence their vote, as FDF already knew with 
13 

nearly 100% certainty 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. 

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

independent expenditures when the Audit staff audited FDF 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 acknowledged 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. 

4. Draft Final Andit Report 

The Draft Final Audit R^ort reiterated that FDF did not file amended reports to 

disclose the expenditures in question as independent expenditures. 

5. Committee Response to the Draft Final Audit Report 

In response to the DFAR, FDF. restated its Interim Audit Report position that the 

expenditures were properly reported as operating expenditures. PDF filed amended 

reports disclosing the expenditures in question as independent expenditures. 

6. Audit Hearing 

At the audit hearing, the FDF Treasurer stated that since the audit of FDF from the 2008 

election cycle did not result in recommendations that similar transactions be reported as 

independent expenditures, FDF continued to report these items as operating expenditures, 

As a result, FDF believed that the apparent independent expenditures identified by the 

Audit staff totaling $868,015, should not be subject to a fine. 

Commission Conclusion 

On October 25,2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission adopt a finding that FDF failed to report apparent independent 

expenditures totaling $868,015. 

The Commission approved the Audit staffs recommendation. 

B. Failure to File 24/48- Hour Reports for Independent Expenditures 

1. Facts 

During audit fieldwork, the Audit staff reviewed independent expenditures reported 

by FDF, as well as the apparent independent expenditures noted above, to determine 
14 

whether additional reporting of24/48-hour reports was required/ As noted above, 

the Audit staff identified apparent independent totaling $868,015 which may also 

require filing of24/48-hour reports. 

2. Interim Audit Report & Audit Recommeudatiou 

At the exit conference, the Audit staff presented schedules of independent 

' expenditure reporting enors. The PDF Treasurer stated that FDF's position would be 

that these exp^itures were fimdraising expenditures and not independent 

expenditures. 

Absent documentation and evidence that apparent independent expenditures totaling 

$868,015 did not require reporting as independent expenditures (per Part A above), 

the Interim Audit Report recommended that PDF provide documentation to support 

the date of public dissemination for the communications to determine whether a filing 

of a 24/48-hour report was required. 

3. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendation, the FDF Treasurer stated 

that FDF has reported and filed 24/48-hour reports for expenditures for broadcast 

media and targeted voter contact mail totaling $385,619. Further, the Treasurer stated 

that the expenditures 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 maintained that 24/48-hour reports for apparent independent 

expenditures totaling $868,015 should have been filed. 

4. Draft Final Aiidlt Report 

The Draft Final Audit Report reiterated that FDF did not file 24/48-hour reports for 

apparent independent expenditures totaling $868,015. 

5. Committee Response to the Draft Final Audit Report 

In response to the DFAR, FDF restated its Interim Audit Report position that the 

expenditures were properly reported as operating expenditures. 

6. Audit Hearing 

At the audit hearing; the FDF Treasurer stated that since the audit of FDF from the 2008 

election cycle did not result in recommendations that similar transactions be reported as 

independent expenditures, FDF continued to report these items as operating expenditures.. 

As a result, FDF believed that the apparent independent expenditures identified by the 

Audit staff totaling $868,015, should not be subject to a fine. 

* The date the expenditure |s publicly distributed serves as the date that the independent expenditure is 

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

mail date for each mailer on the list 
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Commission Conclusion 

On October 25,2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission adopt a finding that FDF failed to file 24/48-hour reports for these 

apparent independent expenditures. 

1lie Commission approved the Audit staffs recommendation. 

I Finding 4. Recordkeeping for Comnmnications 

Summary 

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

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

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 FDF was insufficient to make a determination 

pertaining to the purpose for these expenditures and verification as an operating expense. 

In response to the Interim Audit Report, the FDF Treasurer stated that FDF was 

attempting to obtain the missing documentation from its vendors, however, it asserted 

that these expenses have been properly reported as operating expenditures. In response to 

the Draft Final Audit Report, FDF aclmowledged that it was not able to obtain the 

necessary documentation, and filed amended reports disclosing the expenditures as 

independent expenditures. Absent the provision of records, the Audit staff considered the 

matter a violation of the recordkeeping requirements at 11 CFR §104.14(b)(l). 

The Commission approved a finding that FDF did not provide the necessary records 

pertaining to 13 disbursements totaling $90,814. 

Legal Standard 

A. Formal Requirements Regarding Reports and Statements. Each political 

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

which shall provide in sufficient detail the necessary information and data from which 

the filed reports may be verified, explained, clarified, and check for accuracy and 

completeness. 11 CFR §104.14(b)(1). 

B. Preserving Records and Copies of Reports. The treasurer of a political committee 

must preserve all records and copies of reports for 3 years after the report is filed. 

52U.S.C. §30102(d). 

Facts and Analysis 

A. Facts 

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

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

reported expenditures totaling $90,814 for which documentation was insufficient to make 
16 

a determination pertaining to whether these disbursements were correctly reported on 

Schedule B, Line 2 lb (Operating Expenditures). 

The Audit staffs analysis resulted in the following; 

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

Communications ($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 FDF 

should have reported these disbursements. During audit fieldwork, the Audit staff 

requested copies of the mml communications. To date these records have not 

been provid^. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff presented a schedule of the disbursements for 

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

Audit staff requested copies of die mail communications. The FDF Treasurer stated that 

he would contact the vendors to find the missing mail communications, or find out if the 

invoices had incorrect mailer job identifiers, and would provide the Audit staff with any 

documentation that was obtained. 

The Interim Audit Report recommended that FDF provide, in sufficient detail, the 

necessary information from which the reported operating expenditures totaling $90,814 

may be verified or explained. Such records should have included: 

• Copies of communications that could be associated to the vendor invoices, and 

• If the communication had already been provided, information associating each 

communication with an invoice(s). 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, the FDF Treasurer stated that 

FDF was attempting to obtain the missing documentation from its vendors, however, it 

asserted that these expenses have been properly reported as operating expenditures. 

Absent the provision of records, the Audit staff considered the matter a violation of the 

recordkeeping requirements at 11 CFR §104.14(b)(l). 

D. Draft Final Audit Report 

The Draft Final Audit Report reiterated that FDF did not provide the necessary 

information from which the reported operating expenditures totaling $90,814 could have 

been verified or explained. 
I 17 

E. Committee Response to the Draft Final Audit Report 

In response to the Droit Final Audit Report, PDF did not provide any new documentation 

relating to these expenditures. PDF filed amended reports that disclosed these 

expenditures as independent expenditures. 

F. Audit Hearing | 

FDF did not address this finding during the Audit Hearing. 

Commission Conclusion 

On October 25,2017, , the Commission considered the Audit Division Recormnendation 

Memorandum in whic i the Audit staff recommended that the Commission.adopt a 

finding that FDF did not provide the necessary records pertaining to 13 disbursements 

totaling $90,814. 

The Commission approved the Audit staffs recommendation.