Draft Final Audit Report of the 

Audit Division on the Friends of 

Sharro n Angl e (February 17, 2009 -

December 31, 2010) 

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 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, 

with respect to any of the 

matters discussed in this 

report. 

About the Campaign (p^ 

Friends of Sharron Angle is the^rincip^al campaign committee for 

Sharron Angle, Republican^f^^M^te for the United States Senate 

from Nevada, and is headqiTartere j in Reno, Nevada. For more 

information, see the chart oil the Campaign Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions-from Individuals 

o Contributions from Other 

Political Committees 

o Contributions from Otiier. 

Authorized iCdrr^ 

o Refunds aiid Other pSfsets 

Total Receipts .v'^ 

• Disbursements,' 

o Operating Disbursements 

o Contribution Refunds 

o Other Disbursements 

Total Disbursements 

•'7 

$ 27,790,037 

399,037 

56,544 

23,531 

$ 28,269,149 

$ 27,948,259 

206,202 

22,675 

$ 28,177,136 

Findings and Recommendations (p. 3) 

• Filing of 48-Hour Notices (Finding I) 

• Reportingof Debts and Obligations (Finding 2) 

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

Audit Division on the 

Friends of Sharron Angle 

(February 17, 2009 - December 31, 2010) 
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. Summaries 

Findings and Recommendations 3 

Part IV. Findings and Recommendations 

Finding 1. Filing of 48-Hour Notices ' 4 

Finding 2. Reporting ofDebts and Obligations 6 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Friends of Sharron Angle (FOSA), 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 imder this 

subsection, tiie Commission must perform an intemal review of reports filed by selected 

committees to determine whether 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 proceduresfthe Audit stsiff evaluated various risk 

factors and as a result, this audit examined: 

1. the receipt of excessive contributions and loans; 

2. the receipt of contributions from prohibited sources; • 

3. the disclosure of contributions received; 

4. the disclosure of individual contributors' occupation and narrie of employer; 

5. the disclosure of disbursements, debts and obligations; 

6. the consistency between reported figures and bank records; 

7. the completeness, of records; and 

8. other conimittee-operations necessary to the review. 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration April 9,2009 /iZ> . 

• Audit Coverage February 17,20Q9 - December 31,2010 

Headquarters Reno,Nevada 'Z%. 

Bank Information 

• Bank Depositories Three 

• Bank Accounts Five •; 

Treasurer 

• Treasurer When Audit Was Conducted William E. Rasavage (March 7,2011 -

October 24, 2011) 

Robert Fee (October 25, 2011 - Present) 

• Treasurer During Period Covered by Audit Alan Mills 

Management Information 

• Attended FEC Campaign Finance Seminar, Yes.. 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid St ^ 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hafnd @ February 17,2009 $ 0 

Receipts 

o Contributions from Individuals 27,790,037 

o Contributions from Other Political 399,037 

Committees 

o Contributions from Other Authorized 56,544 

Committees 

o Refimds and Other Offsets 23,531 

Total Receipts $ 28,269,149 

Disbursements 

o Operating Disbursements 27,948,259 

o Contribution Refunds 206,202 

o Other Disbursements 22,675 

Total Disbursements $ 28,177,136 

Cash-on-hand @ December 31,2010 $ 92,013 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Filing of 48-Hour Notices 

FOSA filed in an untimely manner or failed to file 48-hour notices for 169 contributions 

totaling $243,750, that were made prior to the primary and general selections. These 

included 65 earmarked contributions totaling $107,200. In res|ibnse to the Interim Audit 

Report recommendation, FOSA submitted written comments^'stating that it made a goodfaith effort to file all notices, but that the contribution processing system in place could 

not handle the large number of donations received. (For. itibre detail, ;isee p. 4.) 

A/ 

Finding 2. Reporting of Debts .aind Obligations 

The Audit staff identified debts totaling $2,287,0i8i):;that vv^re not itemized on Schedule D 

(Debts and Obligations). In response to the Interim^ Audit 1^^ recommendation, 

FOSA amended its reports to materially correct the repGirting of debts and obligations. 

FOSA also stated that the debt reporting problems were due 'tp a breakdown in 

communications between vendors and committee stafif. (FbfMbre detail, see p. 6.) 
Part IV 

Findings and Recommendations 

Finding 1. Filing of 48-Hour Notices 

Summary 

FOSA filed in an untimely manner or failed to file 48-hour notices for 169 contributions 

totaling $243,750, that were made prior to the primary and general elections. These 

included 65 earmarked contributions totaling $107,200. In response to the Interim Audit 

Report recommendation, FOSA submitted written comments stating that it made a goodfaith effort to file all notices, but that the contribution processing system in place could 

not handle the large number of donations received. 

Legal Standard 

A. Last-Minute Contributions (48-Hour Nojiiceis). Campaign committees must file 

special notices regarding contributions of'$1,000 or more received less than 20 days 

but more than 48 hours before any election in which the candidate is running. This 

rule applies to all types of contributions to any authorized committee of the candidate, 

including: 

• contributions from the candidate; 

• loans from the candidate and other non-bank sources; and 

• endorsements or guarantees of loans from banks. 11 CFR § 104.5(f). 

B. Reporting by Recipient CQnnmittee. When a candidate committee receives 

earmarked contributipns thrbiigh a conduit, each individual contribution should be 

itemized when the intiiyiduai's total contributions to the committee aggregate over 

$200 per election cycle.J iTiis itemization iriust include: 

• the full name; 

• address; 

• occupation and employer bf the contributor; and 

• date the contribution was received by the conduit. 11 CFR § 110.6(c)(2)(ii)(C). 

Contributions from Political Action Committees, authorized committees, or other 

political committees must be itemized regardless of the amount contributed. 11 CFR 

§ 104.3(a)(4). 

In addition, the total contribution(s) transmitted through the conduit should be itemized 

on Schedule A as a memo entry. The conduit's full name and address must be provided, 

along with the date when the candidate committee received the contribution and the total 

amount. 11 CFR §110.6(c)(2). 
Facts and Analysis 

A. Facts 

The Audit staff reviewed contributions of $1,000 or more that FOSA received during the 

48-hour notice filing periods for the primary (May 20,2010 - June 5,2010) and general 

(October 14,2010 - October 30, 2010) elections. FOSA filed in an untimely manner or 

failed to file 48-hour notices for 169 contributions totaling $243,750 as summarized 

below. 

Primary General Total 

48-Hour Notices Not Filed $31,200 

(21) 

$115,450 

(88) 

$146,650 

(109) 

48-Hour Notices Filed Late, 

but Before the Election 

$51,500 

(29) 

$0 $51,500 

(29) 

48-Hour Notices Filed After 

the Election 

$45,600 

(31) 

$0 $45,600 

(31) 

TOTALS $128,300 

(81) 

$115,450 

(88) 

$243,750 

(169) 

Primary election contributions for which notices vvere filed late (prior to or after the 

election) or not filed included 53 earmarked contributions totaling $86,100. General 

election contributions for which notices were hot filed included 12 earmarked 

contributions in the ambunt of $21,100. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the filing of 48-hour notices with FOSA's counsel at the exit 

conference.and subsequently provided schedules of the contributions for which FOSA 

did not fjlie 48-hour notices or filed them in an untimely manner. FOSA's counsel 

expr:essed concern that these notices were not filed or were filed in an untimely manner 

and stated:tha$ FOSA had established a system under which the finance director would 

examine thexontributions received on a daily basis to identify those that required such 

notices. Counsel further stated that FOSA would attempt to determine why the required 

notices were not filed. • 

The Audit staff recommended that FOSA provide evidence that the 48-hour notices were 

not required to be filed or were filed in a timely manner, or provide any further comments 

it considered relevant. 

C. Committee Response to Interim Audit Report 

FOSA submitted comments regarding its failure to file 48-hour notices. FOSA stated that 

it makes no excuses, but that it made a good-faith effort to file the notices. 

By way of explanation, FOSA notes that "Sharron Angle was not the favored 

'establishment' candidate in the GOP Primary, but began to receive small dollar 
contributions from across the country..." FOSA added that the endorsement of the Tea 

Party Express and the win in the June 2010 Nevada GOP Primary led to FOSA receiving 

far more contributions than previously anticipated. FOSA pointed out that the funds 

received were equivalent in volume to those received for a Presidential campaign, 

without the infrastructure already in place to handle such volume. 

FOSA also noted tiiat the notices not filed for the general election period comprise less 

than 2% of the total amount of contributions during the 48-hour notice reporting period. 

FOSA reiterated that there was no intent to fail to comply with the law, but the 

contribution processing system in place could not handle the large number of donations 

received. 

Finding 2. Reporting of Debts and Obligatiohs 

Summary \ 

The Audit staff identified debts totaling $2,287,080 that were not itemized on Schedule D 

(Debts and Obligations). In response to the Interim Audit Report recommendation, 

FOSA amended its reports to materially correct the reporting of debts and obligations. 

FOSA also stated that the debt reporting problems were due to a breakdown in 

communications between vendors and committee staff. ,v 

Legal Standard 

A. Continuous Reporting Required. A political committee must disclose the amount 

and nature of outstsmding debts and obligations until those debts are extinguished. 

2 U.S.C §434(b)'(8) and 11 CFR §§ 104.3(d) and 104.11 (a). 

B. Itemizing Debts and Obligations. 

• A debt or obligation of $500 or less must be reported once it has been outstanding 

60 days from the date incurred (the date of the transaction); the committee reports 

the debt or obligation on the next regularly scheduled report. 

• A debt or obligation exceeding $500 must be disclosed in the report that covers 

the date on which the debt was incurred. 11 CFR §104.11(b). 

Facts and Analysis 

A. Facts 

The Audit staff reviewed FOSA's invoices and computer files containing disbursements 

made in 2009 and 2010 to 19 selected vendors and identified debts totaling $1,442,452 

that were reported on Schedule D. However, FOSA did not report debts totaling 

$2,287,080 on Schedule D as required.^ The majority of these debts should have been 

reported on the 2010 October Quarterly and 12-Day Pre-General reports. 

^ This is the sum of the total unreported debt balance for each of the 19 vendors during the period covered 

by the audit (debts only counted when incurred). 
B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the reporting of debts and obligations with FOSA's counsel at 

the exit conference and subsequently provided workpapers detailing the unreported debts. 

Counsel stated that FOSA would look into this issue. Documentation provided by FOSA 

subsequent to the exit conference was considered in the "Facts" section presented above. 

The Audit staff recommended that absent evidence that the debts did not require 

disclosure, FOSA should amend its reports to itemize these debts and obligations on the 

appropriate Schedule D and provide any further comments it considers relevant. 

C. Committee Response to Interim Audit Report 

In response, FOSA amended its reports to materially correct the. reporting of debts and 

obligations. FOSA also provided a written explanation stating tiiat the vendors were 

under the impression that FOSA was provided tiie infc>rmation to disclose all outstanding 

debts and obligations in a timely maimer. FOSA sta|fi however, were either unaware that 

the information needed to be reported, or did notjedeive tfie information. FOSA admits 

that, whatever the cause, "...the amounts were.<|^pparently*iipt reported as debts." 

In addition, FOSA noted that when preparing its respbnsie to the Interim Audit Report, it 

had discussed this matter with the vendors involved aiiti^expressed to them that each 

should review its procedures to ensure better communicatiOn^w^ political committees in 

the future.