REPORT OF THE AUDIT DIVISION

!

ELECTIO~S C~~TTEE OF THE

COmNTY OF ORANGE

i

I

Approved April 1, 1999

FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

WASHINGTON, D.C.
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TABLE OF CONTENTS

ELECTIONS COMMITTEE OF THE COUNTY OF ORANGE

Page

Executive Summary 1

Final Audit Report 3

Background 3

Finding 5

Transmittal to Committee 7

Chronology 9
REPORT OF THE AUDIT DIVISION

ON THE

ELECTIONS COMMITTEE OF THE COUNTY OF ORANGE

EXECUTIVE SUMMARY

The Elections Committee ofthe County of Orange (ECCO) registered with the Federal

Q\ Election Commission on November 5, 1984.

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The audit was conducted pursuant to 2 U.S.C. Section 438(b), which states that the

Commission may conduct audits of any political committee whose reports fail to meet the

threshold level of compliance set by the Commission.

The one finding arising from the audit was presented to representatives ofECCO at an

exit conference held at the conclusion offieldwork on November 22, 1998, and later in an

interim audit report. The following is an overview ofthe finding contained in the audit report.

PROIDBITED CONTRIBUTION - IMPERMISSIBLE TRANFER FROM THE NONFEDERAL ACCOUNT

11 CFR §§ 102.5(a)(1)(i), 106.5(g)(l) and (2). ECCO received a $3,000 loan from its nonfederal account that was repaid approximately six months later. During the period the loan

remained outstanding, it is considered a prohibited contribution. ECCO's response to the

interim audit report did not demonstrate that the loan was permissible. The finding concluded

that ECCO violated the cited regulatory provisions when it received a $3,000 transfer in the

form of a loan from its non-federal account. It should be noted that ECCO's response did

indicate that its current officials understand that such loans are not permissible and have taken

measures to prevent the likelihood ofsuch an occurrence in the future.
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FEDERAL ELECTION COMMISSION

WASHINGTON. DC. 20463

REPORT OF THE AUDITDIVISION

ON THE

ELECTIONS COMMITTEE OF THE COUNTY OF ORANGE

I. BACKGROUND

This report is based on an audit ofthe Elections Committee ofthe County

of Orange (ECCO), undertaken by the Audit Division ofthe Federal Election

Commission in accordance with the provisions ofthe Federal Election Campaign Act of

1971, as amended (the Act). The audit was conducted pursuant to Section 438(b) ofTitle

2 ofthe United States Code which states, in part, that the Commission may conduct

audits and field investigations ofany political committee required to file a report under

section 434 ofthis title. Prior to conducting any audit under this subsection, the

Commission shall perform an internal review ofreports filed by selected committees to

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

for substantial compliance with the Act.

A. AUDIT AUTHORITY

B. AUDIT COVERAGE

The audit covered the period from January 1, 1995 through December 31,

1996. During this period, ECCO reported a beginning cash balance of $906; total

receipts of$115,728; total disbursements of$114,740; and an ending cash balance of

$1,894.1

C. CAMPAIGN ORGANIZATION

ECCO registered with the Federal Election Commission on November 5,

1984, and maintains its headquarters in Santa Ana, California. ECCO had three

Treasurers during the period covered by the audit. Mr. Paul A. Strabala was the

Treasurer from January 14, 1993 until January 26,1995. Mr. Michael R. Robinson was

the Treasurer from January 27,1995 through March 17,1996. On March 18,1996, Mr.

William B. Carolan became Treasurer and held the position until October 21, 1996. Mr.

Robinson again served as Treasurer from October 22,1996 through August 3,1997. The

1 All amounts in this report have been rounded to the nearest dollar.

3
current Treasurer is Tamara Jean McIntyre.

To manage its Federal financial activity, ECCO used one bank account,

from which it made approximately 340 disbursements. ECCO received contributions

from individuals totaling approximately $64,000, transfers from its non-federal account

totaling $48,747, and a $3,000 loan from its non-federal account.

D. AUDIT SCOPE AND PROCEDURES

The audit included testing ofthe following general categories:

ii

1.

2.

3.

the receipt of contributions or loans in excess of the statutory

limitations;

the receipt of contributions from prohibited sources; such as those

from corporations or labor organizations; (see Audit Finding and

Recommendation)

proper disclosure of contributions from individuals, political

committees and other entities, to include the itemization of

contributions when required, as well as, the completeness and

accuracy ofthe information disclosed;

4. proper disclosure of disbursements including the itemization of

disbursements when required, as well as, the completeness and

accuracy ofthe information disclosed;

5. proper disclosure of debts and obligations;

6. the accuracy of total reported receipts, disbursements and cash

balances as compared to bank records;

7. adequate recordkeeping for transactions;

8. proper disclosure of the allocation of costs associated with

administrative expenses and activities conducted jointly on behalf

offederal and non-federal elections and candidates; and

9. other audit procedures that were deemed necessary in the situation.

Unless specifically discussed below, no material non-compliance was

detected. It should be noted that the Commission may pursue further any ofthe matters

discussed below in an enforcement action.

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II. AUDIT FINDING AND RECOMMENDATION

PROHIBITED CONTRIBUTION - IMPERMISSIBLE TRANSFER

FROM THE NON-FEDERAL ACCOUNT

Section 102.5(a)(1 )(i) of Title 11 ofthe Code of Federal Regulations states, in

part, that each organization, including a party committee, which finances political activity

in connection with both federal and non-federal elections and which qualifies as a

political committee under 11 CFR 100.5 shall establish a separate federal account in a

depository in accordance with 11 CFR part 103. Such account shall be treated as a

separate federal political committee which shall comply with the requirements ofthe Act.

Only funds subject to the prohibitions and limitations ofthe Act shall be deposited in

such separate federal account. All disbursements, contributions, expenditures and

transfers by the committee in connection with any federal election shall be made from its

federal account. No transfers may be made to such federal account from any other

account(s) maintained by such organization for the purpose offinancing activity in

connection with non-federal elections, except as provided in 11 CFR 106.5(g).

Section 106.5(g)(1) ofTide 11 ofthe Code of Federal Regulations states, in part,

committees that have established separate federal and non-federal accounts under 11 CFR

102.5(a)(1)(i) shall pay the expenses ofjoint federal and non-federal activities as follows:

(i) pay the entire amount of an allocable expense from its federal account and transfer

funds from its non-federal account to its federal account solely to cover the non-federal

share ofthat allocable expense; or (ii) establish a separate allocation account into which

funds from its federal and non-federal accounts shall be deposited solely for the purpose

of paying allocable expenses. Once a committee has established a separate allocation

account for this purpose, all allocable expenses shall be paid from that account for as long

as the account is maintained.

Further, 11 CFR §106.5(g)(2) states, in relevant part that, the committee shall

transfer funds from its non-federal account to its federal account following determination

ofthe final cost of each joint federal and non-federal activity, or in advance ofsuch

determination if advance payment is based on a reasonable estimate ofthe activity's final

cost as determined by the committee and the vendors involved. For each transfer, the

committee must itemize in its reports the allocable activities for which the transferred

funds are intended to pay, and such funds may not be transferred more than 10 days

before or 60 days after the payments for which they are designated are made. Any

portion of a transfer from a committee's non-federal account to its federal account that

does not meet the requirements of paragraph (g)(2)(ii) ofthis section shall be presumed to

be a loan or contribution from the non-federal account to a federal account, in violation of

the Act.

On its July 15th 1996 Quarterly Report, ECCO disclosed the receipt, on April 17,

1996, of a $3,000 loan from its non-federal account. The loan, repaid on October 10,

1996, had remained outstanding 176 days. It appears that ECCO received a prohibited

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contribution of$3,000 from its non-federal account during the period the loan remained

outstanding.

ECCO representatives were informed ofthis matter at the exit conference and had

no official response at that time.

The interim audit report recommended that ECCO demonstrate that the $3,000

loan received from its non-federal account was permissible.

In response to the interim audit report, ECCO's controller submitted a letter which

stated, in part, that:

"The volunteers who worked on ECCO's reports and handled their

finances at the time ofthe April 17, 199610an are no where (sic) to

be located. Hence, no explanation from them is attainable. New

volunteers are now working on ECCO's finances and their reports

are being prepared by a professional (namely me). Therefore,

mistakes ofthis nature should not happen in the future."

It is concluded that ECCO received a $3,000 prohibited contribution in the form

ofa loan from the non-federal account. ECCO's response indicates that its current

officials understand that such loans are not permissible and have taken measures to

prevent the likelihood ofsuch an occurrence in the future.

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FEDERAL ELECTION COMMISSION

WASHINGTON. D.C. 204&3

April 2, 1999

Ms Tamara Jean McIntyre, Treasurer

Elections Committee ofthe County ofOrange

1700 East Garry Street, Suite 211

Slinta Ana, CA 92705

Dear Ms McIntyre:

Attached please fmd the Report ofthe Audit Division on the Elections Committee

ofthe County of Orange. The Commission approved the report on Aplill, 1999. As

noted on page 2, the Commission may pursue the matter discussed in an enforcement

action.

The Commission approved Audit Report will be placed on the public record on

ApriIS,1999. Should you have any questions regarding the public release ofthis report,

please contact the Commission's Press Office at (202) 694-1220.

Any questions you may have related to matters covered during the audit or in the

audit report should be directed to Henry Miller or Alex Boniewicz ofthe Audit Division at

(202) 694-1200 or toll free at (800) 424-9530.

Robert J. sta

Assistant StaffDirector

Audit Division

Attachment as stated

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CHRONOLOGY

ELECTIONS COMMITTEE OF THE COUNTY OF ORANGE

Audit Fieldwork

Interim Audit Report

to the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

9

10119/98 - 10/22/98

2110/99

3/15/99

4/1/99