• "I ••

FRED EILAND

PRESS OFFI~

BOB COSTA -,'/'-""""""

PUBLIC ISSUANCE OF PINAL AUDIT REPORT - REAGAN BUSH COMMI'l"l'EE, THE REAGAN BUSH

COMPLIANCE FUND AND THE DEMOCRATS FOR REAGAN

FEDERAL ELECTION COMMISSION

\\'>\SHINCTO!lll, 0 C 204&)

cc: FEC Librar~'

RAD

~lic Record

December 11, 1981

Attachment as stated

Attached please find a copy of the final audit report of

the Reagan Bush Committee, The Reagan Bush Compliance Pund

and the Democrats For Reagan which was approved by the

Commission on December 8, 1981.

Info~ational copies of the report have been received

by all parties involved and the report may be releaaed to

the public as of today, December 11, 1981.

TO:

SUBJECT:

MEMORANDUM

FROM:

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FEDERAL ELECTION COMMISSION

\\'"'1I11NC 'ON. 0 I: ~lo4t>.'

On August 7, 1980, the Committee amended its statement of

organization to conduct business as the Reagan For President

General Election Committee and/or Reagan Bush Committee.

The Reagan Bush Compliance Fund was established to defray legal and accounting costs associated with ensuring compliance with the FECA.

2/

1/

REPORT OF THE AUDIT DIVISION

ON TIlE

REAGAN BUSH COMMITTEE, THE REAGAN BUSH COMPLIANCE PUND

AND

TIlE DEMOCRATS POR REAGAN

In addition, Section 9007.1 of Title 11 of the Code of

Federal Regulations states that after each Presidential election,

the Commission shall conduct a thorough examination and audit of

the receipts, disbursements, debts and obligations of each

candidate's authorized committee(s). Such examination and audit

shall include, but shall not be limited to, expenses incurred

pursuant to 11 C.P.R. 9003.4 prior to the beginning of the

expenditure report period, contributions to and expenditures made

from the legal and accounting compliance fund established under

11 C.F.R. 9003.3(a), contributions received to supplement any

payments received from the Fund, and qualified campaign expenses.

The Reagan Bush Committee ("RBC" or "the Committee") registered with the Federal Election Commission on May 29, 1980

(under the name Reagan for President General Election Committee y) and served as the principal campaign committee of the Honorable

Ronald Reagan, Republican candidate for President of the United

States. The Candidate designated the Reagan Bush Compliance Pund !I

("the Compliance Fund") on July 7, 1980 (under the name Reagan for

I • Background

A. Overview

This report i. based on an audit of the Reagan Bush C~ttee, the Reagan Bush Compliance Fund and the Democrats

for Reagan, to determine whether there has been compliance with

the provisions of the Pederal Election Campaign Act of 1971, as

.amended ("the Act"). The audit was conducted pursuant to

Section 9007(a) of Title 26 of the United States Code which states

that after each Presidential election, the Commission shall

conduct a thorough examination and audit of the qualified campaign

expenses of the candidates of each political party for President

and Vice President.

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".10 In addition, certain financial activity was reviewed through March 26, 1981.

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Ending

Cash

10,000.00 Y

1,512,152.36 598,705.44

Total

Expenditure.

10,000.00 Y

Total

Receipts

2,110,857.80

$32,516,345.37 $31,647,351.55 $868,993.82

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Beginning Cash

Activity of Democrats for Reagan was comprised solely of a .

transfer received from and made to the Reagan Bush Committee.

Therefore, this activity is not subject to the limitation

at 2 U.S.C. 44la(b) (1) (B). In addition, the Democrats for

Reagan filed a termination report on January 30, 1981.

'On January 21, 1981, these Committees amended their statements'

of organization to disclose Mr. Scott Mackenzie as Treasurer,

and on October 2, 1981, a further amendment was filed to disclose

Mr. Arthur J. Dellinger as the present Treasurer.

B. : Key Personnel

The principal officers of the Committees during the period audited were:

Democrats for Reagan

Reagan Bush Committee -0-

Reagan Bush Compliance -0-

Fund

Colilmittee

e 4/

Committee- Chairman Treasurer..

C' Reagan Bush Committee u.s. Senator Paul Laxalt Buchanan Ms. Bay !I

Reagan Bush Compliance u.S. Senator Paul Laxalt Ms. Bay Buchanan !I Fund

Democrats for Reagan Mr. Leon Jaworski Ms. Janine Perrignon

President Compliance Fund) and the Democrat. for Reagan on October 31,

1980 a. authorized committ.... The Reagan Bu.h Committ•• and the ~Reagan Bush Compliance Fund maintained their headquarter. in Wa.hington, D.C. and the Democrats 'for Reagan maintained its headquarters in

Arlington, Virginia.

The audit covered the-period May 29,1980 through December

31, 1980, the final cov.rage date of the most recent reports filed

by the Commi.ttee. at the time of the audit. During that period, the

Committees reported the following activity:

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.~ This report is based upon documents and working papers supporting each of the factual statements contained herein. They

,0 fo~ part of the record upon which the Commission based its decisions , on the matters addressed in the report. and were available .to the . , Commiss.ioners and appropriate staff' for review. " , . ,- ., '" ,
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C. Scope

Th. audit included such te.ts a. verification of total ~eported receipts, expenditures and individual transaction., review

"'of roquired supporting documentation, analysis of the Committ••• d.bt.

and obligations, review of contribution and expendituro limitation.,

and such other audit procedures as deemed necessary under the

circwnstances.

II. Audit FindiDls and Recommendations Relating

to Title 2 0 the United State. COde

A. Monies Received 'by the Reagan Bush Committee Relatin!

to Expenditures Made by the RepUblican National Comm ttee

Section 44la(b) (1) (B) of Title 2 of the United States Code

states, in part, that no candidate for the Office of President of the

United States who is eligible under Section 9003 of Title 26 (relating

to condition for eligibility for payments) to receive payments fram

the Secretary of the Treasury may make expenditures in excess of

$20,000,000 (as adjusted for the change in the consumer price index ~- since 1974), in the case of a campaign for election to such office

(also see 2 U.S.C. Section 44la(c» •. The limitation relating to

operating expenditures for the 1980 general election is $29,440,000.

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Section 44la(d) (1) and (2) of Title 2 of the United States . ". Code permits the national committee of a political party to make

expenditures in connection with the general election campaign of any ...·'Acandidate for President of the United States who is affiliated with _~such party not exceeding 2 cents multiplied by the voting age population of the United States as certified by the Secretary of r~ Commerce (also see 2 U.S.C. Section 44la(e».

Section 9004.6(a) and (b) of Title 11 of the Code of

Federal Regulations permits an authorized committee of a publiclyC funded candidate to receive reimbursements for expenses for

transportation and related ground services made available to the

media, Secret Service and other staff authorized by law or required by

(0'. national security to travel with a candidate.

The Audit staff analyzed the campaign tours of the Presidential

and Vice-Presidential candidates for which the Reagan Bush Committee

sought reimbursement from the news media, Secret Service and Reagan Bush Compliance Fund. Based on a review of Committee records, and

disclosure reports filed by the Republican National Committee, the

Audit staff has found that the RNC made seven expenditures totaling $1,633,293.89 in connection with the campaign tours, the RNC applied this amount to its expenditure limit under 2 U.S.C. Section 441a(d) (2). ~/

These RNC expenditures were made directly to the vendors and were 'in

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The RNC's limitation in 1980 was $4,637,653.76. It should be

noted that although there are several references in this report

to certain financial activities of the RNC, the scope of the

audit work performed was limited to tests of the financial

records of the Reagan Bush Committee, Reagan Bush Compliance Fund

and Democrats For Reagan. The Audit Division did not perform an

audit of the RNC.
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addition to the campaivn tour expenditures made by the Reagan Buah

Committee itaelf. Without distinguishing between those amounts paid

.,y the Reagan Bush Comm1ttee and those paid by the DC, the Reagan Buah

.-tommittee billed the news media, secret Service and ita own compliance fund (-Compliance Fund-) for their respective shares of the total

campaign tour costs (transportation and related services).

As a result of these billings, the Committee obtained

reimbursements f~om the newa media, Secret Service and Compliance Fund in the amount of $2,423,595.34. The Audit staff determined

that $1,138,891.24 of the total amount of su.ch reimbursements received

by the Reagan Bush Committee was based on the above-described

expenditures made by the RNC.!I These reimbursements were retained

by RBC and reported on FEC Form 3P, Schedule A-P, Line 21. y As a

result, the RBC's reported expenditures subject to the limitation

of 2 u.S.C. Section 44la(b) (1) (B) were offset (reduced) by $1,138,891.24.

It is the opinion of the Audit Division that the Reagan Bush

Committee improperly retained the above-described reimbursements since

the expenditures on which they were based had been made by the RNC and

not the Reagan Bush Committee. In effect, the Audit Division's position is that the Reagan Bush Committee was -reimbursed- for amounts it had ....... not expended. The Audit staff has also stated that such rebates should ~~ not have been applied as an offset to RBC expenditures to the extent

that the related expense was paid by the RNC. According to this ~~ reasoning, to permit such an artificial "offset" would have the effect

of increasing the expenditure limitation of the publicly-financed '~andidates under 2 U.S.C. Section 44la(b) (1) (B) by the amount of the

_.W"offset-.

r-. During the fieldwork and at the exit conference of March 27,

1981, the Audit staff informed committee officials of their opinion .. that the Committee was not entitled to reimbursements based on RNC

expenditures and that these reimbursements could not reduce RBC

C' operating expenditures. On June 16, 1981, the Commission approved the Audit staff's recommendation contained in the interim audit report that the Reagan Bush Committee be afforded 30 days from receipt of the

c": interim report: to explain the circumstances surrounding its receipt of the $1,138,891.24 in reimbursements received related to expenditures made by the Republican National Committee, and to demonstrate that the

receipt and reporting of these amounts are consistent with the requirements of the Act· and Chapter 95 of the Internal Revenue Code (26 U.S.C.

Sections 9001 - 9012). Further recommendations were to be made after

the Reagan Bush Committee had had an opportunity to respond within the

30 day period.

!/ This total includes $8,733.07 in reimbursements which were billed

but not collected as of 2/24/81. It was included in the above

calculation based upon the Audit Division's review of reported activity subsequent to 2/24/81 which indicates that an amoUnt in

excess of $8,733.07 was reported as being received by RBC.

After completion of the audit fieldwork, the Committee filed an

amendment showing a different treatment as to a portion of these

monies. This is discussed at pages 7 and 8.
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In it. re.ponse to the Commi••ion-approved interta audit

report, the Committee did not dispute that it had obtained reimbursement. from the news media, Secret Service and Compliance Fund based

upon tour expenditures of the RNC. The CoaUttee stated that the·

$1,138,891.24 repreaented "a proper offset of expenditures incurred

by the RBC and QC in furtherance of Ronald ..agan· a candidacy in

confor,mity with an agency relationahip that exiated be~een the RIC

and RNC." Briefly stated, the Committee claimed that: 1) it waa

acting as the RNC's agent in managing certain of the RHe's funds, 2) in its capacity as agent, the Committee obtained reimbursementa due

the RNC in connection with campaign tours, and 3) it expended, aa RNC's

agent, for purposes of 2 U.S.C. Section 441a(d), an amount of money corresponding to the amount obtained in behalf of the RRC in connection

with these same campaign tours.

The Committee did not point to a specific agency agreement, . but indicated that the "course of dealing" be~een RBC and the RNC _~ demonstrated the existence of an agency relationship whereby the

Reagan Bush Committee managed funds for the account of the RNC.

The response also cited as authority for such an agency relationahip ~~ Section 110.7(a) (4) of Title 11 of the Code of Federal Regulations which states that the national committee of a political party may make .~ expenditures authorized by this section through any designated agent, including State and subordinate party committees. . ..",

Finally, the RBC presented an analysis of these trans- _.. actions with reference to Generally Accepted Accounting Principles

(GAAP) which included the concept of offsetting assets against liabilities and the concept of proper financial presentation for entities

: ". under common, direct, or indirect control. The RBC indicated that given

r the agency relationship, the GAAP concept of offsetting suggests that

the $1,138,891.24 in reimbursements received by the RBC should be

recorded as a liability to the RNC which could appropriately and

preferably be offset against other costs incurred by the RBC for the

C'0 RNC. Further, the RBC indicated that there is substantial support in

the GAAP concept of proper financial presentation for entities under

common, direct or indirect control to suggest the more meaningful presentation of the financial results of the Reagan Bush Presidential

Election Campaiqn would be to combine the activities of the RBC and

the RNC's Presidential Election Fund, based upon the common control

through the agency relationship. The RBC's GAAP analysis is, of

course, dependent upon the existence of common control and its

permissibility under applicable law.

Were the Commission to sanction the type of agency relationship described by the Committee, the consequences would

include the following:
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1) The separate expenditure limitations for party ~ommittees ~nder 2 u.s.c. section 441a(d) (1) and (2) and publicly- financed candidate co~ttees under 2 U.S.C. Section 441a(b) (1) (B)

would be effectively eliminated in favor of a combined limitJ

2) The limited ri9ht of a party committee under 2 U.S.C.

Section 441a(d) (1) and (2) to make certain expenditures in connection

with the general election campaign of that party's nominee for

President would be expanded to permit the actual transfer of party committee funds to the publicly-financed candidate committee,

effectively vitiating the distinction be~een expenditures and

contributionsJ and

3) The limitation of 2 U.S.C. Section 441a(b) (1) (B) would

effectively be increased, since the committees of publicly-financed

candidates wOuld be permitted to receive and expend private funds in

the form of reimbursements, refunds and rebates due another entity.

In addition, there would be changes necessary to the disclosure provisions to correspond to the above-noted results.

The Commission is of the view that the ~o limits, the"

party's 441a(d) limit for expenditures from private funds and the .~ candidate's 44la(b) (1) (B) limit on expenditures to the amount of

the public financing grant, must be maintained and administered

'".separately. Despite the fact that the RNC and Reagan Bush Committee ~hared the goal of electing a Republican President in 1980, the .... Federal Election Campaign Act and Commission Regulations treat them ,. as separate and distinct legal entities.

It should also be noted that while section 44la(d) pe~ts

the party to coordinate its expenditures with the candidate without

this being deemed a contribution, the funds must be party fund. for

whose expenditures the party is responsibleJ such party funds cannot

be contributed to the publicly-financed candidate nor be given over -. to the candidate's control.

Since the Act, its legislative history and Commission

Regulations recognize a distinction between an actual transfer of

money to a candidate's committee by a party committee and an

expenditure under section 441a(d), a publicly-financed candidate'.

committee cannot be the agent of the party committee for obtaining and using private funds despite the RBC's permissive reading of

11 C.F.R. Section 110.7(a) (4) which allows a party co~ttee to

designate an agent. The Reagan Bush Committee, therefore, should not

have retained monies in the form of reimbursements which were due the

RNC. While the Commission has permitted the use of section 44la(d)

monies to pay for expenditures incurred by the candidate if the party

so chooses, the effect of allowing reimbursement to the candidate for

expenditures made by the party is to mingle private money with public ~money in a way not contemplated by the public financing system.
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If a publicly-financed candidate committee were permitted ~to be the agent of a party committe. with re.pect to the latter'.

Wexpenditure. under .ection 441a(d), the eXPenditure limits of both

committee. in the general election would effectively be combined.

While it appears that the Reagan Bush Coaaittee mi.takenly viewed

the transaction. in this way, the committee. did not exceed thi.

"combined" limit by virtue of these tran.action., had the INC

received the reimbursement. in question, such amount. could have

been deducted from its expenditure. under Section 441a(d), thus

allowing the RNC to expend an additional $1,138,891.24 under this

.ection. 8/ The Reagan Bush Coaaittee, in effect, expended the

INC's $1,138,891.24. The total expenditures of both colmftittees

were not increased by these transaction.. '

Amendments to Year-End Reports

One of the more significant aspects of the Reagan Bush

Committee's receipt and expenditure of RNC funds concerns the current

lack of clarity on the public record. This problem has been further

complicated by amendments by both committees toreporta which they had previously filed with the Commission.

n During the fieldwork and at the exit conference of

March 27, 1981, the Audit staff informed RBC Officials that, in the

'; Audit staff's opinion, the RBC was not entitled to reimbursements

received based on RNC expenditures and that these reimbursements ·'~could not be used to offset RBC operating expenditures. While the _.~udit staff indicated that the reimbursements received relating to

RNC expenditures approximated $750,000, RBC officials were also

informed that this figure was preliminary and might be substantially

:'. higher once the calculations were made final. Prior to the Audit

staff's finalization which resulted in the figure of $1,138,891.24,

C' the Reagan Bush Committee filed an amendment apparently based on the

conversations during the audit fieldwork and at the exit conference.

On April 1, 1981, the Reagan Bush Committee amended ~- its 1980 Year-End report to delete $748,163.16 in previously reported reimbursements (Line 21, FEC Form 3P) and $748,163.16 in previously reported operating expenditures (Line 24, FEC Form 3P) fram its

reports and attributed these transactions to the Republican National

Committee. This amendment showed a downward adjustment to the Reagan Bush Committee's reported reimbursements and operating expenditures.

!I This assumes that 11 C.F.R. Section 9004.6 permits the party committee to receive reimbursements from the news media and

Secret Service for transportation expenses which the party committee had made. It should be noted that the regUlation speaks only in terms of an "authorized committee" being permitted to receive such reimbursements.
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It appears the amendment was designed to show that RBC received and

_expended these amounts in behalf of the RHC under the latter'• ....pending authority under 2 U.S.C. section 441a(d). On July 21, 1981,

the RHC amended its 1980 Year-End report to corre.pond to RBC'.

treatment of the above noted receipts and expenditures. The total

reported expenditures of the RHC under section 44la(d) and RBC under

section 441a(b) (1) (B) were not changed by these amendments.

As pointed out in the interim report, the aforementioned

$748,163.16 amendment did not involve a tran~fer of monies between

RBC and the RNC, but rather, was merely a ·paper· attribution of ·the

amount of tour reimbursements allocated to the RHC· and selected

expenditures paid by RBC and later attributed via RBC disclosure

reports to the RHC.

In effect, the amendments of both committees reflected

the interim finding of the Audit Division that the Reagan Bush

Commdttee could not be reimbursed for expenditures made by the RHC.

The corresponding amendments were apparently designed to show that ._. RBC was acting in behalf of the RHC, although the public record .is

by no means clear on this point, this reading of the amendments is

consistent with the agency theory advanced by RBC in response to the ~, interim report of the Audit Division. The discrepancy in the amount

(the amendment's $748,163.16 versus the audited figure of $1,138,891.24) ~., appears to have resulted from the RBC's use of the lower figure verbally

presented to it by the Audit staff at the aforementioned exit conference, '.~and the RBC's failure to update that figure after receiving the

ritten calculation of $1,138,891.24. . .

The interim report indicated that the Audit staff

did not believe that the after-the-fact attribution of expenditures

(actually made and originally reported by the Reagan Bush Committee)

was permissible, and advised the RBC to make an appropriate amendment

C to the public record. To date the RBC has not filed the recommended

amendment to its reports.

( :' CONCLUSION

The Commission does not agree with the theory advanced

by the RBC. The Commission is of the view that the two lim!ts--

the party's 44la(d) (1) and (2) limit for expenditures from private

funds and the candidate's 441a(b) (1) (B) limit of expenditures to the

amount of the public financing grant--must be maintained and

administered separately. While 441a(d) permits the party to

coordinate its expenditures with the candidate without having that

deemed a contribution, the funds must be party funds for whose

expenditure the party is responsibleJ the funds cannot be contributed

to the candidate nor given over into his control. In short, the

Commission rejects the idea that the limits are interchangeable, or

that the publicly-funded candidate can be the direct agent of the

party for obtaining or using the private funds.
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Having erroneously viewed the private funding limit and

the public funding limit as combined, the co_ittees, nevertheless,

did not, through those transactions violate the combined limits,

rather, the RNC counted the expenditures against its l~it, and the

combined total of expenditures was not increased by the transaction.

While the Commission thus concludes for that reason that no action 1s

to be taken against Rae, the Commission will in the future insist that

the candidate committee. and their associated party committee keep

separate thei~ funds and be responsible for making the expenditure. under their respective ceilings.

Finally, the COmmission concludes that the public record,

amended after the initial exit conference with the auditor., doe.

not at present accurately reflect the transactions which took place. While the RBC has shown, by its amendment, the desire to correct

the public record, the public description leaves unexplained the

nature of the reimbursement. Bence, the reports should be amended.

Recommendation

It is recommended that with respect to the tour reimbursements

oreceived by the Reagan Bush Committee relating to expenditures made

by the RNC, an amendment is to be filed by the RaC within 30 days of

receipt of this report. The correction to the public record may be

accomplished by reclassifying from line 21 to line 22 of the Detailed

Summary of Receipts and Expenditures (Page 2, FEC Form 3P) that portion of the $1,138,891.24 received in 1980 and 1981 respectively. Line

22 of the summary should be retitled wReimbursements Received Relating To Expenditures Made By The Republican National Committeew• It .hould

be noted that when filing this amendment the RBC does not have to file

supporting FEC schedules A-P for line 22 detailing each reimbursement,

but merely may disclose a wlump sumw amount being reclassified from

line 21 to 22 for 1980 and 1981 activity. In addition, lines 14 and

15 (FEC Fo~ 3P, Page 1) of the Reagan Bush Committee's Reports of

Receipts and Expenditures for the 1980 Year-End Report and reports filed in 1981 should be corrected to reflect the changes to eXPenditures subject to the limitation reSUlting from the reclassifications

noted above. In the altemative, the correction to the public record

may be accomplished by placing an asterisk at line 21 of the Reagan Bush Committee report stating, wsee the Federal Election Commission

final audit report at pages three through nine. w .

With respect to the April 1, 1981 amendment ($748,163.16), it is

recommended that within the 30 day period the Reagan Bush Committee

file an amendment to its 1980 Year-End Report of Receipts and

Expenditures to reverse the transactions contained in the 4/1/81

amendment. Further, the RBC should advise the Republican National

Committee to file a corresponding amendment to its 1980 Year-End

Report within this recommended period 80 that the reports may properly reflect the transactions and their impact on both committees.
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B. Di.closure of Debt. and Obligation.

Section 434(b) (8) of Title 2 of the United State. Code . requires disclosure of the amount and nature of debts and obligations owed by or to such political committee, and a statement as to the

circumstances an4 condition. under which such debt. or obligation.

were extinguished, and the consideration therefor.

The Audit staff noted that the following letter. of

credit were established with the Riggs National Bank in favor of

three vendors. The amount and nature of these letter. of credit

were not disclosed in the Reagan Bush Committee's reports to

the commission.

(1) Pacific Telephone and Telegraph Co.

An irrevocable letter of credit was established •• in favor of the vendor pursuant to an agreement dated August 26,

1980. The credit, secured with certificates of deposit totaling _.~ $300,000 (subsequently increased to $500,000), guaranteed the ,... satisfaction of all Obligations owed to the vendor by the Reagan· Bush Committee. .

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(2) United Airlines, Inc. '~JIt Two irrevocable letters of credit were established

in favor of United Airlines on August 29, 1980 and september 11,

1980 pursuant to aircraft lease agreements. The credits,

collateralized with certificates of deposit totaling $425,000, ~'. guaranteed the satisfaction of indebtedness to the vendor by the

Reagan Bush Committee.

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(3) Trailways Leisure and Travel

~~ An irrevocable letter of credit was established

in favor of the vendor pursuant to an oral agreement of September 4, 1980, and payable upon written demand from Trailways. The

credit was collateralized with certificates of deposit totaling $20,000. .

On April 15, 1981, the RBC filed its first

Quarterly Report for 1981, which substantially disclosed the

necessary information regarding these instruments.

Recommendation

Based on the above, the Audit staff recommends no further

action on this matter.
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Transfer TO and From Affiliated Committees

Sections 434(b) (2) (E) and 434 (b) (4) (C) of Title 2

of the United States Code require the disclosure of the total

amount of all transfers made to or received from affiliated

committees.

The Audit staff noted a $10,000 transfer .ade by the

Reagan Bush Committee to Democrats For Reagan. The same amount

was subsequently transferred from Democrats For Reagan to the

Reagan Bush Committee. Democrats For Reagan disclosed the

receipt and disbursement of the transfers. The Reagan Bush

Committee considered the disbursement and receipt as inter-bank

transfers and did not disclose this activity in its report. filed with the Commission.

On April 15, 1981, the RBC filed its first Quarterly Report for 1981 which properly disclosed these transfers.

Recommendation

,_. Based on the above, the Audit staff recommends no further

; action on this matter.

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~III. Findings Related to Title 26 of the United States Code

and Repayment to the u.s. Treasury

A. Investment of Public Funds

Section 9004.5 of Title 11 of the Code of Federal

r.' Regulations states, in part, that investment of pUblic funds

is permissible, provided that an amount equal to all net

income derived from such investments, less Federal, State

r."' and local taxes paid on such income, shall be repaid to the

Secretary. .

Further, 11 C.F.R. 9007.2(a) (6) states that the

Commission shall notify the candidates of a political party that a repayment of money to the Fund will be required in an

amount equal to any income received as a result of investment

or other use of public funds pursuant to 11 C.F.R. 9004.5, less

any Federal, State or local taxes paid on such income.

The Audit staff's analysis of activities through March 18, 1981, revealed that the Reagan Bush Committee received

$465,040.86 in interest income from the investment of public funds.
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The Audit .taff has determined that the intere.t income i. .ubject

to $213,918.86 in Pederal income taxe., and an unknown amount of

eState and local income taxe.. The intere.t income and ...ociated

Federal income taxes were calculated through March 18, 1981.

Therefore, the.e figures are subject to an adjus~ent based upon updated information regarding intere.t income and related taxe••

Th. Treasurer stated that the account would be clo.ed on

or about August i, 1981, and the net income (after taxe.) would

be paid to the u. S. Treasury at that time.

On June 16, 1981, the Commission approved the Audit staff'.

recommendation contained in the interim audit report that, absent a

showing to the contrary, the value of interest income le.s applicable

taxes (approximately $251,122) be repaid in full to the u.s.

Treasury within 30 days of receipt of the report.

The RBC has not provided any information concerning its liability for State and local income taxes, nor has the

RBC made a repayment.

Recommendation

The Audit staff recommends that within 30 days of receipt of ~~ this report the RBC submit documentation to the Commission's

Audit Division concerning any interest earned since March 18, 1981 '~s well as documentation supporting Federal, State and local taxes ~pplicable to all interest income earned. Further, it is - recommended that the RBC repay to the u.S. Treasury, within (~ the 30 day period, $251,122 plus an amount equal to any income

received as a result of investment or other use of public funds

:--.. pursuant to 11 C.F.R. 9004.5 since March 18, 1981 (less any Federal, State or local taxes paid on such income). During this

r 30 day period, the aBC may submit legal and factual materials to

demonstrate that the repayment or any portion thereof is not required (!!! 11 C.F.R. 9007.2(c».

B. Determination of Net Outstanding Qualified Campaign Expenses

On March 26, 1981, the Reagan Bush Committee presented

an updated Statement of Net Outstanding Qualified Campaign Expenses ("NOQCE") to the Audit staff depicting its financial

position as of December 4, 1980. The Audit staff reviewed the

books and records to verify the totals on the NOQCE. The

following represents the financial position as determined by the Reagan Bush Committee and an audited version prepared by the Audit staff•

•

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-14-

(1) Cash on Hand - Difference $2,453.27

. The difference represen~s checks wri~~en prior 12/5/80 and .ubsequen~ly voided. The RBC has no~ adjus~ed (increas.d) i~s cash on hand ~o include ~ese voided checks.

(2) Accoun~. Receivable - Difference $13,331.49

The difference repre.en~. (a) a $909.50 oV8rs~a~...n~

re.ul~ing from including ~wo reimbur8emen~. ($15.00 and $894.50) no~

rela~ed ~o opera~ing expenditure., (b) a $2,137.91 over.~a~emen~

re8ul~ing from ~he RBC'. use of an es~ima~ed accoun~. receivable ~otal

a~ 3/26/81. The Audi~ staff calcula~.d an actual ~o~al based upon a

review of all available records, and (c) a $16,378.90 under.~a~emen~

represen~ing ~e. balance owed ~o ~e RBC for asse~s sold prior ~o 12/4/80.

The RBC included ~e $16,378.90 in i~s capi~al asse~8 ~o~al. However,

since ~he asse~s were 801d prior ~o 12/4/80 ~e Audi~ s~aff has included ~he amoun~ as an accoun~ receivable as of 12/4/80.

(3) Capi~al Asse~s - Difference $30,239.03

As previously s~a~ed in paragraph (2), ~e Reagan

Bush Commi~~ee sold a por~ion of i~s asset. prior ~o 12/4/80 for

$16,378.90. The Audi~ s~aff has classified ~e $16,378.90 as an accoun~ receivable as of 12/4/80. In addi~ion, the Audi~ 8~aff

has classified o~her asse~s on hand as of 12/4/80, to~aling

$46,617.93, as capi~al asse~s. The RBC's NOQCE does not recognize these asse~s. The Treasurer s~ated he would review the 8~aff's

calcula~ion of the fair market value of ~ese asse~s.

(4) Reimbursements Received Relating to Expendi~ures

Made By ~he Re~UbliCan Na~ional Comml~~ee - Difference $1, 38,891.24

The RBC has no~ recognized as a con~ra asse~ ~/

reimbursemen~s i~ received relating ~o expendi~ures made by e

Republican Na~ional Commi~~ee. The Audi~ s~aff's adjustmen~ offse~s

(reduces) the RBC's asse~s which are overs~a~ed by ~e amoun~ of reimbursemen~s received rela~ing ~o expendi~ures by the RNC. (See Finding I I .A. )

(5) Accoun~s Payable - Difference $31,097.29

The difference represen~s (a) a $14,296.50 oversta~emen~ resulting from including expendi~ures for which ~e checks

were later voided and no~ reissued or reissued and included twice,

and (b) a $45,393.79 understa~emen~ resulting from the RaC's use'of

an estimated accounts payable. The Audi~ staff calcula~ed an actual ~otal based upon a review of all available records.

Con~ra Asset - a credit balance account which offse~s (reduces)

a particular asse~ account.

..

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.

:

•

•

• FEDERAL ELECTION CO~ISSION

WASMINCTON. D.C. ....

1. lnt.riJI Audit Repol't, approved bi the

Ccmmission on June 16, 1911.*

2. Certification of Ccmmission action by which

Revised Interim Audit Repol't was apPl'ovec5. Certification dated June 17, 1911.

3. Cover letter to Scott MackenZie, T:asu:e:,

ae.gan-Iusb Committee, dated June 18, 1911, t'ransmitting Interim Audit Report•

... Acknowledg.ent of receipt of lnter1m ~udit Report b.r E.L. Weidenfeld, dated

line 19, 1981.

5.·Memo, ,dated June 11, 1981, fram C.R. Steele

to R.J. Costa, re: Suggested Cbange. to

Intel'im Audit .eport.-

(.J

... BOiiliiLDiiiiil !Sm HSSDGn

.'J' .. ' . '.

Dec:.bel' 10, 1911

Edwal'd L••e1denfeld, Esqu1l'e Hclenna, Connel' and Cuneo

1575 Bye Stl'Ht, H.W•.

Wasbington, D.C. 20005

•" Deal' Mr. We1'denfeld: _ -.. ... .

'.~, ';"'-.. '" Tb1s will confim CUI' telepbone conversation of

.~And will I'educe' its 'subject mattel' to vl'iting.

Tbe recol'd. whieb we vi1l aake available tamol'l'ow al'e the ' ·~-fol1owing:

.. •

~~ Ccnsisten1: with the action it took witb I'espect to the files whieb

bad been senel'ated in the coul'se of the audi1: of the 1976 Cal'ter-Mondale

'jCommittee, the Commission ha. decided to place on the pUblic I'ecol'd ,~he file dev~l~ed dUI'!ng its audit of youI' client, the Reagan-Iu.b '.. , ....JCIIIDittee. ,. . .. ,

Accordingly, we anticipate that, simultaneous ,with tbe public ~I'el.ale of the Pinal Audit Repol't of the Reagan-Busb Cammitt.e,

l-.sc:hedulec5 to occur at 10:00 a.a. tCIIOI'I'OW, we also will begin to ' make the audit docwments available to the public. C'
,"

- "

"

"

..

Hemo, dated November 12, 1981, C.N. Steele to

R.J. Costa, reI Comments on Revi~ed ~ra~t Report of the Audit ~ivision.·

9. Memo, dated November 13, 1981, fram R.J. Costa

to Commission, reI F~nal Audit Report, with

draft Final Audit Report attached.*

6. Memo, dated May 29, 1911,- R. Costa to

Commissioners, re: Interim Audit Report " of the Reagan Bush CCIIUIli~tee, et al.,

with draft Interim Audit Report attached.*

7. Memo, dated May 26, 1911, from C.N. Steele

to R.J. Costa, re: Analysis of Interim,Audit' Report. * '

I. Memo, dated April 13, 1911, fram R. Costa to

C.N. Steele, re: Interim Audit Report, R••gan- Bush Committee, et al., with draft Interim Audit

Report attached.*

11. Memo, dated November 25, 1981, C.N. Steele to

Commission, reI Addditional C~ents on ieagan- Bush Audit ~r. liqht of the Dist:ict Court's

Opinion anc Order of November 13, lS81.

12. H~~o, dated October 13, 1981, froc C.N. Steele to

Commission, reI RaC Audit, Ccmmission Directive of

September 16, 1981.

10.

•

•

• rursuant to~"O.S~C. S437g(a)(12)(A), all reference to matters ~ein9 r~vieGed by the Ccmmissicn in the en:crcL~ent traCk have dele~ed ~rcm these records.

Ltr to E.L. Weidenfeld

December 10, 1911

'ave 2

,

As per our conversation, I understand that you will contact " me in the morning with respect to the release cf the above des cribed

records.

..

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,

2.- Pindins III B - Campai,! Tour ~atmbursemen~s

Two cClllllponeDts of !'1D4iDg II A ara' u~.rd a4just:ments report~a expenditures subject ~o 'the ltmi~~iOD at 2 U.S.C. 441a(~) (1) (B). The discussion at F1Dd1n9 III B 4e~a11s an4 suppor~s these adjus~ts.' Consistent with thai: recommendatiOD

for Finding II A, the Office of General Counsel r.c~ds that . Find~n9 III .• ~e daleteA in its an~1re~y from 'the in~er~ re~.

The Aud~t ~ivisioft agree. wi~ Office-of General

COunsel's recODlJMftdatioft provided that all- other f1Ddlll,s relati%si

'to the proposed Mmt aeti= aeleted in their at1rety•

3. Finain, III E - Oe~er.minatiOft of Ne~ OUtst&n4in, Q!al1!~ea campallft EXpanse. .

Consi.~ent with Finding II A and III B this fin~ift9

reco~ize. ~wo liabilities. The first is reimbursements 4ue-the Me ($1,138,891.24) and secondly, income repaya))le from cam;:.&1p ~ours ($16,849.50). The Office of General Counsel ha. recommended

that all references ~o the amount due ~he RNC and the income fram

campaign tou~. 4eleted._

The Au4i~ Oivision is of the opinion that .electively ~.le~ing these i~ems materially UDder.~ates and ~srepresents the

deficit spending, po.ition of the Reagan Bush Co~tte••

4. Finding IV - Repayment Summary

This' finding i. merely a recap of the matters notea iDe

the inte=~ report which may re.ult in a repaym.nt to the ~.S\

T:.a.u....-y. The Office of General Coun.el has concunec1 with 'the

recommendation providea tha~ 'the repayment-from Section III A

reduced $ • and the repayment from Section III a.(l)

C_ • .) ~e daletad. The.e adju.tments to~l $ _ . .

ana reduca tha recommended repayment

amount from $ . to $.

As an alternative to preparing the re~rt as recommendea

by OGC, it is the recommend.~ion of the Audi~ Division that the

findings related ~o the propo••d Maa action.~e completely excisea from the interim repor~- To select~vely remove Portions

of the affected findinas wnuld ma~~~i_'1v ~.state snd ~srepresent

the issue. at hand.

",~... .....; ., '"

, ....or.nd. to IDbel1i COat• .... 'Ibn•

...,.ated a.ng.a to "vlaed %nt.rt. Audl t "POrt of tb.....an

.uab CCllllltt.., ".,.n .uab Coapll.nc. Fund .nd o.ocr.ta for ".,.n

'.

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P.rt III. E. Determlnation of Net Out.t.nding Qu.llliea Campal9n Expen.e.

.J.

The Office of General COun.el r.commend. th.t par.gr.ph (4) on p.g. 15 be .xp.nded to fUlly .xpl.ln: 1) Why the moni•• receiv.d are con.idered a contr.-••••t: .nd 2) wh.t • contr.- ••••t i •.
The Office cf General Counsel has concurred ~ith the rec~~endations provided that certain mat~er. noted in the f~~dinss

~e celeted L~d the amount in excess of ~~e limitation be adjusted accorcingly. Counsel reccmmends that all reference. in the

findinss ccncernins expenditures made by the ~~C, and income =~~:i:=c :=~~ c~~?ei;~ ~~~=s =e =~:~~e~ ~~= ~~e ~~~~e= :.=.~=::

~cr MU~ ~:ea~~en~.

• . .

~tures ~n ~xcess 0: ~~at~on

- Limitation on ~~nditures and

May 2', I'll

INTERIM AUDIT REPORT OF THE

REAGAN BUSH COMMITTEE, REAGAN

BUSH COMPLIANCE FOND AND

DEMOCRATS FOR REAGAN

THE COMMISSIONERS

B. ALLEN CLUTTER

STAFF DIRECTOR

FEDERAL ELECTION COMMISSION.

WASHIlC10N. D.C. 2CMU

1.

T~e Audit ~ivisicn is of t~e opinion ~~at selectively ce:e~i~; t~ese ite~s material~y understa~es and misrepresents ~~e ~a~~e~at hand • .,

!t should be no~ed that ~~e Audit Division and the Office

of General Counsel are no~ in agreement regarding the presenta~ion

of certain findin;s in this report. The staffs have had several

discussions resarding the subject. The areas of disagreement.

a:e discussea below. All references to findings pertain to matter• ccntained in the interim report forwarded to OGe for analysis t'see Exhi~it B). __

Attached is a copy of the subjec~ repor~ for you: review

and consiaera~ion. In addi~ion, the le;al analysis perfor.med ~y the Office of General Counsel is a~~ached a~ Exhibi~ A. "'ttac.~ed at ~ibit B is the cover memorandum and in~erim ~epcrt

fo:warc!ed to OGe. These documen~s are provided as ~.ck;rC)und

in~or.mation L~d to facili~ate re~erence between ~he legal L~alysis

a~c t~e findinss contained ~~ ~~e report revie~e~ ~y OGe.

SUBJECT:

FROM:

MEMORANDJJM

TO:

THROUGH:

,.~

.....

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.-

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FEDERAL·ELECTION COMMISSION

WASHINCTON, D.C. ..

JuDe 11, 1981

.. .

11/,//1,

1/:tr1!M

It.JC--

.BROUGH.

noM.

...

Boben ;S. Co.ta Aa.i.tan~ Staff Dinc~or

B•. Allen C1u~t.r /

Suff Dinctor

Quirl•• B. s~.elJfJJO I.. General couna.11~lfIW\

Su,g••~ed a.ang•• to Revi.ed In~.r:l.a Audit ,. Rep:»n of th. "a,an Bu.h CCIaIIit~e., "a,an .Bu.h Coliplianc. Fund and De_ocrat:a for

Reagan

.,.

.

o~"

)

Pur.uan~ to the CO.-i••ionl • dinc~ion, the Audit

Divi.ion and the Offic. of Ceneral COu.el bav. diacu.aed ·...ded chang•• in the abo"e-d.scribed report .cheduled to

be di.cu••ed in .x.cuti"•••••ion on June 16, 1981. !bi• offic. ha•.revi.wed th. Audi~ Di"i.ionl • draft ba.ed upon the•• di.cus.io., and ha. additional COIIID.nta and .ugg••ted

chang•••

Par~ II.A. Lt.ita~ion en IXp!ndi~ure.

It i. the "i.w of this offic. that the di.cu••ion of

the CoIDIIitt•• Ul.~.nta of April 1, 1981 should be .xpanded.

Du. to the l.ngth and compl.xity of th. facts di.cu•••d, th.

Offic. of General COu••l r.cClllll.nd. that the following

subb.adingpnc.d. th•••cone! paragrapb on page 5. • A1I.ndII.n~ to Year End R.port Not R.cogniz.d- '

Af~.r the fir.~ ••nt.nc. in th. s.cond paragraph, th.

following languag••bould be insert.d. .

The audit di.closees that th. Republican National

Committ.e (-RNC·), pur.uant to 2 U.S.C. S 44la(d),

.ad••xpenditures of $1,633,239.89 for campaign

tour. of the pre.id.ntial and Vice-presidential

candidates. The•• RNC expenditures were in addition

to campaign tour expenait~res of $ by ~~e ~agan

Bu.b Committe. it••lf. As de.cribed more fully in

Finding Il1.B.(2), th. "agan Bu.h Committee billed

th. new.. Dedia, Secret Service and its own compliance

fund f~r their respective share. of the total campaign

tour ca*ts without distinguishing between amounts

paid by the RNC and tho.e paid by the "agan Bush eomllitte••
_.

.' '

(n.

" I

Memoranc5ua to Rober. Costa

'age TwO ' Suggested Changes to Revised Interim Audit Report of the Rea,an Bush Committee, Reagan Bush Compliance FU~ and Democrats for

Reagan .

As a result of these billings, the Committee

obtained $ in payments frcm the news lIedia,

Secret serv1ce and the Compliance Fund. The audit

staff determined that $1,138,891.24 of this total

repr4isented payments to Reagan Bush based on the

abov.-described INC expenditures.

• Again, without distinguishing between monies

received related to expe~itures made by the.RNC

and Reagan Bush, the Committee reported the total

amount on Schedule A-P, Line 21, thereby showing

a reduction of $ to the COll1llitte.' s operating expenditures.

During the fieldwork and at the exit conference

of March 27, 1981, the audit staff informed Committee

officials that the Committee was not entitled to

payments based on MC expenditures and that these

RNC-related payments could pot reduce Committee

operating expenditures. While the audit staff indicated

to the Committee that its estimate of RNC-related

payments approximated $750,000, it also infOr.med the

officials that this figure might be substantially higher once the calculations were made final. Prior

to the audit staff's arriving at the figure of . $1,138,891.24 in RNC-related payments, the Committee

filed an amendment apparently based on conversations

during the audit fieldwork and at the exit conference.

After the above insertion, begin a new paragraph with the

second sentence. ftOne of the effects of this amendment, if

the amendment is deemed permissible would be •••ft should be

deleted. In its place, this office suggests that the following 'be inserted: "It appears that the amendment was filed to

show ••• "

~he first part of the first sentence on ?age 6 should be c~anged to read as follows: ftThis amendment attempted to

stow a • • •II

This Office also suggests that all the language after

the ~irst sentence of the second paragraph on page 6 be deleted

as too speculative.


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lid t'Pe lata - IIIIJID )

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AgIInde am'·,L 181-002 - ..M m b -.tmg.

JD'-n.IIIU.~....L of tM"l:ca aIIb a:-I.~, _I.'.'"

.m.:t:Ial. OwnInim -._tt,. CD .1Uae 11, 1181, da __ CICt:I.!y

tIat: b OwrIeeicm Aec:1.... Om • af 5-1 1:10 4\&UN b ...u.s

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FEDERAL ELECTION COMMISSION

WASHINCTON. D.C. 20aU

("

,.

REAGAN

IN'rEJUM REPORT OF THE AUDIT DIVISION

ON THE

BUSR COMMrrTD, THE REAGAN BUSH CCMPL:ANCB nnm

AND

THE DEMOCRATS FOa REAGAN

..'"

.......

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...

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I. Bac)cqrounc!

A. Ov.rview

Thi. int.rim r.port i. ba.ed on an audit of the a.a,an

Bush Collllll1tt••, the "avan Bu.h Complianc. Fund and the Democrat.

for ba,an, to d.termin. wh.ther th.re has b••n complianc. with

provisions of the F.der~} Election Campaign Act of 1971, a.

amend.d ("the Act"). Th. audit was conducted pursuant to ~ection 9007(a) of Title 26 of the United Stat•• Code which .tat•• . that after .ach Pre.id.ntia~ election, the Collllll1••ion .hall

conduct a thorough .xamination and audit o~ the qualified campaign . expens•• of the candidate. of each polit~cal party for Pr••ident

and Vic. President. .

In addition, Section 9007.1 of Title l~ of the Code of

Federal Requlations state., that aft.r each Pre.idential .lection,

the Commission shall conduct a thorouc;h .xamination and audit of

the rec.ipt., di.bursements, debt. and obliqations of each

candidate'. authorized committee(s). !uch examination and audit

shall include, but shall not be lim!ted to, expen.es incurred purSUL~t to 11 C.F.R. 9003.4 prior to the beqinning of the

expenditure report period, contribution. to and expenditure. mad.

from th. legal and'accounting compliance fund established und.r

11 C.F.R. 9003.3(a), contributions received to supplement any

paym.nt. received from th. Fund, and qualified campaiqn .xpen••••

The Reagan Bu.h Co~tte. '("aaC") registered with the

Federal Election Commi••ion on Hay 29, 1980 (under the name aeaqan ~or President Gen.ral Election Committe.*) and served a. the

principal campaign committee of the Honorable Ronald Reagan, Rep~lican candidate for Pre.ident of the United State.. Th.

Candidate desiqnated the Reagan Bush Complianc. Fund** ("th. Compliance Fund") on July 7, 1980 (under the name Reagan !or

Presid.nt Compliance F~nd) and t~e Democrats for ReaqL~ on

\-

• On Au~ust 7, :980, ~~e Committee L~ended its statem.nt of

orqani:ation to conduct business as the Reaqan For Presid.nt

General ~lection Committee and/or Reaqan Bush Committee. ;,.

~h. Reagan 3ush Compliance Fund was established·to d.fray leqal and accounting costs associated with ensurine; compliance with tte F~CA.
.J

(

-2-

OC~~ 31, 1'80 u aQ1:ho~iae4 =-U.~1:ae.. 'file ...... au8b

C~~~ee aDd the "a9aD .au C~11aca I'UDd 1I&1A~ ~eu

head~e~. 1D •••b1ll91:OD, D.C. ad ~e DeIIo=au fOZ' "a9aD _1Il~aifted i~. beadquaR... 1Il k111lg1:on, Viqilli••

The· audi~ COft~e4 tbe pe~lod lI&y 29,. 1980 ~OQ9b

DeceJlbe~ 31, 1,aO, the f1lla1 cove~a,e 4.~e of the IIO.~ nc_~

~epo~ fl1a4 by the eo--f~~•• th•. ~1M of the audi~.

Durin9 tha~ ,..104, the C..a.~~ee. npoRed ~e foUoriD9

aC1:1viqrl

M91nn1D9

Cub

"agaD Bull Co-.1~~.. -0-

"a,aD BU8b Comp11uGe -0-

I'Uft4

832,516,345.37 $31,647,351.55 $86a,'~3.a2

2,110,857.80 1,512,152.~6 598,705.44

In ad41Ucm, ceRaiD fiDucial a~"l~y vas nviewa4

1:!2=u,b Much 26, 1'81.

This nport is ba.ed upon doc:umeD~. and wo~kiD9 pa~.

suppor~1Dg each of the 'fac:1:ual sU~e.-n~. con~a1ne4 bereln. ney fom par~ of. the ~ecoZ'4 upon whleb the commi ••10D based 1ts . declsions on the _~~e~. ~essed in ~e report aDd we~e availele ~o ~e Colllllli.sloner. aDd app~op~i.~e .uff fo~ re"lew•

.....

.

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.pelllOC~au fo~ ".,D _.

-0- . ·10,000.00* 10,000.00* -0-

...'.

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The p~incipa1 officera of the Commi~~ee. d~1Il9 ~e pe~lod

au4i~e4 wen:

'. ,

Ca.d.t~..

"a,aD Buah CoIIIDi~tee

"agD Bush ComplluGe

I'uD4

Democ~a~a fo~ .e.,an

u.s. Senato~ 'aul L&xal~ Bay auchanaD**

u.s. Senator 'aul Laxal1: Bay Buchanan**

Mr. LeaD Jawo~ski .... Janine Per~l9DOD

*

',) **

Ac~ivi~y of D.mocra~. For Reaqan was comprisee solely of a ~ansfe~ received fram aDd made ~o the .eagan Bush Colllllli~~ee.

Therefore, thla ac:1:lvl~y 1. DO~ subjec~ ~o ~e oveN11 111111:a- ~1on a~ 2 U.S.C. 441a(b) (1) (B). In ad4it1on, the Democ~at.

For .eagu filed • t~na~ion report on Janua;y 30, 1'81.

On Janu~y 21, 1'81, ~e Com.1~~eea amended their s~at"'D~a of organlza~1on ~o diaclo.e MZ'. Sco~~ Mackenzle as Trea.urer.

,~

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Audi~ ADaly.i. - Overall L1m1~ (2 0 .S.C.44la SlUlllB»

.epor~ed expeD41~ure••=je= 1:0 l1a1~a~iOD fJ:CII

5/1/80 through 12/31/80 • . $2',012,404.02

. yj·u.a.n~. ~o ~e above r.pone4 ~~al.:

A44:

Add:

Add: ..

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r· ... Les.:

r:-:- Less:

Le.s: ~r.

Expend1~ure. subje= ~o l1m1~a~iOD from

1/1/81 ~OU9h 3/26/81.

Deb~ aDd obliga~ion. owe4 by R8C .~ 3/26/81

"imbur••meD~ ·..d. ~o the Compliace rund

(••• Fi~ing III.e~) .

..

Moni•• r.c.ived rela~ing ~o expendi~ure.

mad. by the aepublica Na~ional Commi~~ee

(••• Finding 111.8.(2».

Incaaerealized from campaign ~our.

(••• Finding 111.8.(1».

Void.d ch.ck. included in op.ra~in9

expendi~=•• from 5/1/80 thJ:ough 12/31/80.

Capi~al ....~. OD haDe! ~o be liquida~e4.

Deb~. aDd obliga~ion. owed ~o RBC .~ 3/26/81.

To~al Expendi~ur.. Subj.c~ L1m1~a~ioft

from 5/1/80 through 3/26/81.

..

270,431.52

75,3'3.7'·

137,883.67

•

* A~jus~en~. to th••e figure. may be n.ce••ary upon r.view

of the actual r.ceip~ and .xp.nditur. activity r.lating ~o debt. and obligation••
......

...

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Based upon the above analysis, it appears that the,

Reagan Bush Committee has exceeded the limitation at 2 U.S.C. 4~la (b) (1) (B) in the amount of $ ($ less

$29,440,000). The Au4it staff noted that the Reagan Bush Committee

did not identify on its reports any amounts paid from its operating

accounts which may be allocable to the Reagan Bush compliance Fund

(e.g., hea4quarters/field office overhead, etc.). Therefore, the

Reagan Bush Committee may wish to review its overhead costs and

reallocate, on a reasonable basis, ~n amount applicable to the

Compliance Fund an4 obtain reimbursement for same.

Amendment to Year End Report Not Recognized.

It should be noted that the above analysis does not

recognize an amendment filed by the Committee to its 1980 year end

report. The audit disclosed that the RepUblican National

Committee ("RNC->', pursuant to 2 e.s.c. Section 441a(e!) (2), made

expenc:itures. of $1,·633; 239.89 for campaisn tours of the presidential ,.and vice-presidential candidates. These RNC expenditures were in addition to campaign tour expenditures made by the Reagan Bush Committee • As described more fully in Finding 11I.B.(2), the Reagan Bush Cc~ittee billed the news media, Secret Service and its own compliance fund for their respective shares of the total campaiqn ~our costs withoutdi$tinguishinq between amounts paie! by ~~e

~NC and those paid by the Reagan Bush Committee.

As a result of these billings, the Committee obtained pay~e~ts from the news media, Secret Service and the Compliance :~nd.The Audit sta~f determined that $1,138,891.24 represented

payments to the ~eagL~ Bush Committee based on' ~~e above described ~NC'expenditures.

Again, .without distinquishinq between monies received

related to expenditures made by the ~eagan Bush Committee and the ~NC, th~ Reagan Bush Committee reported the total amount on Sc~edule A-P, Line 21(~efunds, rebates, returns of deposits), ~~ere=y reducing operating expL~ditures subject to the limitation.

Ouring the :ieldwork and at t~e exit ccnference of Marc~ 2i, 1981, the audit staf: informed Co~ittee o~ficials

tha~ t~e Co~ittee was not entitled to payments based on RNC

expenditures and that these payments could nct reduce Committee

operating expendit~res•. While the Audit staf: indicated that ~he monies received relatins to RNC expenditures approximated $750,000, it also informed the officials that this figure may :es~=s~a~~~1l:y ~~;~e~ once ~~e ca::~~a~~=~! we:e ~ade :~~al.

?ricr ~o the Aucit s~a::'s a:ri~inq a~ ~he :igure of $1,138,891.24 ~~e ~eaqan 3ush Cc~~ittee filec an amend~e~t ap?arently based C~ ccr.versaticns d~ri~q the audit fieldwcrk and at ~~e ex~t

:=~:e=e:-:ce.

-


<...

-1-

..

•• . Di.clo.ar. of Debt. aDd Obli,.ticma

secUOA ·434 (b) (8) of 'fiU. 2 of the UniU4 sut•• Cod. requi~. di.clo.an of 1:h. UIOUftt aDd _1:u. of deb1:8 u4 oblig.t1ou

owed by or 1:0 .uch poliUcal CCl"'it1:••, aDd ••ut~t a. to 1:h. c~cuma1:aDce. aDd COD4itiou UDd.r whJ:c:Il .uch deb1:. or obliga1:ioe.

wr. ex1:iDpiahed, aDd 1:h. COftS14.ra1:ioft 1:h.r.~on.

'!he Audit .uff ft01:ed that 1:he follow1q 1.t1:U. of

credit wen ••1:abU.hed with 1:h. aigg••a1:i=&1 8aDk 1ft favor

of 1:hr.. ~or.. The &IIOUftt u4 natar. of th... 1.1:1:er. of

credit were ft01: di.clo.ed 1ft 1:he "agan Buah Ca-11:'tH·. reporU = th. Co.-1••ioll.

(1) Pacific T.l.pboft. T.1.,..Rb co. - .

All ~.~abl. l.tt.r of credit va. ..1:abliahe4 1ft

!.vor of th. veDdor PuZ'.U&ftt 1:0 an .9r.~t dated AU9U.1: 21,

!'. ·1910. 'lb. crec!it, ••cured with cU1:ifica1:•• of d.po.it 1:ouliDV

$300,000 (.ub••quutly 1ftc:r...ed 1:0 $500,000), 9U&Z'an1:Hd the ••ti.f.ctioll of all obligation. owed to 1:11. veD40r by the "agan Bu.h Collllllitt••• ""

~~\J

.~.

i.)

(2) United Airlift••, %Dc.

Two i=-vocabl. l.tt.r. of credit wen ut:abli.he4

ift favor of United Airlift•• on Augu.1: '9, 1910 aDd S.ptember 11,

1910 pur.uant 1:0 Aircraf1: 1•••••gr.emaza1:•• The. credits,

collat.ralized with c.rUficat•• of d.po.it total1ftg $425,000,

guarant.ed the .aU.f.c1:ion of 1D4.bte4ft••• 1:0 the veD40r by

the ae.gaD Bu.h C~tt...

(3) Tr.ilvay. Lei.ur. aDd Tr.vel

AD ~.'VOcabl. l.tt.r of credit va•••tablished 1ft

f.vor of the veftc!or pur.uazat to an oral agr••JDeDt of S.ptember 4,

1910, &Dc! payable upon writteza 4.mancl frOID 1'railway.. Th. credi1:

w•• collat.r.liz.d with c.rtificat•• of d.po.it touliftg $20,000.

OIl April 15, 1981, th. Committ•• filed it. fir~t

Quart.rly a.port for 1981, which .ub.Uiltially 4i.clo.ed the

n.c••••ry 1ftformation r.garding th••• 1ft.trument••

a.commend.tion

....d on the abo"., the Audit staff r.coJllllleDc!. no furth.r

.ction on this matter.

~. .Y
_0

-9-

OS11Cl'ations For ~~e United States Cod.,

.erayment to •

A. Expenditures In Exces. of the Limitation

Reaqan Bush Committe.

III.

C. Transf.r To and From Affiliated Committ••

. Section 9007(b) (2) of Titl. 26 of the United State.

Code states that if the Commission deter.mines that ~~e eligible candidates of a political party and their authorized committe.s

incurred qualified campaiqn .xpenses in excess of the aggregate

payments to which ~e eligible candidates of a major party were

entitled under section 9004, it shall notify such candidates of ~he amount of such excess and such candidates shall pay.to the·

Secretar1 of ~h. Treasury an amount equal to such amount.

~xce?t :or ~~e issues addressed in Find~nq !II.C.,

no rna~erial Title 26 matters were noted relating

to ~he Compliance Fund. Also, ~~ere ~ere no Daterial ~a~~ers no~ed ccncerninq Democra~s For Reaqan.

Based on the above, the Auditsta~f recommends no further

action on this matter.

Th. Audit .taff noted a $10,000 tran.f.r mad. by the

Reagan. Bu.h Collllll1tt•• to D.mocrat. For Reagan. Th..... amoUDt

was .=••qu.ntly tran.f.rred from Democrat. For R.agan to the

Reagan Bu.h CODlftitte.. Democrat. For R.agan disclos.d the

rec.ipt ancl di.bur....nt of the tran.fers. The a.agan Bush

Committ•• con.id.r.d the disburs.ment and r.c.ipt as int.rbank tran.fers and did not disclo•• this activity in it. r.ports filed with the Commi.sion. .

S.ctions 434(b) (2) (E) aDd 434(b) (4) (C) of Titl. 2 of

the United Stat•• Cod. require the di.closur. of the total

&mOunt of all tran.fer. mad. to or r.c.ived from affiliated

cOllllD1tt••••

,. On April lS, 1981, the Committe. filed its fir.t Quart.rly . Report for 1981 which properly disclosed th.se tran.fers.

Recommendation

"....

,r"\

,-'

~.
-10-

:} A. previou.ly noted in l':1Dding II.A., the Aa4i~ .taff identified expeftc!i~u~e. wbich appear to be 1ft axe... of

the ove~all limitation fo~ the pa~i04 5/01/80 1:h%ougb 3/21/81

totaling $' ••

. Recommendation

The Audi~ .taff nc:~. tha~ the "agan Iu.h cOlliu.tt.. be ~eque.1:ac! 1:.0' show within 30 day. of ~eceip~ of the audit . ~eport that the ova~all 11m11:&tion ha. no~ !)aeJl exceeded a••e~

for1:h in thi. ~eport. Al).en~ such a showing, .• 4.a~~ion

will be made ~egu41Dg aDt UIOWlt ~aqui~a4 1:0 ]:)a 'repai4 1:.0 th.

U.S. T~e..ury. .

B.. Campai9ft Tou~ "imbu~se_nt.

• Section 9004.6<a) of Title 11 of th. Cod. of raderal , .• Regalaotion•.state., in part, that if ~eiJabu.UIeft~ for ·.t~an.portation made availabl... to _dia, S.c;:re~ Service or oth.~

1'" staff authorized by law or requir.d by na~iona1 s.curity 1:0

,~~ "avel with a candidate i. r.ceived by a c=-1tte., the UIOUft~

of such reimb~._nt fo~ each individual sbal.l not axcHd that . ,.., inc!ivic!ual's p~o rata share of 'the actual co.~ of the uanaportation made available. 'Pur'ther, Section 9004.6 (b) of Title 11: .~ of the Code .of Federal "gulation. .tate., in part, that if

'J reimbur.e.n't for g~oW1C! se:vices and faciliti•• is received ],y . -~. a committee, 'the &mOunt of sucb re1mbu:samant fo~ each 1D4ividual

('" .hall not exceed either the inc!ivi4ual'. pro rata share of the . actual cost of the service. an4 facilitie. mad. availabl., or a

". reasonable .stimat. of th. individual's pro rata shu. of the co.t

of the services and facilities mad. available. If it i. detanaiDed

c: that reimbur.ements related to a trip ha". exceed.d by 10' or more

.:: the actual co.t of the .ervice. aDd facilities mad. availabl.,

.uch exce.sive amount shall be deemad ince. to the cCllaitta. aD4 ~:., .hall be repaid to the S.cretary.

Section 441a(d) ofTitl. 2 of' the United State.

Code pe:mits the national committ•• of a political party to make

expenditure. in connection with the gene~al election campaign of.

any ca~didate for President of 'the United State. who is affiliated

with such party not exceeding 2 cent. mGltiplied by the voting

age population of the United State. as c.~tified by the Secr.tary

of Commerce (al.o ••e 2 U.S.C. 441a(.» •.

. ;1,.-

.'

.:~
(1)

".

.-~

....,

'..

.. .

-11-

Sec~ion 9007 (b) (3) of Title 26 of the United State.

Code .ta~e., in par~, tha~ if the Commi••ion de~ermine. tha~ the

eligible candidate. of a major par~y or any authorized committe.

of .uch candida~e. accep~ed contribu~ion. (other than tho.e

allowed under Section 9006(c» ~o defray qualified campaign

expen.e., it .hall no~ify .uch candidate. of the amoun~ of

th. con~ibution. so accep~ed, and .uch candidates .hall pay

to the Secretary of the Trea.ury aD amoun~ equal to .uCh amoun~.

The Audit s~aff analyzed the campaign =ur. unde~aJcen

by the Presiden~ial and Vice Presidential candidate. for which the

Reagan Bush Commit~ee sough~ reimburs_en~ from the new. _dia,

Secret Service and Reagan Bush Compliance Fund for a pro ra~a share . of cost. for air tran.por~a~ion and ground service. and· facili~ie••

Reimbursemen~. Based SolelY on Costs Paid By The

Reagan Bu.h committee

The analysis of available records suppor~ing the ac~ual cos~ of .ervices and facilities made available to the new.

media, United States Secre~ Service and Compliance Fund personnel disclosed tha~ the Reagan Bush Commi~tee realized income in

conjunction with the tours of at least $50,588.48 ($1,284,704.10 reimbursements less actual cost $1,234,115.62).

Recommendation

Since the above reimbursements have not exceeded by 101 or more

the ac~ual cos~ cf the services and facilities as contained at 11

C.F.R. 9004.6(b), the Audi~ staff recommends no repayment action

with respect to the associated income. However, since this income . has an impact (understates repor~ed expenditures subject to the

limitation) on expenditures subject to the overall limitation, the

entire amount ($50,588.48) has been included in Finding II.A. as

an upward adjustmen~.

(2)

In addition to ~~e ma~t.r in (1) above, ~~. Au4i~

staff noted that the Republican National Commit~ee made seven

expenditures totaling $1,633,293.89 in conjunction wi~~ the tours

and applied the amount to its 2 U.S.C. 44la(d) (2) l~~itation.

The Audit sta::'s review of the Reaqan =~sh Cc~~ittee ~eco~ds

~e',ea1ed ~~at $1,613,049.:5 of ~he Rt;C ex::enc:~t~ras were app:iec:

to air charges associated with ?residential tours 6 ~~rouqh lS and

vice presidential tours 6 ~~rouqh 14. A pro rata share of the.e

expenditures was billed by the Reagan Bush Co~ittee to ~~e news ~edia, United States Secret Service and Reaqan Bush Compliance Fund. The ~aqan Bush Committee obtained $1,138,891.24 in rei~ursernents associated wi~~ the Republican ~ationa1 Committee's

expenditures. These reimbursements were retained and reported by




11,573,717.12

465,040.8'

$2,073,716.54

8,894.32

2,657,740.25

$

$ ''',362.34

1,664,034.'3

23,643.16 $2,666,634.57 46,617.93 $2,712,658.3'

($1,138,891.24)

$2,666,634.57

$ '75,90'.07 1,650,703.44

23,643.16

16,378.90

Total U.td]i U.s

~et ~U~Q\alifiec! car.;.ign

E>::e:wes-S-==lua . . (ce~icit) .

Payable f=: $2,042,69'.25 O"'ifW ~gD ExpeDIu

Intarut ~le 1:0 the

o.s. T:usuzy plu. ux. 465,041.00 paycl.

Z. De~e:aina~ioD of Ne~ OU~.~andin, Oualified eampa11P Expen.e.

-16-

•

CD Much 26, 1'81, the aeaga Bu.h Collll1~~ee pre.eD~ed a up4a~ed S~a~e"D~ of Ne~ OU~.~aDdiDg Qualified CampaigD.Expenae.

(-NOQCZ-) ~o the AUdi~ .uff depic~1Dg i~. fiDucial po.ioD .. of December. 4, 1'80. The Audi~ .~aff reviewed the book. ad record. ~o ..veZ'ify ~e ~o~al. OD the NOQCZ. TJie following repre.uu the'

fiDucial po.i~ioD a. 4e~enU.De4 by ~e "a,an. au.h Cola1~~ee aDd

aD audi~ed ver.ion prepared by the Au4i~ .uff~

a.v- a.b caam.=-

ADalya1a of O·,1fle4 Capli9ft DcpnU,~

Aa of l)e1)1i'a.r 4, 1980

'.

( ':

..,

Cash en Hmxt .~ 12/04/80

Acccun1:a Race1wble

Intca1: RIce1vab1e

capital Aasats

..,....

.f-tN.. Race1w4 ~1:1.ng to

!Xpc¥!1=:a Ma ),y the

RapubllcaD Na~ CcIIIai.tt8e
-17-

Cl) Ca.h Qn Hand - Difference S2,453.27

The difference r.pre••n~. ch.ck. wri~~.n prior

to 12/5/80 and.Ub.equen~ly void.d. The Commi~~.e has no~

adju.~ed Cincr.a.ed) i~. ca.h on hand to includ._~e•• voided - -- check.• . ... -

,....

, .

'.

".....

.('...

(2) Account. R.ceivable - Differ.nc. $13,331.49

The diff.r.nce r.pre••n~. Ca) a $909.50: ov.r.ta~...nt r ••ultin9 from includin9 ~wo retmbur.em.n~. C$15.00

and $894.50) not r.la~e4 to op.ra~ing expenditur••, Cb) a $2,137.91 ov.r.~a~emen~ re.ul~ing from the Commi~~e.'. u•• of an ••t1mated

accounts rec.ivabl. ~o~al a~ 3/26/81. Th. Audit .~aff calcula~ed

an ac~ual to~al b••ed upon a r.view of all av.ilabl. record., and

(Pl a $16,378.90·und.r.ta~...nt repr••entin9 ~. balance ow.d ~o the Commi~t•• for •••• ••01d prior to 12/4/80. Th. Commi~t••.

ha.included the $16,378.90 in i~. capi~al a••et. ~otal. However,

.inc. the ••••t. w.re .old prior to 12/4/80 ~e Audi~.s~aff haa

included the amount as an account receivable a. of 12/4/80.

01 Capital A.set. - Diff.rence $30,239.03

As pr.viously stated in pU.9raph (2), the Reagan 'Bush. Committe••old a por~ion of its ••se~. prior to 12/4/80 for

516,378.90. Th. Audit .taff has cl••sified the 516,378.90 as an

account receivable a. of 12/4/80. In .ddition, ~~e Audit.taff

has cla.lified other a.s.ts on hand as of 12/4/80, t01:aling . $46,617.93; a. c.pital· assets. The Commit~ee's NOQCE doe. not

recoqnize ~~es. assets. Th. Trea.urer stated h. would revi.w the . staff's calculations of ~be f.ir m.rk.t value of these ass.t•• . c.se. Attachmen~ Il:[l

(4t Mon1e. R.ceiv.d Rel.~inq to Expenditur•• M.d. ~he Reoub1!can.N.t!onal comm!t~ee - ~!f.r.nce $1,138,891.24. ..._... .

~.. Th. COJIlIIl1tt•• has not recogniz.d as a contra a•••t*

monies it rec.ived rel.~inq ~oexp.nditur.s m.de by ~he R.pUblican· Nation.l Commi~t.e. The Audi~ s~.ff' ••dju.tmen~ offsets Cr.duce.) ~. Committ••••••••t. which .re ov.rstat.d by the amount of moni•• . rec.ived r.latinq to .xp.nc!i~ures by ~h. RNC. (see Findinq III.B.

t2) >. •

(51 Accounts Pay.ble - Differenc. 531,097.29

~~e d~~~~r9~=~ ~9;rese~~s (a~ _ !l;.:~~·.!~ eve:~

s~a~ernent ~es~l~inq from inc:~dinq expenditures ~hich t~e check.

were later voided .nd not reissued or reissued and included

twice; and (~) a 545,393.79 understatement resultinq frcm the Cornmi:~ee's u.e of an.estirna~ed accounts payable. The A'.:dit st.ff

calcul.ted an actual total based upcn a ~eview of all available ~ecords. .•

• Co~t~a Assets - a credi~ :alance acco~nt which offse~s Creduces)

a partic~lar asse~ acccunt.
Ab.ent a showing to the contrary within 30 day. of receipt of this report, the. Audit .taff will recommend to the Commission

>hat .>& value of the amount detailed above ($1,583,755.01) De

:epayable in full to the U.S. Treasury.

"

.. ...

•..

r,--

"

-18- ....•

..'

Iy• Repayment. to the o. S. Treasu9

Finding III.A. Expenditure. in

Exce•• o~ the Limitation .

Finding III.D. Investment of

?ublic Funds

Total aecommended Repayment

RecCo'11:ftendation

$'

$

251,122.00 ,
I

.:

Actac!wenc I ...

.......,

SchMu1e of Caplcal M.ec. _ Bad ac 12/4/10

Value of

'local taa. M.ec. OIl Ila4

DucrlpclO1l Qupt19 'rice Deprec1atlO1l 12/4/10

Xerox uch:I.De 1 18,156.60 4,539.14 13,617.46 (Mele124OO)

'1m., low.. Copler 1 5,294.70 1,323.68 3,971.02

Autocrac Slpacure 1 1,550.00 387.50 1,162.50 Hach:I.De

Motorola CommuD. 3 5,900.00 737.49 5,162.51 Equlp.-ena .. ",. ... . 'lme)' Bow.. 'on..e 2 4,229.40 1,057.36 3,172.04 Macb:l.1'le (5600) ... -.

Hotorola equlp.- 9 10,962.36 2,740.59 8,221.77 walkie tuki..

...... Olivettl te. 401 1 5,713.40 1,428.34 4,285.06 word proce••or

C 'itn., Bow.. Hall 1" 1,761.72 440.42 1,321.30

:;-.. Opener (LA)

C -Son)' Video recorci:l.1'll 1 4,090.00 5U.25 3,578.75

systa

JVC 3/4 Video player 1 800.00 100.00 700.00

c"-

MaU:I.1'l1 Mach:l.1'le 1 1,629.16 203.64 1,425.52 (56001.)

Total 60,087.34 13,469.41 46,617.93
·.

(""" .

... .

FEDERAL ELECTION COMMISSION

WASHINCTON. D.C.-..J

INTERIM REPORT OF THE AUDIT DIVISION

ON THE

REAGAN BUSH COMMIftEE, THE REAGAN BUSH COMPLIANCE FOND

AND

THE DEMOCitATS FOR DAGAN

I. Backqround.

A. Overview

This interim report is based on an audi1: of ~e ReagaD Bush Comm1ttee, the aeagaD Bush Compliance Fund and 1:he Democrats

for Reagan, 1:0 d.t.rmine whether there has been compliance with

provision•.of the Eederal Elec1:ion Campaign Act. of 1971, as

... am.nded ("1:he AC1:"). The awl!twa. conducted pursuant to

Section 9007(a) of Title 26 of ~e United Stat•• Code which .1:&tes

that aft.r each Pre.idential election, ~e Commi••ion .hall

conduct a thorough examination and audit of the qualified campaign

expenses of ~e candidat.s of each political party for President

and VicePresid.nt. .

In addition, Section 9007.1 of Title 11 of the coae of

Federal Requlations stat.. that after each Presidential election,

the Commission .hall conduct a thorough examination and audit of

the receipts, disbursements, debts and obligations' of each

candidate's authorized committee(a). Such examination and audit

shall include, but shall not be limited to, expenses incurred

pursuan1: to 11 C.F.R. 9003.4 prior to the beginning of ~e

expenditure report period, contributions to and expenditur•• mad.

from the legal and accoun~inq compliance fund established under

11 C.F.R. 9003.3(a), contributions received to supplemen1: any

payments received from the Fund, and qualified campaign .xpen••••

The Reagan Bush Committee ("RBC") register.d with the

Federal Election Commission on May 29, 1980 (under the name aeagan for President General ~lection Committee·) and served as the

principal campaign committee of ~~e Honorable Ronald Reagan, Republican candidate ~or President of th, United States. The

Candidate designated ~~e Rea~an Bush Compliance Fund·· (lithe

*

••

On August i, 1980, the Cc~itt.e amended its statement of

organization ~o conduct business as the Reagan For President

General Election Committee and/or Reagan Bush Co~ttee.

The ~!gan Bush Compliance Fund was established to defray leqal~and accounting costS associated with ensuring compliance with the ~ECA.
-2-

Complianc. Fund-) OD July 7, 1980 (UDd.r ~. name RaaqaD for

Pr••id.nt. Complianc. Fund) and t.h. Democrat.. for ReaqaD on ~t.oJ:)er. 31, 1980 U. au1:horizec! cOllllll1t.t..... n. Reaqan Iu.h

Collllllit.t•• and th. "a9an Bu.h Complianc. Fund maintain 1:h.ir

h.adquart..r. in Wa.hin~OD, D.C. and 1:h. D.mocrat. for "agan maintain.d it. h.adquart.r. in Arl1nqt.on·, Virginia.

n. audit. cov.red 1:h. period May 29, 1980 1:brough December 31, 1980, th. final cov.raq. dat.. of th. mo.t. r.cent

r.ports filed by th. COJIIIDit.t.••• at th. t.ime of th. audit.

During that. period, th. C01Imit.t.... r.port..d th. following act.ivity:

.......I

,

. Beginning Tot.al Total EDdinq Co!Rlllit.t.ee Ca.h lac.ipt.. Expendit.ur•• Ca.h

Reaqan Bush Committ.•• -0- $32,516,345.37 $31,647,351.55 $868,993.82

Reagan Bush ~omplianc. -0- 2,110,857.80 ~,S12,152.36 598,705.44

Fund ."

Democrats for Reagan -0- 10,000.00* 10,000.00* -0- r-

,..-. In addition, c.rtain financial act.ivit.y was reviewed

-through March 26, 1981• . .

..

,....

This report. is based upon documents and working paper• supporting each of the fact.ual statements cont.ained herein. They form part of ~~e record upon which th. Commission based its

decisions on the mat.ters addressed in the report. and were available

to the Commissioners and appropriat.e staff for review.

~. 0

B. Key Personnel

r' The principal officers of the Commit.t.ee. during the period .audited were:

co Committee Chairman Treasurer

Reagan Bush Committ.ee 0.5. Senat.or Paul Laxalt Ms. Bay Buchanan**

Reagan Bush Compliance 0.5. Senat.or Paul Laxalt Ms. Bay Buchanan**

Fund

Democrats for Reagan Mr. I.eon Jaworski Ms. Janine Perriqnon

_.

nc~ivi~y of Oemccrats For Reaqan was comprised solely of a

transfer received from and made to the Reagan Bush Co~~ittee.

Therefore, this activity is not subject to the overall limitation at 2 U.S.C. 441a(b) (1) (B). In addition, the Democrats

For Re~~an filed a termination report on Ja~~~ry 30, 1981.

On January 21, 1981, .the Committee~ amended its statement· of - orqani:ation to disclose Mr~ Soott ~ackenzie as Treasurer.
-3-

C. Scop!'

Th. audit' included such t.sts as v.rification of total

r.ported r.c.ipts, expenditur.s and individual transa=10nsJ r.view

of required supporting documentationJ analysis of Committ•• debts

and obligationsr r.view of contribution.and expenditure ltmitationsr

and such oth.r audit procedures as d....d n.cessary uDd.r the

cirCUlllStaJ)ces.

II. Interim Audit Findint. and aecOllllllendations Relating to fItl. 2 of €h. On tid stat.s coa.;

"..

.-.

. ."

a.aian Bush Committe.

A. Disclosur. of Debts and Obligation.

S.ction 434(b) (8) of Title 2 of the United State. Cod.

requir.s disclosure of the amount and nature of debt. and obligation. owed by or ~o such political cO:Dlllitte.J and a statement as to the

circumstances aDd conditions under which such debt. or obligations . were extinguish.d, and the consideration th.refor••

Th. Audit staff noted that the following l.tter. of

cr.dit w.r. established with the Riggs National Bank in favor

of thr.e vendors. Th. amoun1: and nature of th.s. letters of

credit w.re not disclos.d in the Reagan Bush COJllllitt•••• r.port. to ~~. Commission. .

(1) Pacific Telephon. and T.l.iraph Co.

An irrevocable let1:.r of cr.dit was .stablish.d in.

favor of the vendor pursuan1: to an agreement dat.d August 26,

1980. The credit, secured with c.rtificates of deposit totaling

5500.,.000, guarant.ed the satisfac1:ion of all obligations owed

to'th. vendor by the Reagan Bush Committ.e • . '

- . .. (2) United Airlin.s, Inc.

Two irr.vocable letters of cr.dit w.r. establish.d .in favor of "nited Airlin.s on August 29, 1980 and September 11,

1980 pursuant to Aircraft lease agreements. The credits, colla~eralized with certificates of deposit totaling $425,000,

guaranteed the satisfaction of indebtedness to the v.ndor by the Reagan Bush Committee.

* The:e were no ma~erial :i~dings with r.spect to either the

Reagan Bush Compliance Fund or O.mocrats For Reagan r.lating ~o Ti:le 2 of the enited States Code.



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:.ler:lorand\::l to Ro·ber~ J. Cos~a

,Page 'l'wo

Analysis of the In~erim Audit Report cf the Reagan lush

Cc::oomi ttee, Reagan Bush COJ:lpliance !'und and teDOcra,ts , . for R~~gan - A-924

previsions, rela~e~ ~ransac~ions raise sericus ques~ions

concerning potentially substan~ial repay=en~s by Reagan Bush and violations of the Act and Chap~er 95 by both

co::o..":\1 :te.s.

As result of tour charges to the media, Secret ..Serv ice, . and its own Co:pliance Fund, Reagan Bush obtained

In.excess of S2.2 million in payments. Thi~ amount was

reported on the Ccmmittee's filings as reductions to its opera~ing expen~itur.s subject to the llJ:litation of

2 ~.S.C. 5 44la (b)(l)(B). According to the Audit Division's

calculations, Reagan Bush o~tained Sl,138,89l~2' of the

over $2.2 million total based upon tour expenditures of

the ~~C. It is the Audit Division's contention that:

1) ~eagan Bush cannot be rei~bursed for expen~itures allocable

te the ~1C; and 2) Reagan Bush operating expenditures shculd be 'adjusted upwards in th'e at:lcunt of Sl',138 ,S91. 24,

since the Cocmittee cannot reduce its own cperating expenditures based upon JU~C expenditures•

T~e interim repcrt recc=~ends tha~ Reagan Bush re:~=~rse the Sl,138.89l.24 to the m:c within 30 days

c: receipt cf the report, and further states that a recc~endation will be cade to the Cc~raission to treat t~at a~ount as a ccn:ri=uticn subject to repayment. under ,6 u.s.c. 5 9007(b)(3) in t~.e event t;lat t~e Cc=.mittee ~c~s not so rei:~urse the~:C. In a~diticn, Findin9 II A i~~icates that Reagan 3ush has expended S

substantially in excess of the limitation of 2 U.S.C.

§ ~4la(b)(1)(£). The calculation on page 4 of the report :~cl~~es the aJ:lount 0: these N~C-based payJ:lentsin

tte total acount of operating expenditures. rarts III A an~ IV indicate that the accunt in excess of the ex~encitures limit (approxi~ately S .) be" repaid to the

0.5. Treasury.

Having reviewe~ the Audit Division's findings and recc~~encaticns in this area, the Office of Ceneral Cc~nsel

r~ce~~encs that the ~a:ter :e treated as a referral to :~~s c::ice. ~~is ~atter raises a nu~oer 0: cc~~lex legal a~= :act~al issues which can be better handled within

::.e centext cf an i:wes'ti9a:ion uncer 2 U.S.C. 5.437g_

!:crec"'e-t", it a:-=ears at this juncture that there ma... ha"·e :~e~ ~~l:i~le vlcla:ior.s 0: the Act ar.d C~apter 9S by ~~!ia~ ~~sh a~~ :~~ ~:::. ~~~~ :~e ~c~e~~~al ~~~ay~e~~

~~=er 26 U.S.C. 9QC7(:)(3), nc:e~ a:cve, is depen~ent

~~C~ a Cc~~issicn ce~er=i~a:lon ~hat ~~e ACt has been

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M.corandumto Rot.rt J. Costa

Page Thr•• Analysis of th. Interim Audit R.port of th. R.agan Bush

Committ••, R.agan Bush Cemplianc. Fund and D.mocrat. . for Rugan - A-t24' . . violat.d. Awaiting the Committ•••• r.sponse to th. int.rim

report, und.r th••• circumstanc••, is unlikely to hav. any affect on the recomm.ndation of this offic. to initiate a

MUR. Proce.ding with an inve.tigation at this tim. will

achi.ve the dual purpo•• of affording the parties involv.d

the proc.dural saf.guards of 2 U.S.C. 5 437g and helping re~ine the issues so that furth.r repayment recomm.ndations

will have a solid l.gal and factual basis. .

Given the interrelatedne.s of Reagan Bush and JU~C

exp.nditures in the campaign tour area, this offic.

further recommends that all reference to income realized

from campaign tours also be treated as a referral.

References to these matters should be deleted from pag•• 4, 5, 8, 9, 10, 13 and 15. In addition, adjustment. will

have to be' made to figures on pages 4, 5, 8, 13. and 15.

In 'order that the Committee be given written notic• that further repayments could result from an analysis of the matters refer~ed, a footnote should be added to

the "Total Recocmeneed Repayment" figure on page 15. It

should read as follows:

As p~evieusly noted, certain matters have

been referred to the Office of General Counsel.

Cpen their ~esolution, further. repayments may be ~equired.

Findinc II. A. Limitation on Expenditures

The Office of General Counsel concurs in those parts of the finding and reccr.~endation not involving the matters

to be deleted.

Finding II. B. Debts and Obliaations

The audit report indicates that the Reagan Bush Committee

did not compo~t witr-the requirements of 2 U.S.C. 5434(1:)(6)

when it failed to disclese the amo~nt and nature of letters

of credit established at the Riggs !~ational Sank in favor

of three veneers. Hence, the audit staff recommends that

within 30 days of recei?t of the interim audit report, the

neaganuusn committ&e :i1e an ameneed report disclosing the

eates, ame~nts, int&rest and eellateral asscciated with t~~se ins~r~~ents.

h recent r~;ert filed =y the Reagan ~ush Co~rnittee

(April 10 Quarte~ly) ~eveals that the Co~mittee has cc~plied with t~e auc:t r~co~=eneaticn ?ertaining to

'.
t-ie::lorandu::l to Robert J. Costa

Page Four

Analvsis of the Interim Audit Report of the Reagan lush co~~i~tee, the Reavan Bush Compliance Fun~ a~ Democrats

for a.agan - A-924 . .

th~s finding. It is the understanding of this office

that the audit report will be up~ate~ to include a

statement regarding the recent disclosure and that the rece~endation will be changed to propose that the Co~~ission take no ~urther action with respect to

this finding • ..

Finding II. C. Transfer To an~ From Affiliated Committee

The auait report indicates that the activity of

Oemocrats For Reagan was comprise~ solely of a transfer ~eceived from and made to the Reagan Bush Committee.

While the Democrats for Reagan disclose the receipt and disbursement of these transfers, the Reagan Bush

reports failed to disclose such information in accordance

with 2 U.S.C. S 434(b)(2)(E) anc! S 434(b)(4)(C)~

Accordingly, the audit staff' recomJ:lencs that w"ithin , 30 oays of receipt of the interim report, the Reagan

'""', Bush COJIICi t tee amend i t.- repor~s to ~eflect the activity between the coa~ittee and the Democrats for Reagan.

..,-.

r.

A recent report filed =y the Reagan Bush Committee (Ap~il 10 Quarterly) reveals that the Cocrnittee has

cemplied with the recocmendation per~aining to ~is .. findins. It is the understand ins of this o~fice that

the aucit repert w~ll be upeatec to incluce a statecent

resareing this mest recent aisclosure and that the recom- ~endation will be changed to propese that the C~~is.ion

take no fur~her action with respect to this finding.

:indinc III. A. Ex~enc!itures In Excess of the Limitation

Cons!stent with the treatment of this ~atter in Finding ~~ II. A., the Office of Ceneral Counsel concurs in the

finding ana recommendation of the Audit Division. As no~ec above, the figures will have to be adjusted given t~e celet~en of the campaign tour issues from the report.

F~~c~~= I:!. s. Ca~=aicn Tour Reimcurse~ents

~his ~atter should be aele~ed in its entirety.

I

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uemorandua to Rob.rt J. Co.ta

'age Six

Analy.i. of the Interim Audit Report of the Rea,an lu.h

Coamitte., .eagan lu.h Compliance Fund and Deaocr~•.

for a.aVan - A-924

the Audit Divi.ion may want to indicate that certain it.a.

are mi••in, from the analy.i. pur.uant to a referral to

this offic•• . On pav. 1', paragraph (2), it·i. recoQaend.d that the

Audit Divi.ion indicat. that the -actual total- calculated

by'audit .taff i. ba••d upon a r.vi.w of all availabl.

r.cord.. It i. ,al.o r.coamended that a similar .tat.m.nt b.

includ.d in paragraph (4) on th..... pag••

Finally, thi. office reco~.nd. that paragr.ph (3) indicate either the aajor capit.l ••••t. involved, or .ttach

a schedule to the interim report which li.t. them.

Findinc IV

Th. Office of Gen.ral Counsel concurs in th. Audit

Division's recommendation to the extent that th. III.A.

repayment is reduced pursuant to the deletion of camp.ign tour questions.

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Ap~11 13, 1.11

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J J .~. . ../::Of:+", .~.::' f: . (J) ..... . '. . "

CHARLES N_ STDI.Z

GENDAL COORSe.

B. ALLEN CUJftza

STArF Drucroa

.oB COSTA

INTERIM AUDIT REPoa-: - REAGAN BUSB

COMMI-rP...J:, REAGAN BOSB COMPL%»fC1 PUND

AND DEMOCRATS roa REAGAN

FEDERAL ELECTION COMMISSION

\\ 'iH'~CTOS DC.:o.&.J

FROM:

SOBJECT:

TBaOUGB:

'1'0:,

may a princi~al campaiift commi1:1:ee of a candi~ate

initially pay ~or qualified campai.c;n expens.s ~rcm its desic;nated deposi1:ory(i.s) and, at a

later da1:e, assi;n or transf.r th••e expense. 1:0 ~~. ~a~icr.al eo~i~~ee ~=r ass~~p1:ion QY ~~e ~a~ic~al

=Q=:~:~ea '~~~e= ~~e : :.5.:. 44la(a) \2) ~rQ~is~c~?

At~ach.d for your s~ff's review and leVal analysis is a

copy of ~e iD~.rim audit repor~ on the ItaaVaD Bush Cmam,1~'tee , . lteac;an Bush Compliance Fund. and DeiDccra~s For Itaava. The working

papers in support of the audi ~in4inc;s are availaJ)le in ~e

Audit DiVision should your s~aff Deed torevi.w them. Copies of

disc:epancy schedul.s associa~ed wi~ the audi~ findings were presen~eQ toCcmmitt•• officials during the exit conference as aD

aid in taJc~~g co=rec~ive ac~ion such as =aJcinC; =eimbursamen~s, filinC; amendments, so fo~~.

Also, for your s~aff's r.view in cODjuc~ion findinV II.A.,

w. have at~ach.d a copy of an &mended repor~ of rec.ipts L~d

expeDdi.~ur.s as filed by the lteaqa Bush Committe. (see At~achmen~ 1). Includ.ec1 in FindinC; II.A. and more specifically in rindinq III.!.2. is an issue which has Dot been squarely adc!re.se4 by ~e

Commission in previous c;eneral elec~ion audits of presi4en~ial

candi~at.s and ~~.ir authorized committ.... The is.ue, .imply sta1:e~, is:

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~he· a.aqan lush Committee filed Scheclule. I-P showing the paye.,

purpos., date and amoun~ of 30 expenditures totaling $748,163.16

which t~e Reaqan lush Commi~tee paid for out of its federal fund

accountrs). ~e ~a~e~~s ~ela~~~q ~o ~~ese eX?endit~es occur=ed =e,:·~een lJ/loS/30 and :=,..;~/ao (se. "l:tac:ent ~li. All:l1ouqh not s=eci~~callv s~ated ~n the amen~en~s, our discussion with ~'e

~=easu:er i;dicated ~'1a': it was ~'1e Commi~t.e's intention in the ~~lin; ~~e amenement ~o show ~~e assi;nment o~ ~'ese expenditures ~o t.~e ::\NC ~or att=il:)ution a;ains~ ~'1e :mC's 2 U.S.C. 44laCd) (2) li:lit•. As sutec! wit.'1 :-es:»ect to t.'1e allocation of refunds, no

=oney was actually exc~an;8d as a :-.sul~ of t~is tran.action, =a~~e= it was ~.=.ly a "paper" ~ransact~on.

Th. fa~ual li~ua~on il a bi~ mor. ccmplic.~ed a. i~

involv••••veral typ•• of C:.ftSaC~oD. a. d••c~ibe4 below.

- during' th. gen.ral .1.c~oD campaiiD, th. JUte paid p'W:'.uan~ ~o 2 U.S.C. 441a(d) (2) $1,633,293.89 in co.ta r.late4 ~o th. campaign ~o=. UDder~ak.D by .1:h. pr••id.nUal aM

vic.-pr••id.n~al can4ida~•••

- a. a r.lul~ of billing'. ~o ~. media, S.cr.~ Service aD!

th. "agan lu.h Complianc. Fund r.laUDg ~ourl fiDanced.f;s1:h. aRC, ~. Reagu lush COIIIIli~'t•• ob~aine4 $1,138,891.24 in r~le­

;;;u. Whi1.~. paymenu mad. by 1:h. DC OD behalf of the Rea9U

IUlh Ccmmi~'t.e wer. charged again.~ th. RHe'. 2 U.S.C. 441a(d) (2) limi~, th. r.imb'W:'....D~. r.c.ived by the aeag'&D·lu.h Ccmmi~~•• were t:.a~e4 a. re4uc~ion. ~o i~. 2 U.S.C. 441a(b) (1) (B) limi't as r.por~e4 in d;sc~o.u:. r.ports thru the 1980 y.ar-end repor~.

.. . OD April 1, 1981, the Reag'an Bu.h CCIIIIIli~~•• filed an • _.nc!m.n~ ~o iu 1980 year-.nd r.por't which covered ~. period fram 10/25/80 thru 12/31/80. Th. purpo•• of this amendman'tw.. ~o rev1•• previously r.po~ed f1g"W:'•• in 1:WO ar••••

(1) .~uC't:1:on of hpor'tec! R.fund. - Lin. 21 - $748,163.16

The a.aqan BUlh Commit~ee .~a~.d in 1:h. amen~.n~ ~at ~'e

$748,163.16 rec!uc~ion in repor~e4 refund. rec.ived repre.en~e4

"the amount of ~our reimburs...n't. alloca~ed ~o the KNC." I~

should b. no~ed tha~ ~'.r. were no fund. aC'tually ~ransferrec!

to ~'1e RNC. ~is was mer.ly • "pap.r" 'transaC'tion. As no'ted

abov., the Auc!i~ staff has calcula~e4 the amoun~ of refund./

r.imbursements r.ceiv.d by the Reagan lush COIIIIDi~~•• re1a~ng

~o tour. paid for by 1:he KNC ~o be $1,138,891.24. A~ pre.eD~,

~he Audi .~af! doe. not have an explana~on a. ~o why the bag'an lush COIIIIDi~~.. cho.e ~o "a110ca~e· only $748,163.16 ~o the INC

instead of the en~re $1,138,891.24.

Reduction of ~epor~ec!' Ooera~in9 ~.ndi~ure. - Lin. 24

-5'74'8', 11l.16 (21

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The Commit~e. ~ppa:en~ly believes ~~at ~e above two recl&s.i~ica~ions/assignments are pe:m1ssible under 2 U.S.C. 441a(4) (2). The Audit staff disagrees with the Comm1t~ee's apparent position ~or the rea.ons discussed below.

Allocation of Re~un4s (5748,163.16) to INC

It: is the opinion of 1:he Aw!it s~aff that at ~~e very minimum, t.'1e entire $1,138,891.24 must be returned to the INC since

t.'1e accep~ance of RNC refunds by the Reac;an Bush Committee wa., in ef~ect, an impermis.1l:»le contribution/loan by 1:he RNC to the ..aCJaD

Bush Committee. Support for the Audit sta~f's position can be

found in Ac;enda Document 180-195, dated May 30, 1980 - General

Election Public Financing Requlation.:"Issue. to be Resolved at

Me.tIns o! June 5, 1980 lHemc:candum from eSarle. N. Steele7 " Patr~c1a AnD '1or1 to the Commission). The issue requirinc; resolution was whether or not a National Commit:~ee may loan fund. to • party candidate and/or nominee to pay expenses incurred before the o bec;i:ninc; of the expenditure report period. Alternative A on page 5 of the a~orementioned agenea document set forth ~~e General

Counsel's basis for not allowing a National Commit~ee'to make

such a loan. This alterna~ive was adopted by t.'1e Commission on

June 5, 1980 by a vote of 4-2 and incorpora~ed into ~~e General ~lec~ion Rec;ulations•

Alte=:1a~ive A

The current era~~ o~ 9003.4(a) does not pe~t a

candidate to obtain a loan !rom t.~e naticnal Q~t~ee

to ~ay for expendi~ures incurred ~efore t.~e receipt o~

federal !unds. 3y de~inition, any loan Which is not a

loan from a bank or si3ilar lending ins~i~ution is a

contribution. Since major party candidates who receive ~ull !ederal fundinc; are prohibited from receivinc; any private contributions, statutory provisions appear to

prohibit a loan from the national committee. The national

committee would, c~ course, be per=itted to pay directly !or expenditures ~~curred by ~'1e cL~dida~e. Any suc~

pa~ents would count against ~'1e national cc~~ittee's

2 U.S.C. Section 4~la(d) l~~itation.

Additional su;port for ~~e Audi~ sta:!'s contention

relatina ~o 2 U.S.C. 441a(d) (2) ex~endit~res :v & national cc~~i~~e. is :cu:~ a~ paie - 15 o~·the :i~ancial .Ccnt=ol and ::~;:~~~:~ ~~~~~: ::= :=es~~a~~~a: Cl~~~~a~es ~=ce~?~~= ?~li=

:~~a~c~~=: :Gane:a: ~:.~~~cn:.
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. wThe~natiollal cOllllll1t.t.ee CaDDot malee a lou 1:0

t.he caDd14ate for subsequent. re1JDbw:s~t. from

the caDdic!at.e or his or her cODlD1t.t.... Rowever,

the national cOlllllit.t.ee would be a110we4 to make

a reflm4able ftDdor depo.it. on behalf of the c&D4idate'. campaign in accordance with 2 U.S.C. 441a(4),

for sub.equent. reimbu:•..-nt. t.o the national cOIIIIi".e

°by i:he veDdor. W (Emphui. a4diC!).

Thus, it. is apparent. i:hat the &JDOWlt of refuD4s receivee! aDd

deposit.ed by i:he ...~&D lush COllllld.ttee wbic:h re.ult.ed from pa,..n1:S

made by i:he DC const:it.ut.es • 10aD/cont:r~U1:ion by the DC 1:0 'the "a~aD lUsh Collllll1t.1:ee which is clearly prohibit.ed.

• . As not.ed above the Rea~&D lush COIIIII!t.t.ee lI&4e expendit.ure• from i1:. Federal fund accoun1:(s) t.o1:&lin~ $748,163.16 4uriDV the

period 10/16/80 th:ru 12/31/80. The COIllllU.t.t:.. filed aD ..-nd_n1:

to its 1980 year-end report. where1D 30 expenditure. t:01:al1D~

5748,163.16 were deduc1:ed from report:e4 operat.1Dg expeD4it.ure. - Line 24, and, as a result. of discus.ion. with the Cczamit.t... 'rre..u:er, are t.o be .1:1:ru»'uted t.o the ;utC's 2 U.S.C. 441a(4) (2)

limit..

The Audit st.aff do.s not. believe th.t. this waft.er the fact. w

.t:t.ribut:ion t.o the INC is pe:m1ss~le ~e: the 2 U.S.C. 441a(d) (2)

provision. Lanc;u.~e con1:a1Dad in Alt.e:nat:.i.ve A (A~en4a DoCWDeDt:

'80-195) cited aJ:)ove support.s ow: poli1:ion:

W'rhe na1:ional cOllllllitte. WQuld, of course, be

pe:mitt.e4 t.o P.y 4irec1:ly for expenc!it.w:e. iDc:u:ed

by the canC!Iait.e. XDy such paymenu would count. .~ainst. ~~e na1:ional committ.e.'. 2 U.S.C. 441a(d)

limit..t.ionw· (Emphasi. added).

:loweve:, neit.~er t.~e Stat.ut.e or the Requlation. cont.ains any l&Dgua~e

suqqestinq t.~.t. na1:ional committe. expenciture. be o~~er WiD connec~ion wi~~w ~e general election campai~ of any canc1id.te for

President of the Unit.ed States who is .ffil~at.ed with such party (see 2 U.S.C. 44la(d) (2) and 11 C.F.R. 110.7(a) (1».

-_.- _../'S---.--- --.... ~_.:_-- --..-.... -5 - r.- eA -looe -ep • . '': _'-e. "':, __': -- -=':t~ ,= :.-..-- \;1; WI _ c=_ sncu':"\6

~e di:ected to Tom ~u~~en 0: Charles :lanshaw at. ext:ension 3-4155.
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FEDERAL ELECTION COMMISSION

WASHINCTON. D.C. ZCMU

Ilft'IRIM REPORT OF THE AUDIT DIVISIOlI

011 TIIZ

REAGAtf BOSB COMMITTD, THE REAGU BUSB COMPLIANCE PUlQ)

AND

THE DEMOCRATS FOR REAGAN .

I. BackCFounc!

A. OVerview

Thi. interim report i.· ba.ed on an audit of the Reavan

Bush Committee, the Reavan Bush Compliance Fund and 'the Democra~.

for Poeavan, to det~ne whe'ther 'there has been campliance wi'th • provisions of 'the Federal Election Campaivn Act of 1971, a• • amended (•'the Act·). The audit "a. conducted pursuan~ to

Section 9007(a) of Title 26 of 'the United States Code which sta~es

'that after each Pre.idential election, 'the Commission shall ~onduct a thorouVh examination and audit of 'the qualified campaivn

expenses of 'the candidate. of ea~h political party for Presiden~

and Vice P~esident.

In addition, Section 9009(b) of Title 26 of the United

Stated Code states, in relevant par~, 'that the Commission is

authorized to conduc~ examinations and audits and to require the

keepinq and submission of books, records, and information, as it

deems necessary.

The Reavan Bush Committee ("RaC·) reqistered with the . Federal Election Commission on May 29, 1980 (under the name Reaqan for President General Election Committee*) and served as the

principal campaivn commit~ee of the Honorable Ronald Reaqan, Republican candida~e for President of the United States. ~e

Candidate desiqnated the Reaqan Bush Compliance Fund** ("the

Compliance Fund") on July 7, 1980 (under the name Reaqan for·

President Compliance Fund) and the Democ~ats for Reaqan on

* Cn ~uqust 7, 1980, the Committee amended its statement of

organization to conduct business as the ~eaqan Fo~ President ~e~e~a: Zlec~~o~ C~r.~i~~ee anc!c= Reaga~ 3us~ Cc~i~tee.

** The Reaqan Bush Compliance Fund was established to defray legal and accountinq costs associated with ensurinq com- ~liance with theF~CA. - ~,.

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(

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598,705.44

Ending

Ca.h

10,000.00*

1,512,152.36

T01:a1

Expendi1:ur••

10,000.00*

Toul

Receip1:.

2,110,857.80

$32,516,345.37 $31,647,351.55 $868,993.82

-0-

Beginning Ca.h

Kev Personnel

• _ •••• --~ ••• _.__••y

~c~ivi~y c: :amocra~s Fer Reaqan ~as comprised scle:y of a

trans:er received from and made eo ene Reagan Bush Committee.

Therefore, this activity is not subject to the overall limitation at 2 U.S.C. 441a(b) (1) (B). In addition, the Democrats

For Reaqan filed a termi~ation repor~ on January 30, 1981.

r On January 21, 1981, the Committee amended its statement of

orqanization to disclose ~r. Scott ~ackenzie as Treasurer•

B.

.1t

..

Commit1:ee Chairman Treasurer

Reagan Bush Commit1:ee O.S. Sena1:or Paul Laxalt Ms. Bay Buchanan**

Reaqan Bush Compliance O.S. Senator Paul Laxalt ... Bay Buchanan**

Fund

Democrats for Reaqan Mr. Leon Jaworski Ms. Janine Perriqnon

The principal officers of 1:he Commi1:1:ees during ~e period audi1:ed were:

Democra1:. for Reagan

ReaCJan Bu.h COIIIIDi1:1:.e -0-

Reagan Bush Compliance -0-

Fund

OC1:ober 31, 1980 as au~orizec! cCllllli1:1:.... Th. Reagan Bush

COIIIIIli1:1:.. and 1:h. ..aCJan Bush Ccaplianc. Fund main1:ain 1:h.ir

headquar1:.r. in Wa.hin91:On, D.C. and 1:he Democrau for· Rea,an

main1:ained i1:. h.adquar1:er. in Arling1:on, Virginia.

Th. audi1: covered 1:h. period May 29, 1980 1:hrOUCJh

December 31, 1980, 1:h. final coverage dab of 1:h. 110.1: recen1:

report. filed by 1:I1e CClIIIIi1:1:... a1: 1:h. 1:t.e of 1:h. aud~1:.

During 1:I1a1: period, 1:h. Coaai1:1:.e. repor1:ed ~e following aC1:ivi1:y:

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C. Scope

The audi~ included such ~es~ as verification of ~o~al

reported r.ceip~s, expendi~ures anc! 1nc1ividual uansactionsr review

of required sUPPOrtin9 dOCUllen~ationr analysis of CCIIII1~~ee deb~

and obli9a~ionsr review of con~ibu~ion and expendi~ure ltmi~atioDar

allC! such other audi procedures as d...e4 necessary under 1:I1e . cirC\DU~ces.

In~er1m Audi I'indinis and RecOIIIIendaUons RelaUng

to Tit!e 2 of £he tin tea S~a~es coaeReagan Bush COJIIIIli~1:..

A. Limi1:a~ion on Expendi~ures

Section 44la(b) (1) (B) of Ti~le 2 of ~he Uni~ed S~a~es

Code s~ate.,· in part, tha~ no candida~e for the Office of Pr••iden~

·of the Uni~ed S~ate. who i. eligible UDder Section 9003 of Title

26 (relating ~o condi~ion for el~gibility for payment.) to receive paymen~s from ~e Secre~ary of ~e Treasury may make expendi~ures

in excess of $20,000,000 as adju.~ed for the change in the consumer ~ric. index since 1974, in the case of a campaign for elec~ion ~o

.uch office (also see 2 U.S.C. 44la(c».

The limitation relating to operaUng expendi~ures

for the 1980 qeneral election is $29,440,000.

The Audit staff's analysis of ~e R.agan Bush COJIIIIlitt•••• reports filed from May 1, 1980 through December 31, 1980, and

available records rela~ing to receipts and expendi~ures from

January 1, 1981 through March 26, 1981 revealed the following with respect to expenditures subjec~ ~o the $29,440,000 limitation.

* There were no material findings with respect ~o either the

Reagan Bush Compliance Fund or Democrats For Reagan rela~in9

to Tit:e 2 0: the United States Coce.

, ....

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sased upon the above analysis, i~ appears tha~ the

Re.gan Bush Commi~~ee has exceeded the 1imi~a~ion .~ 1 U.S.C.

441. (b) (1) (B) in the amoun~ of $. ,0.. ($ . - less

$29,440,000). The Audi~ si:aff no1:ed tha~ the Reagan Bush COIDIIli~~.. did DO~ iden~ify on i~s repor1:s any amoun~s paid from i~ opera1:inv .CCOUD~s which may be allocable =the ae.gan Bush Compliance Fund

(e .g., he.squar~ers/fie1doffice overhead, e~c.). Therefore, ~e

Reagan Bush Commi1:~ee may wish ~o review i~s overhead cos~s and real10ca~e, on a re.sonab1e basis, aD amoun~ 'app1icab1e =the

Compliance FUD4 an4 ob~ain reimbursemen~ for s...

I~ should be DO~ed ~~ the analysis doe. no~ include

a downward adjus1:men~ for expendi~ures subjec~ 1:0 1imiu1:ion ~0~a1iDg $748,163.16. On April 1, 1981, ~e Reagan Bush COlllllli~~.. amended i~s repo~s ~o de1e~e the.e expendi~ures (originally made

by aBC) in order for the Republican Na~iona1 Commi~~ee~o amend i~s

repo~s and disclose the eXPendi~ures ($748,163.16) as being made

(by ~he RNC)' pursuan~ ~o 2 U.S.C. 441a(d) (2). As of April 8, 1981, . the RNC ha. no~ amended i1:s repor~s recognizing the above noted

expendi~ur.s • Further, the RNC·. year end disclosure repor~

indica~ed tha~ i~ has made other expenditures pursuan1: ~o 20.S.C.

441a(d) (2) on behalf of ~~e candida1:e ~0~a1ing $4,479,239.27 1:oward ·i~. limita~ion of $4,637,653.76.

It is ~e opinion of the Audit s~aff that the a.signment of expendi~ures (oriqinally made and repor1:ed by ~e Reagan Bush

Committee) to ~~e RNC is no~ ?ermissible within the defini~ion of

2 u.s .C. 441a (d) (2) • . .., - .

Recommendation

The Audi~ staff recommends that the Reagan Bush Commi~tee be

reques~ed to show wi~~in 30 days of receip~ of this report ~a~

~~e overall limita~ion has no~ been exceeded as set forth above.

Further, if the Reaqan Bush Commit~ee rea110ca~es any expenditures

to the Compliance Fund, compu~a~iona1 schedules detailing the realloca~ion should be provided ~o ~~e Audi~ Division for review

within the 30 day period. Further, i~ is recommended tha~ the . ReaqanSush Committee withdraw its amended year end report (filed A?ril 1, 1981) and thereby properly disclose the $748,163.16 in expendit~res (originally made by the Reaqan Bush Committee) as

subject to the limitation contained a~ 2 U.S.C. 441a(b) (l)(B).

Absent s~ch a showinq t~at the 1L~itation has no~ been exceeded,

a de~e~.~~at~e~ ~~:: ~e ~a=~ =~:a=:i~~ a~ ~~O~~: tc ~e'~e~ai: ~c ~c

U.S. Treasury (see re~ayment s~~ry at Section IV.).

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B. Di.clo.ur. of Deb~. aDd Obligation.

Section 434(b) (I) of Ti~l. 2 of ~. Oni~ed S~.~•• Cod. require. di.clo.ur. of ~. amoun~ and na~. of d.b~

.nd oblig.~ion. owed by or ~o .uch poliucal CCIIal1~~"J aDd . a s~.~..en~ •• ~o ~. circuma~c•• and condi~ions under vbich

.uch deb~. or obligation. were ~ingui.hed, aDd ~. conaid.ra- ~ion ~.refor••

Th. Au4i .~.ff no~ed ~.~ ~h. following l.~~er. of credi~ were ••~abli.hed wi~ ~. Rigg. National Bank in f.vor

of •• vendor.. Th. &IIIOun~ and na~ure of ••• l.~~.r. of

credit were not di.clo.ed in ~. Reagan Bush Ccmaa!tt•••• repor~.

to ~. Commis.ion.

(1) P.cific Tel.phon. and Telegr.ph Co.

An irr.vocabl. l.tt.r of credit was ••~abli.hed in • °favor of the v.ndor pursuant ~o an agreement d.ted Augu.t 26,

1910. Th. credi~, .ecured wi~ c.rtific.~e. of depo.it tot.ling $500,000, 9U.ran~eed the ••~i.f.ction of .11 oblig.tions owed ~o the vendor by ~. R••gan Bush Committee.

(2) United Airlin.s, Inc.

Two irrevocable le~ters of credit·wer. established

in favor of Uni~.d Airlines on AU9U.~ 29, 1910 and S.p~ember 11,

1980 pursu.nt ~o Aircr.ft 1•••••greement.. The credi~.,

collater.lized with c.rtific.t.s of depo.it tot.ling $425,000,

quarante.d the satisf.ction of indebtedness to the vendor by

the Reagan Bush Committ.e.

(3) Trailway. Lei.ure and Travel

An irr.vocabl. letter of credit was establi.hed in ~:. favor of the vendor pursuant to an or.l agreement of Sep~ember 4,

1980, and payable upon writt.n demand from 'l'ra11ways. 'l'he credit

was collateralized wi~ c.rtificat•• of depo.it totaling $215,000.

RecOllllll.ndation

The Audit staff recommends that wit.~in 30 days of receipt of this report the Reagan Bush Committee file an am.nded report disclosing the dates, amounts, int.rest, coll.teral, etc. as.ociated

with these instruments.

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. C. Tran.fer To and Frem Affiliat.d Committe.

Section. 434 (b) (2) (E) and 434 (b) (4;(C) of Ti~le 2 of

the United Stat.. Cod. require the di.clo.ur. of the total

amount· of all tran.f.r. mad. to or r.c~ive4 from affiliat.d

committ••••

The Audit .taff noted a $10,000 transfer mad. by the

aeagan Bush Committee to Democrats For aeagu. The same amount

was subsequently tran.ferred from Democrat. For aeagan to the

Reagan Bush Committee. Democrat. For aea9an di.clo.ed the

receipt and disbursement of the transfer.. The Reagan Bu.h Co~ttee considered the di.bur.ement and receipt a. interbank transfers and did not disclo.e this activity in it. report.

filed with the Commi••ion.

The Treasurer stated that the transfers will te di.clo.ed

in the report of receipt. and expenditures for the period ending ··March 31, 1981.

Recor.m:endation

The Audit staff recommends that the Reaqan Bush Cccmittee

amend its filinqs within 30 days of receipt of ~~is report properly disclosing the transfer• ......

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.-- •••• ?indinas Related to Title 26 of the enited States Code, Dete~!nation of ~et Outstandinq Obliqatiens For

Qual1f1ed campalin Expenses ana leoayment to the

u.s. Treasurv. •

Reaqan Bush Committee

A. Expenditures In Excess of the Limitation

(:"1 Section 9007 (b) (2) of Title 26 of the United State.

Code states that if the Commission determines that the eliqible candidates of a political party and their authorized committees

incurred qualified campaiqn expenses in excess of the aqqregate

payments to which t~e eliqible candidates of a major party were en~itled under section 9004, it shall notify suc~ candidates'o:

the amount of such excess and such candidates shall pay to the

Secretary of the Treasury an amount equal to such L~ount.

.. -., :,.. ,..~-- __::-_ ...:c__.... -"'e.• _.; ssu'es adc_·.... ess ea"';_:1 ,:,,;,,".; ••••c:_n~- 1-- •••C_,

no ~a~erial Title 26 matters were no~ed relatinq ~o t~e Also, ~~ere ~ere·no material ~a~ters no~ed concerning Oe:ocrats Fer Reaqan.
of"",

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As previously n~ee! in Finding II.A., the Audit

sUff identified expenditures which appeu to be in excess of ~e overall ltm1ta~ion for 1:he period 5/01/80 1:brough 3/26/81 to~al1ng $.

RecoaaendaUon

The Audit staff recoaaends 1:h.~ the "a9an Bush C~ttee

be requestee! to show wi1:hin 30 days of receipt of the audit

report ~at 1:be overall limita~OD has not been exceeded as set

forth in this report. Absen~ such a showing, a determinaUon

will be made regarding an amoUDt required to be repaid to the

U.S.Treasury. ' ,

B. Campaiern Tour ..imbur....nt.

'SeC1:ion 9084.6(a) of Title 11 of the Code of Federal

te9Ulation••1:&te., in par1:, that if reimbur.ement for . transportation made available to media, Secret Service or other

,staff authorizecl by law or required by na~onal .ecurit.y to

travel with a candidate i. receivee! by a cOllllllitt.., the Ulount ' , of such reimbursement for each individual .hall no~ exceed 1:hat

individual's pro rata share of the actual cost of the transpor- tation made available. Further, Sec~ion 9004.6(b) of Title 11

of the Code of Federal Regulations .tate., in part, that if

reimbursement for ground services and facilities is received by

a committee, the amount of such reimbursement for each indiv.idual

shall not exceed either the individual'. pro rata share of the

actual cost of the services and facilities made available, or a

reasonable estimate of the individ~al's pro rata .hare of the cost

of the services and facilities made available. If it i. determined

that reimbursements related to a trip have exceeded by 10' or more

the actual cost of the services and facilities made available,

such excessive amoun~ shall be deemed income to the committee and

shall be repaid to the Secretary.

SeC1:ion 441a(d) of Title 2 of the United States

Code permits the na~ional committee of a political party to make

expenditures in connection with the qeneral election campaiqn of

any candidate for President of the United State. who is affiliated

with such party not exceeding 2 cents multiplied by the voting

age population~of the United States as certified by the Secretary of Commerce (also see 2 U.S.C. 441a(e». '

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Section 9007 (b) (3) of Ti~le 26 of the Uni~ed S~a~•• Code s~a~es, in par't, tha't if the COIIIIIlission eSe~ermine. that ~h. .... • 1~9ible caneSida~es of a major par~ or any authorized commit~e.

of such caneSida~es accepted contribution. (other ~han tho•• allowed uneSer Section 9006(c» to eSefray qualifieeS campai9n

expenses, i shall no~ify such caneSida~es of the &IIlOun~ of . the contribu~ions so accepteeS, aneS such caneSieSa'tes shall pay ~o the Sec~e~ary of the Treasury an ~oun~ equal ~o such amount.

The AueSit s~aff analyzec! the campaip ~our. UDc1ertaken

by the Pre.idential aneS Vice Pre.ieSential caneSida~e. which the

aea9an Bush COIIIIIli~tee SOU9h~ reimburs...n't from the mec!ia, Secret

Service and Rea9an Bush Compliance FuneS for a pro ra'ta share of cos~s for air transportation and 9rouneS services anc! facilities.

(1) Reimbursemen~s Based Solely on Costs PaieS By !be

Reagan Bush cODD!ttee .

The reimbursements associa~eeS with ~he ~ound service.

and faci1i~ies appear to be reasonable. However, i~ appears ~ha~ the

-Rea9an Bush Commi't'tee realized income in conjunc'tion with the airfare - reimbursemen~s pertainin9 to the .'tours of at least $50,588.48. The

Audit staff has de'termined ~hat this amoun~ ($50,588.48) exceeeSeeS by .

15' the ac~ua1 cos~ of the services provided by ~he Rea9an Bush Commi~'tee ($50,588.48 divided by $336,989.81). Therefore, $16,849.50 ($336,989.81 X 5') is repayable ~o the u.s. Treasury. I't shouleS be

no'ted tha't the en'tire amoun't ($50,588.48) has been included as an

upward adjustmen~ to expendi'tures subjec't to the limita'tion (see Finding II.A.).

Recommenda~ion

The Audit s'taff recommends tha't wi'thin 30 days of receip~ of

this repor~ 'the Reaqan Bush Commi~'tee be reques'ted ~o demonstra'te ~ha~ no income was realized. Absen't a showinq to the contrary,

a repaymen't de'termination will be made.

(2) Reimbursements Based Solely on Costs Paid By The Republican National Comm1t'tee .

In addition to the matter in (1) above, 'the Audit

staff no~ed that the Republican National Committee paid $1,633,293.89

in conjunction with the tours. Of this amount, $1,613,049.15 repre- sented pa~~ents of air charqes for which a pro ra'ta share was billed

to the media, Secret Service and Reaqan Bush Compliance Fund. However, the Reagan Bush Committee obtained $1,138,891.24 in reimburse- ~ents associated wi~h the Republi:an National Cc~~it~eets

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D. Inve.tmen~ of Pul:»lic Funds

Sec~ion 9004.5 of Title 11 of the Code o~ Federal Regula~ion••~a~e., in par~, tha~ inve.tment of pul:»lic fund.

i. permi.sible, provided tha~ an amoun~ equal ~o all ne~

income derived from .uch inve.tmen~s, le•• Federal, Sta~e

and local taxes paid on such income, shall be repaid ~o the Secre~uy.

The Audi~ s~a~f's analysis of activities ~rough

March 18, 1981, revealed ~a~ ~e Reaqan Bush Commi~~ee received

$465,040.86 L~ interes~ income from ~~e inve.tmen~ of pul:»lic funds. The Audit sta~f has dete~ined ~~a~ ~~e in~ere.~

° earned is subject ~o $213,918.86 in Federal income ~axe., and

an ~nknown amount of State and local income taxes.

The Treasurer sta~ed tha~ ~~e account will be closed on

or abou~ Au~st 1, 1981, and the net income (after ~axe.) will

be paid to ~~e o. S. Treasury at that ~ime.

~ecc::::nendation

Absent a showing to the contrary within 30 days of receip~

o~ this report, the Audi~ staff will recommend to ~~e Commi.sion ~~at ~~e value of ~~e interest earned less applicable taxes

(approximately $251,122), be repaid in ~ull to ~~e o.s. Treasu--y. •

E. Oetermina~ion of Net Outs~andina Ouali~ied

Campa~qn Expenses

Section 900i(b) (l} o~ Title 2E o~ ~~e United States

Cede s~ates ~h~t.if ~~e Commission.de~er.mines tha~ any portion of ~he pa~~ents made to ~~e eliqible candidates c~ a political pa:~y ~nder Section 9006 was in excess of the aqqreqate pay- ::len~s to which candidates we::,e entitled unde::, Section, 9004', -:-.:.: -_ ':"S-':'r~ ,., ... ..; .._._-- ---, _..- ?ay ~o ~~e Sec=e~a:y c: the ~:easury an arncun~ e~~al ~o such

?c=-::'on.


(6)

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Income Repavable from cameaiqn Tours - Difference '16,849.50

Committee officials have stated, that no profit has been realized from the campaign tour operation. The Audit

staff has determinea that the Committee has r••1iz.d & profit of

$50,588.48 from the tours, of which $16,849.50 is repayable to

the u.s. Treasury. (s.e Findinq III.B.).

(7) Reimbursement to the iNC - Difference $1,138,891.24

The Committe. has not recognized an ob1iqation owed to the Republican National Committe. for tour related refunds

erroneously received. The Audit staff has determined that

$1,138,891.24 is cue ~~e RNC. (see Findinq II1.B.(2».

It is the Audit staff's opinion that no unspent

u.s. Treasury ~unds exist. Furt~er, the deficit position not.d i~ the NOQCE Statement prepared by the Audit sta~f supports its

previous findinq (III.A.) that ~~e Reaqan Bush Committee appears ·~o ~ave exceeded the limitation at 2 U.S.C. 441a(b) (1) (3).

Revisions to ~his de:ici~ figure will ~e made as additional i~fo~ation becomes available.

:.v. Repay:nen~s ':0 t."le u.s. Treasury

("', Repayment ~rom Section III.A. s. ... Repaymen~ from Section III.B. (1). 16,849.50

r Repayment ~rom Section 111.0. 251,122.00

Total .Recommended Repayment $ (. :

Recommendation

Absen~ a showinq ~o the contrary within 30 days o~ receipt of ~his repor~, :he Audi~ staff will recommend ~o t.~e Co=milsion ~hat ~~e value of ~~e &mount detailed above

is repay~le in fu:l to the u.s. Treasury.
·Ne . ., ,.,. ..............ca•• '. .DC . ...,._ D:C---

REPORT 0' RECEIPTS AND EXPENDITURES . By. CandIdata or AuIharIzId Commm. cd • Clndidall Sllkl", Nomination Dr EIICtIan • the Office cd Prllldlnt Dr VIce Prllldlnt

Df the Unltld StallS

-::.' •• HAr~D E!EUC.itED . r'\ , ·._v_··~w

AU.DED

Bf~7f~:~!OIS

At1:achMllt 1 - trag. 1 of 7

NOTI: JM,.,.".10......,......or.."."..,.." .,...IdeIe..."" or......... 0III0e.,ft...., or WIt"...".,rile UtIOtI.- ortIOfllf/llllc ,... .....

I ... NAMlDllCANDlDATlD.ua••nulNlIUU. 00.-._.............. 2 IDINTIPlCfA1IDN..-_

U&GA~ BUSB COlUlI'tUK 7i,.=nn~I'~~~lca~nn~'7;;;;;;::i=:t:;;I 1----------------------------11a fer: ..........1............ ·

901 South 81ahlan4 Street

w crrt.Sl'Aft AND ZIPe:aeArlinGton. V1rG1n~a 22204

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CANDIDATE OR COMMlnEl SUMMARY O' RECEIPTS AND EXPINDITUIIU . • COVI..INGPERIDD: PRDM 10/25/80 THRDUGH 12/31/80 .

.....A-ciIIl.......u_lIfY,

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'0 CIIII a-ot "'~"""' u. .

" Cost 11lI CA I LillI •••• -gDBTIAND DlUGATIDNI

12 DIIIilI DIlII DwIdTO"ea.-tI M ••••••••••

'a DIIIilI D111 _Dwld·.V.... CDc' I M ••••••'••••

......- ••_'otl .............U.....

, T CAdd 1234,357.14 80429188.39

' I uMZ1 1217,499.95 '1416784.37

lei UftligdeaI U. U.141 16,857.19 ~9012404.02

• IDI £~. '""" Prior v.,. SutIitc:.. Uml1Miaft • • • • • • • • • • • • • • • • • • • • •• roO':':'::'.:' ....:.:.:':.:::.;::.:::::;...:::.:.::;,:"/.:. - 0 - I

CcJ TOIII ElIIIIllIiant~. Llnmllosu IAdd ..... 'Ie... '1IlI. • • • • • • • • • • • •• ::~::-::=::·:::f:::::::::::::·::t:.:::~:::::i=:~~::::':::'~~: IJ 9012404 • 02

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Scott B. Mackenzie .~ '-I'JT////"..,./I//'" L 3/l9/81

ITy.NlSilIotlf_worCinclidnel l~ofT"""'orCend~) C01III

NOTE: Submission of f.I.., moneoua. or inclompl,. information may subject" ::'1..dtis RIpon to the PIftIItitI of

2 U.s,C. i~37I, 14411: and 28 U~.c.19012, 11042. ,. .

---"--- ....-. ~\ •...

F..... EIJcIioft CoIMliIliaul

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lei ...~c::., of O~.,iftI a.a.•." ."... •.••..•••,. . . •••••••• •••••••••••• ;-.

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::I iOTAL !X'£NQIT\.:RIS

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1·•• £ ... :\.....

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Memorandum to the Commi••ion

'ag. 2

Additional Comm.nt. on the Reagan Bu.h Committ•• Aud1~

Th. court'. opinion do•• not dir.ctly addr••• th• • ituation wh.r. an audit r.port di.cu•••• action. whicb

apparently violate applicable law, but which the Ca.ai••ion

chooses not to pur.u. und.r 2 U.S.C. S 437g. With r••pect

to thi. f.atur. of the Commission's practice, the mo.t .e~.itive a.pect of tbe court'. opinion involve. the . proposed report'. treatment of the monies obta~ned by Reagan Bu.h ba.ed on expenditure. by the Republican Na~ional Committe••

1. Background

A brief hi.tory of this i••ue may be helpful. Thi.

issue was first pre.ented in the draft audit report. Tbe

General Counsel recommended tbat the RBc/m~c transaction. be

pursued in th, context of a MOR. The Audit Division agreed and made the recommendation to the Commission. At its

meeting of Jun. 4,- 1981, the Commission rejected the

-recommendation to treat the issue "as a MOR and directed that

the audit report be re-written to give Reagan lush an

opportunity to address the i.sue within the audit process.

The Commission next considered the issue at its

Executive Session of September 16, 1981 in its consideration

of the draft final audit report prepared by the Audit

Division and concurred in by this Office.!7 As was ~he cas.

with the first draft of the interim report, the issue

involving the RNC/RBC transactions had been recommended a. a

referral to the Office of General Counsel: no mention of the

issue was in this draft report. At this meeting, the

Commission expressed its uncertainty that the circumstance.

warranted MUR treatment, and directed this Office to prepare

a legal memorandum on the issue in question.

On October 14, 1981, the Commission considered the

issue once again, deciding that the matter be discussed in

the audit report to be released to the public rather than

being referred for MOR treatment. The Commission further

!/ By the time of this meeting, Reagan Bush had been given additional time to supplement its response to the interim :e~ort, had su~plemented its i~i~!al respense, had ma~e -five req~e3:3 of :~= C~~~i3Si~~ ~~cer :C~A, anc nac ~rou;ht suit a9ai~st t~e Co~~ission.
.,

,

M.mor.ndum to the Commi••ion

'a9'3

, Additional Comm.nt. on the a.a9an lu.h Comaitt•• Audit

;'

d.cided th.t, 9iv.n the circum.tanc•••urrounding tb.

transaction., no r.paym.nt would be sought. At the pre••nt

time, the Comai••lon ha. before ita draft r.port pr.p.r.d by the Audit Divi.ion wbich di.cu•••• tb. i••u. within tb.

ov.rall tr••tm.nt of it. finding on -Limit.tion on

Exp.nditure.- (pag•• 4-23 of Ag.nda Docum.nt X81-108). ,It i. the vi.w of tbi. Offic., particularly in 119bt of th.

court'. opinion, tbat tb. Commis.ion will encount.r

substantial l.gal difficulty if iti••u•• tb. audit r.port

a••tructured and writt.n.

2. Analy.i.

Tb. court ha. reli.d upon the Commi••ion'••tat.d di.-

tinctions b.tween the audit and r.paym.nt proc••• und.r 2 U.S.C. S 437g. Th.,opinion's languag. with r.sp.ct to th. ~ont.nts of publicly r.l••••d audit r.port••mpha.iz•• tb.

detrim.nt to the parti•• unle.s they ar. afford.d the

·statutory process for contesting legal determinations tbat

they have violat.d the r.l.vant statut.s. In light of the

cQurt's opinion, the Commission should be car.ful not to deter~in. in the course of the audit r.port that viol.tions

have occurred, .ven if no .ction is to be taken. For

example, the opinion stat•••

t pag. 11:

Mor.over, by law the final audit report

cannot contain assertion. of violations

of election laws. As notea-above, violations of FECA and PECFA, a. distinguished from repaym.nt determin.tion., are .nforc.d

under FECA, at2 U.S.C.5 437g. (Emphasi. supplied)

At page 16, the court .tat.s,tb.t tb. only interest of RIC

that could be affect.d by publication of the r'eport i. it.

concern about its reputation. In this connection, tb. opinion states:

Bowever, this interest is not sufficient

to warrant keeping the audit report in

question secret, especially when this

particular report will not contain in- ~e=~a~ie~ i~~lieati~c R3C with ~ie:~ons

e: :3..... t::=~~.1.a~s s;':Prliecj

AS currently struct~red, the draft report be~ore the Ce~~~ssion discusses the RBC/RNC transac~ions within its "~~~i:ation en Expendit~res" ~inding. The overall

p-

••
-_ _--- .... --- ._---..... -.--_.--~..-

..,

e.' ..

Memorandum to the Comaiaaion 'a,. 4

Additional Ca...D~a on the a••,an Buah Ca..itt•• Audit

r.comm.ndation for thia finding, at pal. 23 of the A,.nd. Doc:WI.nt, ia that ·th. Comaiaalon d.t.rmin. that the •••,an Buah committ••, ab••nt • showing to the contrary within 30

days of thi. r.port, haa .xc.ed.d the 2 U.S.C. C

441a(b) (1) (a) 11aitation in the -.cunt of. a• ••0 forth abo•••• ror the Cc..ission to approve th.

reeomm.ndatioD by ••king sueh a d.t.rmination,.would be to

fly in th. fac. of the court'. opinion. Ind.ed, .v.n th.

plac...nt of the discu••ion it••lf und.r th. h.adin, . ·Limitation on Zxp.ndirgr.s~ ••rv•• to hi,hli,ht a•• violation .om.thiDg for which th. comaiaaion b.s d.t.r.ained . not to s••k .ith.r r.p.ym.nt or .nforc...nt.

Giv.n th. Commission's d.cision, affirmed a. r.c.ntly as·Octob.r·14, 1981, to discu.s tb. r.imburs•••nt matt.r in . th. audit r.port, tb. G.n.ral Coun••l strongly r.ca.a.nd.

tbat the isau. should b. t%••t.d a. a diacus.ion s.p.rat• •fram the .xpenditur.s limitation i.au.. Our comm.nt. of

Nov.mb.r 12, 1981, app.nd.d to th. audit r.port, r.co.m.nd.d

that cours.. Th. court'. d.cision, in our vi.w, mak.s tbat

CGurs••v.n more n.c••••ry. If the Cc=mi.sion w.re to find

an app.rent violation without the full-fl.dg.d bri.fing of

legal is.u••, the court might find that the COmmi.sion h.d

not afforded appropriate proc••• for cont.sting the

conclu.ionf jeopardizing th. ba.ically f.vorabl. court

deci.ion by .uch action would not be in the int.r.st of th. Commi••ion.

~h. Commis.ion can, how.v.r, affirm its pr.viou. conclu.ion that it will in.ist in the future that .ach of

the two entitie. b. re.pon.ible for making the .xpenditur•• under it. own c.iling .nd for .aintainin, th. ob••rvation of

th. sep.rat. limitationa, for the r.a.ons outlin.d in th.

October 13, 1981 memor.ndum to the Commi••ion. Con.i.tent

with the Commis.ion's direction of OCtob.r 14, 1981, w• .submit that the discu.sion in the audit r.port should b.

limit.d to the following outline. .

Th. Reagan Busb Committ.e (ABC),' as .et forth in its

respon.. to the int.r 1m audit repor.t, claims' to have

operated wi~h the Republican National Committee (RNC) on a

theory :~at they were Mutual agents and eeuld cc~bi~. t~ei:

ex?e~=i:~:e :i~i:3:ie~s. !~ a:::== -i:~ :~a: :~~~:~, ~~e~

e~sagec in a n~mc.r of ~ransaetions which ~he Commission h•• questienec. A summary of these transaction. and the

Commission's position with :esp.ct to the. i. present.d =.lew.

\

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...

I •

Memorandum to the Commi••ion

'age5

Additional COmment. on the Reagan Bu.h Committee Audit

1. Pur.uant to it••pending autbority under2 U.S.C•.

5 441a(d), the RNC mad.a number of direct payment. to

vendors in conn.ction with the campaign tour. of th.

Pre.idential and Vice Pre.id.ntial c~didat•••

2. R.agan Bu.b, on th. ba.i. of tb••e RNC

.xpenditur••, billed tb. m.dia, S.cret S.rvic. and it. own

Compliance Fund for th.ir re.pective .hare. of the

tran.poration .xp.n••••

3. Bas.d on tbe.e billings, aeagan Bu.h r.ceiv.d

approximately $1.1 million in -reimbur••m.nt••-

4. R.agan Bush was notentitl.d to th••• reimbursemen~., .ince RNC made the initial outlay. . S. The Reagan Bush Committee originally reported tbe••

. -RNC reimbursements~ a. offs.ts to their operating expenditures.

6. Since R.agan Bush was not entitled to the -RNC

reimbursements·, it improperly offset its operating expenditures by approximately $1.1 million•

7. To properly report its receipt and expenditures of

the monies in question, the Reagan Bush Committee's amended

reports would sbow an increase in its operating expenditure. of approximately $1.1 million thus putting tbe Committee

over the limit of2 U.S.C.5 441a(b) (1) (B).

8. Were tbe RNC to filea corresponding amendment, the

RNC's reports would sbowa d.crease in it. expenditures of

approximately $1.1 million under2 U.S.C. 44~a(d).

9. If the separate limitations of the RNC and R.agan 3ush are viewed as a single, combined limit, there is no net

expenditure in excess of the limit by virtue of tbe

transactions in question.

. The Commission has not agreed with the theory put fortb

by the RaC. The Commission has always considered tbat tb.

two limits--the party's 441a(d) limit for expenditures f~om

p:i~ate ~unds and the ea~cidate's 4~:arai li~i: of ex~~n~i­

~~res :0 :~e amour.: of ~~e ?~=lic financing grant--must be

maintained and administered separately. While 44la(d) permits the party to coordinate its ex~enditures with the

:
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Memorandum to the Commission

Page , Additional coaments on the Reagan Bush Committee Audit

candidate, without having that deemed a contribution, the

funds must be party funds for whose expenditure the party is

responsible, the funds cannot be raised directly by the

candidate or given over into his control. In short, the

Commission ~as rejected the idea that,the limits are

interchangeable, or that the pUblicly funded candidate can

be the direct agent of the party for obtaining. or using the

private funds.

,

i

Baving erroneously viewed the private funding limit and

the public funding limit as combined, the committees,

nevertheless, did not, through tho.e transactions violate

the overall limitf rather, the INC counted the expenditures against its limits, and the total of expenditures was not

increased by the transaction. While the Commission has thus . conCluded that for that reason no action is to be taken

against either RaC or RNC, the Commission will ~n the future

insist tbat the two entities keep separate the funds and be

-responsible for making the expenditures under their respec- tive ceilings. _ . .

Finally, the Commission concludes that the pUblic record, amended after the initial exit conferences with the

auditors, does not presently reflect accurately the nature

of the transactions. While the Committee has shown, by its

amendment, the desire to conform the public record, the

public description leaves unexplained the nature of the rei~bursementsJ the reports should be L~ended to indicate

that the $1.1 million, while reimbursed to the RBC, are to

be offset against the RNC's 441a(d) limitations.

As a suggestion for how the issue could be appro- priately dealt with in the audit report, we have appended a

draft- for discussion (Appendix A) which sets forth these

matters.

3. Additional Issues

a) Introcuction to Findinos and Recc=mendations

In the comments to the Audit Oivision of November

12, 1981, this Office sU9gested that the above-titled ~iscussion be del~ted ~:cm the audit :e?c:t i~ its e~ti~ety.

~:~~C~S~ :~e n~~~~ ~~~is~c~ ~e:e~ec :ta~ ?ar~ c: t~e

discussion dealing with FOIA, the remaincer of the

discussion was retained. It remains the view o~ t~is Office ~hat the entire introduction oe deleted.
b)

M.moran~um to the Commi••ion

Pag. 7 . A~ditional CO...nt. on the R.ag.n Bu.h Committ•• Au~it

••

,. Delete from the draft report tbe finding in Part II

entitled -Expenditures in Exces. of the Limitation.- '

S. Retain the fin~ing in Part III entitled -Investment of Public Funds.-

6. Conform the remainder of the report, inclUding tbe ~.. finding in Part III entitled -Determination of Net

Outstanding Qualified Campaign Expenses-, to the above recommendations.

Th. Commi••ion'••~option of the .ugg••t.d l.ngu.g. in App.n~ix A would obvi.t. tb. n••d '·for tb••bov.-.ntitl.~ discu••ion r.i•• by the Au~it Division ~n it. Cov.r , memorandum to the draft r.port for tb•. Commi.*ion•. Bow.v.r, the .Offic. of G.n.r.1Coun••l r•••••rt. its po.ition , contained in it. comm.nts to the Au~it Divi.ion of .o9.~r 12, 1981 th.t th.r••hould be no upw.rd .dju.tm.nt to RaC'.

operating expenditur•• b••ed on r.c.ipt. from the ..~i. and

Secret S.rvic. whicb exc••d -.ctual co.t.- by 1••• than 10'.

Recommendation.

r:

~.

1. Sub.titute-Appendix A for tb. draft report'. • . .discussion in Part II entitled -Moni•• Received Rel.ting to ~xpenditure. Mad. by the Republic.n .ational Committ••••

2. D.let. from the draft report th. finding in Part II ~ntit1ed -Limitation on Expenditures.-

3. Retain the findings in Part II entitled -Disc1osur•• of Debts an~ Obligations- an~ -Transfer To and From Af:ilia~ea Committees.-
-

0,""

t:.•

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AppencUx A- Subwtitute 'incUn, .

ttee

Section 4.1a(b)(1)(I) of Title 2 of the Onited State. Code

.tate., in Poart, that no candidate fo~ the Office of Pre.ident

of ~he Onited State. who i. eligible under Section '003 of Title

26 (relating to condition for eligibility for payment.) to receive

payment. frCII the Secretary of th, Trea.ury may make expe~cUture.

in exce•• of $20,000,000 (a.adju.ted for the change in the con-

.umer price index .incel"4), in the ca.e of a campaign for,

election to .uc:h office (al.o .ee 2 O.S.C. S 441a(c». The liaitation relating to cperatingexpenditure. for the 1'80 general election i. $29,440,000.

Section ·44la(d)( 1) and (2) of Ti.tle 2 of the Onited State., . Code permit. the national CCIIU1littee of a political party to make

expenditure. in connection with the general election campaign of

any candidate for Pre.ident of the Onited State. who i. affiliated,

,with such party not exceeding 2 cent. multiplied by'the voting

age population of the United State. a. certified,by the Secretary - of Comme r ee Cal. 0 'ee 2 o.S•C. S, 441aCen.

Section 9004.6Ca) and (b) permit. an authorized cammittee . of a publicly-funded candidate to receive reimbur.ement. for expense~ for transportation and related ground .erviee. made

available to the media, Secret Service and other sta!! authorized

by law or required-by national .ec:urity to travel with a candidate~

~he audit staff analyzed the campaign tours of the Presidential

and Vice-Presidential candidates for which the Reagan lush Cemmittee

sought reimbursement from the news media, Secret Service and Reagan Bush Compliance Fund. Based on a review of Cemmittee. records",

and disclosure report. filed by the Republican National Cemmittee,

the Audit staff has found that the RNC made seven expenditure. totalling $1,633,293.89 in connection with the campaign tour.,

the ANC applied this amount to its expenditure limit under 2

O.S.C. S 44laCd)(2). 1/ The.e MC expenditures were made directly

11 The RNC's limitation in 1980 was,$4,523,'89.2i. It should be

noted that although there are several references in thi.

report to certain financial activities of the aNC, the scope of the audit work performed was ~~~ited to te~t! of t~e

=;~anc~al :ec:rc~ of t~e Reagan ~~~h Committee, Reagan Bush Cc~pliance Fund and Oemocrats For Reagan. Since the Audit

Division did not perform an audit of the MC, it expresses ~o opinion as to the ac~~racy or eo~pleteness of the financial ~~for~ation ci~closed b¥ the RNC in its reports of receipts and expend~~res filed with the Commission. Onless otherwise ~tated, the figure. relating to the RNC contained in this

report were taken from the RNC d~sclosure reports on file

with the Commission.
.....

'.

".'.

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to the vendors and were in addition to the campaign tour expenditures made the R.agan Bush Committee itself. Without distinguishing between those amounts paid by the Reagan Bush Ccmmittee and those

paid by theMC, t~. Reagan Bush CClIIUIlittee billed the n.s Jledia,

Secret Service and its own ccmpliance fund ("Ccnpliance Pund-)

for their respective shares of the total campaign tour costs

(transportation and related services).

As a result of these billings, the Committee obtained payments fram the news media, Secret Service andCcnpliance Pund ~n the

amount of $2,281,149.00. The Audit staff determined that

$1,138,891.24 of the total amount ofsuc:b payments received

by the Reagan Bush C01IIIIlittee was based on the above-d.scribed

expenditu res made by the MC. Y These receipts were retained

and reported on FEC Form 3p, Schedule A-P,. Line 21. 3/ As a

result, the .RaC's reported expenditures subject to the limitation

of.2 U.S.C.: $ ~41a(b) (1) (B) were offset (reduced) by $1,138,891.24 •

.. It is the opinion of the Audit Division that the Reagan • Bush Committee improperly retained the above-described payments, since~ the expenditures on which they were based had ,been made ' the MC and not Reagan Bush. In effect, the Audit Division's,

position is that the Reagan Bush Committee was "reimbursed" ~or amounts it had not expended. The Audit staff has also

statec! that such payments should not have been classified and

reported by Reagan Bush as refunds or rebates, and there=y applied

as ,an ·offset" to the original expense, since the original expense

was theRNC's. According to this reasoning, to permit such

an artificial "offset" would have the effect of increasing the

expenc!iture limitations of the pUblicly-financed candidates

under 2 U.S.C. S 441a(b)(l)(B) by the amount of the "offset".

During the field wcrk and at the exit cenference of March

27, 1981, the Audit staff informed COmmittee officials of their

opinion that the Committee was not entitled to payments based on , RNC expenditures and that these payments could not reduce Committee

,cperating expenditures. On June 16, 1981, theCammission approved the Audi t staff's recommendation' contained in the interim audit

report ,that the Reagan Bu~h Committee be affcrded 30 days from

1/

1/

T~is total includes $8,;33.0; in reimbursements which were

:illed but not collected as of 2/24/81. It was included in t~e above calcJ~a~ion base~ ~?on ~he A~d~t ~i~is~on's

:~~::ew c: :=i=c::'~c 'ac:.iv~:;~ «s~=,eC:lJe:-:~ :c :./ ~';l'Sl ·..:hic.a,

i~dicates that an ameunt in excess e~ S8,7~3.07 was reported

as being received by RBC.

~~:e: cc~ple~ien e~ the audit ~i~ldwerk, the C~~ittee filed

an amendment show ina a different treatment to a portion of :he~e mcnies. =~is-is Cisc~5sed at page, __ and __•
- 3 -

receipt of the intedm report: to explain the circumstance.

surrounding its receipt of the $1,138,891.24 in reimburs..ents

received related to expenditures made the Republican National

CommitteeJ and to demonstrate that the receipt and reporting of

these amounts are consistent with the requirements of the Act

and Chapter '5 of the Internal Revenue.Code (26 U.S.C. Sections

9001 - 9012). Further recommendations were to be made after

the Reagan Bush Committee had had an opportunity to respond within the 30 day period.

~he Committee did not point to a speci~ic agency agreement, but indicated that the -course of dealing- betweer. Reagan Bush and

the RNC d~~onstrated the existence of an agency relationship where~

the Reagan Bush Committee managed funds for the account of the

ANC. The response also cited as authority for such an agency relationship Section 110.7(a)(4) of Title 11 of the Code of Federal

Regulations which states that the national ~ittee of a political

party may make expenditures authorized this section through

any designated agent, including State and subordinate party c:c~ittees.

t

In its response to the Commission-approved interim audit report, the Committee did not dispute that it had obtained payments fram

the news media, Secret Service and Compliance Fund based upon

tour expenditures of the KNC. The Committee stated that the

$1,138,891.24 represented -a proper offset of expenditure. incurred

by the RaC and ANC in furtherance of Ronald Reagan's candidacy in . conformity with an agency relationship that existed between the

RBC and ANC.- Briefly stated, the Committee has claimed that:

If it was acting as the RNC'. agent in managing certain of the

INC's funds; 2) in its capacity as agent, the Committee obtained rei~bu:sements due the ANC in connection with campaign toursJ

and 3) it expended, as RHC's agent, for purposes of 2 U.S.C.

S ~41a(d), an amount of money corresponding to the amount obtained

in !:)ehalf of the R.~C in connection with these same campaign tou.rs.

,

r'

Finally, the Ccmrnittee presented an analysis of these transactions with reference to Generally Accepted Accounting Principles CGAAP) whi~~ included the concept of offsetting assets against liabilities and the concept of proper financial presentation for

entities under common, direct, or indire~ centrol. The RBC

indicated that given the agency relationship, the GAAr concept of

offsetting suggests that the $1,138,891.24 in reimbursements received

:y the RaC should be recorced a~ a !iacility to the R.~C whi~~

cc~:d be ac::c::~atel'" ::"\c ::e:::ab:." .::fset acainst other costs

i::e..:r:ed :;; the Rac fe: tne·?.NC. :\J·rt~er, t~e-RBC indicated that

there is substantial support in t~e GAAP concept of proper financial ::ese~taticn fer entities unce: c~~on, direct or indirect control ~o g~ggest the ~e:e rneaninsf~l pregen~a~icr. cf ~he financial :e~ults

~: tte Rea9an ~h rresiaential ~lec~ion Campaign would be to cc~bine the ac~ivities of the Rac ana the RNC's P:e~idential

elec~ion Fund, ba~ed upon the COr.l::lon ccntrol through the agency

•
.....

"'~'.

,.....

,. '.

- 4 -

relationship. The Cammittee's GAAP analysis is, of course, 4ependent

upon ~he existence of cammon centrol and its permissibility under

app11 eable law.

Were the Commission to sanction the type of agency relationship described by the Committee, the consequences would include

the followingl

1) The separate expenditure limitations for party committees

under 2 O.S.C. S 441a(d)(1) and (2) and pUblicly-finaneed t

candidate committees under 2 O.S.C. S 44la(b)(1)(B) would tie

effectively eliminated in favor of a combined limitJ and

2) Th. limited right of a party committee under 2 O.S.C.

S 441a(d)(1' and (2) to make certain expenditures in connection

with the general election campaign of that party's naminee for . President woul~ be expanded to permit the actual transfer of party committee funds to the publicly-financed candidate committee,

effectively vitiating the distinction between expenditure and

OOntributionJ an4

3) The limitation of 2 U.S.C. S 441a(b) (1) (8) wou14 effectively be'increa5ed, since the committees of pUblicly-financed candi4ates

would be permitted to receive and expend private funds in the . form of reimbursements, refunds and rebates due another entity.

In addition, there would be changes necessary to the disclosure

provisions to correspond to the above-noted results.

The Commission has always considered that the two limits,

the party's 441a(d) limit for expenditures from private funds and t~e candidate's 441a(b)(1)(B) limit on expenditures to the amount

of the public financing grant, must be maintained and administered

separately. Despite the fact that the RNC and Reagan Bush Committee

shared the goal of electing a ,Republican President in 1980, the

Federal Election Campaign Act and Commission Regulations treat

them as separate and distinct legal entities.

It 5hould also be noted that while section 441a(d) permits t~e party ~o coordinate its expenditures with the candidate, without

thi5 being deemed a contri~ution, the funds must be party funds

for wh05e expenditures the party is responsible: such funds cannot

be raised by the publicly-financed candidate nor given over to

the candidate's eontrol.

S~~ce the Act, its :egislative hi5tory and Ccmmission Regulations :ecogni:e a distin~ion between an actual transfer of money to • candidate'5 c~it~ee :y a ?ar~y committee and an expenditure under sec~icn ~~la(d), a :ubliclv-financed candidate's committee cannot

be the agent o~the·party committee for obtaining and using private funds de5pite t~e Ccmmittee's permis5ive reading of 11 C.F.R.

5 110.7(a)(c) whi~~ allows a party ccmmittee to designate an agent.

•
- 5 - . The Reagan Busb Committee, therefore, should not have obtained

monies in the for.m of reimbursements, rebates and refunds which

were due the INC. While the Commission has permitted the use

of section 441a(d) monies to pay for expenditures incurred the

candidate if the party so cboo.e., the effect of allowing reimbur.ement to the candidate for expenditure. made the party i. to

min91e private money with public money in a way not contemplated

by the publi c. financing .ystem.

, .If a publicly-financed candidate committee, were permitted

to be the agent of a party committee with respect to the latter'.

expenditure. under Section 441a(d), the expenditure limits pf both

committees in the general election would effectively be combined.

While it appear. that the Reagan Bu.h Committee mistakenly viewed

the tran.actions in this way, the committees did not exceed

this -combined- limit virtue of these tran.actionsJ had the

INC received the reimbursement. in question, such amounts could . have been deducted from its expenditures under .ection 441a(d),

·thus allowing the ANC to expend an additional $1,138,891.24 under

this section. 4/ The Reagan Bush Committee, in effect, expended the RNC,s $1,138,891.24. The total expenditures of both committees

•. ", "'ere not increased by these transactions.

Amendment. to Year-end Reoorts

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One of the more si9nificant aspects of the ~ea9an Bush Committee's

receipt and expenditures of RNC funds concerns the current lac::Jt·

of clarity on the public record. This problem has been further c~plicated by amenements by both ~ittees to reports which

they had previously filed with the Commission.

Ourin9 the fieldwork and at the exit conference of Harch 27,

1981, the Audit staff informed Committee officials that, in the

Audit staff's opinion, the Committee was not entitled to reimbursements received based on RNC expenditures and that these

reimbursements could not be used to offset Committee operating expenditures. While the Audit staff indicated that the monies

received relating to RNC expenditures approximated $750,000, Cor.~ittee officials were also informed that this figure was

preliminary and may be substantially hi9her once the calculations were made final. Prior to the Audit staff's finali:ation whi~~ resulted in the figure of $1,138,891.24, the Rea9an Bush Cor.~ittee filed an aDen~ent apparently based en the conversations during the audit fieldwork and at the exit conference.

...

':" ~~i! aS9~mes ~na~ :: :.:.~. s S=C~.5 ~e=~~:; ~~e ~a:tr

cc~~ittee to receive reimbursements from ~he news ~edia

and Secret Service for transportation expenses whi~~ the ~artv committee had made. !t should be noted that the

:esuiation speaks only in terms of an "authori:ed cc~itte.­

bein9 pe:~ted to receive such reimbursements.

•
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On April 1,1981, the Reagan Bush CCIIIUIlittee amend.d its

1980 Year-End report to delete $748,163.16 in'previously reported refunds (Line 21,F!C Fom 3P) and attributed these. refunds . to the Republican National CClllUlittee. This amendment showed

a downward adjus~ent to the Reagan Bush Committee's reported reimbursements and operating expenditures and a corresponding .. reduction to the RepUblican National CCIIIUIlittee's previously reported expenditures on behalf of the candidate. The amendment

was designed to show that RBC received. and expended these amounts.

in behalf of the INC under the latter's spending authority under

2 U.S.C. 5 441a(d). On JUly 21, 1981, the aNC ..ended its 1980

Year-End report to correspond to RBC's treatment of the above

noted receipts and expenditures. The total reported expenditures of the RNC under seetion 441a(d) and DC under seetion 441a(b) (1) (B)

were not "changed by these amendments.

As pointed out in the interim report, the aforementioned

$748,163.16 amendment did not involve a transfer of monies

between Reagan Bush and the aNC, but rather, was merely a ·paper- , attribution of ·the ~ount of tou r reimbu rsements allocated

to·the MC· and selected expenditures paid by Reagan Bush and

16ter attributed via Reagan Bush disclosure reports to the RHC.

In effeet, the amendment of both committees refleeted the in~erimfinding of the Audit Division that the Reagan Bush

Committee could not be reimbursed for expenditures made by

the aNC. The correspcnding amendments were apparently designe4

to show that aeagan Bush was acting in behalf of the ANC:

although the public record is by no means clear on this point, this reading of the amendments is consistent with the agency theory advanced by Reagan Bush in response to the interim report of the Audit Division. The discrepancy in the amount (the ameri~,ent's $748,163.16 versus the audited figure of $1,138,891.24)

appears to have resulted from the Committee's use of the lower

figure verbally presented to it by the Audit staff at the aforementicned exit conference, and the Committee's failure to update that figure after receiving the. written calculation of $1, 138,891.24.

The interim report indicated that the Audit· staff did not

believe that the after~the-fact attribution of expenditures (actually made and originally reported by the Reagan Bush

Committee) was permissible, and advised the Committee to

make an appropriate amendment to the public record. To date

the Committee has not filed the recommended amendment to its

reports.

CCNC:'US:CN

~~e Co~missicn does not agree with t~e t~eory put forth by ~~e ~ac. T~e Cc~~ission ha~ always considered t~at t~e two limits --t~e ?arty's ~a(d) limit for expenditures from ~rivate funds

and t~e candid~te's 441a(a) limit of expenditures to the amount

of the ~u=:ic ~inancing 9rant--~ust be maintained and administered

•
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separately. While 44la(d) pe~its the party to coordinate it.

expenditure. with the candidate, without having that deemed a eontribution, the fund. mu.t be party fund. for whose expenditure the party is re.ponsible, the funds cannot be raised directly the candidate or given over into hi. control. In .hort, the

ComDi.sion reject. the idea that the limit. are interchangeable,

or that the pUblicly funded candidate can be the direct ~gent

of ehe party for obtaining or u.ing the private funds.

Having erroneously viewed the private funding limit aqd the

public funding limit as combined, the ~ittees, nevertheles.,

did not, through those transaction. violate the overall limit,

rather, the RNC counted the expenditures against its limits, and

the total of expenditures was not increased by the transaction.

While the Commission thus concludes that for that reason no

action is to be taken against either RaC or RNC, the Commission

.will in the future insist that the two entities keep separate the

fund. and be responsible for making the expenditures under their r~pective eeilings. . . Finally, the Commission concludes that the pu~lic record,

amended a~ter the initial exit conference with the auditors,

doe. not presently reflect accurately the nature of the transaction.. While the Committee has .hown, by its amendment, the.

cesire to correct the public record, the public de.cription . leave. unexplained the nature of the reimbursements. The reports " should be amended to indicate that the $1.1 million, while rei=bursed

to the RBC, are to be offset asainst the RNC's 441a(d)" limitations.

Rec~~endation

It is the Audit staff's recommendation that with respect to

the tour rei~bursements received by the Reagan Bush Committee

relating to expenditures made the RNC, an amendment is to

be filed by the RBC within 30 days of receipt of this report. The correction to the public record may be accomplished by reclassifying from line 21 to line 22 of the Detailed Summary of

Receipts and Expenditure. (?age 2, FEC For.m 3P) that portion of

the 51,138.891.24 received in 1980 and 1981 respectively. Line

22 of the su~ary should be retitled "Reimbursemen~s Received

Relatins To Expenditures Made 9y The Republican National Committee".

It shculd be noted that when filing this amenc~ent the RBC does

not have to file supporting FEe schedules A-? for line 22 detailing ea~~ rei~burse~ent, but mere1y ~ay cisclose a "lump sum" ~mount

~~i~g :~c~a!!:::~: ~~e~ ~~~~ :: :: :: :~: :9:0 a~= l~S: ~c~~~~:~.

In acc~ticn, lines 14 and 15 (:~c Fc~m 3?, ?ase 1) of t~e Reagan Sush C~~~ittee's Reports and report. filed in 1981 should be

corrected to reflect the changes to expenditure. subject to the li~ita:ion resulting frcm the reclassifications noted above. •


..

'-,

MeIIorandwa ~o ~. COIIDi••iOD .a,. 2

"1~ would be anCllalou. ~o .eek a r.paymen~ Oft ~.

ba.i. ~a~ ~. exc•••iv. amoun~ 1... than 10'

h.1Ped pu~ cCllllD1~~•• ov.r ~. lla1~. linc. ~. "a,an lush eo-ei~~.. cUd no~ r.c.ive r.imburse- ..n~. 10' or mor. in exc••• of ~. a~ual co.U, ~er••hould be no adv.r.e .ffec~ OIl the CCIIIU.~~••••

1~ .ppear. ~~,"'1:h'" Coun.el'. iD~.rpr.ta~iOD of 11 C.F.R.

I 9004.6(b) cODclud.~~a~ any amoun~ of r.tmbur• ..-n~* ov.r co.~ up ~o 10' i. viewed a. a per.ai••1bl. .ub.idiza~loD of • camp.ign by ~h. medi. or.~.r individu.l. throu,b ~. char,in,

of higher than pro r.~a .har. for ~. use of caDcUda~e-.upplie4

~ran.port.~iOll.

Th. Audit. .uff di.a9r••• wi~ thi. int..rpr.~a~lon. ':h.

main purpo•• of 11 C~F••• I 9004.6 wa. t.o pr.clude a .it.ua~ion

.0 occurring in the ,o.ral .1.~iOD .imi.lar ~o t:h.~ which occurr.d

in t.h. primary camp.i9n. of Sen.~or Kenn.dy and Gov.mor •••gan. In tho•• c••••, ~h. media w•• ch.rged bet.w.en 150' and 225' of

fir.t. cla.. airfar. (~ 50' wa. in~.nd.d t.o cov.r ,round co.~.

paid by the Commit.t.•••) which r••ult..d in r.tmbur....nt.s r.c.ived

by ~. r••pect.iv. commit.t.••• in .xc••• of .ct.ual co.t... Admit.t.edly, in the final •••••sment. no d.t.ermin.t.ion r.garding a r.cla~.ific.­

t.ion of the .xc••• r.imbur....nt. wa. mad., .iDC. bot.h commit.t.••• had sufficient. room in th. 2 a.s.c. S 44la(b) (1) (A) limi~at.ion

t.o absorb or r.nd.r immat.erial any r.cla••ificat.ion. Bow.ver,

t.hat. fact. doe. DOt. n.gat.. ~. fundament.al principle th.t. it. i.

inconsi.t.ent. t.o charg. ag.in.t. an .xpen.. an amount. gre.t..r t.han

th••xpen.e it.••lf.

Furt.h~or., the Explanat.ion and Ju.t.ificat.ion portion of

the Gener.l Elect.ion regul.t.ion. p.rtaining t.o 11 C.F.R. S 9004.6

.t.at.e .

"Th. purpo.e' of t.hi. provi.ion i. t.o .liminat.. the po••ibilit.y for t.h••ub.idizing of a campaign by 1:11. media

or oth.r individual. through ~. charging of high.r than

pro r.t.a .h.r.. for th. u.. of candidat. - .upplied tran.portat.ion"

(F.d.ral Regi.t.r/Vol. 45, No. 126/6-27-80, pag. 43376)

1.

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FEDERAL ELECTION COMMISSION

WA$MINCTON. D.C. 20IU

RDOR'l or 'tBE AUDI~ DIVISICII

08 TD

ItEAGAR 8USB CQMKIfta, 'nB RDGAH BUlB COMltLDHCB I'UID

UD,

'tD DDIOCU.'1'S 1'O1l REAGAR • 0

.- .. BacJcgroUD4

A. OVeni..,

. 'rhi. npo~t i. b..e4 OD U aw!i1: of the ReagaD lush

COIIIIIit1:••, 'the ReagaD Bu.h Compliance 1'uD4 aDd 'the DeIDoc':ata fo~, R.agan, 1:0 4e1:.~. wheth.~ t:h.~e ha. be.n compliallC8 with

t:h. pmvi.iona of' the I'edual Elec:t.i~D Campaign Act of 1971, .. ·°&JDeD4e4 (wthe, Act-) • 'the aw!i1: wa. con4uC1:e4 pur.uu1: 1:0 .

S.cUOD 9001 (a) of Title 26 of 1:he Uni1:.4 S1:&1:•• Cod. which .1:&1:e.

1:ha1: a:1:£ each P~••i4utial .i.c:tiOD, the COIIIIILi••ion' .hall

con4uc1: a 1:ho~ough exajnation an4 audit of the qualified c:ampaip . - .xpo.e. of the candida1:.. of .ach political. pu~ fo~ Pr••i4u1:

an4. . Vic. ,P~e.idut.

_. In addition, S.c~on 9007.1 of Title 11 of the Code of Fede~al. "~la1:iona stat•• tha1: aft.~ each P~e.iaen1:ial .lection,

th.' CODIDi••ion .hall conduct a 1:ho~ough examiDation and au4.i1: of

th. rec.ipts,· di.bur....nt., debts an4 obligations of each

candidat.'s autho~iz.d commi1:t.e(.). Such examination and audit·

shall includ., but .hall not b.,li.mi1:e4 to, expen.es incu='e4

pur.uant to 11 C.I'.R. 9003.4 p~io~ 1:0 the beginD.ing of the , expenditure ~epo~t puiod, conu,ibutiona to and expenditur•• mad. 0' from the le9al an4 accounting compliance fund .s1:abU.hed UDdu

11 C.F.R. 9003.3(a), conuibution. ~.c.iv.4 'to supplemu1: any

payments ~ec.ive4 f~am the Fun4, an4 qualified campaign ~n••••

The "agaD Bush Committ.. (WDCW) ~egi.t£e4 with the

Fedual Election Commi••ion on May 29,· 1980 (und.r the name

"agan for Pr••ident General Elec1:ion Committee*) and served as

'the principal campaic;n CCDIIIU.ttee of the Honorable Ronald ReagaD,

Republican candidate ~or Pre.ident of 1:he United States. ~he

Candidate d.sig.nate4 ~e Reagan Bu.h Complianc. Fund** (-the

*

**

On AU9Ust 7, 1980, the Ccmmittee amended its statement of

organization to conduct busine•• a. the Reagan Fo~ President'

General Election Committee and/o~ "agan Bush Committe••

'''.-.' . The ireagan Bush Compliance Fund was establishea to defray

legal and accounting costs associated with .nsuring compliance with the lECA.

I
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cc.pl1mc. FaDcS-) on July 7, 19.0 (VAder th. n_ "a.,u for

Pr••1deD~ CCIIp11mce hAd) aDd the Democ=aU for "a.,u OIl

oetobeZ' 31, 19.0 as allt:h=izac1 eO"D'~UU. The .,aD .all Ccaa1~ue

aDel th. • ••.,u BU8h CCllP1J.uc:e Fund 1I&1D~.d tb.1Z' bea4quaftu. in . wub1D~, D.C. u4 the O-O=a1:& for "a.,u maiDb1Ded i1:& head- quu~er. ill AZ'11Dg1:em, V1Z'.,1D1a.

Th. au41~ conrad the pci04 Hay 29, 19.0 thZ'01l9b Dee:e.bu

31, 19.0, t:he fiDal COftZ'a.,e date of the lIO.t receD~ repoZOU fil.d

by the CC8I1~tee. a~ the u.. of the au41~. Durin., tha~ pui04, the Cea.1~t... reporte4 the fol1owiD., a~ri.1:Y1

.e•.,aD Bush CCIIID1tue -0-

..a.,u Busb Complioce -0-

1'Wl4

Ca.1~tee·

...ca.li .:

Total ,BIld1D.,

Exp!ft41t=••; cash

$32,516,345.37 $31,647,351.55 '.6.,'93••2

2,110,.57.80 1,512,152.36 59.,705.44

DeaocraU fOJ" ..ago- .' -0- 10,000.00· 10,000.00· -0-

. In ad411:1on, ceZ'~ fiDucial ac:1:ivity wu reviwed through -MarCh 26, 19.1•

.- .. .Th1s" report i. baaed upon c!oCUlD.nu and worJc.1Dg paper• • uppor't1Dv .ach of th. fac1:Ual .utemenu con'tained h.rein. ':hey. form par~ of 'th. r.cord upon which the Commis.ion baaed it. d.ci.ion.

,.-' OD.-th. matur••4dr••••d in 'the r.port an4 were .vai.labl. 'to the

Commissioners cd app=pri.t. s'taff for revieW.

!,", . -"B. Key Persozm.l

, The principal offic.rs of th. Comm!tte•• during the period au4i~ed werel

Committ••

lteavan Bush COJIIID1tte.

Reagan Bush Compliance

Pune!

Democr.ts for Reagan

Ch.irman

o.s. Sen.tor Paul Laxalt Ma. Bay Buchanan••

O.S. Senator Paul Laxalt Ms. Bay Buchanan••

Hr. Leon Jaworski Ms. Janine P.rrignOD

•

**

~~~~~~~y e: :~~c~:~~. =~: ~~ai~' ~aa comprisea scl.ly o~ a ~ransf.r received from and mad. to the R.agan Bush Cammit~e•• Th.refore, thi.s actiVity is not subject to 'th. limitation

at 2 O.S.C. 441a(b) (1) (B). In a4dition, the Democrats for

Reagan ~ile4 a ~er.minaticn report on January 30, 1981.

J,.. On January 21, 1981, these Committe.s amended their statements

of or9anization to 4isclos. Mr. Scott Mackenzie as Tr••surer.
II.

~e Commit~.es submitted a written requ.s~

an ex~.nsion of 30 days ~o respond =~e , The Commi~~ees,cited the following reasons

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C. Scope·

The .uc!i~ included .uch ~e.~s .. verificaUon of ~U1

reported receipu, expencU~ure. and inc!ividual tran••cUcms, ~ev1.. of required supporUnc; 4ocuaaenuUonJ analysis of ~e COIIIIIi~~e. 4eba

and obligaUons, review of conuibu1:ion and expencU~ure ,JJ.m1UUODS'

and such o~er aucU1: p=ce4ure. as de_d nece.sary under 1:I1e

circ=sUDce••

AUc!i~ FincUn,. and "::rlndaUons RelaUn, ~o Ti~le 2 of €hi Un~~ ~tes coae '~ .. , ID1:rodu=ion = Finc!inq. and ReCOlllDenc!aUons

On June 16, 1981, ~e COIIIIIission approved 1:I1e in~erim auc!i1: repor~ on ~e Reag&1'1 Bush COIIIIDi~ue, laagaD Bush Campliance I'UDd

and D_o=au Por Reagan which con1:ained in~erim finc!ings and

recommendaUons developed during ~. auc!i1: fieldwork conduc1:ed during

January-March, ~98l. The ,COIIIIDi~~e.s we~e. afforded 30 4&ys f~om

~eceipt of ~e report: ~o ~espond = the in~erim findings. The COiami~Utes received the in~e~im report on June 19, 1981, hence, ~e

response was due on o~ befor& July 20, 1981.

On July 2, 1981, Legal C01.U1sel for 1:he CODIIDi~1:eesreques~ed

and 'ob~ained from 1:."1. Auc!i Division pho~ocopie. of the AUc!i s~a:ff "s workinc; papers (originally p=vided ~o the DC Treasurer on

Marc.'i 27, 1981) in suppor~ of certain findings cont:&ined'in the

interim r.po~t.

on July 6, 1981,

to the Commission for

interim audit repor~.

in the :eques~:

-1. It has been extremely difficult ~o loca~e ~e

financial records of ~e Reagan campaign which are relevan~ to findings and recommendaUon. set forth

in 1:he FEC' s interim audit repor~. The campaign

comlllit~ee is no longer staffed and obt:aining interviews

and info:mation from former staff members has provK ~o

be a time-consuming ~ask. In addition, due ~o th.

fact ~"1at ~~y of the matters highlighted in the

audit report occur:ed quite some time ago, it has

been particularly difficult to acquire the information

necessa.-y to prepa:e a response to the PEC.

:. A =:eecom ~f In::::a:icn Ac~ :acuest ~as

:ecently submitted to the FEC requesting 1:."1e disclosure

and inspection and copying of the auditors' work

papers gene:ated or :elied upon with :espect to

seve:al of ~~e findings and :ecommendations con~ained

~..in 1:."1e interim audit repor~. -:he Commit~ee will no~

be able to p:epare an adequate response to the audit

:eport until the requested materials have ~een reviewed.-

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CD 3uly 1~, 1111, 1:he CoPDissiem vo1:.4i:O 4eDy t:h. 30 day - - - .x~Uaion of u.. :equ..1:.4 by the Cc:.ai1:g.a. -_;ED so cSoin." 1:11.

cOmmissioll aU1*! tha~ i1: haa couia1:.Il'tly taka the positioll cluill., _'th. 1980 .1.e:u01l cycl. tha't such :eques1:a fo: -ex1:ellsiolla by CCBait~••a

o:f publicly-fill_c.d c:~4i4&1:Ube 4ai.4 ill 0:4u t:ha1: th. public:-

:.1.... of th.au4i1: :epo2:U be ..d. ill .. 1:imely a mama.: .. po.sil:»l.. ;b. Coad.saioll officially iDfomed 1:11. cc.ait~_ of iu

d.c:1sion em 3uly 17, 1981.' -' . . . " .. . ' . -

: '. CD 3uly 20, 1911,~"·~1tt••a aW:ai1:1:.4 th.i: iniUal :aspoDS.

1:0 1:h. 1Dt.::I.m audit r.poi"1: ~4 :equ.a~.4· (1) a auy of'

Ccaaission acUon'- OIl c.rta1D ma1:1:.:s, :,(2) AD oppo~=1t:y' suppleae1l't 'the iZl11:ial r.spons.,' (3) .. hea:iD9 befo:. the Ccmnnissiem nvutiD9

c.rtain ...1:1:.:s in 41.pu1:eaD4 (4) a reCODsi4era1:iem of the CaaaiSSiOD'S'

denial no1:.4 abov.. ... - - _..,'

on 3ul~' 28, 1981, 'the Conaaission g:al11:.4 a wo w.ek .xtension . of time (unU1Augua1: 11;-1981) for th~ CODDi~~..a 'to, sU1=i1: a '- . ~upplement..l' :.spori•• 1:0 the interim audit :.port., TheCOJIIIIi.siOll _ .notifi.d the CCIIIIIl1ttees of iu ct.cisiem by 1.1:t.: c!at.4 Augus1: 4, , • ,·19.81, &Dd also noUfi.4 the COIIIIIli't~••s 'that a h.ariD; veule! be - _ , prema=:e at 1:hi. tim., given the statu1:o:y and :.gu1ato:'Y.. previsions &Dcl.. safe~rc!s. ., .. - , --- ".." ,

On August: 11, 1981, the Cammiasiol1 r.c.ive4 'th. Committ•••• supplemental respen.e 1:0 the int:er:l.m,r.port.

Although several' r.feraDc.. ar. contained in' this report ," __ , ':'ec;U'~nc; certain financial act:ivities UDe!ertaken by the Republican

National Committe. (WDCW), the .cop. of the auc!it work pe=fo:me4

was limited -to t.ests of the finAncialrecor4s of the bagaD Bush

Commit1:ee, lteaC;an Bu.h CcnpliaDce FUDe!, aDd Democrats For It.agu, ~d no aucUt was perfonl.d relative 'to the INC. 'therefor., 'the

Audit staff expr••••• no opinion as to the accuracy or compl.tene.s

of the financial info:ma'tioll di.clo.ed by the'UC in it. w"ports'

of Receipts anc! Expen4i'tures- filed with the.Commission. Th.

fiqure. relating 1:0 th. RNCcontainec! ill this report were taken ..from 'the MC 4isclo.u.r.r.po:-ts Oft file wit:h the Commi.sion, =le•• c't:h.rwise .~at.4.

A. LL~1:a1:ion on Expenditure.

Section 441a(~)(l) (B) of Titl. 2 of the Uni~e4 Stat••

C·ode states, in ~art,'that n~ can4i~a1:e for the Office .of P=esid.n-:

=f the United S1:a~es ~~o i. eligible ~~der Sec~cn =vO~ c: ~i1:1. 26 (=e:a~i~; ~o ccnei~icn fer eliii~ility ~or payments) 1:0 receive pay~er.1:s frcm ~~. Secretary of ~ie Treasury may make expenditur•• in excess o~ $20,000,000 (as adjust:ed for the chang. in the consum.~

price index since 1974), in the cas. of a campaiC;n for elec~ion ~o - suc~ of~ice (also see 2 C.S.C. Ula(c». .
-5-

Th. llmi1:auCm r.la1:iDg W op.ra~1Dg expendi~UZ'•• for ~. 1180 gen.ral .1.cUca i. $29,440,000.

,. .' Thi. fincUng .d=••••• four ma~~.r. r.lat:1v. to apenti-

=zoe••ubj.c~ 1:0 ~. 2 U.S.C. 441a(b) (1) (B) 1iJD11:at:1OD incand

by ~. RIC dur1Dg ~. pui04 May 1, 1980 ~o\19b March 2&, 1981.

Sp.cific reCOlllllenc!a1:1ODS, wb.re app=pri.~., follow ~. ti.cu..ioll

of each ..~br. A fiDaDcial .=aa:y &Dd r.coaDeDdat:1on re1&1:1". ~o the expentiture lim1~.1:1OD is con1:a:1n.4 on p.g. 22 of thi. :.P=' 1?<~#IIf,w~~i ' 1. ga..tts ...ved ..la1:1OLIo ~n4:1t=•• M.a., '';' X. lip ncan Na~:i. eoaDi~ue

.:. 8ect:1on 441a(d) (2) of Titl. 2 of the Uni1:e4 S1:ab.

Cod. pezm1~s ,~. nat:1caal commi~ue of a poli~ical par~ 1:0 make

expend!~=.. in connec1:ica wi the general elec1:iOD campaip of

any cancU4at. for P:.siden~ of the united Sta~e. who i. affillate4

with such pu1:y no~ exc.,~g 2 cen~. mu1~ipli.d by the voung .g. popU"la~on of the UD:1t.d State. a. cerUfied by the S.creb.:y of

COmme:ce (also se. 2 U.S.C. 44la(e».

.. 'fhe AUcU.t .Uff analyz.d the campaign 1:our. =de:1:aJce

by ~. Pre.idential and Vic. Pre.idenUal cand!4a~•• for which the

Magan Bush CODIIlittee sought r.i.mbur....n~ from the news _cUa,

Secret. Service and Reagan Bush Compliance Pund, for a pro ra1:a .b~.

of costs for air transportation, ground servic.s ane! facilit:1••• • 4

. The analysis rev.alec! ~&'t th. Republican Nat:1onal

COmmitt.e mad. seven .xpenditures totaling $1,&33,293.89 1D

conjunction wi~ the tour. and applied the amoun~ to its 2 U.S.C.

441& (e!) (2) limi'tation. The Audit staff's review of 'the Reagan'Bush

Committe. r.cords rev.aled that $1,613,049.15 of th. RNC expencUtar.

we:e. applied to air chuges associat.e! with·pre.idential 1:our. &

th:ough 15 and vice pr••idential tours 6 ~ough 14. A pro rata

shu. of these expenditures was billed by the Reagan Bush Ccmmitte.

to the news media, Sec:e~ S.rvice and Reagan Busb Complianc. Fund. ~e Reagan Bush Committ.e obtained $1,138,891.24* in reimbu:.emen1:a

associat.d witb the Republican National Committ•••• expen4i=ZOe•• The.e reimbursements wer. r.tain.d and report.d by the aeagan Bush

Committe. on FEC Pom 3P, Schedule A-P, Lin. 21. As a re.ult, the

DC'. r.ported .xpenditure. subjec't to the limitation (2 U.S.C.

441a(b) (1) (3» were offset (reduced) by $1,138,891.24. Copi•• of

computational schedul.s depicting this si~uation were provid.d to

the Reagan Bush Commi~te.·'1'reasurer.

* ~~i2 ~:~31 i~~l~:as S3.7lJ.~7 i~ =eL~u=sL~e~~s whi~~ we:_

billed but not collected as of 2/24/81, however, our revi.w

of reported act~vity subsequen~ to 2/24/81 indicates ~a~

an amount in exc.ss of $8,733.07 was reported as =eing

received ~y REe, a portion of w~~ch may be associatee with

the.2/24/S1 amount calculated =y the Audi~ staff. r
-,..

t":

-1-

~iD9 ·the fie14wo~k ana at:·the ait: C::ODf~_ce of ~ch 27, 1981, the Au4it: .~aff iDfoaa4 CCIIIIi~t:.. official. 1:bat:,

1A the Audit: .~aff'. Op1D1OD, 1:he c:o.i~t:ee was DO~ uUUe4 1:0

~e1Jlb~.~u nc:eived ••U1t:i.D9 f~ IRe expenc!it:U'e. aDa tha1:

1:hea. ~.imbU'.~u couleS DOt: be asacS =off.et: CCnli1:be ~a~ . expencSit:u... Whil. the Awlit: .t:aff 1Dc!icat:e4 1:ha1: the n!abu.-au . ~ecelvaeS ~e1a'tiAv t:o DC expua4it:ure. appr=dmat:a4 $150,000, ee-i1:t:ea

officials were alao iDfome4 1:ha~ this figure was prel1aiDa~ _4 may

2:»a .ub.~aDUal1y bighu cmce t:ha ca1=1a'tion. w.r. aa4a fiDal. .~1=

1:0 the AwU.t: .1:aff'. f1Dallaa1:1oD, the ltIC, OIl April 1; 1981, fUe4

aD ~dIDu~ 4ele1:ing $7~8,113.16 :I.D previously ~epona4 r.hD4a aD4

$148,163.11 1A previou.al~npo2:t:ee! opua'tiDg expeDti~u:•• fRIll 1u ~epo~ ane! at:t:r:Sbu1:e4 1:he•• transactions to 'the ac. Su.aqun'tly,

1:ha Audit at:aff calc=1ata4 tha1: the 1:01:&1 amount of rdmb\U'.~u

received re.ulUDg frca expen4it:ue. mac1e by 1:he RIIC was $1,138,.91.2••

OIl July 21, 1981, 1:he DC amen4e4 i1:. 19.0 Yeu-BIl4 -

report 1:0 sbeN a $748,163.11 rec!uc'tion of previou.ly ~.pofta4

expenti1:11:es on behalf of. the cuc!idate, thereby e.~abll.hing . enough-room within 1'tS 2 U.S.C. 441a(4)(2) ltmita1:1on of $4,137~653.76

.to accoaodate the ae!c!itional $7.8,163.16 in expen4it:u:es made by the

itBc. The afo~ementioned $7••,163.11 amendmen't 41d not involve a . transfer of monies betwe. the RIC anc! 1:.'\e RNC, but rather, was merely

a -paper - at1::11:»ut1011 of -the amount of tou re1mbursaenu allocatee!

1:0 the DC- and .e1ected "expe.nc!iture. paie! by the RBC ane! later

at1:ributec! via ~. RBC's d1.c10sue reporu to the DC. Further, 1:he

INC's 41sclosure reports filed a. of that c!ate in4icatec! 1:hat it

had made expenditure. pursuant to 2 u.s.c. 441a(4) (2) on behalf of

the can41e!at. totaling $4,523,789.27 towarc! its limitation of

$4,637,153.76.

The interim nport beticated that the Audit staff

doe. not believe that this -after the fac1:- attribution of exp"91c!it~es (mac!e and or1gina1ly reported by the Reagan Bush

Committee) 1:0 the RNC is permissi1:»le within the def1D1i:ion of

2 U.S.C. 441a(4) (2).

Thus the i.sue presented is whether or not it was

appropriate within the constraints of the Act and Chapter 95 of

the Internal Revenue Code for the ReagaD Bush Committee to ob'tain

reimbursements related to expen4iture. that were actaally paic! 1:»y

the Republican National Committ.e ane! also as a re.ult offset

(reduced) RBC operatin9 expenditure. subject to the limitation, and

whether or not the -after the fact- attri1:»u1:ion of certain . reimbursements an4 expend1tures to the :me was penU.ssible.

•
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On JUDe 16, 1981, 1:he CoIDi••icm app=ve4 the Audi~ .~aff'. :ecommen4a~on con~1ned 1ft ~e 1D~:ta :eport 1:ha~ the "agaD Bush COlllD1ttee be affo:4e4 30 day. f:OII :ec:e1pt

of ~e audit :epon 1:0 explain the c:1:CUlUtaDce. SU::OD41Dg 1t.

:ece1pt of the $1,138,891.24 in retmbu:semanta :ece1ved ~1a~e4

to expen41~u:e. made by the Rep,m11cu .aUonal ea-ittH, u4 1:0

demon.t:a~e tha~ the :ece1pt aDd nPO~9 of th••e UIO_U

a:e consi.teD~ w1th the :equ1:_nta of the A= and Chaptu 95 of

the Inte:nal Revenue Code (26 U.S.C. sec:d.OIlS 9001 - 9013), aDd tha~ fu:the: ncoaaendaUon. wc:nl1d be u4e afte: the "ag_ Bah ~CXDID1tt.ee·had an opportun1ty to :e.PoncS wi~ the 30 day period.

Wi1:h :e.pe..$~· t:o the April 1, 1981 DeDdMnt, the Au41~ .taff :eccmaended that the aBC fUe aD ~de4 :ePo:t" to

prope:ly di.close the uansacUOIl. as :ece1pt. and expuc!1tu:e.

of the RBC (i.e., :esciDd the Ap:1l 1, 1981 amaDdmeD~).

Analysi. of COIllllIi ttee a..e.e

The RBC :e.ponded to the 1nte:1m :epo:t by .ta1:iDg

that at the.out.et·of the 1980 p:e.1dential campai9ft the committ... ('RNC and DC) made a COIIII~ tlDant to spend the legally ~.ible

- amount to promote the can4idacy of the nominee of the lapublican - puty. The R.BC explained ~t .i:D coo:dinat1ng thei: expen41-

t=e., it was agreed by the cOJllllitte.. that the DC wou1c! a••,.. re.ponsi.bility for ce:taiD cost. incu:red by the DC 4u:iDg the

·campaic;D &Dc! that to this end, ce:tain de.ignated &1: fue invoices

receivea bY the uc: we:e sent to the INC for payment di:ectly to

the airlines. ~e response furthe: stated that the RIC billed

the paying passeng-ers, primarily SeC:8t Service and the p:e.s,

for their pro rata shue of t,he transpo:tat1on costs. ':he

reimbursements from these passenger. were received and retained

by DC and· used to offset RSC expense. that otbe:wi.e would have

been paid by the RNC. With re.pe~ to the billing'S and ::eiaburselllents, the RBC stated tha~

-Initially, the RBC p:esented the INC with

inv01ces fo: expense. iDcu::ed by the BBC.

'!'he RNC would in tu:n make payment to the

designated vendor. In orde: 1:0 p:ovide an

appropriate treatment fo: the re1mbu:s..ents,

it was dete:m1ned that the same result woUld

be achieved if DC credited rei:Dbu:sements

received against expense. incur:ed on behalf

of the RNC anc! paid by the RBC. The DC billed ~~e RNC for ai: charg-e., receiVing- travel

re:':n!:)u:sement:s on lWC' s acccur.t. :~ t:~rn, ~e.e

re~~urs~ent:s we=e crec!ited against ~~.e.

the RBC incurred en behalf of the RNC.

"'.... ,

7
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,

All of the expencU.~ur.. were coortinau4

by the CODIIlit.ue. pursuant. t.o tbe1J:

CODIlDi=ant. to fu:ther the cantic!acy of

t.he Rapablican nominee.·

1n iu July 20, 1981 response to the ill1:uia npoR,

t.he ItBC .t.au4 that. -the $1,138,891.24 a44e4 by the autit.

(sUff) t.o aBC expenti1:ures .abjeC1: t.o Umit.ad.on because they

'represeDud pa,..nu t:o ...the "agan Bush commi t.t.ee based OIl •••

DC expend1t.uru,' in ac~~t.y represent. a P:oPeJ: offsei of e~41~ures i.nCUJ::e4 by the' RBC an4 the DC in furthuuce of

Ronald ReagaD's C&Dtic!acy in c:onfo=aance with the agency

relaUonahip tha1: exi.~ed bet.ween the lUIC and the DC. - In the AU9US~ 11, 1981 resPODSe, i~ was s1:at.e4 that. the JUSC acud as tbe

act. agent. i.n 1IIAD&g1DV INC's campai;n expendit.ures. DC, in the

role of the principal, rai.ed funds aD4 paid expense. of the -.c, it.s agent., wit.h the DC ult.imat.ely r.'taining the power to cont.rol

how ane! wh.re i t.s fund. would be spent.. .

The RBC st..t.ee! it.. belief that. the agency rel.Uonship is - authorized by law and cit.ad numerous legal preeec!ent.s which it. fel1:

.upported this t.heo~.

. Fu:the:, th. RBC referred =SecUon 110.7 (a) (4) of Tit.le 11

of the Cod. of P.deral Requla'tions which st.at.es that. the naUonal

cODllllit.t.•• of a poUt.ical party may make exp.n~it.u:es aut:hori.ze4

by this .ection through any designat.ed agent., inelu~g State anc! .ubordi~at.. party commit.t.••••

In ac!4i.ti.on, th. R!IC .t.at..d 'that. Sect.ion 441a (a) (4) of

'rit.l. 2 of the Unit..d Stat.es Cod. provides t."1at. the li.mitat.i.ons

on contribut.ions contain.d in paragraphs (1) and (2) do not. apply

to transfers bew.en ane! among polit.ical commit.t.ees which are

na'ti.onal, St.at.., c!ist.rict. or local commit.t.ees (inclUding any

subordinat.. colllllli.t.t.ee th.reof) of the sam. political pa~.

In 'the opinion of the AUc!it.. st.a!f, the RBC appears

t.o conclude that. Bect.ion 110.7(a) (4) of ~it.1e 11 of the Code of

F.deral Regulations permit.s the designat.ion o~ a principal campaign

commit.t.ee of a candic!at.e t:o act. as an agent of the national

commit.t.ee wit:h transfer authority wi~"1in the limit.at.ion contained

at. Sect.ion 441a(4) (2) of Title 2 of the Onited St:at.e. Code.
...

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Th. RIC r••pon•• fails .labora~. on ~e fac~ tha~ 2 U.S.C.

441a(d) (1) * cl.arly r••uict.s 1:he making of .0 call.4 441a(d) .xpencU.~ur.. ~o/~rouih only party cm=i~~... (S~a~. c:o-i.~~es of

a political p~y, inclu4iDg any .,morcU.na1:e CODD11:1:e. o~ a su1:e

cClllDlDi1:1:ee) •

Fu1:hu, in ~e AucU~ .1:aff·1 opinion, linC. the ~,

i~. legislative his~ory, aDd the Commil.ion Regulation. ncopize

a 4i.~ct.icm beween aD ac1:ual t:anafer of money 1:0 a can4i4a1:e's.

cCllllllDi~1:ee by a p~ c:ommi1:1:ee and aD expenti~ure UDder .ecUon

441a(d), a p,mlicly-finapcec! cucU.4a1:.· •. COIIIIDi~be c:anno~ be 1:he

agen1: of 1:he party CQ1IIIIIi~ for ob1:a1n1n9 and using priva1:e funds

de.pi1:e t:he CODPDi~~ee·. Pamis.ive r.a4iDg of 11 c.p.a. sec'tion

110.7 (a) (4) which allow. a par1:y COD'II11:1:ee 1:0 de.i9Da~. aD a9aD~.

The ReagaD Bush Call1lDi1:~ee,.therefore, should no~ have obtaiDec1

reimburs..-nu, rebau. and ref1mc!a which were due 1:11e DC. While ~e Commi••ion haa pemi~~ed use of .ec1:ion 441a(d) moni•• 1:0

pay for expenc!i1:ure. incurred by t:he cancU4at:e if the part:y .0

choose. , the effec1: of ~~lowing rei.mbur.emen1: 1:0 the can4icSa1:e for

expenditure. made by the par1:y i. 1:0 mingl. private money wit:h

public money in a way not cont~lat.d by the public fiDancinv

sys1:am.

In the August 11, 1981 response 1:0 t:he interim repor1:, ~e RIC rei~era1:ed i1:s conclusion tha1:, ba••d upon 1:.'1. aqeney relationship, it was appropriate for the Rae ~o offse1: 1:Our

reimbursem8nu againS1: other =11:s incurred by the DC ~or the

Republican Na~ional Commi1:1:ee (al por1:rayed in the April 1,

19S1 &menCman1:). The RSC pr•••n1:ed a'definitive analYli. of . these transac~ion.in accordance wi~h General~y Accep1:ed ACCOUD~in9

Principles (GAAP) which included t:he concep1: of offse1:~g a••eu

ac;ains1: liabili1:ies and the concep1: of proper financial presenta'ticm

for entities under the COllllDon, di=ec1:, or indi=ec~ conuol.

* Section 44la(4) (1) of Ti~le 2 of the Oni1:ed S1:a~.s Code

s1:a1:e5 tha1: no1:Wi1:hs1:anc!inq any other provision of law wi1:h

respect ~o limitations on expenditures or limi~ation. on

contribu1:ions, the national committee of a political par1:y and

a 51:a1:e committee of a political party, i~cludinCJ any subordinate committee of a 51:&te commi1:1:ee, may make expendi1:ure.

in connection wi1:h 1:.~e qeneral elec1:ion campaiqn of candidate.

for Federal office, subject 1:0 ~~e limitations contained i~

?araq:-ap1'1s (2) a."\e (3) o~ this sU=sec~icn. .
- '" 'the Au411: S1:aff believes that: 'the amen=ent:. filed by . 'the RBC &Dc! DC cont:ain :ansacUoD. which c!ic! not: occu: as c=:eD~ly peruayed CD 'the public r.cor~.

Conclusion

'!'he Commission haa det:e:minecl that: ~e Act: and Regu1aUons

do not: permit: an agency re1at:ionship such as that: which, accorcUnv,

1:0 the RBC, existed bet:ween the DC and RNC. Therefore, the GAAP

analysis present:ed, bas.4 on the exist:ence of the agency

relat:ionship, is not: relevant: in this case. !'uJ:t:he:, ~'la1: 1:11e 1tBC

limit on expenditures (2 U.S.C. 441a(b) (1) (B» must: b. kep~

sepa=at:. from the RNC limit: (2 O.S.C. 441a(d) (2». Finally, that: the.e~enditure. totalinv $'48,163.16 made by the Reagan Bush

Col'llllli1:1:e. could not: prope:ly be regarded as 20.S.C.44laCd)(2)

expenditures ])y the RNC because 1:he DC did not :81:&1."1 conuol over

the'expendit:ures an4 di4 not: pay the venQors.i~self.

The RBC in41cau4 1:ha~ vinn the aveney :elauon.hip, t:he

GAAP CODcep~ of off.e~UnCi sUVCie.~. tha~ the $1,138,891 ill nimb=._

manu :eceive4 by the aBC shoul4 be reco:4e4 a. a liaJ:»ilit:y to the

DC which coul4 be appropria~ly aDc! preferably off.e1: aCia1Jla1: othc co.~. inc=nc! by the aac f= the DC. Puther, the RBC

1D41ca1:e4 tha~ there i••ubS1:utial .uppo:1: in the <aU CODcep1:

of prope: financial pre.,ntauon for uU1:ie. =4e: CODIDOJl, tinct:

0: lzuU.net: CODt::ol t:o .ggJe.~ the more maan1DCiful pres._t:aUem of

the finulcla1 :esult:. of laaVaD Bush Pre.idenUal Blection

Culpaip woul4 be t:o' COIIbiDe the act:!vi1:ies of the IBC an4 the DC'.

Pre.lc!anUal Blect:1OD F1m4, based upOn CODIDOn coDt::ol t1u:oUVh the

aVeney :elaUOD.hip. !'iDally, the mac st:a1:.4 tha1: these UIO=U

were a1:=i):»111:e4 1:0 the DC t:o account: for various campaign casU

inc=re4 by t:he RBC on behalf of the RNC, anc! that: this amenc!meDt:

accu:a1:ely reflect:. the pnderlyinCJ 1::ansacUons b.t:ween the ' c01lllDi1:t:••••

'-10- ,

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ReCo=mendat1OD

I~ i. 'the Audit .taff'. nCOlllDendaticm 'tha~ w11:h n.pe= 1:0

the 1:0= ~eimb=._na :eceived by the Re.,an Bush Co_l~t.. :ela~ng 1:0 expenti~=e. lII&4e by 1:be DC, aD uaencSment i. to·

be filed by 1:be ItBC wlt:hiD 30 day. of :ecelpt of 1:1\i. :epo:i:. Ce

co::eeuon =1:he p,mlic nco:d may be accompli.hed by :ecl...ify1Dg

f:om line 21 = liDe 22 of the Dei:ailed Summary of :Mce1pU and

Expen4iture. (Page 2, I'ZC rom 3P) that po:1:ion of 1:be $1,138,891.24

:eceive4 in 1980 and 1981 :e.pecUvely. LiDe 22 of' the au.azy

should be :ei:itled -Be1mbur.-.nta Received Re1aUng To Expentii:U:U

Made By The Rep=lic&D National Cosmnltue~. It should be noted t:ha~

when filing 1:bi. uaeDdme~.1;he DC 40ea not have ~ile auppo:1:iD9

FEe .chedules A-P fo: Une 22 detailing each :e1mb=aement, but

me:ely may 4isclose a -lamp sum- amount being :eclaa.ified f:oa

line 21 1:0 22 fo: 1980 and 1981 aci:ivi1:y. In a44ii:ion, linea 14

and 15 (RC FODl 3P, Page 1) of the Reagan Bush COIIIId.ttee's Reporta

of Receipu and Expen41~=ea fo: the 1980 Yea:-Bnd Repo:1: and :epo:1:a

filed iD 1981 should be co::eci:ed 1:0 :eflec1: the chan,e. 1:0 expu41-

tures subjeci: 1:0 1:be llJD1·tation :esulUng f:OIIl the :eclasaificaUcma

n.oted above. . .

Wi1:h :espec1: 1:0 the Ap:il 1, 1981 amenc!ment ($748,163.16)

the Audit staff :ecommenc!s that within t:he 30 day pe:iod the

Reagan Bush Committee file an amen4ment 1:0 its 1980 Yeu-End

Repo:t of Receipts and Expen4itu:es to :eve:se t:..'1e transac1:1on.

contained in ~~e 4/1/81 amendment. Fu:"the:, the RIC should infQCa

the Republican Na~ional Committee 1:0 file a simila: amenc!men~ 1:0

its 1980 Year-End Repo:~ wi'thin this recommended pe:iod so that,

the repo:ts may p:ope:ly :efleet the. cansactions and thei: impaci:

on ~th committees. .

Fo: the discussion :e,ar41n, ~~e Commission's deter.mination'

:elaung to any repayment, please :efe: 1:0 Finding' III.A. at page.

25-26.

Reimbursements bceived ilelated to

Campa1qn '1'Ours Paid By RIC

Section 9004.6(a) of Title 11 of the COde of

Fede:al ",ulations states, in part, that if :eimbursement fo: ~anspo:tation made available to media, Secret Service 0: othe:

staff au'tho:ized !:»y law 0: requi:ed ))y national security to ~avel with a candidate is :eceived ))y a committee, the amount

of su~~ :eimbursemen~ fo~ each individual shall not exceed that

individual's p:o :ata shue of t.~e aC1:"o1al coso: of t..~e t:anspo:~tion

made available. Furthe:, Section 9004.6Cb) of Title II of the

C:ce c~ =~~~:al ~e;~lat~:~s 3~a~~a, i~ r~=~' ~~a; i: rei~~=se=e:~

:0: qro~d ser~ices and facil~tie. is received ~y a committee, the

amount of such :eimbu:sement fo: each individual shall not exceed

II
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.ith.~ 'the 1ncUviduu'. pro ~ata .hue of 1:h. ac1:ual =.1: of the

.enice. and facillUe. mad. availaJ:tle, o~ a re..onable e.Uma1:e

of 'the intividual'. p~o ra1:& .ha:e of 'the co.1: of 'the .enice. an4

facilitie. made ava1laJ:)le. If i1: i. detumin.d t:ha1: reimb=.~U

rela1:ed to a uip have exc..ded 10' or mor. 'the aC1:u&1 =.1: of

1:he .ervice. and facilitie. macSe ava1laJ::tle, such exce••ive UIOUD1:

shaU b. de..d inccae 1:0 'th. COIIIl11:te. and .hall ])a repaid to the

S.cr.1:&2:Y.

Th. analy.i.· of ava1laJ)le :eco~c!s .uppor1:Uv the ac~l =.1: of se:vice. "~d~faciliUe. ma4e available,~ 1:he news ••41a, ODi1:ed Suu." S.cre1: ·S."ice aDd complianc. I'uDd ~.ODDel

41scl0••d t:hat i:h. "aVaD Bush Coan$ 't1:ae reaUzed :e1mburs~U

in .xce•• of =s1:. 4oCUlDeD1:a4 iD conjunction wi1:h 1:he tour. of a't

1.as1: $15,238.53* ($1,284,704.10 r.imbur.ements le•• actgal co.'t

$1,269,465.57). Included in 'the ~'tal for re1mbur• .menu i. an . e.'t1mated $21,559.82 in 1:our re1mbur.emenu due"the ReagaD Bush

CODaI1tUe a. of Peb:u~.·24,-1981. OUX revi.w of 'the JtBC'. 41.clo.ure r.po~ f= the puiods en41ng Ma:ch 31, '1981 and June 30, 1981

·ili41caU. 1:ha1: 1:he RBC has received $33,228.25 a porUon of which 1.

iD re1mbur.emenu, apparently a••ociated with the 2/24/81 figure

calcula1:.d for tour r.i.mJ)u:....nu due. During t:he cour.e of 1:he

follow-up au41t work plumed 1:0 colllllltmce a't 'the cd of the 30 day period afforded t:h. RBC 1:a respond 1:0 1:hi. report, the Auc!1t .1:&ff

will verify the.e repor1:ed figure. 1:0 underlying documeD1:ation aDd~

if i1: is de1:ez:mined tha't the RIC has received or expect. 1:0 recei",

aD amotmt which differs from the Audit s1:aff'. c:alcula'tion, an adjus~nt will be made.

On June 16, 1981, 'the Commission approved the

Audit suff's recommendation conUin.d in 1:he interim repcr1:

that, since the above re1mbursemen1:S have no1: exceeded by 10'

or more the actual cos1: of the service. and facili'ties a.

contain.d a1: 11 C.F.R. 9004.6(b), no repaymen1: would be

recommended with respec1: 1:0 the associated income. Bewever,

since this amoun1: has an impact on expenditu:es subject to

the limitation (und.rstates sai4 expenditu:e.), the entire

amcun1: ($15,238.53)* has been included in Finding II.A. as an

upward adjustment.

* ~he interim report placed the figure at $50,588.48, hewever,

infor.mation relating to certain ground costs contained 1n the

RBC's response resulted in ~~. figure being reduced to $15,238.53.

/:2.
pOOl

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Analy.i. of Commt~1:ae ".pOP.e

CD J~ly 20, 1981 an4 ADvu.~ 11, 1981 the aBC re.p0a4e4 to ~e in~erim report an4 cODclu4e4 ~a~ ~e "van Bush c:emai~1:ee

ha4 in faC1: inc:urn4 a 10•• OD the campaign tour. to~aliD' . $18,429.10 rather than a profi~ .. 4etemiDe4 by the Au41t .taff.

Accor41n, to the RBC, 4u:iDf 1:he v_eral elec1:1OD, 4aily records

wue main't:&i.De4 .. to the ac:1:U&l expen.e. incurred by the pre•• and .ecret .ervic;:e and a vreat effort wa. executed to ••ure that

the.e partie. were accura1:ely and equitably billed. A f1Dal review

at the end of the campaign .clearly indicate. that the.e Partie.

were not ove:charved, ..~ctual tour co.ts incurred !:?Y the

campaign exceede4 reimbu:.tlllieDts. .

The Au41~ .taff plan. toO review the records in .upport of ~e final review perfoz:me4 by the :aBC at the end of the campaign,

du:in, follow-up work plazmed to occur dur1DV the 30 day re.ponse periocl, and 41.cu.. the 41fference. with RIC official.. However, i~ appear. that the difference. primarily re.ul~ from the approach in determining the net amount realized from the tour••

First, ~e RBC' s compu't:&:con shovinv the 10.s fiCJUre indicate4

that the DC a9qregated toul expenditure. and reimbur.ements in

conjunC1:ion with the tour. wit:hout separating the expenditure. made

by the RNC and the a.socia1:ed reimbursements: whereas the Au41 . sta~f's calculation separated ~e RNC activity frcm the RBC ac1:1vi~;

and campu~ed a pro rata amount of reimbursements accor41ngly. :

Secondly, it. appears that the RJIC in i~. review d14 not include i

an amount for re1mbursments due the R:BC as of Feb:uary 2'4, 1981, , whereas the analysis perfor.med by the Audit staff did include an

amount.for reimbursements due the RBC as of February 24, 1981.

The Audit staff's subsequent review of reports filed by the "aqaD Bush Commit.tee for the peri04. ending March 31, 1981 and JuDe 30,

1981, indicates that the RBC has received $33,228.25 in retmburs__ a portion of which is a ••ociated with the amount calculated by the

Audit staff a. tour reimbursement. due. This will be varified by reviewing R!JC =ecorcls during the follow-up fieldwork.

In conclusion, an adjustment of $15,238.53 is included at the

summa.-y of expenditures subject to ~~e limitation (see page 22) in

order to account ~or the retmbursementa received in exce.a of coat•• If no adjus~ent. is made, the effect would be to increase the

$29,440,000 spending limitation by ~~e $15,238.53 since the RBC

applied this amount of reimbursements aa an offset to its operating

expenses.

IJ
-14-

laCOlllllaftc!aUon

I1: i. the Au4i1: .1:a~~·. nCOllllD8D4aUon ~a1: the RBC, within

30 day. of receip1: of thi. npon, file an ameDc!lleD1: in ordu 1:0

properly accoun1: for the $15,238.53 in reim1:n=.~u receiv.d iD

.xce.. of =.1:.. Thi. amendllleD1: may be acccmpU.hed by recl...ifyiDtJ

the $15,238.53 f=- Line 21 to LiDe 22 in the .... fashion a. DObe!

in Finding II.A.l. DU:1Dg the 30 day period, the DC may .W:a11:

documeDU1:iOD to show tha1: i:Ou: r.imbu....U rec.iv.d aid no1:

.xceed tow: =.1:. paid .01.ly by the DC. " .. .

.3. Mi.cellaDeou. A"!j·u".~U

The Audi1: .1:af~ analyzed th.·DC r.cords iA luppor1: of

i1:. r.ceipu and exp8DcU.1:u:ea frclll January 1, 1981 1:h:oWJh Ma:ch 26,

1981 aDd i1:. upc!aud Sb1:emen1: of Ne1: OU1:.1:aDdiDCJ Qualified OImpa1p

Expen.e. ("ROQCE") preseD1:.d March 26, 1981. This ana1y.is re.u11:.d

in a n.1: upward adju.~~~ of $301,178.02 in expend11:u:e. sUbjec1:

1:0 limi'tation. a. follows: . •

- . -.

.,-,

.Add: ExpencU.1:ures sub~ec1: to limiQUon

from 1/1/81 1:h:ouCJh 3/26/81

Add:. Deb1:S and obligation. owed by 1USC

a1: 3/26/81

Less: Debu and o!)ligations owed 1:0 RBC

at 3/26/81

Less: Voided check. inc1uc!ed in opera't:inq

expenditures from 5/1/80 through

12/31/80

To1:a1

$270,431.52

75,393.79

( 29,208.09)

( 15,439.20)

$301,178.02

Ca)

The Audi1: staff reviewed checks wri1:1:en duriDCJ this

period and under1yinq invoices and other documenta1:ion in .upport

of expendi1:ures 1:0 de1:er.mine whe1:her 1:hese expendi1:ure. were . qualified campaic;n expenses. The review indica1:ed that 1:h. R3C

made expenditures for quali~ied campai;n expenses 1:otalinq $1,266,421.50.

t--•.

/'1
(b)

....

o

..'

'"

-15-

No~ included 1A this aiDoQD~ were 4iabu.~~. ~0~1Dt 'lOS, 000

the Inuz:nal Revenue Service fo~ ~. on iDUre.~ earned wbic:b

were no~ chaqeaJ:)le =the expen4i~ure liai~aUon. Fur1:her, 0=

review of th. receipU recor4a reveale4 tha~ tbe RIC rec8iva4

$995,989.98 1n nf1m4a an4 n1mbur.~~.. '1'h1. amount. w•• • ub~rac*ed f~ca ~~ qua.Ufie4 campaign expen.e. yieltiDg ne~

expendi~ure. of $270,431.52 .ubje= =1:11e UmiUUOD fo~ the

peri04 1{1/81 ~OU9h 3/26/81.

Analy.is of Commi~~ee ~.POD••

in" t:he Aw;ua~ 11, 191i %e.pona., t:he DC .~aud ~a~ there was no evidence =iD4ica~e whether the au4i=r. reviewed

in4ividual expen4i~ure. = 4e~lImine whether- they were compliance rela~ed and .hould have been charged to the compliance Fad.

Although expenditure documen1:ation was in fact reviewed, it

was no~ nece.sary to det~~e~wJ1et:her or no~ the exp8nditures wue

compliance.related, in view of the fa~ tha~ the RBC elec*ed . to classify 1:11ese expendi~ures a. operaUn~, havin~ paid tb_ fr'aa

the Federal fun4a accoun~. The ComIIIis.ion IS b9UJ,auons a~ nc.!'.ll.

9002.l1(b) (5) clearly s~ate that a commi~tee has tba aptian of payin~ for cc::apllance expenses from eithe~ the Pedual f=4a . account(s) or if t:he expenses were solely for the purpose of ensuriDg compliance wit:h the Ac~, they may be paid from a priva~ely funded

compliance accoun~. The purpose of t:he review was to ensure t:hat

the expenditures we:e for qualified campaign expenses and to identify

additional amounts chargeable to the spendin~ limitation. Further,

in response to the interim report, the RBC was provide4 an opportunity

to show t.."lat any of these expenditures were for compliance.

Debts and Obliqations Owed BI The Realan Bush

Committee at MarCh 26, 1981 75,393.7

The Audit staff reviewed unpaid invoices and

discussed wit:h the Treasurer the amounts owed by the RBC. As'

a result, it was determined t:hat the RBC had accounts payable of-

$75,393.79. Therefore, this amount was added as an adjustment to

expendi-ture•. subject to the li.mitation. .

Analysis of Commit~ee Res~onse

In the August 11, 1981 response, ~"le RBC state4 that

-we found no evidence to indica~e whether ~"le

audi~ors ::eviewea i:ldivi d-.:.a1 :.":e:~ '!:·:-:-an:::"-;·':'::9S ~o dete~ina whe~~e= ~hey we::e compliance ::elate4.
/6

In 1:he Au~t 11, 1981:e.ponse, the RIC sta1:e4 that

, "we found no evidence that 1:he FEe auc!i1:oz:.

traced the amounts in the schedules to the

sOUJ:ce documents. we al.o found no evidence

that the auditors examined cash z:eceipts sub.equent 1:0 Maz:ch 26, 1981 to de1:e=U.ne

whethe: (1) all receivables had been recorded

as of t:hat date and (2) receivable. z:ecorded

were at the pz:oper amounts."

With respect 1:0 uacinCJ t:he amounts in the schedules to .ource

c1oCUJDents, this trace was in fact pez:fo:med. As is the Audit

DiVision's practice for Federally ~inanced committees, all eS~1:e.

,(i.e., projected winding down cos1:s oz: open items (accoun1:.

payable or accounts receivable» are verified by evidence of paymen1:, . collection, or other c1isposi~ion a. the case may be during the ini1:ia:

or follow-up audit work. As previously indica~ec1, the follow-up audit wc:k is ~lL~~ec ~o :e~.nce nea: ~~e e~d 0: ~~e !O :av ?e=~cc . . . .... ..'". . a::c:...aa -:'0 =~oipe:'1... ..0 ...:.s :epo:-e.

"

-11-

we also foUft4 no ev14ance ~a"1: t:he auf!11:oz:s 'had

~akeD s1:eps to 4e~e=d.De whet:hez: all UIlpa14 invoice. bad been recoJ:4e4."

W10th z:e.pe~ to whet:hu a z:eview of iD41vi4ual 11:ea upen41tue•..

rqaz:41Dc; compliance oz: non-CCIIlPliaDce was nece.sary, 'the A1J4i .taff re1tez:a~e. it. previous rtat_D1: t:hat the lUIC elec:1:e4 to des1pab 1:he.e expendituz:e. as non-c:oapUanC8 UIldez: 11 C.P••• 9002.U(b) (5).

Fw:1:hez:, the z:eview was con4Uc1:e4 as outline4~. P1.DaUy, as

indica1:e4 in an explanatoz:y .DOQ in 'the iDi:uim rep=~1 , ..

, "*A4ju.tmenb. t"O'the.e fiCJUJ:e. may be nece••Uf

upon z:eriew of ~e ac1:Ual receip~ and expeftditun a~v1ty relaUiig 1:0 debb &Dd obligaUona" (!!pha.i. added)

(c) Debt. and ObliIations Owee! To The basan Bush

Ccma1.t1:ee a1: z:Ch 26, 1981 - $29,208.09 ", . The Audi1: .~aff· z:eviawed t:he recoz:4a iD .uppo~ of . debt. and obligation. owed = ~e ltBC and discu••ed 1:I1e debbud

obligaUon. wi1:h 1:I1e 'tJ:ea.uz:ez:. A. a. re.ult, i1: was debmiDed tha~ ·the ItBC had accounb receivable of $29,208.09. Thez:efore, , thi.· ~UDt was c1edUC1:ed from expencJitu::e.subject to ''the limiQ1:!an.

ADaly.is of CODIIIlittee a..l'anse

, ..'
.~

~"..

,...

"

-17-

. (c!) Voided Chec:Jcs Iftc1w!ec! 1D~~aUn~tit=es

'~OII Mix 1, 1980 fiiioW;h ceibir l"IC1Jio - $15,431.20

'lbe Aw!1t staff'. ~evi_ of DC baDJc ncor~

aD4 reporu 4isc10.ed checks toU1iDCJ $15,43'. 20 we~e ~1t:ta 1zl

payment of expe.4it~es Ul4 sw.equnUy voic!e4. A1f:houCJh the. DC

hac! not a4ju.tee!· its reports ane! ~ecoru fo~ the.e checka, the Autit

.-taff ac:kDow1e4ged th_ by %ec!uciDv expenditure. subject to 1imitat1cm

.by..that amount. - .. . .~ ", . . . ADa1ys:l.s of CoIIImitbe itaspOMe ..

- In the AUCJUSt 11, 1981'~e.ponse, f:he RIC state4 that:

-The workin9 papers cUe! not in4icaf:e the sow:ce f~om wbich this c!af:& was obtained. There is no

in41cation tha-i (1) the cbeqk r89:1.st8: wu ex_inec!

to' ensure 'that all voided checks hac! been ~ecore!ee!

on the sche4ule or that (2) voided checks hac! been

examine4.-

"The above statement is conect insofa~ as the workin9 papers toeviewe4 by the RBC in prepa~in9 its response. Bcwever, other .working papus reference4 Oft 1:."1e working paper scbe4ul.s i.'" support of the voided check figure of $15,439.20 were inadvert:anf:ly excludec!

from the materials forwarded to Coun.el fo~ the cnmmittee. and thus

not availa!)le for" review. . 'rhe.e wo~king papers which detail ow:

examination of all bank accounu are ~esponsive to the points made

1n 1:11e response and document the adequacy of the procedures employee! by 1:11e Audit staff.

COnclusion

Based upon the i.sue. noted in the r ••ponse «a)

througb (d) &1)ove), the Audit staff believ•• that the amouna u.ed

to arrive at expenditures subject to ltmita1:ion for the perio4 1/1/81

t:hrough 3/26/81 as not.d on page 22 of this report are aD accurate

reflection of RBC's financial activity. At th. close of the

30 day response period, the Aucit: Sf:a!~ will perfo:m ad4itiona1

fieldwork to update the analysis for ac~vity from 3/26/81 to the

present. .

;'.-

/7
-18- ,

/~

In addition, the DC stated that "W. could not det.=ine,

based on our review of the FEC vorkin; p.pers, the following:

whether a physical inven1:Ory was conc!uc~edJ

the RaC reccrds used to compile ~~e list: of capit.l

asset. on ha:1c!:

Analysis of Committee aesponse

In both its initial respon•• (7/20/81) and i~a supplemental

response (8/11/81) the RBC mainta1ned t.hat:

(a) Certain of the a.sets we~e no 10Aver 1UIC property

as of December 4, 1980, an4

(b) An improper methoc! w•• used to. as_ip a valuauOD

t:o the.e assets.

4. capi~al ••

Inu04ucUOIl

. Dw:1nV the fi.lc!work i~ was .ppuiln~ tha~ the DC -J

h.v. excHc!e4 the expenc!i~=. 1iai~a1:1= a~ 2 U.S.C. 441a(:b) (1) (B).

It was also appuen~ tha~ the DC iD~Ue!ec! to Uquic1a't. a. UDl ....~. a. po••iJ::»l. .iDc. the p~oc••4. frOID th. ..1. wou14 :.c!uca axpeDc!i~=.. .ubj.~ to th., 1im1~~ion for tho.. • •••~. co.U

orivu.lly chargee! 1:0 thit ·limi~a1:1OD. ':he:.fo~e, in a4cU.1:1i:m to

c.lcW.a1:1Dv t:he 4011a: vll1u. of capit.l ....1:8 OIl hane! .. of

12/4/80 for NOQCZ purpo••• the Auc!i~ st.ff 1Dclwle4 this amoUDt .. an ••~'ted downwa:c! ~Ju.1:ment to expen4itu:•••ubj.ct to th.

abori _nnond 1li1~.uon, pendinv .ctual uta em 'th••al./

c!ispo.itiOll of the•• capital ••••t.. ':h. RBC calculat.d th. val_

of c.pital ....u to :be $16,378.90, wh.rea., the AW!it staff

determined the value to b. $46,617.93, a «!ifferenee of $30,239.03• .' '

'"

r .

,....

.... •

, '!'he Re.v& Bush CO'IIIlit1:8e .01e! • portiOll of i 1:8 •••ets

·prig: to 12/4/80 for $16,37.8.90. In view of the fact that payment . for thes•••••t. had not :been rec.ived by the RBC as of 12/4/80, the Audi~ staff clas.ified the $16,378.90 as an account receivabl•• In addi.t"ion, a. noted above, the Audit ataf! iden1:1fiec!' 01:h.= 0 ....ts

on hand as of 12/4/80,' 1:Otalinc; $46,617.93, as capital ass.ts. '!'he 00... 'l'reasu:er stated he would review 'the Aue!it staff 1 • calcula~ions of

the fair m.rket value of the.e asset_ (see Attachment 1) •
~."

-1'-

1:11. pJ:Ocedu:e. perfoz:med 1:0 deteD\1n. 1:b. comple~••• 'of 1:h••chedule. of ass.t. on hand,

1:11. proc.d=•• 1:0 relat. 1:11. valuaUon d.tumiDed by

au41tor. (co.t, le.. year. .1:raight liDe

d.preciaUon bued on aD eight year lif.) 1:0 .ubsequent

r.aUzaUon in cash upon 41.po.iUon- •

Pur1:b.r, the RBC .ta1:84 that .ach of 1:11. it_ was

.ubject 1:0 a rapid 10••. p~. ~~l_ 1:1POD conan.Dc_ent of ••

With re.pec:1: to the RBC·'s u ••~on that cerUiD as.eu

were no longer RBC PJ:Opert:y .. of 12/4/80., it should be not.d

1:bat during 1:11. Audit staff'. review of capital ....t. i 1: was

d.termin.d 1:hat all of. th••• asset. wu., in fac1:, on hand at

December 4, 1980. 'rhi. fac1: was confirmed with t:h. DC per.on

in charge of· t:hem. He idc1:1fied cer1:ain capital as••u .. being in use at t:he uaniiUon office and inaugural h.adquar1:u••

Pur'thermore, a. noted pr.viously, .t:h. RSC calcula1:ed a value

for capital a.sets of $16,378.90. However, 1:I1es. asset. were, in

fact, sold by the aBC prior 1:0 December 4, 1980. As s1:ated above,

the Audit staff classified the $16,378.90 as an accoun1: rec.ivabl•• Therefore, it is the Audi1: s1:aff's position ~~at the RBC did not

recoqnize 'the existence of any capital assets on the Sta~1: of

Net OU1:standing Qualified C&mpaiqn Expens.s (as of 12/4/80) provide4

to the FEC Audit staff on March 26, 19"81.

Regarcling the aBC's contention that aD improper meth04 was

used 1:0 assign a valuation to these assets, certain background

info:=ation is appropria1:e at this point in t:he discussion.

During the post-primary audit of 1:I1e Reagan For President (prima%y

Committee), documenta1:ion reviewed by th. Audit st~f disclosed 1:ha1:

the Primary COmmittee initially a.signed a value to its capital

assets Cased on an 18 mon1:b life expectancy and wi'th deprecia'Cion

computed using the strai9ht line method. -rhe Audit staff question.d this valuation method initially used by the Prtmary Comm!tte. as

evidenced by Finc!in9 III.D. "Valuation of Committe. Assets- contained

in the Report of the Audit Division on Rea9an For Presid.nt (rel.ase

date 2/2/81). 'l'he Audit staff recommended that the prima:y Commi1:te.

prepare a revised valuation of ~~e items. On Oecember 22, 1980, ~~e Primary Committee submitted a revised valuation for the capi1:al

assets in question. The Primary Committee, in calculatin9 the

revised valuation, assigned an 8 year life expectancy and computed :e?:-ec:'a~:'cn (1 ~·e:!=) us:'nq t.'te s~raic;h~ line me~'Aod.· ':'~e C:=.=iss:'e~

~aer.e~ ~~is ~e~~c~ ~o ~e =easonable.

/'T
.. -20-

verifica~ion, using RBC records available, of any . representation. made by RBC personnel.

As a resul~ of these procedures, the Audit staff id.ntifi.d

certain capital asset. on hand as of December 4, 1980, and calculated

the value for the•• a••ets to b. $46,617.93 •

If the RBC is able ~o produce evidence which sub.~an1:ia~u

it. a•••rtioD that there was a rapid loss of va1ue upon commencemen1:

of,'u.. of the a•••~., or there was a marke~ decline af~er D.cember 4,

1980, the Audit .~aff will review such evidence, and, if nec•••ary, make appropria~e adjus~ents to the capital asset valua1:1on and

corresponding adju.~en~s to the expenditure limitation.

SiDe. may of· th... capi~al ••••~. w.r. purchas.d by tile

DC from 1:h. Primary ea-i~~.., ~be Au4i~ .~aff con~iDuee! ~o

use the a••ignee! 8 y.ar life and c:ompu~ed depr.cia1:ion (2 y.ar.) a.inCJ 1:be .uaiCJh1: liD. _dl04.

Wi1:h rupaC1: ~o the ·proc.dur•• employed by dle AwU1: .1:aff,

i1: .hould be no~ed that" ~. de.crip1:1on of c.n.in proC,e4ure• .perfona.d was D01: iDi1:1ally provided ~o the IBC. How.v.r, iD

gen.ral, th. procedure. employed were •• follow.:

- review of dOCUlDeD~.1:ion main1:ained by dle IBC r.CJar41DCJ

th. purcha•• of mat.ri.ls,.including IBC records and , FEC working p.pers r.la1:1ng to a•••t. purcha••d by.

~e RBC ~rom' th. Reagan Por ,re.ident (Primary COJIIIl1.1:~..),

phy.ical in.pection of ....t. loc.ted in the Commi1:1:•••• office., in W••hiDg1:0D, D.C.;

di.cu••ion with aknowledgeabl. RBC employe. concer.niDg th. .xi.tenc. and location or di.positi= of cenain

capital •••et.; and

o •

. ,

.0

'.0 .

o'~

- .~.

""-

f· . .'.

...
... ...

....

; .

...

-21-

Pinally, i~ mua~ be -.phuiz.d tha~ the calculaUon aade by

1:.'1. Au41~ .Uff i. All ••Umau of the fair marJc.~ value of the ic!~~ifi.d 'capi"l a •••u. Should the proc••ds frCIII the .&1.

of th... capi~al ....u 'B'OD Uqu14aUon be 1... thaD the

••1:1ma1:e4 value ($41,I17...J,3>, 1:hen obviously the .ffec:~ (i••• , r.ducUon of expen41~=••··.ubj.= 1:0 the JJ.m1Q~on) i. i••••eel••

In th. .ame v.h, .hould the C)wm'i ~~.. .1.= 1:0 conu1buu th••• it... (in accorcJanc. with applicabl. law. and rec;ulaUon.) and

r.aliz. DO proceed. &~ 41.po.i~=, th. 1:her. would be DO

ac!justmeD~ wha1:soev.~ 1:0 expa4i~=.. .ubj.c~ 1:0 the lim1Q~ion.

. 5. summag:-L1mi~aUofton ijP'n411:ur•• . (2 O••c. 441a(6) (1) (1_ .

Th. Audi .~aff'. analy.i. of the a.aVAIl. Bush . COIIIIl1~1:ee anc! a.aVaD Bush Comp1ianc. Pund reporu and availab1.

recorda from May 1, 1980 ~ough December 31, 1980, and aVailable

r,cor4a fram January 1, 1981 throuVh March 26, 1981 with re.pec~ 1:0 expendi~ure ••ubj.~ 1:0 the $29,440,000 1imi1:aUon i. P~"-1:ed below. Wi1:h 1:.'1. excepUon of 1:11. $137,883. 17 repo~ud re1abuZ'.emen1:

made by t.'1e RIC 1:0 i1:8 Compliance Pund, all other audi1: ac!just:IDeDu . to the RaC's reportee! 8Xpen411:ure••ubjec~ 1:0 the 11mi1:a1:ion (5/1/80- 12/31/80) are explained on ~e preceding page. of this repo~~•

* The .f~ect cn the Dete::nina1:ion of Ne~ OU1:s1:andinv Qualified

Campaign Expenses is" discussed at Sec1:ion III.C. of this report.

:;/
-22-

..

15,238.53

270,431.52.

75,393.79

137,883.67

'1,138,891.24

( 46,617.931-

S30,558,977.55

.0

Debts and ob1i,at:ions ~ed by Ric at: 3/26/81

3/31/81 Re1mbursuient: made t:o t:he Cclmpliance Fund (a. reported by t:he RBC)

Less: Capital Assets OD hand t:o be liquidat:ed

Total Expenditures Subject: to

LimitatioD fram 5/1/80 through 3/26/81 per Audit Analysis

Md:

• ,Md:

Adds Re1mburs~t:. receiVed re1at:ed t:o campa1gn t:ours paid by R8C

Add: Expendit:ure. subj ect: t:o lim1t:at:ion frca

'.' 1/1/81 1:lu'ough 3/26/81

. Less: DBt:s and 'ob1igat:ions owed t:O RBC at: 3/26/81 ( 29,208.09) V

Less: Voided checks included in operating (15,439.20) expendit:ures fram 5/1/80 t:hrough 12/31/80

Adjus~ents to ••e figures may be neces.ary upon review of

the actual receipt and eXpenditure activit:y during the

follow-up field work planned to, CODlllence at t:he end of t:he

'30 day period afforded the Committee to respond to this

report.

** In addition, as noted in Finding III.D., a certain other matter

bas ~een referred to the Commission's,Office of General Counsel.

Opon resolution, a ~ur1:her adjus~t may be required.

*

Audit: ADa1ISiS -'·Ua1~..~io~ ODp41~ures .( , D.i.c.' 4'4ia'(6Stln~:

Reported expendit:ures subject: t:o t:he 1tmit:at:ion $29,012,404.02 . from'5/1/80 through 12/31/80.

!!!justmeDt:s t:o t:ha a!)ove reported' t:ot:a1sl

A44: Re1mb,:sement:s received re1at:1D,

t:o expend!t:ures _de by t:he "publican .a1:1ona1 Comm11;t~·'!

""

.. ' ,

...

.."
.....

...-,

c: :

",.. " ,

c

r:.'. ". '

, I

-23-

., " sased upon ~he above analysi., i1:appears tha1: the

RIC ha. exceeded ~he Itm1~a1:ion a1: 2 U.S.C. 441a(b) (1) (B) .1ft the

amoun1: of $1,118,977.55 ($~~,55_8_,977.55 les.$29,440,000). --.----.

RecOllllDenda1:ion

11: i.1:he Au41~ s1:aff'. recommenda1:ion tha1: the Cammi••ion .de~erm1De tha1: the' laagaD Bush CoDai~~ee, ab.eni: a .howing ~o the o con1:ruy wi~in 30 day. o( rece1pi: of •. report:, ha. exceeded ~e 2 u.s.c. 441a(b)(1)(B)~lmi1:a1:ionin the amoUDi: of $1,118,977.55· I

as .e1: for1:h above. .." 1 . \ .i

. Br' Disclo.ure of' Debi:·.·.'and' Obliga1:ion.

SeCi:ion 434 (b) :(8)' of 'l'iUe 2' of ~e Uni1:84 S~ai:'-. COde

,require.·disclo.ure of the amcUD~ andna1:ure of deb1:. and obliga1:ion• . owed by ·orto suchpolitic;.al cOllllDitt..: and a statement· .. to ~e

circumstance. and conditions under which such debts or obligation. we~e eX1:ingui.hed, and the con.ideration therefore•

':he Audi staff noted that the following letter. of cre~i~wereestablishedwi~ ~e Riggs National Bank in favor of

three ~endor.. arbe amount and nature of these letters of =ed1t

were not disclosed in ~he Reagan Bush Committee'. report. to the Cominission.·' -' ...;

(1) Pacific Telephone 'and' Teleqraph Co.

An irrevocable le~~er of credit was es~ablished

:in favor- of 'the' vendor pursuant ~o an agreement dated Auc;ust 26,

1980. The credit, secured with certificates of deposi~ ~o~aling

"$300,000. (subsequently increased to $500,000), guaranteed the. satisfac~ian of all obliga~ion. owed to the vendor by the Reagan Bush Committee.' ." , .0

(2) Onitec! Airlin...·,·Tnc.

Two irrevocable letters 'of credit were es~ablished

in favor of Onited Airlines on August 29, 1980 and September 11,

1980 pursuant to aircraft lease agreements. The credits,

collateralized with certificates of deposit totaling $425,000,

.guaranteed ~'1e' satisfaction of 1ndeb'tec!.~ess 'to 'the vendor by ~'1e

Reagan Sush Co:nmi~~ee.· ..

• ~~ease refer ~o Finding II!.A. en pages 25-26 for the discussion

reqarding the Ccmmission·s·~e'te:minationrela'ting to resolution

of repayment issues.

J;-e

,

"Z3

." ' .' •...
-

,'",

co,

-24-

(3) Trailways Le'is=e an4 -:ravel

AD !znvoCable 1.~1:U of =e4i~ was e.~llahe4

1A favoz: of the vencSoz: p=sUD~ =an o:al a9z:e~~ of lep~

4, 1980, aD4 payable upcm W'i~~eD 4__4 fz:oa Trailway.. fte c:e4i~ was colla~£aUae4 wi~ CC'Uficau. of d.posi~ 1:o't&11DV

$20,000. .

OIl Apz:il 15,. "1981, the DC filed i~. fua~

Quart.Z:ly "port foz: 198k which .ub.1:aDUally 41sclo.e4 the neca.s~ iDfoz:maUon ftgutiAv th••• 1Ds~Z'\DIeftu. · . .

RecoaDeD4aUon

B...d on the above, the A\lti~ a~ff z:eCOJlllDeD4s no furthu

action c;m dUo. 1D&~1:U.

. .. .e'~ Transfez: '1'0 and From Affiliaucf Camm1~1:e.a

Se~ons'434(~) (21(£) &D4-434(~) (4) (C) of Ti~le 2 - of the On1:ed 5:'1:8. Coda xaqv.iz:e the 4isclosv.re of the ~al

&mOun~"of all ~&ftsfe:s mada to or received from affilia~e4

comml~~.es. . .. . .

The Aw!i: staff no~ed a $10,000 transfer made by t:he

ReaCJaD. Bush CoJlllD1:tee 1:0 DemocraU For Reavan. The same amc:nm:

was-subsequently :ransferred from DeIIloc=a~. For Re.CJa.~ to the

ReagaD Bush Committee. Democrats 1'0: ReaCJaD diaclosed the

receipt a:1d cU.s~ursement of the transfers. Th. laagaD Bush

COmmit.ue considered the 41sbursemen: and rece1p: aa :i.nt.er-~ank

cansfers &Dd did not cU.aclose this ac1:ivi:y 1A 1:. reports file4:~~th the Commission.

On April 15, 1981, the RIC filed i:. first

Quarterly Repo~ for 1981 which propez:ly disclosed th.s.

:ransfera. '

aecammendaUon

8as.4 on ~e above, the Au4i: staff recommends DO further

action on this mat:~•

. - .. __ . ·0·· ....__ . . ..
'..

"."

,.-, 'M' .~

.. -

-25-

•

III.F1nd1nq.' '.ela~ed ~o '!i~le 21 of 1:be uni~ed SQ~e. COde aDa Repay!!!!~ to die o.s. fie..sy

A. ExP!ftc!i~=e. In Exce•• of the t.imii:a'ticm

sect.icm 9007 (b) (2) of '!i~le 21 of the tlDi1:ed Staa. Coda .~aU•. if the commi••ion 4e~e=d.De. tha~ theeligiblecaDdida1:a.

of a pdlitJ.c:a1 p~y &Dc! thei: au'tbo:ize4 conai~Ue. ineutted

qualified' campa191l expen.e•.in exce.. of the ag9%eva~e paymezaU 1:0 which the elig~le cu4tdaUS of a majo: puqr were _U~le4 , undu • .cUOD 9004, i~ .ll&1r DOUfy .uch C&D4i4a~e. of ~e.81101m~

ot: s~ exce.. and .uch c:an4ida~e.·.hul·pay to the Sec:e~ . of:-the. fte..u:y aD UIOun~ ~al to .uch a.nm~. '

. As previously D~~ed in FiD4iDgII.A. of this repo~,

pap 231 theAudi~ "~aff'. analy.i. iDdica~e. tha~ the DC" . appea:s to have' exceeded.. ~eexperadi~=e limitation at 2 U.S.C• • 4l.(~) (1) (B) fo:. the' period May 1, 19.80 -th:ough Ma:ch 21, 1981

b7 $~,118·,977.S5. The CODIIDissioD detenained tha~ the DC cou1d'DO~

prope;-ly off.e~~ .(reduce) i~s expendi~=e••ubje= = the lim1~aUOA

by ~c:lu41ng $1,138,891.24 in reimbu;-semenu rece~ved by ~e'

ltBc- rela1:1Dc;, ~o expendi~ure. made by the Republican NaU=u" . ~t~. ' (see Pinding II.A.l. .fo:. a detailed discu••ion).• ,

':he Audit staff'srec:ommendatioD on page' 23 of .this report

_tat.S.l absent a showing to 1:he contrary Wi~D 30 days of' receipt

of this report, the Commission de~e:mine that the Reagan Bush Cammi~a·

.xceeC!e~ the expenditure limitation by $1,118,977.55, and 'tha~, as- ' '110t.d- :in Fin4inq II.A.l. and 2., cer2in amen=ents should be file4 ~o . co::ect the public record. '

With respect to the repaymen~ a.pec~ of this fiDding, as

noted above, the amoun~ in exce•• of thelimi~aUOD is di:ectly a~tri~utable 'to the reimbursemeD~s received by theRBC relating ~o

expendi~ure. made by the bpublican National Commi~~ee. Regarding

this i.sue, the Commission doe. no~ agree wi~h. the agency relationship

theory described by the UC(see Finding' II.A.l.). Fur1:he:,~'

Commission is of the opinion that ~e spending 1imi~.tiOD relative . 1:0 the ~C ,(2 O.S.C. 44la(d) (2» and the RBC limit (2 O.S.C. 441a

,(b) (1) (B» must be kept separate. 'l'he commi••ion also concluc1ed ~.~

the expend!tures to~aling' $748, 163. 16 originally made by 1:he "agan

Bush Ccmmit~ee could no~ be properly reg'arc!ed as expendi~ure.

subject to the previsions'of 2 U.S.C. 44la(d) (2) ~y the INC

since the INC did not retain control ove: the expenditure. and

did ~ot ~ay ~e veneers i~sel~, bu~, i~ ~ae~, a=ce~:i~e ~= ~~=

~~a~c=.e~~ filed, a~~~~ad ~o classify certain expenditure.

under its 2 U.S~C~ 44la(d) (2) au~~ority that had already been

incurred and paic! by ~"le R3C.
... --. - _.--:--: .~.. " . . ~'" .

-2'-

B.

--- -" The Auc!it .~aff'. analy.1. of ac:1:1vlt'.1e. through March 18, 1981, revealed tha~ the ReaC;aD Bush ·Colllld.ttee received

$465,040.8& in ln1:are.1: income fraa" the inves~eDt of public

funds. '!'he Audit'. S1:aff bas d.~emined tha~ the int'.eres~ income

is subje= 'to $213,918. 8& in Federal income taxes, ane! aD unknown

amount- of State and local income taxe.. ~b. 1n1:ere.t'. income and

associatee! rederal income 'taxe. were calculated througb March 18, . 1981. Tberefore, the.. figures are subjec~ to an ac!ju.tmeD~ ba.ed

upon updated informatioD reqardinq in~.re.t'. income an4 ~elated

taxes.

Further, 11 C.F.R. 9007.2 (a) (6) .1:at'.•• that'. the

Commission shall Do~ify the canc!1dat'.es of a po11tical p~y

1:11a1: a repaymen1: of mODey to the Fund will be rec;u1re4 in aD

amoun1: equal 1:0 any income received as a result'. of investmen1:

or .o~r use of public funda purSU&D~ to 11 c.l'.a. 9004.5, 1••• any Federal, 51:&1:8 or local 'taxe. paie! on such income.

Upon coD.iduaU= of w.. i ...,' the CClDi••icm det:e~ed tha~ .ince i~ appeazo. frOli auti~ an4 frCII ~e' reporQ filee!' the ac, 1:heJ:e v.. no ac..41Ag the =ta1

(combined) expeDti~'W:e Ua1uuou of the "agaD luah Connni~tae

(2 U.S.C. 441a(b) (1) (B) - $21,440,000) an4 the 1apUb11can Na~CD&l Comai~~e (2 U.S.C. 441a(4) (2) - $4,'37,653.'6), to~l1D9

$34,017,653.'6, .01ely by V1r~ of $1,138,811.24 iD reimbur..- a.nU rece1ft4 bj tiii DC rela~g t:o upeD41~=e. aa4e by 'the DC,

i1:--wou14 be 1nappropria~ to reque.~ a'npaJlMUl~ ~o ~e. U.S. fte..uy

with regue! = the $1,138,89~.24. However, the Co""'d ••lcm will, 1D

the fu~, in.i.t tha~ 6e" .eparau Um1~aUOD. be cb.enee! &De! ~at DaUODal party conai~te.. an4 authorize4 c:aDcU.4a~e.Coanl~ue.

a re.pons1ble for ..bg expeDcU.~ar.. w1~ i:heir ow n.pec:1:1ve

spen41Dg JJ.m1~at1ODa.

'Concluslcm

' ... ;The C01IIIDi••1OD'. dec1.icm reguding 1:he $1,138,891.24 re.ulU

in no repa~~ obl1gaucii CllD 1:he pU1:.of. _VaD Bub CClllllli~~e.

". --:-..:.:"~_ ...-_.- 5ec~1oD 9004.5 of Ti~le 11 of the Code of I'edual ._rn.Uou .st'.a~es,·J.D put, .that'. investment'. of publ1c funda . it' pei:missible, provi.e!e4 that'. aD amount'. equal t'.o all De~

_income- der1vee! from .uch inve.tmeDU, le.. Federal, Su~e

and local 1:axe. paid CD such income, shall be repai.e! to the

~.~re:=FY.
e • :'

....

. ..

c:

-27- ..

~e ft.uue~ .~.1:e4 th.~ the .eC01m1: will be cl0.ed em

or Gou1: Aups~ 1, 1'81, and the ne~ 1Dc:ame (af~.~ uxe.l will

be patd 1:0 the O. I. ft.a.=y a~ ~~u-. .

OIl June 16, 1'81, the Cnan~••ion .pp~e4 1:be AwU.~ .~aff·.

r.cOlllDeDdat:1em COD~.iMd iD the 1Di:eriJD au4i~ r.pon that, ab.eD~ • • how1D9. 1:0 'the con1:a:Y, the v.lue of 1D~u•• iDe... 1... .ppUcabl.

1:aXa. (app~x1JDa1:ely '251,122) be ~.pa1d iD full 1:0 1:be 11.1.

'l'r•••UZ'Y w1~n 30 day. qf. :~c:aip~ of the .npo~. .. . :.... ... . - ~""" ... " -";'..

The DC hu n01:"p%ov1de4 aDy iDfomatiem cOncaminv . i 1:•. UabiU1:y fo~ luu aDd local income uxe., no~ has the

DC ma4e • ~ep.y.-D~.. ". ". . .

. .

, : : ".'th. Au411: .1:aff r.CODDeDd. th.1: within. 30 day. of r.ceip1: of

this repo~1: the 1UIC .u1'a1~ doc:=eDutiem 'to the Co-i••ion·. '. , Aflc!11: Divi.i= concuniD9 any iDu~e.1: .-=.d .1Dee Ma~ch.18, 1981

as well as c!oc:umeDUtiOD 8UppoZ"1:1DV P.4eral, SQ~. and local ~e• applicabl. 1:0 .11 in1:er••1: in=- eamed. J'U:1:he~,'i1: i.

recommend.d tha1: t:he RBC r.pay 1:0 1:he U.I. 'tr•••~,· w11:hin

the 30 4ay p.ri04, $251,122 plus U UI01m1: equal 1:0 any iDCCIIDe .. :received as a resul1: of 1nve.tm.n~ o~ other.us. of public fml4a

pu:suan1: 1:0" 11 C.P.R. 9004.5 .inee March 18, 1981 (1••• any . .Eederal, 81:&1:e' or local u.xe. p.i4 on such income). Durin9 this

: 30 4ay 'peri04, the RBC may .W:D11: l.,al and fac1:ual . . . materials 1:0 4emon.1::'a1:. tha1: the r.paymen1:' i. D01: riqu1=.d (••• 11 C.F.R. 9007.2(e». . ---

C.' De1:er.m1nation of Ne1: OU1:.1:an41D, Qualifie4 campaign EXPen.e.

on March 26, 1981, the Rea9aD Bush COIIIIDi1:1:•• ;r••en1:.4

an upda1:ed S1:a1:eJDeJ11: of Re1: OU1:s1:uc!1ne; Qualified. camp.ip

Expenses (-Noaa-) 1:0 the Auc!11: .1:.ff 4.pie1:1D9 i 1:8 finucial

posi1:ion as of December 4, 1980. 'the Au4i1: .1:aff ~.viewe4 1:h.

book. and recorc!s 1:0 verify the 1:01:&1. OD the Noaa. Th. ~011owin9 repre••nts the financial'po.i1:ion as 4.1:.:mine4 by

1:.tte Reagan Bush Commi1:t•• and an auc!11:ec! ver.ion pr.p~ec! by

1:.tte Au4it S1:aff.
2,676,721.07

*** SSl,102,953.951.

$1,573,767.12

(1..138,891.2.)

..

.65,040••

137,883.67 **

$2,073,"6.54

'2,657 ;740..25 ..

: 'S: .. 8;894.32

. . ...

. b,.,134.57

.• '75,••07 .~150,703.44 . 23,10.11 , 'Uj371.-to

. Tct:al Liebi lit:i.

Net O'."fi.s

Expensa - St:plus (~ficit)

... ~.. ::~= ;i=:i~"; ;]""':'Q..:l"; Q?J.':-...ec &:::Q'Je ,.;; .It:e..-s .:...... 3 a:zc:r.t t."m~ the ~C1

Bush C::.uli~~ has ap-~tly excHl5ed t:ba 2 U.S.C. 441&(1) (1) (I)

li."llitati~ as c!epic:"oAd eft pap 22 of. this Z:iipQi.'t, pr1mIIrUy bacINse the

a!x:ve analysis 6::les net !ncl.uc!. an cf rela1:e4

to ~gn touz:s pa!4 by DC. .

* Initially, the RIC abcwII4 an 88t:Iate of S15O,ooO, ~, CD Much 31, 1981,.

the ..a;.n Bush Calmitt8e :wpc:tm • to tM CcDFu.me. !'lD! :

tet:.aJ.inc; $137,883.67 wh1c::h 1m is 11ft -=mat:a Z:WPnMft=.. . 1:atia1 of t..'- upm!1=- f:cm t:ba Q:a;:lUaDC8 !'=4 tmic:h ~t8c! tm. ~an !usb CCmaitt8a.

** 'lhis' anClmt is subject to an adjUSt:1att.

.-2'-

. . . ... ..

Acc:ll::b1t:s .Payable far $2,042,6".25

0,.11 fie! Clllpaic;n ~.

Repay8b1e to t:t.

'p•• s~ plus t.-.. .65,041.00 ~;' . .

~~to~ 137,883.'67* !\n! .

JIa~ ~w4 Ra1atmg to

Expmc!11:Uns HIm by tt.

IlIpabllcan canait:t8e

.-

.0 ~.Aaeta.

LiabUita.

Cub CD Bm! a1: 12/04/80 __VIIb1a

~t;~ftb1e

capital Aaeta

", .

,"

,..

.,.
-21-

The ~i~~a:e~ce ~e~=3n~=~~ :~~ ~:,~,:~~.3: Q~.=s:a~.­

me~~ :esultin; from inclUding expendi1:ures for which ~~e ch.cks

were later voided and not r.issue~ or reissued and included

twice: and ~) a S45,393.79 understatement resulting from ~~e

~C's use of an estimated accounts payable. The Audit sta~f

cal~~lated an actual total based upon a review of all availabl.

records. ",.

. ... . . ~' ...

Contra Assets - a credit balance account which offsets (r.duces)

a particular asset acco~~t.

~9

•

,

':h. 4iff.ruc. repr••en1:. check. wri1:t_ prior to

-12/5/80 aD4 .ub••quen1:ly void.d. ':he DC h•• no1: .djus1:ed ~(incr••••d) i1:. c••b OD baDe! includ. the•• voi4.d ch.cka.

(2) Acc~t~ ..c.i~abl. e' niff.r.nc. '13,331.4'

Th. 4iff.r~c. r.pr••ent. (.) • $909.50

.ov.r.t.1:emen1: r••ul1:ing fr~ inc1ud1Dg two r.tmbur.ement. ($15.00 'and $894.50) no1: r.l.ted'1:o oPeaUDV expenditur••, (to. $2,137.'1

ov.rst.1:emen1: r••ul1:ing from the DC'. ase of an ••timated accoun~.'r.c.ivab1.t01:al .t 3/26/81~ The Audit .1:.ff calcul.ted . aD .c1:u.l 1:01:.1 b••ed UpoD • io.view of .11 .v.ilabl. r.cord., and

(c) • $16,378.90 und.r.1:&1:..~t r.pre.uting 'the b.lanc. owed

1:0 th...C for a.s.1:•.•01d prior,1:Q' ~2/4/80. ':he asc includ.d .~1:h." $J.6,378. 90 in i1:. cap~tal ••••1:. 1:01:al. However, . •inc. 1:h. a•••t. w.r. sold prior 1:0 12/4/80 th. Audit .i:aff baa

:included 1:b. UlOunt a. an accoun1: rec.ivable as of 12/4/80•

(3)Capi1:&1 As••t.' e' Difference $30,239.03

:--'. ". As previously' .1:&1:.d 'in puac;raph (2), the ReaC;aD Bush Committ~.· sold a portion of i1:. as.et., prior to 12/4/80 for

-$16,378.90. Th. Audit s1:aff ha. cla••ified the $16,378.90. as an

..account r.ceivable as of 12/4/80~ In addition, the Au4i1: .1:aff

has classified other assets OD hand a. of 12/4/80, to1:aling $46,617.93, a. capital as••t.. Th. R9C'. NOQCE does not

,recognize 'the.e a•••ts. ~e ~reasur.r sta1:.d h. would review th. sta~f's calculations of the fair marke1: value of th••e ....ts.

c.s.. Attachment I)

(4) , ~imbur.emen1:'s' Itece'1vecS' Relatine: to Expenditure. , Made' Iy ilie'ieiUbllcan Natlonarcommltocee - , ])11:.:.nce' '$'1',' '3'8','891'.24

~. RaC has not recognized a. a contra ••••t* . ·r.imbursem.nts it r.ceiv.d relating to expenditur.s mad. by 'th. aepubli,: National Committ... The Audit staff'. adjus~ent off••t. (r.duce.) th•.

DC's assets which. are ov.rsta1:.d by ~. amount of reimbursements r.c.i-; r.~aocinc; to expenditur.s by the RNC. (See Findinc; II_A.l.) . I

- I

(5) 'Accounts Payable' .' nifference 'S31,097.29

.....

."

.
.I.

,.

-30-

$251,122.00 **' FiDdiDV XIX.B. 1Dve.tmaD~ of

Public F\mc!a

* This amount is subjact to an upward a4jUS1:men~ based upon

any iDta~e.t aarnad .ubs.queD~ to March 26, 1981.

** As preViously Dota4, a certain othar mattar ha. baeD J:.f.rre4

to the Cammis.1oD's Offica of GaDa~al Coun.el. Upon re.olution

of this matta~, a furt.ha~ J:epaymaDt may ba raquiJ:e4•

aec:ommandatioft

PU:SU&ll~ to Sec~ioft. 9007.2(a) (2) and (6) of Title 11 of tha

Code of Fede~al Re9UlatJ.on., the &mOunt Doted above ($251,122.00)

is J:apayabl. to the o.S. 'rJ:e••UJ:y within 30 days· of racaipt o~ this raport. If 1:ha C&I1cU4at. disputes the Co:nmis.ioD'. dete:miD.Uon

that a ~apaymeDt is required, ha may subm1t in W::i~inq, within 30 day. of recaipt of this report, laval o~ fac~.l mat.rials to 4emon.tJ:a~ ~.t a ~epaymeDt is not required. '

,

Conclu1OA

X~ 1. the Au41~ .taff'. op1zUOD tba~ DO \m.peD~

O.S. fteuu:y f\mda ex1.~. F=1:hu, the daf1c1t po.1~1OD DOtad

in tha NOQCZ Sta~llt pnpand by the Audit .~aff .uppona 1u p~aviou f1lltiDt (II.A.) tha~ the "aVaD Buh <:cmnaittaa appau.

to have axc.e4ad the 11m£ta~0Il a~ 2 O.I.C. 441a(~)(1) (B).

"vi.101l. 1:0 this def1c1~ f~CJVa will be ma4e a. a441~1cmal 1DfonaaUon acoma. ava11:able.· , ''--'" ,. . , , 'D. _1:1:ar ..fan.d to t:ha Off1ca of GafteJ:al CoUD••l

A cer'ta1D othe~ ..~~u noted dU:inV tha audit wu nfar~.d

to the COBD1••ion'. Off1ca of Gftna~a1 COUDsal for coD.ideration OIl

NOv~ 17, 1981.

XV. RepaY!I!!D~ to tha o. S; ft.a.m

! '

,-

"

...

, "

......
• •

. Ac~""'_~.l

....

• ..

Schedule ttl Capital Aa.eu • Bad a~ 12/4/10

Val.e 01

I)..cripcton total Lea. .jge~..... ,QueCitt Price penedau_ 12/4/10

Xerox aachtzae . 1 11,156.60 4,53'.14 (1IOCIa1 2400) ~,I17.46 .. Pltne, low.. Copter 1 .., . ..

1.323.11 3,'7~.02 . ·5,2'4.70 . Aucoera: S1pacure • 1 1.550.00 317.50 Hach1fte 1.162.50 .

Motorola Co==uD. ... S ...... 5,'00.00 737.4' Equ:1p.-ertl .., 5,112.51

PitJi., low.. Po.~ale 2 4,22'.40 1,057.36 3,172.04 ." Has:h1De (S600)

HOto;ola equ1p.- , • . - - 10,'12.36 2.740.5' .valk1e :a1k1.. 1,221•.77

.. ,~" ".1ve::! t.. ~01 1 5,713.40 1,421.34 .. . ~rc! proc"sor 4.215.06

r- - ':1=e, loW.. HaU 1 1.761.72 440.42 Opaer (U) 1,-:121.30 ..

r: Sena, Vldeo reco:-d1za1 • 1 4.0'0.00 5U.25 .,sta 3,571.75 . •

JVC 3/4 VUeo pla,er 1 100.00 100.00 700.00 ' '.

~111A1 !'.achizle 1 1.62'.16 203.64 (5100A) 1.425.52

to:&1 10.017.34 13,41'.41 '6,117,'3

,

'/,.

,

31 .••• _. : _~_, •••4... 0;" ••' "_"".". '"
The Office of General Coun,el ha, reviewed the above-de.cribed

report which was prepared by the Audi~ Divi,ion pursuant to C~i.,ion in,truetion, a~ it, executive ,e"ion of Oc~ober 14,

1981. ~he purpo,e of thi, memorandum i, ~o poin~ out the area.

of the report which should either be deleted or amended to more

accurately reflect the legal underpinnings of Cammi,sion deci,ions.

The major area, are di,cu,sed under ~he numbered paragraph. below.

1. Introduction to Findings and ReCommendations

The Office of General Counsel ,uggest, that ~he above-titled

di.cus.ion on pages 3 through 6 of the draf~ report be deleted

in it, entirety. It i, our view that the full blown discu,sion

of the Freedom of Information Act (WFOIA-) reque,ts is inappropriate

to include in an audit report and does not ,ub,tantively.add ·to

ehe audi~ :indin~. whi~~ en.ue. Likewi.e, we tee: ~~a~ any discussion relative to the litigation .hould not be included. Thi.

Office .u9ge.t, that any nece••ary reference to wFOIA-, e.g. in de.cribing the Committee'. respon,e to an interim finding,

can be acconplished by briefly explaining its relationship to

a particular gQint. Thi, will serve to liDit the discus,ion of

roIA as it retite. to a particular finding and will make the

entire report aore succinct.

FEDERAL ELECTION COMMISSION

WASHINCTON. D.C. 2IMU

:~ ~,

. ..

.0geabe~ 12, 1981

Comment, on the Revi,ed Draf~ Repor~ of the Audi~ Divi,ion on the Reagan Bu,h Committee,

Reagan Bu.h Compliance Fund and Democrat'

for Reagan

Rober~ J. Cos~.

A,si,~an~ S~.ff Dir.etor Audi~ Division

B•. Allen ~lu~ter . S~aff Di rector ,U''--

Charle, N. Steel~~~ General Counse~

MEMORANDUM

'rCh

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SOBJEC'l':

. 'rllROOGH:

t".,.

'"'" -FROM:
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( ....

M.aorandua to Robert J. Co.ta

Pag. Two

Monie. Received by the Reagan Bu.h C~ittee R.latint

to Expenditur•• Made by the Republican NatIonal Comm ttee

The draft r.port·. Finding II-A - -Limitation on Expenditures-

.pan. 10 pag••, approximately 9 of which are devoted to the . ab09e-de.cribed is.u.. Having reviewed the discussion of the

finding as a whole, and ~he.lengthy discussion on the Reagan

Bush Committ•••• (-ComDi~.e:, -Reagan Bush-, -RaC-) t.ceipt of the RNC's reiobur....nts,· this Office sugg.sts that the leport be r••tructured. As presently ~tructured, the complicated ~s.ue

involving the RNC r.imbursem.nts is lost within the larger issue

of exces.ive expenditure.. In order to highlight and explain the aNC reimbursements issu., it is our view that it be s.t

forth as a separate finding. The exc.ssive expenditure issue

should be thereafter ame!?~ed accordingly.

At this point, a recap of this issue might be h.lpful. ~he aajor statutory and regulatory ba.es for the finding are

2 U.S.C. SS 44la(bHl)(B) and ·441a(d)(1) and (2), and 11 c.r.R.

S 9004.6(a) and (b). .

Section 44la(b)(1)(9) of Title 2 of the United States Code

states, in part, that no candidate for the Office of President

of the United States who is eligible under Section 9003 of Title

26 (relating to condition for eligibility for paycents) to receive

payments from the Secretary of the Treasury may make expenditure. in excess of $20,000,000 (a. adjusted for the change in the eongumer price index since 1974), in the cage of a campaign for

election to such office (also see 2 U.S.C. S 44la(c». ~he l~itation relating to operating expenditures for the 1980 general election is $29,440,000.

Section 441a(d)(1) and (2) of Title 2 of the United States C~e pennit. the national ~ittee of a political party to make

expenditures in connection with the general election campaign of

any candidate for President of the United Stateg who is affiliated

with such party not exceeding 2 cents multiplied by the voting

age pcpulao:ion of ~he United S~ate. as certified by the Secretary of Cc~erce (also see 2 u.s.c. 5 441a(e».

Secticn 9004.6(a) and (b) permit. an authorized committee

of a puclicly-funded candidate to receive reiabursements for

exeenses for transoortaO:ior. and related crou~c se~'ices ~~de

avai:ab:e ~o ~he ~ecia, Secre~ Service and ot:'er staff aut~orized by law or required by national se~~rity to travel with a candidate.

~~e audit st~ff analy:ed the campaign tcurg of the Presidential

and Vice-P~esiden~ial candidates for whi~~ the Reagan Bush Committee

scught re~bursenent from the ~ews media, Secret Service and Reagan
...,-

y

C"'-

Bush Compliance Fund. Based on a revi.. of Committee records,

and disclo.ure reports filed by the Republican National Committ.., the Audit .taff has reported that the INC made seven expenditures totalling Sl,633,293.89 in connection with the campaign tours,

the RNC applied this amount to its expenditure limit under 2

U.S.C. S 441a(d)(2). 11 Th..e INC expenditure. vere"made directly,

to the vendors and were ~n ,addition to the caapaign tour expenditures made by the Reagan Bush ~".itt... itself. Without disttinguisbiDg between those aJIlounts paid t5y "the Reagan Bush COIIIDittee and those

paid by the RNC, the Reagan Bu.h Committee billed the new. media,

Secret Service and it. own c:aDpliance fund (-Compliance Fund-) for their respective shares of the total campaign tour co.ts

(tran.portation and related service.).

A. a re.ult of th..e_~i11ings, the Committee obtained payment. fraa the new. media, Secret Service an~ Compliance Fund in the . amount of $2,281,149.00. The Audit .taff deteEmined that

$1,138,891.24 of. the total amount of such payments received

by the Reagan Bush Committee va. based on the above-described

expenditures made bf the KNC. 11 These receipts were retained

and reported on FEC For.m 3p, Schedule A-P, Line 21. 3/ As a

re.ult, the RBC's reported expenditures subject to the limitation

of 2 U.S.C. S 441a(h)(1)(B) were offset (reduced) by $1,138,891.24.

Memorandum to Robert J. Costa

P&CJe 'rhr.. -',

The RNC's l~itation in '1980 was $4,523,789.27. It should be

noted that although there are several references in ~his

report to certain financial activities of the RNC, the scope of the audit work performed was limited to tests of the

financial records of the Reagan Bush Committee, Reagan Bush

COMPliance Fund and D~ocrats For Reagan. Since the Audit

Division did not perform an audit' of the INC, it has expressed

no opinion as to the accuracy or completeness of the financial

information c:!isclosed by the INC in its' reports of receipts and expenditures filed with the Commission. Onles. otherwise

stated, the figures relating to the INC contained in this

report were taken f:oe the RNC disclosure reports on file

with the Cocmission.

According to the Audit Division, this total includes $8,733.07

in reiDburse~ents which were billed but not collected as

of 2/24/81. ~he Audit Division has also ~ta:e~ t~a: it;

:eview c: re~or~ed activity subsequent to 2/24/81 ind~eates

that an amount in excess of $8,733.07 was reported as being received by RIC, a portion of which =ay be associated with

the 2/24/81 amount calculated by the Audit staff.

After ~pletion of the audit fieldwork, the Coamittee filed

an ameddment showing a different treatment to a portion of

these monies. This is discussed at pages 7 and 8.

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Memorandum to Robert J. Co.ta

Page Four

The Audit staff has expressed its opinion that the Reagan Bu.h Committee iaproperly retained the above-described payment., since the expenditure. on which they were based had been .ade

the RNC and not Reagan Bush. In effect, the Audit Division's

position is tha~ the Reagan Bu.h Committee was -re~bursed- ' for amoun~s it had no~ expended. The Audit staff has also sta~ed ~ha~ such payaents .hould no~ have 'been classified and

reported Reagan Bush .....~efunds or rebates, and th.reby applied

as an ·offset- to the original expense, since the original expense

was the RNC's. Accordift9 to this reasoning, to permit such

an artificial -offse~· would· have the effe~ of increa.ing ~e

expenditure limitations of the publicly-financed candidate.

under 2 U.S.C. S 441a(b)(1)(B) by the amount of the -offse~-.

nuring the field work. and at the exit conference of Mareb

27, 1981,- the Audit staff info~ed Committee officials of their

opinion ~hat the Committee was not entitled to payaents based on

RNC expenditure. and that these payments could not reduce Commit~ee

operating expenditures. On June 16, 1981, the Commission approved the Audit staff's reoammendation contained in the interim audit

report that the Reagan Bush Committee be afforded 30 days from

receipt of the interim reportf to explain the circumstances

surrounding its receipt of the $1,138,891.24 in reimbursements

received related to expenditures made by the Republican National. C~itteef and to demonstrate that the receipt and reporting of

these amounts are consistent with the requirements of the Act

and Chapter 9S of the Internal Revenue Coce (26 U.S.C. Sections

9001 - 9012). Further recommendations were to be made after

the Reagan Bush Committee had had an opportunity to respond ,within the 30 day period.

In its response to the Commission-approved intertm audit report, the Conmit~ee did no~ dispute that it had obtained payments from

the new. media, Secret Se"ice and Compliance Fund based upon

tour expenditures of 'the RNC. The Committee stated that the

Sl,138,891.24 represented ·a proper offset of expenditures incurred

by the RaC and RNC in furtherance of Ronald Reagan's candidacy in

confornity with an a~ency relationship that existed between the

RaC and RNC.· Briefly stated; the Committee has claimed that:

1) it was acting as the RNC's agent in managing certain of the

RNC's funds, 2) in its capacity as agent, the Committee obtained

reimbursements cue the RNC in connecticn with CL~paign tOU:Sf

ar:d 3' :'t expenderl, at; ~NC's agent, =~: ~ur?c.es ::.: Z U.S.C.

§ 44la(d), an aMount of money correspondinq to the amount obtained

in behalf of the RNC in connection with these same campaign tours.

The Committee cid not point to a specific agency agreement, but indicated that the ·course of dealing· between Reagan Bush and

the RNC d~onstrated the existence of an agency relationship whereby the Reagan'Bush Committee managed funds for the account of the
~'"

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Memorandum' to Robert J. Co.ta

'age Five

. RNC. 'rhe r..ponse also cited a. authority for such an agency relation.hip Section 110.7(a)(4) of Title 11 of the Code of Federal

Regulations which states that the national ~ittee of a political

party may make expenditures authorized bf this section through

any designated agent, including State and subordinate party committe...

Finally, the Committee.presented an analysis of these tran.-

actions with reference to Gene~ally Accepted Accounting frinciple. (GAAP) which included th~Cchcept of offsetting assets against liabilities and the concept of proper financial presentation for

entities under caBmon, direct, or indirect control. The RaC

indicated that given the agency relationship, the GAAP concept of

offsetting suggest. that the $1,138,891.24 in reimbursements receiv,d

by the RaC should be recorded as a liability to the RNC which

could be appropriately and preferably offset against other cost.

incurred ~he RBe. for the RNC. Further~ the RaC indicated that

there is substantial support in the GAAP concept of proper financial .. presentation for entities under ca:u:aon, di rect or indirect control

to suggest the more meaningful presentation of the financial results

of the Reagan ~ush Presidential Election Campaign would be to

combine the activities of the aBC and the RNC's Presidential

election Fund, based upon the ~on control through the agency relationship. The Conmittee's GAAP analysis is, of course, dependent

upon the existence of c~on control and its pe~issibility under

applicable law.

Were the Commission to sanction the type of agency relationship described by the Committee, the consequences would include

the folloving=

1) 'rhe separate expenditure limitations for party committees

under 2 U.S.C. S 44la(d)(l) and (2) and publicly-financed candidate committees under 2 U.S.C. S 44la(b)(l)(B) would be

effectively eliminated in favor of a combined ltmit7 and

2) The limited right of a party committee under 2 U.S.C.

S 44la(d)(l) and (2) to make certain expenditures in connection

with the general election campaign of that party's naminee for

President would be expanded to petDit the actual transfer of party committee funds to the publicly-financed candidate committee,

effectively vitiatinq the distinction between expenditure and

contrioutionJ and

3) The :imita~icn of 2 U.S.C. S 441a(b)(~)(8) would effec~ively

be increased, since the carnmittees of publicly-financed candidates

would be pe~itted to receive and expend private funds in the fo~ 0: reinbursernents, refunds and rebates due another entity.

In addition, ~Jtere would be changes necessary to the disclosure

provisions tc(eorrespond to the above-noted results.

••• e u .' ._ -- ---_.-' _ ••• ,. ""'•••
Memorandum to Robert J. Costa

Page Six

The COI!IIlission has always considered that the two limits,

the party's 441aCd) ltmit for expenditures fram private fund. and

the candidates 441aCb)Cl)CB) limit on expenditures to the amount

of the public financing grant, must be maintained and administered

separately. Despite the fact that the DC and Reagan Bush Ccaaittee

shared the goal of electing a Republican President in 1980, the

Fed.ral Election Campaign Act and Commission RegUlation. treat

them as ~.parate and distinCt legal entitie••

It should also be noted that while section 441aCd) per.mit. the party to coordinate '~s ~xp.nditures with the cand¥ate, without

this being d.emed a contribution, the funds must be party funds

for whose expenditur.s the party is r.sponsibl., .uch fund. cannot

b. rai.ed by the publicly-financed candidate nor be given (Werto the candidate'. control. ,.

Since the Ac~, its legislative hi.tory and COl:lllli••ion Regulation. recognize a distinction between an actual transf.r of money to a

cpndidat.·s committee by a party committee and an expenditure under

section 441aCd), a publicly-financed candidate's committee cannot

be the ag.nt of the party camm~ttee for obtaining and using private funds despite the Committ•••• pecaissive reading of 11 C.P.R• . S 110.7Ca) Cc) which allows a party CQIIII!littee to designate an agent. The Reagan Bush C~itte., therefore, should not have obtained

monies in the for.m of reimbursements, rebates and refund. which

were due the RNC. While the Commission has pe~itted the us.

of section 44laCd) monies to pay for expenditures incurred the

candidate if the party so chooses, the effect of allowing rei=bursement to the candidate for expenditures made by the party is to ~ingle private money with public money in a way not contemplated

by the public financing sy.tem.

If a publicly-financed candidate cammittee were permitted

to be the agent of a party committee with respect to the lattei's

expenditures under Section 44la(d), the expenditure limits of both

cammittees in the general election would effectively be combined.

While it appears that the'Reagan Bush Committee mistakenly viewed

the transactions in this way, the committees did not exceed . this -combined- limit by virtue of these transactions, had the

RNC received the reimburseoents in question, such amounts could

have been deducted from its expenditures under section 441a(d), thus allowing the RNC to expend an additional $1,138,891.24 under

this section. !/ The Reagan Bush Committee, in effect, expended

,. _...-_.....-..•.- --_._-------

~~is a~~uces ~tat l~ C.:.R. S 90C4.c ~::=i~~ ~~e ?a:~1

cocmittee to receive reimbursements ~rom the news media

and Secret Service for transportation expenses Which the

party corn=ittee had made. It should be noted that the

regulation speaks only in ter.ms of an -authori:ed committeebeing 'p~:mitted to receive such reimbursements.

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Memorandum to Robert J. Co.ta

Page S.v.n

the KNC·. $1,138,891.24. The total expenditur•• of both ca.mitte•• were not increased by these transaction••

Amendaents to Year-End Report.

One of the more significant a.p.ct. of the Reagan Bush Committ•••• receipt and expenditure.~of.RNC funds concern. the current lack

of clarity on the pUblic~.~rd. ,Thi. problem ha. been furth.r

complicated by Ulendments" bY. both CCIIIIlitte.s to r.port. which

they had previously filed with the Commission.

During the fieldwork and 'at the exit conference of Mareb 27,

1981, the Audit staff infoaaed Committee official. that, in the

Audit staff's opinion, the Committee was not entitled to re~

bursements received base~.on RNC expenditures and that these

reimbursements could not be used to offset Committee operating . expenditures. While the Audit staff indicated that the monies . received relating to RNC expenditures approximated $750,000,

Committee officials were also info~ed that this figure was

preliminary and may be substantially highe: once the calculations were made final. Prior to the Audit staff's finalization

which resulted in the fiqure of $1,138,891.24, the Reaqan Bush

Committee filed the an ~endment apparently based on the conversations during the audit fieldwork and at the exit conference.

On April 1, 1981, the Reagan Bush Committee amended its

1980 Year-End report to delete $748,163.16 in previously reported refunds (Line 21, FEC For.m 3P) and attributed these transactions

to the Republican National Committee. This amendment attempted

to show a downward adjustment to the Reagan Bush Comaittee's

reported reiabursements and operating expenditures and a

corresponding reduction to the Republican National Committee's

previously reported expenditures on behalf of the candidate,

thereby establishing enough. room within the latter's 2 U.S.C.

$ 441a(d)(2) limitation of $4,637,653.76 to ac~odate the

additional $748,163.16 in expenditures made by the Reagan Bush

Committee. On July 21, 1981, the RNC amended its 1980 Year-End

report to recognize the above noted receipts and expenditures. Further, the ANC's disclosure reports filed as of that date

indicated that it had made expenditures pursuant to 2 U.S.C.

S 441a(d)(2) on behalf of the candidate totalling $4,523,789.27

toward its limitation of $4,637,653.76. In its draft, the Audit ~:~i~ie~ ce::c~~~ t~e a~e~d=e~t a. ~o11ow,: .

......- -----_.._._._-.

$4,523,789.27

( 748,163.16)

$3,775,626.11

Reported expenditures made by the RNC

pursuant to 2 U.S.C. S 441a(d) (2)

th roug h 12/31/80

. Less: A:lount of reiabu rser.tents received "-by Reaqan Bush attributed to the

aNC

Subtotal

.. "
748,163.16

$4,523,789.27

...

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Memorandum to Robert J. Costa

PAeJe Eight

Add: Expenditures made by the Reagan Bush Committee and attributed

-after the fact- to the KNC

Expenditures subject to 2 U.S.C. 441a (d)(2~ limit as adjusted by aDendment

As pointed out in the intertm report, the aforementioned

$748,163.16 ..endmen~did not involve a transfer or monies

between Reagan Bush and~he KNC, but rather, was mere~y . a -paper- attribution of -the amount of tour rei.mburs.ents

allocated to the KNC- and selected expenditures paid by Reagan Bush and later lattributet! via Reagan Bush disclosure reports . to the KNC. .

In effect, the amendment of both cammittees accepted the

interim finding of the Audit Division that the Reagan Bush ~ommittee could not be reimbursed for expenditures made

the RNC. The corresponding amendments were apparently designed . to show that Reagan Bush was acting in behalf of the RNC,

although the public record is by no means clear on this point; fhis reading of the amendments is consistent with the agency theory advanced by Reagan Bush in response to the interim report of the Audit Division. ~he discrepancy in the amount (the . eenement's $748,163.16 ver.us the audited figure of $1,138,891.24)

appear. to have resulted fram the Committee's use of the lower

figure verbally presented to it by the Audit staff at the afore-'

nentioned exit conference, and the Committee'. failure to update that ~i9ure after receiving the writtencaleulation of $1,138,891.24 •.

The interim report indicated that the Audit staff did not

believe that the after-the-fact attribution of expenditures (actually nade and originally reported by the Reagan Bush

Committee) was petmissib1e, and advi.ed the Committee to

make an appropriate amendment to the public record. To date

the Committee has not filed the recommended amendment to its

reports.

If ~he issue is restructured as a separate finding, as

recommended by this Office, the finding should al.o indicate

that the Commission has decided not to.take any action on

the matter other than recommending that the reports be amended.

A brief recastinq of the disC'.Jssion on page 39 can be us.ed for ~~:!. 3!~~C~:~ ~h. :~:~re~e~ to t~~ ~c~i!~:cn vc~e ~~~~l~ be

deleted. In aedition, only t~o.e portions of the re~endation

on paces 3S and 36 should be included as the recommendation for

this ~inding. Specifically, only paraqraphs 2 and 3, which recommend an acceptable method of reporting, should be included.

Finally, ~Q be internally consistent, the remainder of the

report shoul~beamended in a manner consistent with the treatment

of the RBC's receipt of RNC monies, a. reeammended herein•

. .. _._- ., ...... _-_ ..••_....._~.----- ....--
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Memorandum to Robert J. Co,ta

Pag. Nine

Retmbursement Receiv.d Related to Campaian Tours Paid

tw the RNC

This issue is discu,sed in sub.ection .2 of the ·LtDitation

On Expenditur.s· finding beg inning on page 17. According to

the draft report, Committee record' indicated that the Committee

·realized reimbur....nt.· fram the new. media, Secret Service

and Compliance Fund in ei~•• of co.t, in the amount of ~lS,238.53.

Th. inter~ r.port had iriaicated that the figure was $50;.588.48.

It is the Audit Division's reca.m.ndation that the newly-calculated

amount be added to Committ.e.operating exp.nditures as an adju.tment to reported exp.nditure.. This would have the effect, along with the other adjustments noted on page 7 of the draft report, of putting the Committee OYer the expenditure limit of 2 o.s.c.

S 441a(b)(1)(~). Th. reasoning behind this adjustment is

apparently that the·Comcittee is not .ntitled to offset ·retabu.rsements· which are in excess of the' actual costs. In this

-respect, the reasoning is stmilar to the previous is.ue con- - cerning the RBC's receipt of MC funds in connection with

campaign tours.

11 C.F.R. S 9006.4(b) provides in part that if reiobursement

for ground services and facilities is received by a ctmmlittee,

the ~ount of such reimbursement for each individual shall not

exceed either the individual's pro rata share of the actual cost

of the services and facilities cade available: or a reasonable

estimate of the individual's pro rata share of the cost of the

services and facilities made available. If it is determined that

reirnbursements related to a trip have exceeded by 10' or more the

actual cost of the services and facilities made available, such·

excessive ~ount shall be deemed inceme to the coomittee and

shall be repaid to the Secretary.

It is the view of this Office that the 10' provision permits

a comMittee to make a reasonable estimate of costs for transpor- tation and services made available to the news media and Secr.t

Service: only if the reimbursements from these sources exceed by lOt or more the actual costs shall the excessive amount be d.emed

income whi~~ is repayable to the O.S. Treasury. It would be

anornalous to seek a repayment on the basis that the excessive

amount less than 10' helped put the committee over the limit.

Since the Reagan Bush Committee did not receive r.imbur!emer.ts lO~ ~r wc!~ i~ exc~~C! ~~ ~~~ .::~~:: '~l$'t~, t~-:t";: ~r.cu:~ :e ~o

adverse e=:ec~ on ~he Committee.

Accordingly, the Office of General Counsel re~ends that

there should be no upward adjus~~ent en the basis of su~~ reimbursements. Since the issue was taised in the interim report, however, the Aunit Division might want to include a truncated

version of i~ present discussion in line with t~ese CamDents

in the report to be presented to the C~ission.
"'.

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"_orand.. ~o Iober~ J. eowu

pqe Ten

':be repor~ wbould be cban9ed 111 appropri.~e placn ~o be conwis~en~ with ou~ recaaaenda~ian an this issue.

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"_01''''._ to Jtobel't J. eo.a .... JU_.
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Memorandum to Jtober~ J. Co.a 'a,_ :V_l".
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".orand_ to Itaber1: J. Costa

'''. 'fbi r1:..n

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• .. FEDERAL ELECTION COMMISSION

WASHINCTON. D.C. 2M)

I J I DCTi3

:-.¥

•••• I

.0

Ple.s. circulate the attached Me=c to the COmmisSioD .'

~o: the agenda of October 14, 1981. This document is

r-,

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1'\ :

la-:e due to t.'1e complexity of 1:.'1. matters.

A-c-:achment

Thank you.

- 0
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OCT 141981

.. -. ".' , .. ,..." ." .::.. ."" : .. , •• II • '. .

'- •••• ".0 .•'.:'•• _ •.... •. tY ,

Are the RNC and'ReC considered. •• a single entity under the Act . which may legally (1) incur exv-nses

on one another's behalf, (2) bill, rec~ive and deposit receipts on

one another's behalf and (3) ultimately hav. their respective spending limitations (see 2 U.S.C. S 441a(b)(1)(B)

for UbC-and 2 V.S.C. S 441a(d)(2) for ~~C) ~e viewed as if there were only c~e cc~;inec li~i:?

.~t:r'~ITNE ~~:'-:U'

FEDERAL ELECTIO.N COMMISSI0S'I DC TI

WASHINCTON. D.C. 2MI . 3 P": ... "':' 0 •

orh. Commi".lon

Charles ~. s~eel~~~~ General Coun.el~ .

Reagan &ush Coamittee Audit - Commi.sion·

Licective of September 16, 1981

~ne issue involves financial transactions of the ~~C and

ALe with res~ect to campaign tours. In the Comeission's interim ouc~t rep~rt, the ~udit ~ivision indicated that curing the l~80 . • resiQen~ial c~paign, the 1U~C made direct payments cf approxi- ~at~ly ~1.6;Million tc United Airlines fer campaign tour expenses orisinally billed to RlC. As a result of tour char~es to the ~edia,

. .'

~n Sept.mber 16, 1961, the Commission directec this Office ~o ,rep&re a leyal Deuorandum in answer to the following question witll respe<:t, to the kepuulican National COlDlilittee ("1UiC·) and ~he Re.~an bUSll Ccmamittee (·OC· or ·Reagan oush"):

.

~lJ bJE.C: :

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MeDOrandgmto the Co~i.sion

Page 'D'lree

Reagan Bush Cotmittee Audit - Col:lllission Direc~ive of ' /' 5epter.aber 16, 1981

~e COnnission ?recedents and how they developed are se~

~orth in Section 2, His~orical Background. pp. 5-1~.

':'10.7).

Expanding the CODDission's interpretation by (1) rule, that

local ~ar~y co~ittees could spend up to SlOOO (former rule

., , :/

1/

_.. ".-.

Congress changed the original Long Act plan to provide ,tha~ .' =", -"~

·;;;';'; ::J:~~ i=~~: cr:~i.:i::·l=~:~i:!/:4 the'::'.,~::;Wt:: ",::,~:,: par~ies would not be • u out, but could aake expendi~ure. .... :.~.._~::~~ ... ':#~~ of their own, withou~ running afoul of. the rule tha~ in-kind, . '.:e.':',. ~.:..:::.:.~~~ . ._.~ (coordinated) expendi~ures "ere contribu~ion.. The 1980 ·aaend-. ~~'''_:''':''~:.:

'-:._ -. menta effec~ively removed the in-kind contribu~ion prohibi~ion.~~~"~' _,~;:\~~:';.,~

... for s~a~e and local party coa::aittees, providing tha~ all e?Cpendi-·:. :.'~~ .. .:..-:- ture. for volunteer activi~ies "ere neither contribution.- nor ,..... .. .'. ~. .xpendi~ures~-l/-. Finally,.. of ·cour.e, ~he. statute make. cl.ar.. ~~_.~~":" ......~~ ... :f;ia;. that the ..:44la(d) :expendi~ure.limit is.: availabl...en·.if ~he.;;·_·..:.::.,__:~:_~ . .i::-~: ultimate.. coordination occu~.,- de.ignation of the na~ional party -.... ~.<...::-:~...• , '. i-.' cor.lJ!littee or ~he principal caJ:lpaign cOl:llli ~tee by' the candidate. ::~' .=' .... •

·Agains~. ~his ba~kground, 11 the ulimate question posed is

whether the Ac~, Coacisaion regulations or prior interpretations give reason ~o believe ·that the RIC's -reimbursement- for the

-expenditures incurred by RNC were improper and illegal. The

conclusion that this office reaches is that, even if the .. statute and regulations properly read bar such transactions,

the violation is at 'best a technical one, resulting in no

exceeding of the overall expenditure l~its. Even if the

Cocnission agreed that the proper construction of the statute

and regulations would be to bar such transactions, as resulting in a contribution because by the reiobursement "dominion and

control" over the money passed 'to RNC to RaC, it would be

extreDely difficult to pursue the matter as a violation, given the state of the law of ~he ttae the transactions occurred.

Indeed, given a bread reading of 11 C.F.R. 9004.6, with regard

to the specialized question of secret service and media rei~

burse~en~s, there is arguably no prohibition in the regulations 'against ~he re~ursenent~ In this office's vie", in light of the

lack of harm to the overall'purpose of public financing from this

financial transaction, nothing is to be,gained by further pursuit of the Datter, except perhaps to note in the audit report the

reasons why, the transaction causes concerns. Certainly a reiaburseDent is inappropriate as a remedy.

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M.nor.nd~ to the Conmi••ion ~.~.

,. "Reagan lu.h Com:l1tt•• Audit - Co=:U••1on D1rec~1v. of • / S.pt.ab.r 16, 1911 ..

lln.7.(a) and (6) and 104.3(b) (3)(vii1). Und.r the foregoing '... provision. ~he MC could incur expen.e. for the Reagan/lush ....~"-= •. : .~ ••: .:.

'~_:'. . Col!lllli tt.e and pay tho.. expense. under 5 441a( d) • -. I~. could also."' -:". :.-:: .. :: ;,.. !

"';! ,.'. !!lake payment '~o ·d.fray .xpen•••·~at were obligation. incurred .: .... :". .::.., ......;';

by the "agan/lu.h CoI:ID1tte.. ~e ~~ could no~ incur .xpen.... ~_'. ··:::l~·.. ;

or cak. expendi~ur•• on behalf of·th. Reagan/lu.h Coaa1tt.e oth.r ."'-:'~'.'~~.-.1

..... than those .xpendi1:ur•• which Wouid be specifically at~ribu~ed...:-'.~:_ "'...'.:;":' :....; '::~:. to ~h. limit.~ion. of 2 O.S.~·.~S:_441a<'d) ~:"_.,,.~. answer to .tb -..;.: :.::: ~~~-~ ~:::~~

_ .... question leads to the DC argment ~a~ 'it can be an -agen~~ :": ,. '. '.' .. !

- under 110.7, which provides tha~ any -agen1:- .can be de.ignated·;;-:::·::·:·-"·: _. ~._.:.~

.--.:-;.. Cor.mission preced.nt.,· as note~;:.:cl~~rJ.y·:bar.the' airec~.tran"~,,r;~~-:::,::~ .":- :-. of fund. by RNC to DC, 'so 'i--t .cannot ~onsis~en~ with ·--those b~·?f.~~~.{2"¥.._~::! . a full ag.nt.. 'l'he agency question, 'however, see.. irrelevan~•...:..::;;::=:-:- ...- .;:.w_::.!

RNC did not designate RaC or an agent in any ev.n~. Moreover,

the central question is not one of agency, but whether the DC

can receive the fund. in the fashion it did.

"

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(3) T.he Reagan/Bush Committee and RNC cannot gen.rally -receive funds or pa~ents from each other. !: is a separate question, however, whether the Reagan/Bush Cocmittee can not

obtain reir.lburser.tent under the provisions of 11 C.F.R. 9004.6

r.terely because the the initial expenditures Which underlies the

retcbursement was made by the RNC under 2 U.S.C. S 441a(d) •

(4) With respect to the third part of the question the limits

of 5 441a(b) and S 441a(d) are separate liaits in that they apply

to t~e Reagan/Bush Conmittee and to RNC as separate political c~ittees (see the initial conclusion.) However, these respective limitations may be utilized ~- i.e. expenditures cay be aade against the li~its -- on a closely coordinated and cooperative basis subject only to t~e condition that the L~C itself Dust oake each expendi- . ture under S 441a(d) and Day not make that expenditure by means o~ transferring funds to accounts under the ·exclusive.control of .'

the Reagan/Bush Comr.aittee. '1'he MC 1:lay give as 1:luch autJ]nr 1tL

as desired to the Reagan/Bush Conaittee with respect t~the

purpose and tiaing of any S 441a(d) expenditure but it ulttaately

nust retain control over the exercise of that authority and must

physically disburse the funds to an entity (vendor) other than

the Reagan/Bush Co~ittee.

B. HISTORICAL 9ACr.CROUND - COMMISSION

4 ....

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C~~~ission reeU:3~ions allow ~he ~3t~=~3l cc~~itte~'o~ a

oclitical ~artv to·aake 441a(0) expendit~res througb a aesignated

aaent. 11- C.F:R. S 110. 7(a) (4). Although this section indicates .-_. t~at the national party can designate ·anv· agent to make such ex- "_' ...;

penditures, there is a question as to whet.her or not this is ~eant· .:.... .---;

to include the principal ca~paign ccr.nitte. of the candidate on

'-'J whose behalf tJU! 44la(d) expenditures are being made. For a principal canpaign co~rttee to aake expenditures under 441a(d) in connection
.:..':'

Although legislative history is silent as ~o

the applicability of ~~issection to the payment of candidate debts by the party committee, the 1~76 Con~erence Report makes clear that ~~e , limited pe~ission in 5441a(d) allows political pa=ties to make cont=ibutions in kind Which would

otherwise be covered by the cont=ibution limits,

in S441a(a). See House Re~ort ~o. 94-1057, ?age

35. Hence, ~e Commission conc:udes that payments

by the committee to candidate creditors are expendi- ~ures for purposes of 5441a(d) and that your committee ~ay make direct payment ~o ~he creditors ~f ~~e . ...-.

10 o.s.c~S 6C&(~) was the forerunner of 2 u.s.c. S 441a(d).

, .

:n~pinion of Counsel" 1976-38, the Commission reasoned:

The'S60&(f) expenditure may not be a

direct donation of money to a candidate.

In that situation, tbe party commit~ee

is making a contribution to the candidate

since the candidate acquires exclusive use

of the money.

Aavisory Opinion 1979-9, an.wered, inter !!!!, the following

question of a subordinate party committee: -May our committee make

direct payment on behalf of our 1978 Federal candidate. to the .. ._. creditors of those candidates?W The AO 'states in part: ..

- .... Two OpiDions of Coun••l, is.ued aft.r the deci.ion in Buckley; ..::.i. ,

al.o addres. the ,di.tJ.nc~ion.: Opinion of Counsel 1975-126 .~ates~- i. ":' ..' .. "~...,?: ..__.. .. :~" .. :o..-:~ ~'. - .....~. .. .;.~~ ~~-..: '•• ;' .... ,,;,';~j-:'fri.;:~~.".:t '.....:..::-. ::~.: ..' '....•.>. :1.-:.:.:: . '. ~:: . '. ': An Wou~righ~ cashcon~ribu~ionW ~o' a·_·· " .. .. ". ,~"... . . ,.:..'_'..:..:':" candidat.·s campaign cOJIIIDitte~.~~::~o ..be,;;...:·,~. ~:f~~.~ ::.: ·.~.7-i.:·.·":.-.,,,

. . used' a~ i ~.di.cr.~ion, i. not an ex-~··:·'.: ':: .:~~ ,.";- ...~:~._-: .. ';:~-3-" '[4. •.~.,

. .... , pend,iture (or the purpo••• of 18 U.S.~· .-::•.:~.~ •.,~ ~-~~~'~7::'":,,,

, 5608 (~). Y The .focal di.tinc~ion be-~~";"::-:' ',' ·..·::l- ."';:':?:::',

.' tween a contribution and .xpendi~ure ia .....:--::~ .... ;..::. .,.:.;:. ~:.~.'-'

....._. -one of dominion ,and control·.·~- An outrigh~~·:::~~7·.--"',···'.·'i:c·:~:!:·:-- .' . :':S.::','. donatioD of .monie. or anything of .~alue;~~::;;~"~;;'·=·~~·~:+'~~:'·.'.:~,'

when i~ i. ac~ively and con.tructively ..~:';':.. , ::.... ,: -. - -.:--,

received by a candida~. or ,c01lllli~t.e, ".

come. within the full dominion and con~rol

of.the candidate or commit~ee, and may be

applied to any purpose at ~heir discretion.

Such an outright dona~ion i. a contribution,

and is attributable to the limit. of 18 U.S.C.

SEtO&(b) •.

Memorandum to the Commission"

Page Seven

aeagan &ush Commit~ee Audi~ - Commission Direc~ive o~

September 16, 1981

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MemorandUm to the Commi.sion

pag. Nin.

a.agan Dusb Committ•• Audit - Commission Dir.ctiv. o~

S.ptember 16, 1981 . _.' ..

....... .

Th. Commission's adoption of the current .ec~ion· 9003.4(b) . va. reflect.d on page 15 of th. Financial Control' and Compliance ..,:: .:. ' c ••

"anual for the Gen.ral:£lect!on whlcb vas provldea to ill 9eneral""::~~~::',,~~~;~_'

.I.ction COIIIDitt••s l:e~.4!.i_~g. ~~~l:~c_f:~~!n~in9~: .. ~!":~~i.~.nt. -~}[. ..:'::;X:J.i_... ..ction r.ad. as f0110v••.o:· .::.,,:,'"o!:":~ ....•.•.--.-:.•..•.. -:.~ .. :_,..-.-"1.:.-:!::..:.~... '. '::"..•...:- '::,e• .,••-. :

...._~ :~:'",.:"~'.",·;,,:,~5':j~·~~-~g:..;:~ .~ ··~~.ti4~~~;:.;~~~·~¥~~~,~3~ :D£:~~:>"~?': -: •. ,....' .•.-- It" .bou1d:-also be noted 'that the nat1ori.1.~=~;r:·~:,:,-:,,:~~:~.~:o1;.::=::~·

cOlllDittee of'a ~litical party may :~~"c.rta~D~.·_~.··"-~~~·~~~.::"::.:~·

expenditures' in·.connection .vith . the general.-l.··· -;~:{~~. _: . ":'

election campai-gn ·of a Presidential candidate... ··.7·¥-'::!':' ,:'~~':"':: .. ' .. - •. - ~he national",cOlllllittee 'cannot make a ·loan-eto. -th.:..... ...~,..-~•.=...... .. .-..~:..

• cancSidate ._.'

for:' aubsiiquent••.re1mburseiient- _. ...'~rolD .the~~~:~--::J:.~ • ...... ,~ ••J"~ ...... ..- ..

.~.. candidate or•.his or- her. c~ittee Bo~ever, the ~':';'''-'~.....;.!':~.:"-:: .;::.:.;.. national committee vould be allowed to make a . . .... refundable vendor deposit on behalf of the c~ndidate's campaign in accordance with 2 U.S.C.

441a(d), for subsequent reimbursement to the

national committee by the vendor.

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The legislative history of 441a(d) is not incontrovertible

with respect to the expenditure-contribution distinction. With ~he plain meaning of the provision itself, however, it forms

the underlying basis for the positions taken by ~be Commissio~

in the Advisory Opinions, MORs and regulations noted above • horeover, it appears that the justification for this distinction

is even more germane in the context of a publicly-funded presidential campai~n than in some of the above-described instances, since

the early history of the provision contemplated public financing of all campaigns for Federal office. See, ~., 5.3044, 93d Cong. 2d ~ession. 4/ The Report ~f the Senate Commlttee on Rules and . Administration on 5.3044 appears to bave acknOWledged this distinction

Dy the folloWing statements contained in the report:: . . ..:: .;: :':.. ;..:'':::':.-.:i... ".:_ •.:-:.... . :..•.:_ •.. : :..:;" .....:~.~.:.:._ .. The Committee' 'recognizes thai' pooling' '~.'.',',

resources from many small contributors " is a legitimate function and an integral'

part of party politics. Accordingly, the bill includes a special provision for private funding by political parties.

In a aeneral electien, candidates mfS

not accept dlrec~ contributions if ev

acceDt the fuIl level of DUblic assistance.

.

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~he init~l version of the bill, centaining the comprehensive ~ublic financing scheme for all Federal elections, was the s~cJec~ of several days of deca~e in the Senate.
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re":

Memorandum to the Commi••ion

Page Elev.n , , , aeagan bu.h Committ•• Audit - Commi••ion Directiv. of,

I Septemb.r 16, 1981

(empha.i. added) Fed.ral Election Ca;:aign Act Amendm.nts of 19761

Conference a.port ACCOmpany 5.306 , 5. a.p. No. §4-}>OS7~9itJl

Cong., 2d ti•••• 59 (19"). ..' .~;,:;!r>}' ,~:.. ' -; a= ' '" . '_... "_ " all"" . -:" - - ." '. ....."

-. The r.port, it .hould be noted, d.scrib.d 441a (d) expenditure. a. .I,:: (".

contributions in-kind. Thi. d.scription is, of cours., accurat... ,1.:. in the sense that a contribution in-kind do.s not involve a cHr.ctr.. payment of mon.y to a candidate committe•• A 441a(d) expenditure'p;~'·

i., howev.r, a special type of contr,ibution in-kind a. refogniz.~d V ., .. by the Comaission in 11 c.l',.a. S l06.l(b). .." -\ .' . •. .. -:_.0 •... .. ...._ .. •....-::-••_:_.......... ._.' •• ... _

, ~t is the conclusion of this Office.that Congressional intent;4 :~\

as eV1denced in the language of 2 U.S.C. S 441a(d) and in the l.gi.- lativ. history of this statutory provision, was to prohibit direct

transfers of money to candidate committees by. party committees pur~

suant to 441a(d). As described above, the Commission has consistently'- :>

:.taken the position that this understanding reflects the Congressional -'

intent underlying 441a(d). It is the view of this Office, therefore,

that 11 C.F.a. S 110.7(a)(4), despite the permissive language con- ~ained therein, does not permit a national party committee to

aesignate the committee of that party's candidate as its agent for 441a(d) purposes. This conclusion is based on the fact that

any suc~ agency would involve the transfer of party Committee

tunas to a candidate committee, Which would in turn use these

funas to make expenditures. aut for the interposition of a

rrincipal-agent relationship between the national party committee

and candidate committee, the transaction would be largely indistinguishable from a direct cash contribution. This would vitiate

the prohibition on direct contributions of DOney to candidate

committees under 441a(d). "

The Commission has specifically addressed the agency issue

in a number of MURs. In MURs 780, 820, and 1234 51, the Commission

took the position that a state party committee did not violate

2 u.s.c. 5 441a(d) by designating a national ,party committee as

agent for purposes of the expenditure limits under this provision. One of the chief underpinnings of the Commission's position was ~hat the Act allows for unlimited transfers of money between and

among party commit~ees. 2 U.S.C. 5 441a(a)(4). It has been the

Commission's position that to prohibit such an agency relationship between party committees would elevate form over substance. See

e.a., 1010R 820, First ("eneral Counsel's Report, page 3.' Since t~ere

-

The Commission's dismissal of the complaint in t~is MeR lead

to a sui~ by the complainant under 2 U.S.C. S437g(a)(8). ~his case, Federal £lecticn Commission v. Democratic Senatorial Cameaign~Commi~~ee, was argued before the Supreme Court of

the ~nitec States on Cctober'6, 1981.
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: .:::'~,:,~~--'",,: :~... ...::~~:.:'~: ......:~.:~:~..~.:. :.. ' .•.·:,:7 :~:~~.:.' :~ . ".:

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.- .- - :..-= '~:-.~.'; - ~-:-.~~~.~;:- -::#.::.~;:-~~~..::::..:~.•~. . ... •..

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.... _.. .. -

The Commission should ~ake no ~urtber action•

(7) Tne Commission shoula direct the redra:ting of ~he auait relJClrt in accordance with tuese conclusions.

(5)

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,~"" FEDERAL ELECTION COMMISSION

WASHINCTON. DC 2(M6)

HAND DELIVERED - December 11, 1981

Edward L. Weidenfeld, Esquire McKenna,' Conner and Cuneo

1575 Eye Street, N.W.

Washington, D.C. 20005

Dear Mr. Weidenfeld:

During our telephone conversation of approximately 9:45 this

mcrning, you advised that you did not object to our placing on the . public record those documents relating to the audit of the Reagan- Bush Committee which were listed in my letter to you of yesterday.

You suggested, however, that the responses which you had submitted

to the C~mission's Interim Audit Report also should be made available to the public.

Those responses, among other records, were placed on the public record today. A complete listing of the additional documents which

were made available today is as follows:

1. Letter of Agreement dtd 18 Jul 80 from

R. Reagan and G. Bush to Commission.

2. Memo, dtd 18 Jul 80, R. Costa to Commission

re: Receipt of above letter.

3. Certification of Commission aetion, dtd

24 Jul 80, re: Entitlement to Campaign Funds.

4. Ltrs, dtd 24 Jul 80, FEC to Secretary of

Treasury, certifying eligibility to Funds,

to R. Reagan and to G. Bush re Certification.

5. Ltr, dtd 4 Dec 80, R. Costa to B. Buchanan,

re: Scheduling of RaC Audit.

6. Ltr, dtd 15 Jan 81, B. Buchanan to C. Hanshaw,

requesting delay in start of audit.

7. Memo, dtd 16 Jan 81, R. Costa to Commision,

re: Request for delay. . 8.'Memo, dtd 21 Jan 81, M. Emmons to R. Costa,

re: Approval of delay.
......

.....

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•

Ltr to E.L. Weidenfeld

December 11, 1981

page 2

9. Ltr, dtd 2 Jul 81, E. Weidenfeld to C. Ranshaw,

re: Delegation of authority to M. Duignan.

10. FOIA request, dtd 6 Jul 81, E. Weidenfe1d to FEC.

11. Ltr, dtd 6 Jul 81, E. Weidenfeld to

J. McGarry, re: RaC Request for extension

of response period, Interim Audit Report.

12. Memo, dtd 8 Jul 81, R. Costa to Commission,

re: Request for extension.

13. Memo, dtd 15 Jul 81, R. Costa to Commission,

reI Proposed Itr to RBC.

14. Certification of Commisson action, dtd 16 Jul

81, reI Denial of RaC request for extension.

15. Ltr, dtd 17 Jul 81, R. Costa to E. Weidenfeld,

reI Denial of request.

16. Ltr, dtd 17 Jul 81, F. Eiland to E. Weidenfeld,

reI Response to 6 Jul 81 FOIA request.

17. FOIA request, dtd 17 Jul 81, E. Weidenfeld to FEC.

18. FOIA request, dtd 20 Jul 81, E. Weidenfeld to FEC.

19. Ltr, dtd 20 Jul 81, E. Weidenfeld to R. Costa,

reI Response under protest to Interim Audit Report.

20. Ltr, dtd 20 Jul 81, E. Weidenfeld to J. McGarry,

reI Request for stay in audit proceedings, or

for opportunity to file supplerne~tal response.

21. FOIA request, dtd 29 Jul 81, E. Weidenfeld to FEC.

22. Certification of Commission action, dtd 29 Jul 81,

reI Grant of additional period within which to

file response to Interim Audit Reoport.

23. Ltr, dtd 30 Jul 81, F. Eiland to E. Weidenfeld,·

reI FOIA requests of 17, 20, 29 Jul 81.

24. FOIA request, dtd 30 Jul 81, E. Weidenfeld to FEC.

25. Ltr, dtd 4 Aug 81, J. McGarry to E. Weidenfeld,

reI Explanation of FEC audit process.

r

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Ltr to E.L. Weidenfeld

December 11, 1981

page 3

26. Ltr, dtd 11 Aug 81, E. Weidenfeld to R. Co.ta,

reI Supplemental re.pon.e to Interim Audit Report.

21. Ltr, dtd 12 Aug 81, F. Eiland to E. Weidenfeld,

reI Respon.e to 30 Jul 81 FOIA request.

28. Ltr, dtd 27 Aug 81, F. Eiland to E. Weidenfeld,

reI Partial response to 17, 20, 29 Jul 81

FOIA requests.

29. Ltr, dtd 1 Sep 81, E. Weidenfeld to F. Eiland,

reI FOIA requests.

30. Ltr, dtd 17 Sep 81, F. Eiland to E. Weidenfeld,

reI Supplemental response to 17, 20, 29 Ju1 81

FOIA requests.

31. Ltr, dtd 20 Oct 81, F. Eiland to E. Weidenfeld,

reI Supplemental response to 17, 20, 29 Jul 81

FOIA requests.

I understand that a member of your firm has secured copies of

the above documents from our Press Office. You will note that all

references to issues which are being reviewed by the Commission

under the provisions of 2 u.s.c 5437g have been deleted from the

materials.

We will continue to keep you apprised as to the additional

documents which will be placed on the public record.

•

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OCo:ober 20, 1981

..

.;.-l ,

FEDERAL ELECTION COMMISSION

WASHINCTON. 0 C :0-3

RepOrt of the Audit ~ivision on ~te ?resldent

Ford Corr~ittee (General ~lec~ion Campa~yn), b pp.

Mellie trom ~'wi11ia;n C. Clcc:ker ~o CeJ:lr.llss~on, dated

OCtODer 2~, l~;i, 9ubject: Audit Re~ort - Pre9iuent

Ford Committee General Election, 2 ?~.

Memorancum trom william C. Oldaker to Soc C09ta,

dated Augu9t 16, 1978, 9ucJect: Interim Audit Report for the 1976 Democratic Pre9ioential Campaign Corr~ittee, Inc. - Analy519 cy Office 0: the General

Coungel, pp.

~. Me~orandurn :rc~ ace Cesta to t;lll~am C. Oldaker,

dated J~np. 13, ~~7~, sU~Jp.c~: !~~~rlm Auait Report _ ~~7Q Oe:nocra!;.:'c i'rfHil.dp.r:tul <.:omlnl.ttee, Inc., with a~~ac~:nants, ~~ ~~.

1. Memo from William C. Oldaker to COJMni99ion, dated

January ~5, 1~7~, su~~ect: Payment :or legal gervices

by ?re9ider.~ Fer: C~rnrnittee - General Election

Cam?aign, 2 p~.

Thi~ 15 in connection with my letter of September 17, 19~1.

In that letter, I inaicated that we were about to begin a record.

5earch. in an attempt to identify all document'~ in Index

Item 119 1/ which would oe re9pon9ive to y~ur Freeaom 0:

Infer=ation reque9t9, dated July 17, 20 and 29, 19&1.

Edward L. ~eidenfeld

McKenna, Conner and Cuneo

1575 Eye Street, N.w. Wa~nington, D.C. 20005

Dear Mr. Weidenfeld:

.;/

-. . To date, we have identified ana are forwarding the following ". aocument9:

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',e1:ter to t:dward L. fteidenfeld

Page 2

6. Memorandum-from Charles N. St.eleto Commission, dated

Augus1: lS, l~ijU, sUbJect: Repayment of Public Funds

by the 1976 Oemocratic Presidential Committee, Inc.,

with Certification of COlnmi'sion action, dated AU9u,~ 20, 1980,re: Repayment J:)y 1976 Democratic Pr~sidential Committee, Inc." 3 pp.

7. Memo frcm William C. Oldaker to Commission, dated

AuguS1: 30, 1979, SUbJect: Request by i~76 Democratic

Presidential Campaign Committee for Extension of :

Time, with at1:achment dated August 2i, 1979, and

Certification of Commission action, dated September 6, 1979, 4 pp.

8. Memo from Bob Costa to ~ill Oldaker, dated December 1, 1~78, subJect: Final Audit Report - 1~76 Oemocratic

?residential Campaign Committee, Inc., with attachments, 71 pp.

I anticipate that we will have completed cur review of

the record~ contained in Item 119,'ane will have forwarded ~ll

~ertlnent record, to you by Frieay, October 23, l~81. At ttat t~~e, we will aavise you cfthe applicacle ~earch and reproduction ctar~e.

S:'nc~rely,

Free

/~X¥ s. ~llan~

FO!A Cf:icer -0

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•

FEDERAL ELECTION COMMISSION

WASHINCTON. D.C. ~J

•

S.p~.mo.r 17, l~~l

toward ~. weloenfeld, £s~ulr.

l'lCKenn., Conner and Cuneo

1575 eye S~ree~,. N.W. washln~ton, D.C. ~0005

Dear Mr. weloenfeld:

Tnis lS in response to your S.&te~ber 1, 19~1, letter, wr.lcn

-concerned my reply ~o your July 17, 20 and ~51 Freeaom of Inforriiation

".Act reques~s (the "second", "tnir~" ana "fourth" re~uests,

~es~ect.vely). In ~daition, I wll1 otier CO~lent as to my J~~y 17 =esponse to tour July b FO!A request (the "first" =equest) • . ~ou indlcatec in ~our le~ter that i~ was lour unde=stancing :~~: the ~~terials p=ovi~ed en Au~ust ~7 ald not cons~itute a . cC~~lete =esponse to the second, tnird ~nd fourth requests, cut

:na: :~~s cfflce woulo continue to s~arch ~or ana process ade~tlo~a!

~at5rlals. In tnis =e~a=d, we have seArcnec our fl!eS ana ~~ve lc~r.tifiec the :ellowing additional documents which we herecy are :orward1:19: ~/

l2b. Spread sheet for Analysis of Reported Totals ~nd Estimation of Item Counts* 2 pp.

127. Letter, 10 Dec 7~, Arthur Anderson and Co. to

RODert J. Costa, re: COmluents on FEC

proposed statistical sarnplin9** 5·pp.

Tne following auei tional doculnents have oeen 1dentlfled as

?ossibly ~eln9 responsive to your request, Dut I have cete==~ned

t:;a t ,:ney a're exempt :rorn ciisclosure unae= :'OIA:

~:~ ~~~~~:s~=a:~~'~ =c~v~~~e~:i, _ ;:~:~~~~ :~~ ~~~~~:~~~

S~St5rn ~t~ll~ed In the Index cv ~nlch : =espcnced tC :ne

second, ':~ird And :ou=th =equests on Au~ust 27, l~cl.
,-.

".

•

•

~e::er to Eaward L. fteicenfe1c ~aCJe 2

146. heMo,~. Jan o~, Boo Co.~a ~o Auait

Stat:, re:. aeV1ew of DocUl;lenta~ion for ~xp.nai~ures, ~lt1e ~b Pre.iden~ial

Canal06~eS ·And 'l'helr Au~horizea

Commit~ees. \4 pp.) ~his documen~ detail.

the type. of docurn.nt6~ion which will

be r~uired oy tne Cor~aission in conducting auai~s. Knowleave ot ~he tnreshola

amounts involved here would ena~le a Cornmit~ee to avoid n.ving cvrtain trans- ac~ions incluaed as a ma~~er of

aiscussion 1n ~he Aual~ Report, ana

avoid possible reterral ~o ~he Off1ce

of General Counsel for le~al review.

See 5 U.S.C•. 55~(o)\2) and (7). - l~~. Memo, 17 Dec 7~, Charles ~. Steele ~o

Bob Cos~a, re: Rev~ew ot Documentat10n

for txpena1tures, ~it1e 26, Preslden~ial

Canaioa~es and tneir Au~horizea

CO::-Jni:tees - A-b~o. (2 pp.) See Item 14l~.

l~O. u1Cisrarn of Accounts, banK Reconcilla~ion

Con~rluutior.s Trace, AttrlDute Sal;lpl1ng. (3 ~~.) hnowlec~e of tn1s proc6cure would

enaDle a Cou~ittee ~o nlae or to ODscure a~parer.:ly ~~preper ccn~rl~~tlOns. See

3 U.S.C. S S~~lO)(2) ilnd (il.

131. Memo, lu Uec i9, Cr.arles N. Steele to

DOC Ces:a, re: Na:erlallty Tnresnolcs

for Aua~ts. (7 ?p.) See clscussion at

Item iUS, oelow.

·~32. Flve paqes nave ~een deletea ~rorn tne ~.cket entitled Spread Sheet for Analysis of loteported ~otals And Estima:oion ° of

Item Counts. Tnese aescribe tne

procecures to ce utilized 1n ebta1ning corn~uter ~enerC:tted ranoom nUI.loers for

aucitiny purposes anc set out :ne

:.;ertlnent ccm~uter prosram. See 3 U.S.C. 332{b)(~) ana (7).

··1~3. Oele~ions ~6ve o~en ~Gde i~ -~~e Ance~scn

.::",.c I::. _.; ': -;0::' • ':.:.e.5e c s == ;.~ -= '::.~ oS -:.~ ••;:, =.~g

:.-roc~sses wtllC:: :.ave :>een or :r.ay ::le accptea

:y tne Comm:'ssior.. See 5 U.S.C. S SS:t(~) (2) ar.d (7).

'lou l:l<.:u:.red Cas ':0 ;.;te,:::er Certaln cccu:.~en:s w~'1lcn were ~~s':~c l:l :.~e· lncex c:ttac:led :0 :;1y Au~use "J.7 ~et:er were aval~aL:lle ':c tne pu~l:'c t:'lrou~n our ?u~l~c Reccrcs Reilclng Room. In ~ccltlcn

t= ':~e records so ~aer:':l=led 1n tne I~dex, G~l cocuments ceSl~n.~ec

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~~~ter ~O ~uwaru ~. ~.luent.!d .

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You '::''ic:uestf:!(,1 tHat .. 0 t--::'ocuc~.l:1uex it~:..s ~'" l:~, ':'vS, ~ut=,

~ll:l cin~ !J0rt:'CJl1s (,It .ltf:!m .L~.l.

,·:Wio'.' s "'!.(.·lCU :l~ve r1l,,;t :..een C~U=:ie~ ~'t t::e \':Oniill:'SS:'(.i:': .•o·w·tt

:.:eer. \Jt:_e~~c: :'::"<.;::l tlllS :':Q:-:t. '" U.~.·... ".Ji:\l:)(~'").

.:./

You ex~ressed 1Ilt~1:ttSt 111 tne !eylSJ.atlV~ lllstCry 1.:: t:~e

s:.-ecltlea statutory una ro~ulc.ltory io'ruvUilullS, .&.1I"iUl:'l:l~ ~artlc:ular.ly

as to wt!l:!t~le:!r tue t;C::UallSSlon has c.:l."eo t~<.lall 1n(.;~x or \;:i,ace :0: tile

0::' l~ lneJ. feeeral. toJ.ecticn <';iil'l:.-a :..~n Act ut .l~'7 J.. '~'Ht: COI&lI,ass.. o~

:las not ~rt:!J.re~ suc:ha UOCU1..e:!nt. 'rj(,lwever, .1:HJ:.ces to ~ue

Le<ilSlatlVe tilstory ut t:1E: ll:t74' clrlCJ J.~7\) ,;me!lCrnel~~s to tue Act.

(jaVe Deen !Jre~arectj.., Hvuert, tI. u~J:'I.:ette (.,t -::,e ~on~t4:SS10na.l

xesearch \.:enter. '~'hose :":l(jlCE:S ere ilerf:!cy :';c,)rwaruec: tu you.

l I tern lJ:, J•

!tt:m ~4 :.s ~n ~ncated Mf:!WOr~ncurn ::'u~ ~CU t;c~t. (Ass:.stant S~at~ :,jl::ec-:cr :cr tbe J\~c:i: :';:.\·:.s:.~r:) tc :.:~e "',\~~:': ~:=::, ~::~~.'i::.."

.. :: ::-a:.:;.":".:.::-:..; :::t:: .~ ... ~:.: r:'-'-i~:'·ci:" ,_ .... :-:-: -:r.\..i :;.-: n';':';:"~ '::':"::''':'';==3

" ti..;. .;,:;i. : :.o·;e <..:et.=r.,&~::cc t.:~Q~ t~~e }\U<:l~ ~::~~~•.::= a:~c.: .:-:."'c.;cec.;-.;=es

~ou in~uirec 1nto ~le e:!Xlstf:!nC~ ot an~ ~U1d"s, m.nuals

oi lnstructlons ~re~.red tor ane/or usea ~y ttle <.;ot~lsslon's

St.il:: 1n iJertorminC:/ :..ts eaudltS ana relilted :unc:tlons. ~ucn

,=uluilnce alreilUY haS &.lcen l-rOV1(,leu. to yuu IJY' way of :tl!:ns ~2,

!#J, . ~~, !#7-lIJ3, .LUb .flU !u7 1n CJur ~u~uSt ~7 lncex anu Ul _tne:! . t:.rst two nUllltlttrf:!d ltelolS C:lt~d :.n tn:.s lettE:::'.

as t;011lJll1SS10n "'.'IIOS, ~ul.lJn1aauon Ulrec:tlV'!S" tinu ft~.n(,la uoc.:ul"ttnts

ar. aViailaul. ln tJI. R"UdUHJ 1(OUIoI. .&: t ..... a!l, ~" .na !ll 61so ..r.

availal)l. th.r.. lnfot'llIiation iJ<:rt.lnin~ tu 'o::u.I:.ss:.on .keCJulat:.ons,

e. ~., f,)acJC.~ruund anu )Ustlt:.ca tlun, 1S etv.l.Lacl. ttlrOU~I; our ~l",rary,

willc:n -is u~en to tIle iJUU.Lic:.

You aaxed Vlletn.r tn.r. eXlst .U'-Il tlonal .nu/or more .~.clflC

ll)uic•• of ~n. v..rlUUS tYiI•• of ilc;tllac.:y rec.:orcJlI. Tn. "AlpllcaueclcaJ. .~

Inaex of 'll:l7~-~U t'ln.l J\u'-li t RelJUrts wuicli HilVV ueen 1t.J.••••d

to t.ue PaL/,uc· and tn. M!luJ1Celi ut (,;011i1UIiS10ti Ac.:tl0n It.ems·, wnlcn

w. aJ.ready h.v. ~ruv:.c:e(J, are tile only iudlCe& iu tnos...reas. A. tar aa l'JlJlt lndlc.:es are c:unc:et"nt!d, I ala tOl.·w..rulng a copy of

the MUK ~tatuli ~Jleet lo1iilut.invu 1J~ tIle UtI lee U1: ti.'leraJ.'

Counsel. "J./ ("~J ~J:lJ. 1 trust that yuu V1J.J. I1na tn. suort·ceacriptlon of die lssues l:wolved 1n eetc:n ot the 11ste(,l ..UJl('S to I)e

,helptul. (It."m 1~4).

You notttd tJlat -tUe:! CUnllJutet'lzea -I'IU!( Incex wuicn we ~t'ovic:ed

on AUC:/USt J.7 a~1ie.rC!d to O.:li,t 2:i~V\tCetJ. recent l":uk's.AS 1

ilavlsed you 1n lny J.e:!t~er ut that. uote, tne IncJex WaS <.lue to ~e:!

" updated on oreaL/out ~e:!lJteliluer !, J.!lbl. we ';i!ve e:!x~~rlenced suaile

". -uiff1culties -in com?let1n~ that .utldatlng iJrucess. However, tne '" !~UR Sta~us Sheet 1& C:Ul:a:ent as UJ: Sttptttnl1JVr J.~, .L!#cs.l, ilna re:J.ec:ts a.l.L~ entorc:eanent. actions WlllCh nau been cJ.osed ilS u1: thataate'•

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~e~~er to ~Qwar= ~. we~~e~telu

Pa'i" .a

at'e eX~Ioi!:'t trom release under FOIA pursuant to U.S.C. l)S4t(O)(2) a~a (7J(~). Speciilc~~~y, tnose documents set out 1n aetail t~e'lnveStl~~tive tecnnlques ana vroc~aures e~~loyed by Commlssion

st.:f 1n ccnaucting i:luaitS.Of Pres1den:ial cOmmlttees.

I~em ~6, a Memorandum dated Au~ust 4tO, l~~u, from BOD

Costa to tne Aua1t Staff, re: Commission Denlal of ~xtension

Re~uested ~y Presidential Committees is provided. However,

certain pre-aecislonal, ae!iuerat1ve !"aterial nas oeen deleted tnerefro~. Specifically, the final paragraph on p~ge 1 ana the

first ~Gra~raph on page set torth dlScusslon whIch occurrea

at a closea rneetlng of tne CommissIon upon whicn no final actlon

WaS taKen. !!! 5 U.S.C. S ~5~(b)(S).

Item lOS is a memoranaum fro~ Boo Costa to the Audit

U1Vlsion uated January ~u, !~bU, by wnich he tri:lflsmitted ~be

Co:~~iss10n's "Materiality Tnresholds for Audits" (24 pp). Item

lOb 1S a Nemo, dated Septemuer !:I, l!:lpO, from Mr. Costa to

Charles N. Steele, re: Revisions to· Cor.omission - Approvea . ~aterial1ty Tnresholdsfor ~udits. These aocuments set £orth

'ana dISCUSS the criteria, or "fla~s,N utilized oy tne Auait

OlVlsion fer determinin~ whe~ner lrregularltles Wlll be ~oler~tec or will ~e maue the subJect of dl,cusslon in an Auuit ~e~Qr~ ~ne/or referred to ~~e Ct~ice of General Counsel for le~al rev~ew. ~nese cec~~ents are exern~: from release under

5 u.s.<;. S 5:)2(0) (~) and (7). Clear~y,·knowlec:se of the crlteria

a:.;.:.;.11ec :,;,v the Cor.J:ass;.on woulc eni:o':'e a CO!:U;ll~tee to Cl:,curnvent ,,::,~ requl=t::i.ents of ~ne pUOllC ::.nCinc~ny law.

Ite~ ll!:l lS.~ flle, ap!:,roximate~y fIve teet deep, fIlled wlt~ ~~7c-l~~1 ~rait !nter~m A~Clt Re~orts, Re~errec Uraft FInal

';:;Clt Re~orts &:'lC Co::une:'lts :ro::l the O:~lce of General Counsel.

In v~ew c~ t~e :'li:lture 0: your re~ues~, we wlll ue requlred to a~~lgn a senlor s~aft ~ernoer to perform a cetallec exarnlnation

ot every record in that flle ln an ef:ort to lcent~fy pertlnent aocumen~s. ~e.have a limlted nurnoer 0: peo~le wno are c~pable

ef ~er:or~in9 tnis se~rcn. Of course, ~nlS nu~~er wlll ~e ~llutec

as a resuJ. t of assignments wl:ich :01USt Lie mace to co:rlply wi tn tne ter~s ef ~ne adCl~lonal oreao FClft r~uest wnlch you su~rn~t:ec

e~ Se~tem:.;.er 14, l~~l. ~ever~heless, we w111 attempt to respond

to jo:.:r rec:uest tor ?ertl~er:t COCU::It::'\~S 1:'\ I:ldex I ~ern :u.9 no. ~a:er t~An CCtc~er ~, ~~cl.

You reeuested t~at we :rcv~ce decu~ents l3, 14, 21, 23, ~~

a~c ~o w~~~~n :ndex :~ern ~2i. ~~cse reco~=s are a~~acned.

:~=~:~; :c ~~e =e5;c~se :..ace ~c your ;~~y a, :~~l ~e~~es~,

! c:c\·~sec ~;C~ ~y .If:-::e::- of ';~l::· .l. 7, :::ts.l ~:~a:a, ~y provlclnc; ~:1e

'b\j~ p a ges c..: QOCL:~e!'l~S' w::=.c~ _e :crwc::-t:ed t::G~ cay, :.:. WilS ::ty

:.;::(.:~cs:a:-.t.::"::S :':1a~ o.e .e:-e i===\-:.dl:1g "a:: auc:I"::':~ cCCU.:ler1~S fWn~C:l

...e-:-e; =~leva::~ ~o ~~e :':l~e:":.:n auc:. :: :.nt:l:'~s a::c: :-'!ccr:'.::enca':~cns "0- ___ II:'''e''c''- ••• _ .. _....•••;.,:.,., ..,w f,._~~ .....'···es-J'-._ "

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~=c~:~e~:s ar~ exe~~: :~c~ r~_ease as ~~~:~-a~ency ~e~c~a~ca, : ~.~.C. :=~(=)l~}

~ar~:.c~~ar~y ~s ~re-cec:.s:.o~a:, celi~era~lv.

.. c:~~:.-.

tC~les of ?ro~rar. ana Prcce~~res utilizec ~y·~~ciit Staf~ curing aUQlts cf kbC and ~~~t. I nAve cieterJ:llnea ~na~ these cocuhlents

are exem~t. tror.: cisclo!:iure tor t.ne saJ"e

reasons set ou~ in Qenyin~ access ~o

Index It.em ~4

l,)oc:Jz:ler: en ti t~ec "R~C-~:oi:'::;'j,lAnce F~ma

Cc~:.es c: CC:;,;':\l ~~ee ~ece~?ts S~:-~ortln9

AJilCl.mt.s To Se P':lC :.lack t.o ~ftCr~ rJy (i:;C."

llu ::.::). '.L'fllS cocu:..e~: :.s :-e':'e..·an: 'eO

Zn~erl= A~Cl~ Re~cr~ Fl~~~n~ IZ:.C.

~ou are advised 0: ~ne eXls~ence.of an "Au~lnlstra~lve Fl~e" wnic~ ~ertalns to

the :\ac anc i\~CF. ':':us:l.le consists

c: :~e several era:: CCPl~S of ~ne

:~~e~l~ ~U~~~ ~e~orts, ~~e ~arlcw:l::en

cc:~~e~~s Qf tne ~ut~crs c: t.eose cra:~s

anu ~~e s~a:: ~e~oers wnc rev:ewec tnem,

and co~ies c: :~e co~~en:s 0: ~he u::lce

c: General CC:Jnsel \oW:' ~:l res:;ect ~c ~ne .

l~b •

IJ6. ~cument entitled "RbC-~~C S~r.~ary of

aank ~econci1iation tPa~es &1/1, 81/2)." ~his document is relevant to finding

IlI.A in the Interim AUJlt ReiJort.

1~i. Uocument. entitle~ ~C-GEC SuroU"ary of

Tours Reviewed (pa~es <;2/1 t.hru C~/7);

workpapers C5/1 thru C5/lb; and <;/4/17

tnru 4/1~. (~2 ~p). ~hese are relevant

to :inclng 111.& of the !~terlrn Audit Report.

I inchC&~8a that, due to t:18 has:e wlth wnlcn you in.lst8C1

we re.,ly to til.t reCiueSt, it was possllJle t.nat certaln cocument. rn~Y have ueen overlooked anu re~uestec tnat. you con~act me if

such provea to ce the CaS~. Slnce you never Have yo~ten ln touch

wlth me, I learned only inuirectly tnat you ap~arently were

uissatisiied with tile cOfilvleteness of tue records which we producec. ~everthel'ss, I requested the Auclt DiVision to search their file. ~new in an attempt to clscover whether an~.. tuin9 inadvertently had ueen omitted from our reply to your first" request.

'1'hilt selarch i,as iuentified ~ne rol10winc.:; recorcs:

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K.proauc.u U~CUMwnts torwMraed :u y~u ~uday tot.l 5b~ p.~.s

an.a recsuirwd .ilJut Hours of s...rcn tu..e. rJ....s. torward your

cneclt In tIle amount us: ~bd.iU, made iJayacle to the r.d.ral ~l.ctlon COr.~isSlon, to me At lJ4~ K ~tre.t, N.W., w.shln~ton, &J. C. :lU4bJ •

You a're advised that you may 81Jpeal any adverse ."v,IA

determin..tion to the tuil <':~I"'ollss1on. Any such Appeal must

be mace in wrltlnCJ, Inust uJentiry tne r ..corus in tne torm in

""hlCh they lJlltiaJ..Ly Wttl.-. rwc:uestud, and snouJ.a bw forwardea

;0 lne at tne aadress noted a&Jove. ~'h .. envelope or ot!ler covering

and tne 11rst lJaCJe suouid clearly and cuns1Jlcuously state "l"UIA

APlJeaJ.... ~ou are encuuralJed :0 Clte leval or other authority ln supvort of any 'such appeal•

Fred S_ t::..lancJ

(o'U!A Ut: lcer

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September 1, 1981

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Mr. Fred Eila.nd

FOI,A Of~icer

Federa.1 Election Co=mission

1325 K S~ree~, ~~

Washi~q~Q~, DC 20463

Re:

It is our uncerstL~di~q that ~he ~~ter~a1s ?revided ~o

us on Au~~st 27 do nct consti~u~e all of the aqency :eco:ds

:es?cnsive to our ?endinq FO!~ requests, L~d ~hat your of:ice

is contir.uinq to search for L~~ process ~he :eques~ee ~aterials.

~~. Neble ~ndicatec ~~a~ a ?cr~ic~ of suc~ :~~~he: ~a~e~~&ls

~ay :e availa=le within ~he week.

Oea= ~r. Eilanc:

Wi~h =es?ec~ ~o your ~uqus~ 27 ":ncex 0: Coc~~ents," we ~~q~~=e~ as ~: ~~e ava~:~=~~i~y c: S~=~ ~a~e~~=:~ ~~ :~~=

~~=:~= =ea~~~i =0==. :~a~ ~~, :0= ~~~ l~s~e~ ~:c·~~:~~! .:~~::

~~a~ ~~e s~a~~~=~y a~c ~e~~:a~=~y =a~e~ials, ~=e ~z~ual RepQ~~S,

ane ~h6 C~~~ai~n Guiees), ~a~e on1v ~hcse =a.~e:ia~s sc i~ci:a.~e~

o-eA "-- -s':e a:.s·;a.--'e ·0 --e _~.,.. :_..,.. .. ,c:~ ··c·· .. -,.--~.;,.. .._ e_ac.·_~.~c:. -- _ ••.•,-- _. --- -- '- -- : __ ... - ••_~ ... _•• 1 ....- :------

==cr.t?

This is i~ res~onse to vour 1et~er of Au~us~ 2i, 19E1.

and to con~i:.= ~~e SUDstanoe·o~ yesterday's conversa~ion

~etween Mr. Hussey ana Mr. Noble o~ your Cf~ice of General Cou.~se1.

..............

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-~........

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_...-.e..•. ..-- --........ _..- -.. ---...-.. --~-- __..

..--- ._-- --_.".. '-.- .._- --"'

_......... .al

_L_••

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~e ~~~~ca~ec ~~a~, a~ ?~esen~, we a:e ~c~ ~~~e=.s~ed ~~

ae:ess ~Q ~~e ~~~al ~~~~sc=y C:L~ions c: t~e C===iss~on (!!! ~~e= l~O) 0: ~~e 1576 Ca=~e~ A~cit {~~e= i:6~.

We i~cuired as to t~e exis~ence e: anv cu~ces, manuals, or i~s~ructions prepared for L~d/er used :y t~e·Ce==ission's staff ~~ pe=~or=in; its auci~s ana =elatec :unc~icns.

. .

::".. :.:::~=-:::-.:s ....:.-:;: ~.':.'::'- :.::-:-:e= :: ....::::s~ :-:- I .;:":::-:==.: :::.1se =~~: a =~eck ?a~a=:e ~= ~~e ::aas~=e= c: ~~e ~~~~e~ S~ates i~ ~~e

a~c~~~ c: 5;3.:: :c= you: aie~cy's sea==~ a~c c~~l~ca~ien e::cr~s

~= :.a~a.

. :cr t~e ?artic~lar ma~erials listed in yo~ ~uqust 27 Ir.dex, ~e =e~~es~ed ~~at e::crts :e =.ade ~o sec~re ~he earliest possi:le release c: ite:s 94, 96, 105, 108, 119, and 121. With respect to i~e~ 9~, we in~uired as to t~e existenoe 0: previous similar =cc~~er.~s. With res?ec~ ~o items 119 L,d 121, we in~uirec as to ~~e exis~ence of incices su::icien~ly detailed (i.e., cy sUbjeo~

~a~~er ana issues) to pe~it the ?cssi~le segrei~n 0: such ~a~erials, and incica~ed t~at, :asec on t~e present desc~i~tion,

~e :e~ieve that we are most interestee in ~~e "?resieential" ~a~erials ~i~~in i~em ~l9 L~d dec~~ents 13, ~4, 21, 23, 24, and

26 w~:~~~ ~~em 121.

::r all of ~~e :creqoinq ~atters, ~r. ~c:le i~=icated ~~at

a;;ro?ria~e ir.~~iries ~ould be ~ade wi~~i~ ~~e Cc~"ission and a

response provided in ~~e c=ntex~ of your aq~,cy's apparently :=~~~~~~~; ef~o~ts ~o :ul:ill ~~e ~enc~~i c~sclcs~=e =e~uests.

We inquired as to ~~e existence 0: respensive materials

pertaininq to the leqislative history of the specified statutory and requlatery provisions. That is, fer example, has an i~dex or quide been prepared for the leqislative history of the

erisinal Act of 1971?

~= . :=.~ E:'1L~~

raqe 2 S.;~.~~er 1, 1981

We ~~auired as to the existence of addi~ional and/or ~ore specific indices of the various types of aqL~CY records

resoonsive to our disclosure reaue.ts. That is, for example, 'are-there indices which specify-in qreater detail the .u~jects

a~d issues involved in the Ml'R's, Final Audit Reports, and

Commission Action Items? Also, is there L~ index for ~he most

recent MuiR's (~~e index provided on Auqust 27 appears to omit approx~tely 225 MUR's)?

:..loW o".'cca

M;KENNA. CONNE" & c..NEO

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:.1=. Free! !ila:e! p.~e 3 S.p~em:.: 1, 1981

cc: Lawrence Noble, Esqui:e Assist~~t General Counsel

. . ~cw':?~ t: weid~~;id· ....

We look forwarc! to your further response. Shoulc! you have

any ~~.stior.s, please contact the unc!ersiqnee!.

Sincerely yours,

~. ~""'~C.

M;;(ENNA,CONNEJI' & '- NEO

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FEDERAL ELECTION COMMISSION

WASHINGTON. 0 C :MJ

Auqus't 27, 1981

Edward L. Weidenfeld, Esquire ~cKenna, Conner and Cun60

1575 Eye Sereet, h.~.

\3asbingeon, D.C. 200U5

~ear Mr. Weidenfeld:

This is in response to your Freedom of Information Act

requests, dated July 17, 20 and 29, 1~&1. As I advised you in cy leeter of July 30, lS81, we expected to begin our search

for records responding to those requests during the week of

August 3, 19&1. because of the press of o~her FOIA business

eben pt!nclin~, caused in part by our responding to your July 6, l~bl, FOIA request on a priority ~asis and out of turn, we

were unable to begin work on the instant requests un~il that ~i::le. 1/

~c~r requests, incivieually&nci collectively, are quite broad. ~ie have made, and \lUl cont.inue to i:'.ake, every effort

to l=enti~y t.hose documents wh~ch respone, or po~er.:ially

respond, to tho~e requests. !n this resare, ! a~ infc~ed that,

in a ~eetin9 with at~orneys from our Office of Ceneral Counsel

on Ausust l~, 19a1, you were unprepared to li~it those requests. Further, in a telephone conversation ~i~h Assis~ant. General Counsel

La_rence NOble on t.he following day, Thomas W. Hussey of your firm

similarly declined to lL~it the scope of your requests.

As was indicated at the August 19 meeting, the Commission

has prepared an incex of the documents identified as being responsive, or potentially responsive, to yo~r requests. I

enclose a co~y of that index, Which has ceen cross-referenced

to your requests, and an initial ~ackage of docucents. The packa~e consists o~ !neex !te~sl-~3; S3: 97-104; 106-107; 109-

:13; l:7-11~; 120; and 122-l25. We will con:inue to ruake every e~fort t.o acccmodate you ~y forwarding, as ~hey beccme available,

all aceitional ncn-exe~~t cccuments until such t~me as t.he index ~as ~~&n exnaus~ee. ~:~o, we will cont.inue to search our files ~C~ a~y c~te~ cccu~en~, ~c: identi~ied :~U9 far ~~ic~ ~al be r91eva~~

~ur~~s ~~e ~er:cc c: July 6 ~troush 3C, :96l, yc~ ~iled five F~!~ =~~ues~s en ~~hal: o~ Rea~an-=usn. ~cu= :uly 6 and 30 =ecues~s . , were answerec cn ~ulv... ~7 anc ~u~~st l~, res~ectively.
•

•

~=':_i~~~' ~;.~::~~! ~~ _=:_~:: ~~;:~~_~~ ::~a =~~~~~~~$ =~~_:~;

.~~~ re~~la~:c~9 :~5~ec a~ :~cex :~e~ 12:.

a::c ::: ''l;!:: ':._ .:. ...... -----

~et~er ~o £cward L. ~eidenfeld

pa~e 2

_I :=: yc~: ~~:c=~a~~c~, C=~~~5~~C~ ~cv~~c=~ Cpinic~5 a:~c a~pear

:n t~e~F~deral ~lec~~cn Ca==a~~n :~~a~ci~c Guice, a :~~:~ca~icn

c: ~c~~e~ce C:ear~ns ~CU$e.

The files in all t~ese ~atter'S are on microfilrn and are

available for in'Spection and copying a~ our Puclic Record'S Oftice;

should you care to ~uru'Se them there, please inform U'S, and we will ~eserve a iliicrofilm reader/copier :or vour use. 2/ On the other

hand, if it i'S your desire tha~ we reproduce ~ne-files :or you, we

wi:: begin ccinS so on ~onday afternoon, ~ugus~ 31, l~cl. Please

le:. us ;";now by ~r.a~ :'i~e ..hel:her you \ilsh l:ha~ ..,e nc~ per:c=::o ~~e

p~c~ccc~ying se~vice :cr you. Al: t~i'S ~~~e, ! can give nc ~i~

~sti~ate as to t~e n~~cer of pages involved.

I note tha~ a number of the documen~~, 9uch as the FEC Kecord,

the F1::C Ca:npaiunc.;uicies and tbeFECAnnual l<eperts, are lJub11catl0ns

wnich would ue :orwarded, free of charge, ~o anyone who had requested that his name be entered on the FE~ mailing li9t. They also would

be provided through our Public Co~unication9, Public Records, or

Press Offices. ~umerous other document9 t16~e been reauced to

microfilm and have been available for in~pection and copying for

'Sev6ral months, if not year~, to any member of the pub~ic, on a

walk-in basis, at the Commi~sion'~ Public Record9 reading room,

located on the fir'St floor of our building. I AQ 9ure you are

aware, thou9h, that notwith9tandins thi9 public acce9sibility,

we s~ill are required to make the documents available to you under

FOIA. See Roeder v. FEC, C.A. 7~-0216 (D.D.C., July 8, 1979). Accordin~ly, our ~roauctionof records will continue unle~9 and

until we receive contrary in9truc~ions from you.

I would appreciate your a'S9i9tance in one area. You demanded,

inter alia, that we provide record9 which, in effect, ccn9true or ir.~erp~several 'S~atu~e9 and regula~icn'S. 1!! July 20 reques~,

ae~ands 2, 3, 4, 6, i; July 29 reque9t, demands 1, 2,~. In response, . we nave provided incices of closed entorcernen~ cases, and of Advisory O;::'nions is'Sued =y the Cor..mission, .hieh invc·lved those Sta~utes

and re~ula~ions. t!!! index entries lle and 120). ~he cases ci~ed

~~erein are n~erous. For instance, 2 U.S.C. S 441a was a~ issue

In l~~ closed en:orce~en~ cases, and in ;6 ~dv:'sory O?i~ions;

~.~.C. S ~41a(a)(1)lA) was a~ issue in ;6 closed en~orcernent cases

and in Advisory upinion9. (~e anticipate tha~ ~he M~R Index will ~e ~pdated ty Septe~~er 1, 19b1. Thu9, it is ~os'Sic1ethat the nu=~er 0: clcsed ~ertinent closed ~UR's will ~e greater :~an the ~igures just cited. he will, 0: course, inform you of any increase

in t~e nu~ber of MU~''S.)
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Le~~er ~o Edwar~ L. heidenfeld ;'a~e 3

we al.o bave provided an Index of ~ho.e mat~ers concerning ~ucit, policy, Procedure., Repaymen~ and En~i~lement which have

been the .ubject of di.cus.ion at public meeting. of the Commission

:rorn 1977'~hrough the present. See Index Item 117. I~ you ar~

lntere.ted in our,preparing tran.cript. of any of these discu.iions, please advise us accordingly. .

Comci••ion staff member. spent 16 hours in searching for the

cocuments which are listed on the attacbed :n~ex. At ~2.50 per half

hour, the search fee i. ~80. Adcitionally, we have reproduced 277 pa~es of docu~ents for which the Commi••ion a••esses a fee of .U5

per page. ~our check in the amount of $93.85, mad, payable to the ~reasurer of the ~nited States, should be forwarded to me at thi.

office.

If you have any ~uestions, please con~ac~ me at 523-4065 •

:,...

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•

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INDEX OF DOCUMENTS IN RESPONSE TO

FREEDOM or INFORMATION REQUESTS SUBMITTED ON BEHALF OF

THE REAGAN BUSH COMMITTEE AND TBE REAGAN BUSH COMPLIANCE FUND

ON JULY 17, 20, and 29, 1981

-. .

. CODES APPEARING ON TBE A'l"l'ACBED PAGES :

.....

:. ) R2 refer9 to the July 17, 1981 rOIA ~equest

,~ R3 refers ~o the July 20, 1981 rOIA Request

R4 refers to the July 29, 1981 rOIA Reques~

numbers ~o11owin9 a hyphen (e.g., R2-1) refer to specific

requests mace within each of the above-referenced rOIA

reque9ts

. .'
INDEX OF DOCUMENTS IN RESPONSE

FREEDOM OF INFORHA'1'IO:: AEQUES':'S SUBMI'l":E·%) ON BEHALF OF ~HE REAGAN BUSH COMHI~EE AND THE REAGAN BUSH COMP~IANCE FUND

ON JU~Y 17, 20, and 2', 1'81

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II

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R2

R3

'R4

Responds To:

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Federal Election Campaign Laws Compiled by t~e Federal Election Commission (Including The "Federal Election Campaign Act of 197',

Pub. L. No. 96-18;), January 1980

3. :itle 11 Code o~ Federal Regulations, revised

a. o~ January 1, 1981.

6. Federal Election Commission Annual Report :9;5, March 1976.

i. Federal Election Commission Annual Report 1976, March 1977.

9. Federal Election Commission Annual Report 19;8

:-..

:. Federal Election Commission Annual Report 197i, March 1978.

1. Feder~l Election Campaign Laws Compiled by the Federal Election Commission (Including The ·Federal Election Campaign.Act Amendments

of 1'76, ·Public Law '4-283), June 1'76 .

2. Federal Election Commission Regulations, April 1977

3. Public Law 96-187, January 8, 1980

14. :e~eral E~eet~on Cemcission Campaign ~~ic., Sep:e~ber ~9~6

~l. :ederal E~ection Commislion Annual Report

1980

l:. :eaeral Elec~ion Co~~i'lion Campaiqn G;.:ide, May 1976

••

10. Federal Election Commission Annual Repor~

1979

Docu.-:\ent

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28. =he Federal Election Commission Record, 1976, Vol. 2, No. 4

~~. ~~~ ~~~~~~: !:~~~!:~ ==~~!!sicn ~~~::~, ':'.?7;, ·:c:. ~, :.0. s

22. ~he ~ed.ral Election CO~ission Record, October 1975 Vol. 1, No. 2

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R3

R4

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Res;»ends To:

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Campaign Guide For 'arty Committees, March 1981

Document

Index of Document~

'age :'wo

20.

21. The Federal Election Commission Record, September 1975, Vol. 1, No. 1

24. ~~e Federal Election CO~ission Record, December 1975, Vol. 1, No. 4

2~. ~he Federal Zlection CC~~ission Record, November 1975 Vol. 1, No. 3

15. Federal Election Commission Campaign GUide, November 197'

16. Campaign Guide For Congressional Candidates

and Their Committees, February 1978

:17. Campaign Guide For Political Committees, September 1978

18. Campaign Guide For Presidential Candidates

and Their Committe.., October 1979

19. Campaign Guide For Congressional Candidates and Committees, August 1980

25. The Federal Election Commission Record, 1976, Vol. 2, No. 1

26. The Federal Election Commission Record, 1976, Vol. 2, No. 2

2i. ~he Federal Election Commission Record, ~arch 1976, 1976 First-Quarter Index

~O. ~~e Federa1 Z:ect:on C~~~ission Reeore, June :e, lSi6, Vo1. :, ~e. 6

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1'2

31. '!'he Federal Election Commission Record, 1'3

August 16, 1976, Vol.2, No. 7 R4

Doc~rnent

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II

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Responds To:

Federa: Election Cc~~i~sion Record,

:978, Vol. 4, No. 5 ..-..

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The Federal Election Cocmission Record,

May 1977, Vol. 3, No.5

3;. ~he Federal Election Commission Record, J~ly 1977, Vol. 3, No.7

3S. ':'he Federal Election Cor.:rnission Record, Augu~t 197;, vol. 3, No.8

:9. ':'he Federal Election Commission Record, Sep~e~ber 1977, Vol. 3, No.9

40. ':'he Federal Election Co~issicn Record,

October 1977, Vol. 3, No. 10

~s. :~e :~ce~al ~:e:~~=~ C=~~ss~on Recore,

';;ri 1 1978, Vol• .;, ~o. 4

42. ':'he Federal Election Co~~ission Record, Oece~ber 1977, Vol. 3, No. 12

44. ~~e Federal Electicn Cor.~ission Record, ;a~uary 19i!, Vol. 4, No. 1

43. ':'~e Federal Election Ccr.~i!sion Record I~dex 19i7, Vol. 3 issued February 1978

41. '!'he Feeeral Election Commission Record,

November 1977, Vol. 3, No. 11

32. '!'he Federal Election Commission Record

October 12, 1976, Vol. 2, No. 8

33. '!'he Federal Election Commission Record,

January 1977, Vol. 3, No. 1

34. The Federal Election Commission Record,

Februari 1977, Vol. 3, No. 2

35. '!'he Federal Election Commission Record,

March 19.77, Vol. 3, No. 3

Index of Documents

Page '!'hree

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Resl)Onds To:

R2

R3

R4

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The Federal Election Commission Record, December 1978, Vol. 4, No. ~2

53. ~he Federal Election Commission Record,

Index 1978, Vol. 4 issued March 19'9

~i. The Federal Election Commission Record, June 1978, Vol. 4, No. 6

48. ~he Federal Election Commission' Record, July 1978, Vol. 4, No. 7

49. The Federal Election Commission Record, August 1978, Vol. 4, No. 8

SO. The Federal Election Commission Record, October 1978, Vol. 4, No. 10

51. The Federal Election Commission Record, November 1978, Vol. 4, No. 11

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:ndex of Doc~~ents

Page Four

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54. The Federal Election Commission Record, January 1979, Vol. 5, No. 1

55. Tne Federal Election Commiss~on Record, March 1979, Vol. 5, No. 3

57. The Federal Election Commission Record, April 1979, Vol. 5, No. 4

58. The Federal Election Commission Record,

May 1979, Vol. 5, No. 5

69. =he Federal Election Co~ission Record, ~~ne 19i9, Vol. 5, No. 6

60. =he Federal Election Commission Record, ~u11 1979, Vol. 5, No. 7

:5. =he Federal Election Co~~ission Record, February 1979, Vol. 5, No. 2

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Responds '1'0:

~he Federal Election Commission Record,

April 1980, Vol. 6, No. 4

~he Feceral ~lection Cor.mission Record Supple~ent, ~arch 1980, Vol. 6

::.,-: :~~-=':!=.:': !.:==~~.:~ '':o:-=.~:$:',j~ ~.e.:c=c,

Se~:~ber 19aO, Vol. 6, No.9

~~e Federal ~:ectien Co~~ission Record,

Cc:ober 1980, Vel. 6, No. 10

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OOcu:n_nt

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i4. ~he Federal Election Co~ission Record,

August 1980, Vel. 6, No. 8

72. The Federal Election Co~~ission Record,

May 1980, Vol. 6, No. 5

i3. The Federal Election Commission Record,

June 1980, Vol. 6, No. 6

i5. ~he Federal ~lection Commission Record S~~ple~ent, Aug~st 1980, Vol. 6

iO.

6~. The Fede~al Election Commission Record,

March 1980, Vol. 6, No. 3

R2

62. ~he Federal Election Commission Record, R3

September 1979, Vol. 5, No. 9 R4

63. '1'he Federal Election Commission Record,

October 1979, Vol. 5, No. 10

66. ~~e Federal Election Co~aission Record,

February 1980, Vol. 6, No.2

!~d_x of Documents

Pag_ Five

64. The Federal Election Commission Record, November 1979, Vol. 5, No. 11

65. The Federal Election Commission Record,

December 1979, Vol. 5, No. 12

66. The Federal Election Commission Record

Index 1979, Vol. 5 issued March 1980

-·67. The Federal Election Co~ission Record, -. January 1980, Vol. 6, No. 1

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80.

81.

82.

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Index of Documents

Pase Six

Document

The Federal Election Commission Record,

November 1980, Vol. 6, No. 11

The Federal Election Commission Record,

December 19~0, Vol. 6, No. 12

The Federal Election Commission Record

Index, Vol. 6 issued May 1981

The Federal Election Commission Record,

January 1981, Vol. 7, No.1

The Federal Election Commission Record,

Febuary 1981, Vol. 7, No.2

The Federal Election Commission Record,

March 1981, Vol. 7, No.3

The Federal Election C~ission Record,

April 1981, Vol. 7, No.4

85. ~be Federal Election Commission Record, ~ay 1981, Vol. 7, No. S

26. The Federal Election Cor.~ission Record, J~ne 1981, Vol. 7, No.6

87. The Federal Electicn Con~ission Record,

July 1981, Vol. 7, No.7

88. The Federal Election Coronission Record,

Augu5t 1981, Vol. 7, No. 8

89. Report On Study of Selected Sampling Procedure by Erns~ and Whinney, September

1979, 41 page5.

90. PPS Sa~pling :mple~entation Guide oy Erns~

and Whinney, September 19i9, S6 pages.

91. Study of ~he :ederal Election Commission's a~di~ f~nc~icn an: the rcle i~ plays in our cc~~~~yt! ~c~~~~~~: a~d e:ec~~~~: $Y5~:~, :y the Aceoun~ants for the ?u::ic !n~ere5t,

Sept~~ber 1979, ~i page5.

9~. ~~~nca Occ~~en~ #i9-:Si, ~ernorancum :0 Cc~~issioners :ro~ Orlando 3. Potter re: ---

Responds To:

112

R3

R4

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R2-1

R2-2

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,-

R2-l

R2-2

R2-4

a2-l

R2-2

a2-1

R2-1

R2-2

R2-1

R2-2

R2-2

Res1:lOnds '1'0:

Revised Proposal for Implementation of

aecommended Changes in Commission Audit

Policies and Procedures -- Part 1, October

23, 1979, 11 pages.

;. ."

~9. Me~c~ancum ~o ftuci~ S:a:: ~~cm aoe C09~a

re: Audit Opinions, October 30, 1979,

:. ?ac: e.

ge. ~eDorandum:o Aucit Staff :ro~ Bob Cos:a

re: ~eadlines !~posed by the Co~nission

regarding Post Audit Work, OGC Review, and Co~~:ss:on Review 19S0 Presicential Auci:s,

96. In:erna1 Document to Audit Staff from

Sob Costa re: Cc~~ission Denial of Extension Requested by Presidential Committees,

August 20, 1980, 2 pages.

97. Memorandum to Audit Staff from Bob Costa

re: Miscellaneous Procedural Changes ~eferencing and Audit Manager Review,

October 30, 1979, 1 page.

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95. ~emorand~~ to Audit Staff f=om Bob Costa,

=e: Miscellaneous Procedural Changes, October 30, 1979, 1 p~~e (procedural chan-= es recommenced by the Commission

in its meeti~g 0: Cctooe= 25, 1979

du=ing discussion of Agenda ~ocurnent

~79-287).

94.

93. Commission Memorandum No. 820, Memorandum'

to Commissioners from Orlando B. Potter re:

Implementation of Recommended Changes in

Commission Audit Policies and Procedures,

March 21, 1980, 39 pages. (Includes as

Appendix 1, Document 92 above).

Internal Do~~ent to Audit Staff from Bob

Costa re: Audit Program for Recipients of

Presidential Election Campaign Fund Payments

Pursuant to Chapter 95, Title 26, United

States Code - Approved by th, Commission

on Ja~uary 15, 1981, 34 pages.

Document

Index of Documents

Page Seven

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(Con't)

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R2-1

R2-1

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R2-4 "

R2-1

R2-1

R3-1 R4-:!

R3-2 R4-3

R2-1, R4-1

R3-1 R4-2 , R3-2 R4-3,

Responds To:

~e: ?rc?c~ec ~evisicn! to Cc~.issicn A?provec ~a~eria::'~y T~~es~c:cs :c~ ~~ci~s, Septe~ber 9,

:980, 1.; pages.

Memorandum to Audit Staff from Bob Costa

re: Ooc~~entation 0: Major Deviations From

the Audit ProgrL"Il and Procedures, January 25, 1980, 1 page. -

106.

-'

le i .' ~er:"leranc;:::I ~o ,Audi ,Sta:: :~o:: Sob Costa,.

re: P~cper Werding 0: Fi~al Audi~ Reports Containin:: Hatter~ Refer~ec 'to' the Of fice 0: Gene~a1. Co~nsel,:e=~~ary 27,lSeO,

1 ::aqe.

100. Memorandum ~o Au~it'Staff from Bob Costa ~e: . Standardized Workpaper Indexing System, Nove."Il!:)e~2, 1979," 3 pages.

101. Memorandum to Audit Staff 'from Bob Costa

re: Audit' Reports With No Findings and

Non-Committee Reports, November 2, 1979,

2 pages.

102. Memorandum to Audit Staff from Bob Costa ~e: Addendum to Memorandum S-6 Dates

11/2/79 Subject: Audit Reports With No

Findings and Non-Commit~ee Reports, ,December 4, , 1979, 1 page•

Memorandum to Audit Staf~ from Bob Costa

re: Committee R~cords Which Are In,an .Onaudi~~b1e State, ~anuary 18, 1980, 2 pages. " , ,

Document

In~exo~ ~c~~.n~,

Page ::iSh~:

:Me:no!:andurn to Audi Sta:: from Bo!:) Costa

r9:' Deacli:'!es ·!:n~csed··=" ~he- :otrimi'ssion

-Resareins ?os~ ,;~c:it, ~crk, OGC ,Review, , and -Co~~ission ~eview, For All Title 2 ,;uc:'~s, January 14, 1980,3 pages.

,105. " !no:ernal!1emorandum to 'Audi~Staf: from

aob Cos~a re: Materiality Thresholds for , Aud its, January 21, 1980, , 26 pages. '., ... ,

.... -. .. 103 •

.' -

-.... .

..r: 10.; •

rt,

t--...

r;,
•

•

R2-3

R2-S

R2-3

R2-S

R2

R3

?4

R2-3

R2-S

R2-3

R2-S

R2-3 . R2-S

R2-2

R2-S

R2-1

Responds '1'0:

Micre:iL~ 0: the 1975 Car~er Audit (General), ~,500 rages. Availa:1e in ?u:lic Recerds Office.

Ccrnou-:.er-aeneratec indices 0: Commission ~ction Items - Includes lis~inc of ~a~ters =iscu~~e~ in C;~~ Ses~ien :rorn-1977 te t~e . .- ;=~~~~: - r~:r~!·:~: :~== :~e C~~?~:~= =~$a

~~=e~ ~h4 :ollc~~~9 tex~!: Auci:, Po:~cy,

Proce~~res, Re~a~~ent, Er.tit:e~ent, prepared August li, 1961, 30 ?ages. Oocu~ents lis~ed

cn indices are availacle in the ?ub:ic Records C~ ~; "'A~ ---'--,,,'

Micrefilm of 1975-1980 Final Audit Reports by FEC, 2,064 pages. Available in PUblic

Records Office.

1981 Final Audit Reports by FEC, approximately 90 pages. Available in Public Reeords Office.

Alphabetical Index of 1975-1980 Final Audit

Reports by FEC ~hich have been released ~o

~he public, 27 pages.

Index 0: 1981 Final Audit Reports by F~C

which have been released to the Public

(chronological order), 3 pages.

..

~~-I •

115.

• • 2 .;.~ .

114.

..- ~~~ .

111.

!

110. Letter to Chairman Thomas E. Barris from R2-2

Royston C. Hughes, Treasurer of the Presiden~ R2-S

Ford Committee re: findings and conclusions in

the interim report of the Audit Division on

the President Ford Committee (General Election), February 17, 1978, 1 page.

Letter to Chairman John W. McGarry from Carol

Darr, Deputy Counsel for Carter/Mondale ReElection Commi~tee, Inc. re: Interim Report of the Audit Division on the Carter-Mondale

Re-election Committee, Inc., June 28, 1981,

4 pages.

109. Direc~ive No. 22 Memoran~um to Commission

Staff from Orlando B. Potter re: Placing On The Public Record Of Interim. Audit Reports Considered At Open Commission Meetings, June 15, 1979, 1 page.

Document

In~ex of Oocuments

Page Nine

-0

--

"., ".J

-,

c

1' ..
•

..

..

R3-5

R3-7

..

..

.-

..

R3-2

R3-4

R3-7

R4-l

R4-2

R2-2

Responds To:

R3-3

R3-4

R3-7

. .'

?~eoosed rule~--~eceral Recis:e~, Vol. 45, ... ~o -96 , -""'''5'':-., •••_.'--G..;I"! Ma' __~: , _~-:,"'o- .. 0, ••::laces ..)-"00"- .. _

3:0l1: ~e: ?u=l~c :inanc~nc of ?resicential Gene~al ~lection Ca~?ais~s·

~etter to Tr.c~as P. O'~eill, Jr., Speaker,

U.S. Heuse of Represe~:atives ~e: t~ar.srnittal

ef propogec requla:ions to administ~ation of ~~: :~~~~~~~~:~: ~:~C~~~~ Ca~;a::~ :~~C ~~~:

i ig:::~ ::~. Ma:< :'. :=~&ders·=-:.:::, ~., .:.~/;~

Official communication to President of the

C.S. Senate from Chai~an of the FEC reI

proposec requlationsl received by S. Hein,

6/13/80, 4:20

( .. )

( : )

120.

l~~. File: Re~ulations - Office ef General Counsel

Lette~ to Walter F. Hondale, President,

u.s. Senate reI transmittal of proposed regulations to administration of the

Presicential Election Campaign Fund AC:l

siqr.ec by ~ax L. rriedersdorf, 6/13/80

(1) Official communication :0 Office of :he

Speaker o~ the House o~ Representatives f~o~ Cha~:~an of the F~C reI proposec regulatiens~ received by H. Koach, 6/13/80,

4:15

118. Co~pute:-g.nerated MOR indices - Includes

listing of closed HURs citing to 26 U.S.C.

SS 9007 and 9004, 2 U.S.C. SS 441a and

441a(a)(1)(A), prepared August 17, 1981,

47 pages. Documents listed on indices

are available in the Public Records Office.

119. File Drawers containing 1976-1981 Draft

Interim and Referred Draft Final Audit

Reports and Comments from the Office of

General Counsel (includes: Presidential,

Congressional, Party and Non-Party), approximately 5 feet thick. .

Two paqes from Advisory Opinion Index

(updated August, 1981) which cite to

2 U.S.C. S 441a and S 441a(a)(1)(A), and 26 U.S.C. S 9004 and S 9007.

Opinions listed on index are availaele

in the Public Records Office

Index of Documents

Paqe Ten

::>ocwnent

--

c

';'. ( 2 )

C

~\~ (3 )

, .

-:'

... ,
•

lU-5

R3-7

•

..

•

•

•

Re.ocnds '1'0:

(6) FEC Agenda OCcument No. 80-163 (to the

Commission through OBP, :~om CNS , PAF,

5/2/80) re: General Election Public

Financing Regulation. (agenda item for

5/8/80 meeting) with attached propo.ed

general election public ~inancing regula- tions submittec for overview discus.ion

by the Commission

(7) FEC Agenda Document No. 80-180 (to the

Commission th~ough OBP, from CNS , PAF,

5/16/80) re: attached proposed general

election public financing regulations

circulated for Co~~ission consideration

at 5/22/80 meeting

(8) Memo to Co~issioners from Staff Director'. • Office re: Commission Memorandum No. 939---

General Llec~ion Regulations and Explanation

and Justi~ication: Chapter 95 of Title 26

(deadline F~iday, June 13, 1980) dated 6/11/80

(9) Memo to the Commission (tr.~ough OSP, from C~S & PAF, E/10/80) re: General Election

Regulations and txplanation and Justification: Chapte~ 95 o~ Title 26 (final version,

circulated on tally vote basis) (Commission Me~orand~m No. 939)

•

..

(~~) ~erno to t~e Co~~:ssier. (th~c~gh OBP, f~cm

c~s & PAF, 5;3C/SO, re: General Election P~~:~c Financ:r.c Rec~lations: Issues ~o

5e Resolved at ~eet:'n9 0: 0/5/80 inclucing:

(l~) FtC notice of pro?o~ed rule~aking, 11 CFR s~=c~~;:e~ .:~~ a:~=c~e: ==~:~ ':a=~$

~COl-90Ci, 900S)

(11) M~~o to the Ce~~ission (through OSP, from

CNS & PAF, 6/4/aO) re: Proposed General ~lection Public Financing Regulations

with attached ?roposed general election

public financing regulations fer ci~culation

(10) Merno to the Co~ission from Staff Director's Of~ice re: Co~~ission Memorandum No. 928--

Proposed General Election Public Financing ?egu1ations (deadline Friday, June 6, 1980),

(objection sheet-6/~/BO)

Docu~ent

Index o~ Docu~en~.

Page tleven

..

.....

,.A

.....

.'.

.....'
~l:) Le:t~r to E=ne9t ;. Galdi, Jr., Ac~in9 ~i~ector,

Office of ~he Federal ~ecis~er =e: ?~=lishing

er.~lcsed nctice ir. L! on e~ergency basis; notice >

Resoonds To: Document

"

"

"

"

R3-S

R3-7

:.:,~=.: :,:':-==-=1 F.-:·:is:,;:, ~~':":i:':E: :,.,: ::-.a;:-: :'·=::'::G~i ..:.~s

e::ec~ive as 0: the ca~e 0: pu:lica:ion of no~ice

M~~o to the Cor.~ission (through Bill Loughrey, :=c~ C~%S a~d r.:":, Sl29/S0) with attached pro~

Copy of ~ederal Reaister, Vol. 45, No. 126,

Friday, June 27, 19S0, Rules and Regulations (pages 433;1-4338;) with attached Table of Conten~s (Public Financing of Presidential

General ~lection Ca~?aigns) ,

•

•

( 16)

.) $50,000 ltmitation on expenditures

from candidate's personal funds or

family funds,

b) Loan from legal and accounting compliance fund to pay expenses incurred before the beginning of the expenditure report period, c) National committee loan to pay

expenses incurred before the

beginning of the expenditure report period.

(1') Memo to the Commission (through OBP, from

eNS' PAF, 5/28/80) re: General Election

Public Financing Regulations--Issues to

Be Resolved at 5/29/80.meeting including:

a) Threshold for detailed do~~entation of disbursements,

b) Oefinition of "Purpose";

c) S50,000 limitation on expenditures from candidate's personal funds or

from family funds;

d) Oseof federal funds to soli cite

contributions to legal and accounting compliance. fund; , e) Naticnal co~~ittee loan to pay expenses

incurred before beginning of expenditure report period;

f) Reimbursements for transportation and

services made available to media, secret

service, and similar personnel, g) Allocation of travel expenses•

(lS)

Index of Documents

Page Twelve

"'-

-.

"

..., ....

... i

-.
~l:) Le:t~r to E=ne9t ;. Galdi, Jr., Ac~in9 ~i~ector,

Office of ~he Federal ~ecis~er =e: ?~=lishing

er.~lcsed nctice ir. L! on e~ergency basis; notice >

Resoonds To: Document

"

"

"

"

R3-S

R3-7

:.:,~=.: :,:':-==-=1 F.-:·:is:,;:, ~~':":i:':E: :,.,: ::-•.;;:-: :'·=::'::G~i..:.~s

e::ec~ive as 0: the ca~e 0: pu:lica:ion of no~ice

M~~o to the Cor.~ission (through Bill Loughrey, :=c~ C~%S a~d r.:":, Sl29/S0) with attached pro~

Copy of ~ederal Reaister, Vol. 45, No. 126,

Friday, June 27, 19S0, Rules and Regulations (pages 433;1-4338;) with attached Table of Conten~s (Public Financing of Presidential

General ~lection Ca~?aigns) ,

•

•

( 16)

.) $50,000 ltmitation on expenditures

from candidate's personal funds or

family funds,

b) Loan from legal and accounting compliance fund to pay expenses incurred before the beginning of the expenditure report period, c) National committee loan to pay

expenses incurred before the

beginning of the expenditure report period.

(1') Memo to the Commission (through OBP, from

eNS' PAF, 5/28/80) re: General Election

Public Financing Regulations--Issues to

Be Resolved at 5/29/80.meeting including:

a) Threshold for detailed do~~entation of disbursements,

b) Oefinition of "Purpose";

c) S50,000 limitation on expenditures from candidate's personal funds or

from family funds;

d) Oseof federal funds to soli cite

contributions to legal and accounting compliance. fund; , e) Naticnal co~~ittee loan to pay expenses

incurred before beginning of expenditure report period;

f) Reimbursements for transportation and

services made available to media, secret

service, and similar personnel, g) Allocation of travel expenses•

(lS)

Index of Documents

Page Twelve

"'-

-.

"

..., ....

... i

-.
Responds TOI

'Index 0: Doc:uments

Pave '::'1:i.rteen

•

•

"

•

•

I

'.

t

•

•

Regulations: Elgh:ig~~s c: Changes/Pcssicle Procl~~s" (Sherri Marsha:l's co~~ents)

{::n ~e.~o tc \:CO (through CBP ~rorn ceb Costa,

6/-Z0/79) reI cuestions on Part 140-145 of t~e Coce c: Federal Regulations

announces effective date of Commission's

revised regulations to implement provi- sions of the Presidential Election

Campaign Fund Act regardinv public financing of Presidential general election campaigns (signed)

(18) ·Public Financing of Presidential General

Election Campaigns· 11 CFR Parts 100, 106,

110,140-146, 9001-9010 (signed by Max L.

Friedersdorf, 6/20/80 (Final Rule:

Transmittal of Regulations to Congress)

(19) Memo to William C. Oldaker from Ken Gross,

Clare Lindsay rea President.Ford Committee and Air Force I

(20) Memo to WCO (through OSP from Sob Costa,

9/20/79) rea Proposed Allocatio~ of

Expenses Between Campaign and Non-Campaign Related Travel .

(21) Memo to CNS from PAF, 5/21/80 reI meeting with Karl San~strom on 5/20/S0--Suggestions regarding:

a) De~inition of political co~~itteeJ

b) De~inition of quali~ied campaign expenseJ

c) Carryover of assets from primary campaignJ

d) Expen~itures by Presidential

candidate on behalf of other

candidatesJ

e) Candidate agreementsJ f) Documentation requirementsJ g) Legal and accounting compliance ~undJ

h) Pre-expencit~re report period paymentJ i) Allowable contributions,

j) Ose of payments.

Document

.

- -. •

, ..

' ...

-~

....
Responds '1'0: Docu::tent

Index o~ Doc~~ents

'age Fourteen

• .-

•

•

•

•

•

..

R3-5

R3-7

, , ,.'

Letter to FEC from Paul D. Racenar, 5/26/80

rea comments on proposed rulemaking for

public financing of Presidential general election cae?aigns submitted on behalf of

tne Citizen's Party (eligibility)

~eno ~o CNS from ~A: rea susses~ed changes

to the ceneral election regulations

($ 9002:11(0) (c), 900~.1(a) (4), 9009,

9003.l(f), 9003.3(c)(1)(A), 9004.4, 9003.1(a) (4)

Letter to FEC from =im Smith, CarterMondale Presidential Comrni~tee, Inc.,

5/20/80 re: cc~ents of tne C-M Pre~icentia: Ccmrni~tee concerning F~C's orooo~ed rea~lations relating . ., , .. . ,. . . to senera_ e_ectlon ?~e_~c _lnanc~ng

:.~;.~.:.; :.,; ~.:..: :,::.:::: :c:: ·':':'5~.! ~-:.:::-:..;=~ :'S:,

6/9jeO) re: ft:ter~a:ives to :: CFR 900~.6

--Prc~osed General ~:ec~icn Resulations (?~b1ie :inanci~s e~ Gene~a: Elec~~on!)

•

•

(24) Memo to WCO (through OBP, ~ro= Bob

Costa, 7/3/79) re: questions on part 140-145 of the Code of Federal

Regulations

(25) Memo to Pat Fiori from Judy Browning, 5/9/80 rea General Election Public

Financing Regulations---comments

on 5/2/80 draft

(26) Memo to Sob Costa (through OSP, from

CNS , PAF, 5/9/80; rea answers to

questions on 11 CFR Parts 140-145

from August 14, 19i9 Audit Division

Memo (answers to 6/20 , 7/3 mecos only)

(27) Memo to the Commission (throusn OSP, ~rom CNS , PAF, 5/2/80 with at~ach.d

proposed general election public financing regulations to be subcitted

to the Co~~ission for overview discussion

at 5/8/90 meeting

(30)

(29)

..

o

...

.,..

.. -.

....

--
Document

122. File: General Election 26 O.S.C. Regs./Audit Division contains:

Index of Documents

Page Fifteen

"

"

•

"

"

"

"

RJ-S

RJ-7

Resoonds '1'0:

, ,

Memorandum to the Commission from Charles

N. Steele and Patricia A. Fiori re: General

Election Public Financing

Regulations, May 2, 1980, 43 pages.

Memorandum to the Co~ission from

Charles N. Steele and Patricia A. Fiori

re: Proposed General Election Public'

Financing Regulations, May 16, 1960, 49 pages.

1) Agenda Document '80-190, M~orandum to the

Commission from Charles N. Steele and.

Patricia Ann Fiori rea General Election

Public Financing Regulations: Issues For

Resolution at Meeting of May 29, 1980,

May 28, 1980, 9 pages.

2) Handwritten draft of Section 9004.4(c).

•

•

~x?lanation and Justificaticn of Regulations Prescri~ed by the Federal !lecticn Commission, ~?ril 13, 1977, issued July 1977

Federal Reaister, Part II, Federal ~lection

CC~isslon Presidential !lection Campaign

Fund and Primary Matching Fund, March 4, 1979

Federal Reaister, Part IV, Federal !lection

Commission Amendments to Federal Election

Campaign Act of 1971, March 7, 1980

,

_., ....

1:!5 • .:

3)

-. "- .. ~.

.; )
• \e

AUiUst 12, 1981

FEDERAL ELECTION COMMISSION

WASHI:"I:CTOS.D.C. »a63

CERTIFIED MAIL

RETURN QCEIPT REQOES1'E1)

". .

Fred S. Eiland

Freedom o~ Infor.mation O:~icer

was_sa .($. , .a.

!'

~nclosure

Edward L. Weidenfeld, Esq. McXenna, Conner' Cuneo

1575 Eye Street, N.W.

Wa.hinvton, D.C. 20005

Dear Mr. Weidenfeld:

This is in response to your July 30, 1981, request under

the Freedom of Information Act for "FEC report prepared by Arthur Andersen , Co. referenced in Commission Memorandum

No. 820 dated March 21, 1980."

Enclosed is a copy of that report, enti~led "Review Of

the ?olitical Campaign Auditing Process" and dated September 1979.

This is a public document readily available ~~rouih ~e Ce~~ission's Pu~lic aecords Room. ~he copy is being prOVided to you at no charge.

",'

,.,

,... .. ""

..
1. Report of Arthur Young & Company dated

August 11, 1981;

......

c::nclusion

.I'/'o,JU A"~.' I '.":l 5· 3C- ·'.LC' IC""I" f1101.te", OILICIIt ••CUIICD "111.'1'1'

120" 788.7640

- ,... _IC C" ,. , CI1• ••• ~. c , e.,. '01111 a........ •• J. ~e• ·"·0110 '.1110111' .0.11 r. &.C .

,,""IC '01 ."""..... ADILI 0. "CVlft' .."." •.•oec.I' ""111& •. 111"1 •• ...... 11011., ......DIU..'

VICTOIt """" ",Ole,., "''''.1.11' •••,••.c.r•., c: "CVC. _u'''• DAVID ••C".,ICWU4 MOita .....w .. ICln .. coo.... """'I••OUO/•• .a.....coult ,_ .. .0••,.Ill.'" ,.•••OC•• •••, C.ICLI•." OOUG"" •. "'~I.'" ....ce. IU..... .",.c~•.••_ _'eoc••.'•••IY. ..It....,_

01011"" ...... ..,.••,. ,'~.e..e"" CU,"II..GIlA...... ........ '.1'''' -'1J. ...... ..."•••l1celu

.a.e., C."llII Je,nn C.11I1.e.. IIOIt'LD M.0_.".'", DCL I,."",C_ OCOItCIC r 1111....0.... "Mle Aoau....... ...e., J. 000'.' C.ltll UWIoUI' .- 'UII., c....to..VIIU .u.e ,..... c".u. Co _ .

II'CIIlA&L t. ItOleft .. .OC'.IL T _. .. c e. l1eIMe. Do ,.,,., ~OUIII e acun. C Le.. ...,e e.'0'.'_ -, u.n aca I'..e••

--_ c.

WRITEI'S OIRECT OIA\, "'UM.ER

. . . . :;.~::a:~al.

•

August 11, 1981

TWC""'·CIO"TN "~OOI

~.u W'loa"'''C 'OU~CVAIO

~O. A"OC~C•• c:.a~I'OI"'A eoolO

I.'~' ~".I'OO • J ••••UI

"10 "I~loa TOWCII

110 'U." .TICCT

.." ..I".CI.CO, c:.a~I"OI.'A ,.," ",•••~~·O'"

c:.a'~C AOOICla: MCII&"CO"" WA'''OC

TCLCX 'TWa, '10•••••0'••

TI:\,CCOlO'&1 '.0.' '••.,.••

\,AW ClI'lI"CC.

Mc;KENNA, CONNER & CUNEO

1.7. CYC .T"CCT. N. W.

W....M'NOTON. O. Co aooo•

laOa, 7••-7.00

Supplemental Response to Interim Audit

Report of the Reagan Bush Committee,

Reagan Bush Compliance Fund and Democrats for Reagan

Re:

3. Affidavit of Scott ~ackenzie.

ue....1OU MU GCH.DC.'

oIOe~ •. ' ••11

.I ~- CD 1I•..owI' ...I., IIU. c C . •,c..e~ '._ e_ a..'~c •. _ ~.

•,...... ' e ... ....e~ " c..·~U .. ·'~I.. C Lu ..o·ca...... oIO· rac.'•• , ...".. ...•••.."c•• ..........."'..... •a•••• "....." .. .'CMn 10.,... ··."••••c....". ..··" •••" ••111 I·.·.cc."'.e.. "WI. J, .,.,...

- '.e.. eDtrl e'H.r&LD .e••.,••.'C'.IIII. LU ...",."". ..e~ ••"c

1II.,eL""WC.'

C_~u C.IO•••11

Dear ~tr. Costa:

_.a. e_.loAI.I"

.LII.," ~.'I"U 'LYI" G...........10...

Enclosed please find the Reagan Bush COtm:littee's ("RBC") submission of supplemental materials in response to the Federal

Election Commission's ("Commission") above-referenced audit

repert. The su?pleQental materials include the fe11owir.g:

DELIVERED

M:. Robert J. Costa

Assistant Staff Director

for the Audit Division

Federar Election Co~ission

1325 K Street, N.W.

Washington, D. C. 20463

••ltIle"' "•. "c".e, f ..

IIOIllt ••••'.OIIt

D"'e~.·'hl. .le.AI" D.'C'" IIc.e. ....ooc•••• •

_I~"." ."ftC'"C''' ••.c...e. _,•• D.CO."CI,JI.

CD c••••" 1011""_ "•• C.II'.~" DCC' ..uYI J. ,,'hICI' "".e"c& '.1'.1' '.D'I~.I.'~.'.'

01111'" ~,'I"'II Ile•••• a.'"••• t.IU~ ,,",••

"'OC_~""'''. .tc.....A. ''''1 . 'lilt••"""C" a._D•• ""1" "·ClJ,~"I' Al.u•••a.cc. .""n•.a ... e....DI al 0101 ••IOCIW It.

'lI"o.••~.

'-.: .

i'.
c. The Reagan Bush C01IIIDi:tee d1d not realize a

?rofit from the 1980 general election campaign

cours. (!!! Report of Arthur Young & Co.,

Section C; Affidavit of Bay Buchanan, Section F, ,7>.

d. The FEC 1:Dproperly calculated che value of

che assets of the RIC on hand as of

December 4, 1980. (See Report of Arthur YOUDg &Co., Section D; Alltaavi: of Scott Mackenzie, Section G, "3 and 4).

e. Additional adjustmencs should be made to the

P3C expenditu=es reported as of December 31, 1980. (See Re?or: of Ar:hur Young &Co., Section !)7

. -

--. KobeZ't J. Co.ta Aupat 11. 1981

.a.e T--ro

that .eveZ'al ftndtnls of the audit report are lDcOZ'Z'ect and

should be s1sn1f1cantly amended before the Commission adopt. it. ftnal repoZ't. Specifically, this supplemental response ct.monst:ates the follOW1DI:

a. It was appZ'opZ'1ate for the DC to offset

tour reimbursements alaiDst other costs

lDcurZ'ed by the aBC fo: the RepUblican aat10nal Coaa1ttee (''INC''). (See RepoZ't of Arthur YOUDI & Co., Sect1on-xi

AffidaVit of Bay Buchanan. Section ", "4-6, 8 and 9).

:or :~e reasons disc~sse~ i~ our : u17 2Q. l~al letter :: ::'~:':=.l.: :=.:;~::=•. ';~ ..: ~:~:"~ :,: ::_'.:. ~_ = .~"": ~:': ,:':..:.:.;.a::.= ::-': :.: :~.,,:.:y :0: ;:.....•.aooo ~_.:.. •••=. =.---" •• •••..---.:. .....

--~ :-_=0: ---.•••• -- -

_.... --~ _••_ -_.:a.:a_IJ -. ::a.a._A_S _._.

which are :-a:evar.: :: its consideration of this ::a::e:. we are cherefore :i:i~g this submission ~der ?r:cest.

..... O.....ou

M9KCNNA, CONNC" .. CUNEO

t.: •

.,

_.

...

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o

• u.w O""'CC8

M~KENNA.CONNEll' & CUNEO

Mr. Rober: J. Cos:a.

Augus: 11, 1981

Page Three

If you have any questions concerning this submission, please contac: the undersigned.

Sincerely yours,

(;1"".l. EdWard L. weidenfeidQ ~L../JJ

ELW/sab

Enclosures

cc: Honorable John W. McGarry Charles N. Steele, Esq.
......

-.,

n

,.

CONFIDENTIAL

REAGA..~ BUSH COMKITTE~ &~ R!AGAN

BUSH COMPLIANCE FUND

SUPPLEMENTAL RESPONSE TO FEDERAL ELECTION COMMISSION

INTERIM REPORT OF THE AUDIT DIVISION ON THE

REAGAN BUSH COHMI'l'TE~. THE REAGAN BUSH COMPLIANCE FUND

AND Tm: DE!'tOCRATS FOR REAGAN

S~:=~::ec on behalf 0: the above-naced Co=:i::ees by

McKe~na. Conne~ &Cuneo A::o~eys a: Law

1575 ~ye St~eet. N.W.

washington D. C. 20005

Of Counsel:

.. ... :-:·l::~':;:',": .•• :":::~.:::::.

;·:a-':'==-=:l ::.::'g::.a::. !~ccas A. :a=:e=

..

I
. '. " w.. c:.--•• _.. -.,;. . '

.'. --:: ,

It was a~~rc?riate for the i3C to offset

tour reimbursements agains: o:~er costs

i:lcurred 'by the R3C for the Repu~licSM.4

National Coc=ittee ("R.~C"). (See Re'.:)or: - . cf A=:h~= Yo~~g i C~., Sec:icn A:

.;.:-::. :: =....:.': :.: -: i.~.. :: -:~.l~::":--.. :.;.~::..::-:. -:.

a.

.

.. . ,

This additional infor=ation confir.Qs our initial conclusion

REAGAN BUSH COtDa'rrEE A.'m REAGA.'t

BUSH COMPLIANCE FUND

SUPPLEMENTAL RESPONSE TO FEDEIW. ::UCTION COMMISSION

IN'rD.IM REPORT OF THE AUDIT DIVISION OF THE

R!AGAN BUSH COMMIT'l'D, THE REAGAN BUn COMPLIANCE FUND • AN]) THE DEMOCRATS FOIl REAGAN

•

The Reagan Bush Com=iccee and che Reagan Bush Co=pliance

Fund hereby file a supplemencal response to che Federal Eleccion

Commission's Incerim Report of che Audic Division of che Reagan

Bush Committee, che Reagan Bush Compliance Fund and the Democracs

for Reagan'daced June 18, 1981.

The supplemental maCerials include :ne following:

1. Report of Arthur Young & Company dated

August 11, 1981;

2. A:fidavit of Bay Buchanan; and

3. A£fidavit of Scott Mackenzie.

should be significantly aaended before the Commission adopts its

final report. Specifically, this supple=ental response demons:ra:es the following:

,.'

f". :hat several findings of the audit report are incorrect and

".'

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~". ,

.,

.'

l'.

o

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2

c. The R.agaft Bush Committee did not r.alize

a profit from the 1980 general election

campaign tours. (~R.eport: of Art:hur . Young & Co., Section C; Affidavit of Bay 3uchanan, Section F, '7).

d. The FEC improperly calculated the value of

the assets of the aBC on hand as of

December 4, 1980. (Se. R.e~ort of Arthur

Young &Co., S.ction~ Affidavit of Scott

Mackenzie, Secti~n G, "3 and 4).

e. Additional adjus~ents should be made to

the aBC expenditures reported as of

December 31, 1980. (See ReDort of Arthur

Young &Co., Section l)7 .
'."

•.

.....~UA ~OUNG & e:::MP.~"''' 025 ::::::~~NeC"iIC:';T ':'V!NU!. ~d:.

WASrtINGTON. Q.C. 20C35

AUIUS~ 11,' 1981

llr. Edward L. We1c1en:telel

XcXeDDa, CODner • Cuneo

1575 Sye Street, N.W.

Washulton, D.C. 20005

Dear Yr. We1den:teld~

The purpose of this letter 1s to d1scuss the prelim1nary fin41Dls

··of the procedures you requesteel our f1rm perform for KcEenDa,

CODner &~eo (as out11~ed in our eDlalemen~ letter to you dated

AUiUSt 11, 1981) relatinl ~o ~he Inte~im Aud1~ Report dateel

JUDe 19, 1981 issued by the Audit D1v1sionof the Feeleral SlectioD

COa:miSS10D (nC) on the Req2J1 Bush Committee (RBC), Realu Bush

Cocpl:'ance Fu:1ci aDd Democrats ~or RealaD. ..

The ~ollowing discussion o~ o~ ~i~di:iS is orIU:':ed as fellows:

A. :.ren:'es received rela~i:1 to expend1tu=es a:ade "'y the Republic~ National Committee (~~C);

3.

C. !:come r::.lized f:-om campaip tours;

D. I:crease 1n value of capital assets;

~. O~~er adjust~en~s for addi~ional expenditures, debts ~d obliia~ions owed by and to ~he asc, ~d voided c:ecks.

~e have ~e~ exa=:'~ed :~e !inanc1al state=ents of :~e RaC or p~C a:d,

accordi:glr we de not render an epi:ion on such !inancial s:atecen~s ~C~ ?3C or ?~C. ~e ~=oun~s cited ~erei~ ~er9 ebtai:ed ~r~m asc

',:;.:,,:,,:-::..::;- .:!.;-:~s ::- :-z: ,,"'':=:'~-=:'' -:c~:::.:; ;:.;.;~s. ':"~ ::.:l·:s :'c": .:~=.:.::.;::. s~c~ ~c~:~s to :~e ~:der~7i:i :ccu=enta~icn. !: additio:, ~e :ave

not dise~ssed o~r ~i:di:gs wi~: ~~e :!C auditors. ~~ese discussions,

as ~ell as ~~e ~er1ticatio~ p~ocess will t~e place i: t:e ne~ ;~ase c~ o~ ~ork ~c= you.

.. ,

•

Various sche~u1es and copies of

RIC documents calculating the

amount of tour costs and

reimbursements allocable to RBC

and RNC for V.P. tours 6-16 and

presidential tours 1-15.

Various schedules and copies of

RBC documents relating to tour

costs and amounts paid by RNC.

Various schedules and copies of RIC documents supporting the calculation of tour costs

and reimbursements.

Desc~1=tion

- 3 -

~ha:;es paid by Rae tcta1lins S:,395,131 (C4/7,

.. . .'

.. l_

Q ••

(a> :~epared a schedule, by tour, indicating ~~e

PEC workpaper reference

C4/1 - C4/16

In addition we have reviewed the 'response o~ the RaC to the

In or~er to arrive at the amount cla~ed in ~~ei: finding,

C3/1, C3/1a, C3/2,

C3/3, C3/4, C3/4a,

C3/S, C3/S-1, C3/6

C2/8, C2/9

3.

2.

1.

interim audit report submitted by McKenna, Conner , Cuneo on

behal~ o~ th~ ABC. We have also disc~ssed t~e issue with the

R3C employee responsible for tour finances.

the PEe auditors, according to the workin~ papers, perfo~ed the

following:

amcunt of air eha~ges paid by the ~~c totalling $1,513,049 (C4/8,

a:nount of

C4/16>:

:~C AUDITOR MET!iOOCLOGY

...

"

......

......

.'.

,~ Scott Mackenzie, present RaC Treasure~ and Robe~ts 3ass, a forme~

.......
ARTB'CR YOU:\G &. COm>A~;Y

•

Fenster

Lemmer

Duignan

cc:

~r. E~wa:d L. Weidenfeld ~cKenna, Conner • Cuneo

August 11, 1981

Page 'tWO

As & result of t~e ~atters discussed herein, we conclude that the

FEC finding with respect to the monies received relating to expen- ditures ~ade by the iNC (Issue A) is inappropriate~ In addition,

we conclude that the FEC procedures relating to the remaining issues

(Issues B-E) were deficient, as described herein, &Dd, accordingly the validity of such findings must be ·questioned. We believe

further analysis and recomputation is necessary prior to the RBC

agreeing to these findings as final.

A detailed discussion of each finding follows. Please let me know

if you have any questions regarding'this report.

- Very trolly yours,

c

"

....
./

$ 3,'018,675

266,003

S 3,284,678

a fa:e costs. :-..

Total air fare costs

Total ground costs

Total tour costs

air fare charges Coasea upon flat rate per diem :ental, plus

members of the news media. Direct costs of ~~ese tours included

BACKGROUND

ISSUE

•

Of the toeal costs o~ $3,:94,678, the ~epu=lican National

SEC'rION A

Montes received relating to expenditures made by the

Republican National Committee. ($1,138,891.24)

?~C :e~o:~s, $1,633,294 of the

their pro-rata share c~ the tour costs totalling, acoording to

q~en~ly b~:led the USSS, ~edia and the RSC Compliance Fund for

Co~~~ttee (&~C), in coor~ination with the asc, paid, accordin; to

:ilease and terminal char;es) and ;round t:anspo:tation costs ~o:

During the course of the 1980 Presidential Election

Campai;n, fifteen Presidential and eleven Vice ?resldential

·~andidate tours were conducted where campaign personnel were

accompanied oy Onited States Secret Service (0555) personnel and

the uSSS and media. ~round transportation costs for campai;n

~.. personnel are not relevant to ~~is discussion. A summary of tour

C) costs, per the records of the ABC is as follows:

..,

....'"

-

-
•

- 4 -

~iscussions wi~h aBC personnel, ...•

Prepared a schedule calculating the percentage of

Co~it~ee was not entitled to paymen~s based on ~~C

(c)

(d) Prepared a schedUle showing ~~e amount of air

charge reimbursements receiVed, by tour, totalling $2,281,149

total air charges, by trip, paid for by RBC and L~C, respec~iv.ly

(C4/6, C4/14),

~he FEC audi~ors' principal argument for ~~eir fi~ding is

It should be noted ~~at amoun~s for air charges, ground

(C4/5, C4/13)7

deter.nined to be allocable to RNC per this sc~edu1e is the

Sl,138,891 at issue (C4/4, C4/12).

costs and rei=bursements per ~he F!C schedUles did not agree to

that ••••

expenci~~res an~ ~hat these pay~ents could no~ reduce Committee

DISCOSSION

!lec~icn c:sou:sements i~ coc:dination with the ~C, and (2) the

# " '.

aBC :r~par~d working papers by $10,445, $39,490 and $106,588

""" respective1y.

-,...

(e) Prepared a schedule showini, by tour, the amount

of to~al reimbursements for air charges allocable to RNC and aBC,

utiliZing ~~e percentages derived in (e) above, times ~~e

.. ' -reimbursements derived in (d) above. The total tour receipts
T~ese pri~ciples are discussed in more detail celow.

•

the concept of proper fi:ancial presentation ~or

entities ander common, direct, or indirect .

control.

- 5 -

ACCOONTI~G PRINCIPLES

and of~set such amounts against the reimbursements received.

There is no indication in the FEC auditors' report ~~at

consideration was given to whether expenditure. were ::lade by the

RaC on beaalf of, or instead of, the RNC which were appropriately

offset against the reimbursements received.

There are two accountin; principle concepts appropriate for

consideration in ~~is discussion:

~~e concept of offsetting assets against

liabilitiesl

~rior to a discussion of the concept o~ offsett1:g, further

O!'?SET"!'ING

The appropriate accounting treatment ~or funds received on

beha:f of another entity is to record sach funds as a

ana:ysis o~ the substance of the transaction at issue must be

per~or::led.

"lia:ilities" :ound at AC~ 1025.19:

~~erican !~stitute of Certi~ied rublic Accountants ~:o~essional Accountin; Standar~s.

o

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.,-,
~~ liability to il.tqc. ~he concept of offsetting is described at AC

102;.25. -Assets ar.~ liabilities in ~~e balance sheet should net

.....,

..

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Economic obligations of an enterprise that

are recognized and measured in confor=ity with generally accepted accounting principles••••

AC 1230.028, -Elements of Financial Statements of Business

Enterprises- further ~efines liabilities as -probable future

sacrifices of economic benefit. arising from present obligations

of a particular entity to transfer assets or provide service. to

other entities in the future as a result of past transactions or

events.-

On~er the argument presented by the FEC auditors that the

o $1,138,891 represents reimbursements received by RIC for

~isbursements made by RNC, and without considering initially the

question of of~settinq, generally accepted accounting principles

(GAAP) would suggest ~~e $1,138,891 be recorded as a liability to

the il.tqC.

Given ~~at would suggest trea;nent of these :eimbursementa as liabilities of RSC, consideration must next be given to

the appropriateness of offsetting othe: costs against ~~is

=e of~se~ ~~less a leqal right of se~o~~ exists. R In practice,

~~e applica~ion o~ this principle normal11 results in an of~set

e~ acceun~s receivable f:e~ a~d accounts ?ayab~e to t~e same

en~i~1 since there is a presumption that ~~e right of se~of~

.....
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exists. Clearly, when a principal~ag.n~ relationsbip exists

oetween two entities with the legal right of setof~, of~set~ing

accounts receivables against accounts payable is the preferable

financial.presentation. In relating this accounting concept to

the FEC finding, and based on our understanding that an agency

relationship exists between KSC L~d RNC as desc:ibed to'us by

McKenna, Conner , Cuneo, we believe it would be appropriate, in , .

. fact preferable, to of~set costs incurred by the ABC as agent for

RNC against the liability to RNC for the reimoursements discussed

- above.

FINANCIAL PR!SENTA~ION FOR COMPANI~S ONDER COMMON CONTROL

Perhaps a more.~uncamental concept in evaluating the FEC,

au~i~or,fincin;s is to evaluate the :epor~in; entity itself.

~~ere ,is "substantial discussion in accountinc; 1iterature'on the

mostmeaninc;ful presen~ation of entities under common cont:ol.

The AICPA Statemen~ of Position 78-10, -Accounting Principles and

Reporting Practices for Certain Non-?rof~t orc;ani:ations- states,

in part:

For a reporting organization ~~at con~rols

anothet organization having a compa~ible

purpose, it is presumed ~~at combined ,or

combininc; financial statements are more

meanincful ~~an se~arate statements and are

usually necessary for a fair ?resentation in :=~:-: t"~':. ••: t.:~. -:~ ;~::-== 3.:::' ~~.='!::"::-:

ac=o~~~in; ~=~nc~ples. Con~:c: mea~s :~e

~irect or indirect agility to determine the ~i=ection of the manacement an~ ~olicies

t~:ouC;~ ewners~:'~, contract or ot~er·.:ise.
!.... agreement was reached. whereby the BEC and the Ro.~C coordinated the

disposition of t~e Ro.~C's Presidential Election Fund.

,,"...

•

. -·8 -

The sta~ement loes on to say:

••• combined financial statements should be presen~ed it (1) con~rol exists ••• and (2)

aDY of the followins circumstances exists:

a. Separate entities solicit funds in the

name of and with the expressed or 1mplici~

approval of ~he repor~ing organi:ation, and

substantially all of the funds solicited are

intended by the contribu~or or are otherwise

required to be transferred ~o the reporting organization or used at its discretion or

direction.

b. A reporting organization transfers some

of its resources to another separa~e entity whose resources are held for the benefit of

the reporting organization •

.c.· A reporting oriani:ation assi~s

functions to a con~rolled entity whose ~und1ngis primarily derived from sources

other than public contributions.

I: the case o! the 1980 Presidential Election Campai~, we

UDderst~d both the !BC and ~~C, as to its ~residential Election

Fund, were in operation ~ort~e same pur~ose, cade expenditures

tor t~e s~e purpose, ~d were gover~ed by the same legal

requirements. In addition, it is cur understanding that an

~ot~ithstanding the separate statutory requirements as to

spend1~g li~~tations for the aBC and ~jC, we believe there is

subst~tial s~pport in G~~ to suggest the most mean1ngtul

prese:~at:c: c: ~:e fi:ancial res~:~s o~ ~:e Reagan Bush Preside:tial !lecticn Campaii~ would be to cocbine the activities of the

RBC a~c ~=e ~;c , Presi:en~ial !lec~ic~ F~:d. Such a coccined

t.

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Tours Method

VP 6-; 150' o~ Fi:st Class rare P 1-7 150' o~ First Class rare VP 8-16 Actual P 8-15 Actual

(VP tours 1 to 5 did not have USSS or media accompanyment).

Page 11 of the FEC au~itors' report states "The analysis of

available records supporting the actual cost of services and

~acilities made available to the news media, Unites States Secret

Service and Compliance Fund personnel disclosed that ~~e aeasan

Bush Committee realized inCOme in conjunction with the

. presidential and vice presidential to~rs of at least $50,588.48

($1,294,704.10 reimbursements less actual cost $1,234,115.62).-

., In its response on behal~ of t~e RSC, McKenna, Conner & Cuneo

reject the!!C :i~~in;s, statins that "in ~act a~oss of more

than S19,000 was incurred on ~,e presidential tours.· (Vice

?residential tours were not ccnsider~d as both the ~C and FEC

c asree ~~at a loss occurred on these tours.)

In assessing ~,is findinq, we have reviewed the auditors'

r:: working papers C4/1 to C4/16 which calculate the profits (losses)

for each of presidential to~rs 1 to lS a~d vice presidential

tours 6 to 15.

In addition, we have reviewed a workin; paper prepared by

~C ?ersonnel in suppo:t 0= t~e S18,000 ~ess inc~~d~d in """- .-.-






•

M!:'!'!!ODOLOGY

$10,76!.58

64,628.21

575,393.79

(105,000.00)

(995,989.98) S 270,431.52

2 -

subtracting payments to ~e Internal

Revenue Service which were not subject

to statutory limitations (~-6/7-0)

SUbtracting receipts and

retnbursements (Z-4/1.2)

....

,

totaling the amount of cheeks recorded

in cheek stubs from March 27, 1981 to

March 31, 1981 (E-6/12)

:~~~~= ~c~~_~:~ ~~.~~:~ a~ c~ Ap:11 ~,

1981 as ;:oviced·~Y ~c (~-6/10.1)

o

o

o

Debts and ob1iaations owed =v RSC at March 26, 1981 _ 575,393.79

The F!C auditors working papers (~ 6/7-0) indicate ~~at the

the auditors reviewed individual expenditures to determine

Additional ex~enditures from Januarv 1,1981 through March 26, 1981 subject to liMitatIon - 5270,431.52

The FEC auditors' working papers (Z 4/1, E 6/7-0) indicate

that the calculation of additional expenditures of $270,732.52

for the period was done by

o totaling the amount of checks recorded

in the check register from January 1,

1981 to March 26, 1981 (Z 6/12) $1,371,421.50 .

whether they were compliance related and should have ~eer. char;ed

to the Compliance Fund.

We found· no evidence in t~e workin; ;apers to indicate whether

amoun: was determined by:

.. ./",


•

A F F I D A V I T

.,

'I

!

Bay Buchanan, being duly sworn, deposes and state. as

follows:

[~ 2 o.s.c. 55 432 and 434.]

. 1. From its inception to January, 1981, I was Treasurer

In that capacity, I was

prescribed by law for the Treasurer of a political campaign

committee.

Chief Financial Officer and responsible for those duties

';

I

II

::

:j of the Reagan Bush Committee (WRBCW). !I

.!

I

II

:i

H

i!

,.

2. The purpose of this affidavit is to respond to two

major issues raised in the FEC's interim audit report of the RaC,

~, funds transferred between RaC and the Republican Naticnal

Committee ("m~C") and funds expended for compliance activities.

3. The Reagan Bush Com:nittee was the principal 'federal

campaign cOtn."'l\ittee of Ronald Reagan, the Republican presidenti'al

nominee for the 1980 general election. By law, Rae was

authorized to spend $29,440,000 in the 1980 general election I

!

campaign. As the National Committee of the Re~ub1ican party, thel

.: ~~C was authorized to expend approximately $4,700,000 on behalf I

of the presidential nominee. 1i

I

! 4. With respect to the transfer arrangement between RaC i

and the R~C, at the outset of the 1980 presidential campaign the

CO~"'l\ittees made a cO~"'l\itment to spe~d the legally permissible

..~A~""~;~=- -:-.. _..._..

--. !~ =oc:ci~ati~; thei: cam~a:;n ~xpend~~ures, i~ was

agreeC;:. by t;,e :or.".::i ttees that the R..~C would assume responsibilit

:cr certai~ ccs~s i~c~rred :y RaC duri~9 t~e campaign. To ~his

e~d, ce:~a:~ desi;na:ed' air :are i~voices received by RBC we:e
•

- 2 -

service and the pres., for their pro rata share of the t:an.-

"

6. RaC billed the paying passengers, primarily .ecret

expenses. These amounts were then attributed to the RNC to

account for various campaign costs incurred by the RBC on behalf

This amendment accurately reflects the underlying

,

i

portation co.t.. RaC also obtained the reimbursement. from tbe.el

passenge~s. These funds were retained by RaC and used to offs.t 'I

RaC expenses that otherwise would bave been paid by the KNC.

7. The Reagan Bush Committee did not realize a profit

from the campaign tours. During tbe general election, daily

records were maintained as to tbe actual expenses incurred by the

press and secret service and a great effort was executed to

ensure that tbese parties were accurately and equitably billed.

A final review at the end of the campaign clearly indicates that

these parties were not overcharged as actual tour costs incurred

by the campaign exceeded tour reimbursements•

8. On April 1, lS81, RaC filea a~ amended report. In

that amendment, the RaC deleted $748,163.16 in previously

repor~ed refunds and $;48,163.16 in previously reported operating I

of the RNC.

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transactions between the Committees.

9. R3C ac~ed as the RNC's agent in managi~9 ~~C's

campaign expenditures in the manner discussed acove. ~~C, in the:

role of the pri~cipal, raised funds and paid expenses of the ?3C.

i ts agen~, ;.,.~ ~h t!':e ?~:c :.o:i:nately :etaining :~e power to cont:ol

.....

,

•

- 4 -

~~L,.. Buchanan l .

and sworn to before me this /I ti- day of

, 1981.

14. With respect to all of the matters discussed above,

I

. i

I maintain and submit all the information reqUired by the Act for al

!,

I

I

!

I

as the Treasurer of RIC I used my best efforts to obtain,

political committee.

My Commission Expires:

Subscribed

'. k:==6~ V

'",

,:-.

!'.


,

Edward L. Weiden~eld, Esq.

Paqe '!'Wo

•

AUc;u.~ 4, 1981

-.

. :

~; .;.: "

......

"-.

~' .. 0,::;,<. O' (!i.'

not required by statute or requlation, the issuance of an

interim audit report and the opportunity to respond to such

report are amonq several informal steps in the audit process.

As a part of the process, they must be viewed in liqht of the

entrance and exit conferences, the audit fieldwork and the

qeneral availability of the audit ·staff to answer questions and to provide relevant documents both durinq and aft~r the

audit fieldwork •

It has been Commission practice to allow committees of

pUblicly-financed candidates a period of 30-days from receipt of an interim report to submit responses to matters contained

in the report. Such res~nses are reviewed by the Audit

Division prior to makinq any recommendations to the Commission,

and are considered by the C~~ission before votinq on the

contents of the final audit reoort. While the Commission has

not qranted any extensions of time in which to submit responses

to in~erim audit reports in the 1980 election cycle, the

audit staff has continued to accept supplementary materials

to such responses durinq·the process of pre?arin~ a reco~~ended

final report to the Commission. .- Whereas additional materials are al~ays accepted, I am

sure you can appreciate ~~at at some point t~eir consideration must be c~t o:~ ~or the purposes o~ issuing a final

audit report. W~ere the ~aterials involve a :epa~e~t

dete~ination, however, they are considered pursu~~t to

11 C.:.R. 5900i.2, discussed above. Moreover, to date Co~~ission practice has provided for adcenda to the :inal a~dit report being made a part of the pu~lic record.

In your letter, you requested an opportuniey to supplement ~he Committee's response of July 20, 1981. Consistent

with the above explanation o~ ~e audit precess, the Commission

has decided to grant an extension of time until August 11, 1981

for the Co~ittee to submit materials suppl~~enting its respo~se to the interim audit report. As noted above, the

Audit Division will review any supplementary materials su~~it~ed before A~e~st ~l, ~9Sl prior to rna~in= its recom- menda~ions to the Cc~~issic~: and the Co~~ission will consider

the. Ccrn=ittee's reponse, as s~pple~ented, be:ore deciding on t~e ccn~en~s 0: t~e final audit report.

~a~~~ c=~=~~~ ex~=e$se~ i~ 7C~= le~t9~ i~v=:·,~~ the

:".::.:':-:; :: =.;::a;·~,::;:-.:. =-=::.:= ..:.>.; :.:.=:-..-:.:...;~:.::: ::-.~.:-=': =':;:. =.:l

~~:~~a: :e~a~~en~ ce~e~i~a:ic~ unce: 25 ~.s.~. §900~(=)

and ::. C.:.R•.S9007.2, the Cc~i~~ee's =es?o:lse to -:he in~e~~~ =e?c:-: wil: :e c:nsi=e=ed and eva~~a~ed. ~o ~~e ex~en~

~~a~ a =epa~~e~~ ce~e~~~a~~c~ is ~ase~ ~~C~ a 3u:s~a~~~al

.J ...
~cwar~ L. W.id.n~.ld, Esq. p~ie Three

August 4, 1981

.'.

!,.

... ..' -

violation of the Federal Elec~ion Campaign Act of 1971,

3S amended ("~e Ac~") or o~ Chapter 95 of t~e In~ernal

Revenue Code, the Act and Cc~is$ion r.gula~ions provide

the Committee with appropriate procedur~l safeguards.

Moreover, the Audit Division has yet to make a recommendation for repayment. The figure of $1,583,755.01 on paqe 18

of ~~e interim report to which your let~er re~ers represents

'a preliminary calculation and should not be interpreted as - a Co~~ission deter.mination. The Co~~ission'has yet to

make any repayment determinations with respect to the , Committee.

It should also be pointed out that an initial repayment

determination under 11 C.F.R. $9007.2 need not be contained

in a final audit report. Where a potential repayment involves

issues that have net been resolved to the Co~~ission's satisfaction and where a sufficient record has yet to be developed,

a repayment deter.mination based on such issues may not be

contained in the final audit report. '

As previously indicated, repayment de~er~inations of t~e Commission are not always ccntained in the ~inal audit

report. Reiardless o~ the tL~inq of the repa~~ent ce~er.minat~on, however, the procedural safequards 0: 11 C.:.R. 59007.2 at~ac~ onlv when the Co~~ission makes such a determination. !nasrnuc~ as ~he Co~;ission has made no repa~~~nt determination wi~~ respect to ~~e Co~ittee, your request ~or a hearing at ~~is time is pr~~ature.

The Co~ission would li~e to address t~e Co~~it~ee's

request ~or the underlying record of the in~eri~ audit

re?ort. The Co~it~ee was provided with the interi~ audit

report on June 18, 1981. Or. July 7, 1981, the Committee

recuested an extension of tL~e in which to submit its res~onse.

The Committee, on this same date, also made a,re~~est under

the :reedom of Infor:natio:'1 Act (":OIA") for certain docu.~ents

relating to the fi~dings and reco~~enda~ior.s 0: the Aud~t

Division as contained in the interim report. 'l'he doc~~ents

requested were provided to t~e Cc~~it~ee en July li, l~Sl.

The Cc~~~~tee ~as a?pare~tly scuq~~ ~~ link t~e :C:A ~e~~es~ to i~s Cp?c:~~nit1 to ~espond to ~~e interi: =e?cr~,

al~~c~gh t~e eoc~~e~~s providec to you unce~ :C!A cou:d have :ee~ c=~a~~ec by in:c~~a~ly =eques~~~q ~he~ 0: t~e Auci~

s~a~~ a~ t~e ~xi~ c=~~e=e~ce of ~~3:ch ~7. l?E: c: a~·a~y

~~=s ~~~S~~~~~~ ~~~=~::. :~ ~~~~ =~.;~=~. i~ ~s ~~s ~~~e:­

5~a~~~~; ~: ~~e C:~~issio~ ~~a~ a~ nc ~~~e c~=~~9 ~~e a~:~:

;:ccess c~: ~~e Co~~~~~ee ~e~~es~ a~: :=c~~s~~s ;:~~~:ec

~~=e= :C:A ~~a: t~e ~~C~~ ~~~~si=~ :a::e: ~~ =e:~$ed ~~

;=:~~~e. :~~ge~, ~a~y c~ ~~~$a F~:A ~c:~~e~:s c=~!is~e~ o~

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IICII"••• 7640

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July 30. 1981

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MIWKENNA, CONNER & CUNEO ••7. C'I'C ."_CCo:'. N w.

-,OI'NOTON. D. C. 1000•

.Ioai 7••-7.00

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?~rs~an: to :he :reedo: 0: !nfo~a~icn Ac~. 5 U.S.C. § 552,

as ~er.ded. and the regulations appeari~g a~ 11 C.F.R. Part 4, re~uest is hereby made on behalf of The Reagan Bush Cou.:i::ee and

The Reagan Bush Compliance Fund .for disclos~re ar.d produc:icn· for i~s?ection and copying of ~he doc~~en~ descri~ed below:

FEC repor~ prepared by Ar~hur Andersen & Co.

referenced in COT:::lission ~1e::tcrandu:n No. 820

dated March 21. 1950.

-- FO!A Officer

:ecera1 Election Cc=mission

1323 K St=eet, N.w. ~ashing~c~. D. C. 20463

Re: F~eeec~ of !~=c~a:io~ Ac: Rec~est

................ _H.' .--~io etCVC. .....-

Res?ons~ve doc~er.ts are re~ues:ec tc be ?rcc~cec in t~e~r

e~:~=e::, i~cl~c~ng all a::ac~~e~:s, encles~res, and exh~bi:s.

:~ :~e even: :hat it is de:e=rnined :ha: a doc~~e~~ ccn:ai~s

=a:e=~al 0= i~:o==ation w~ic~ :a11s wit~i~ the s:a~~:o~y exe=;:ic~s

-- ~-_..:_-c~·~ c~sc'cc:u""e .j-':s e...·~ ... Ass'V 't'Ac··ee-ec -~ .. t s', ... ..... •••.:;. ..... .... __ __:_:;:_ .... :. _ •• ~. __• _ ..... lo •••"c ._ .

::-.;a-:;=~.:l_ ::.- _.. _'.. _...=__lw •• iJC =~.... ~=~.:.:= ::~ ~c:.:~~:.-= 1::'':C=r~::''::-.~=:\:

c~sc:os~=e. Si~~la~l:. ~~ t~e eve~: :~a: l: ~s da:e=~~~=c :~a~ a c~c~=e~~ cc~:ai~s =ate=~al C~ ~~:c=:ation ~hich :al:s wi:~~~ :~e

s~a:~:c=: exe=?:~c~s :0 ~a~ca:==: cisclcsu=e, ~: ~s ex?=ess::

·"'.1 . •1'·•••• .", .. ...r" ....-e . .....~·.I.·. l1li..1. .

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:he undersigned hereby agrees to pay the Uni:ec States all d~r~c: cests incurred uncie:, applicable regulations ir. the search fc~ ~~C c~~:~ca:~c~ 0: :~e ~eqces:ed doc~e~:. Eeca~se 0: the ~~_~~~: ~eed =0: ~~e cioc~me~: desc~ibed above, i: is =ec.~es:e~ :~at cO' :c~r agency ac~ere to the ti~e li~i:aticns set for~h at 5 u.s.c. ;::\a)(6)(~) in =es~oncing to :h~s request.

.,~'i. "'.~ . '.. ;";-' "'\ ~~

• .. ~w

•

req~es~ec ~ha~, in acco:,dance with ~he provis:'ons of 5 u.s.c.

§ 552(b), any and all reasonably segregable port:'ons of such doc~ent be produced.

F01A O:::'ce:' ~ulv 30, 1981 Page Two

\,AW c:rr,:cs

'ENN., CCNNER & CUNEO

In ~he event chat it is deter:ir.ed that you:, agency has,no - doc~~nts· responsive to any individual request item (0:' portion che:,eof), w~:'~~en confirma~ion 0: such fact is specifically requested.

This requesc cons~itutes nocice of decand for produccion of the above-described docuoenc for purposes of inspection and

copying. If fo:, any reason it is decermined that any document

or po:'tion the:,eof will not be made available to the undersigned,

or that th:'s :,equest will not, in whole or in part, be complied withJ prowpt no~iee of any ac~ion taken is solicited. In addition,

it .is specifically :,equested that any document or portion thereof

,- which ~ill no: be produced :0:' inspection or copying be individ~ally

icen:~f~ec and described, and the basis for non~roduction ex~la:'r.ed by reference. to both the sta:u~ory authority fc= and the factual , c~rc~=stances rel~ed upon in the cieter~ina:~on :0 ~~th~old access.

( ,


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M';KE~N"'. CONNE~ & '-l.INEO

, .

• "j In! -:;, ::",. 0&1' • "0••.•-.1 ••

Fe!;..

Jul:--

?ase

O::ice:

29, 1981 ..... ...""

. "'

".....

,....... -, .

4. ~~y agency policies, pronocncements, rules or guide- li~es which indicate tha: a contribu:ion, as defined in 2 U.S.C.

§ 431(8)'A)(i), is no: ~ade when an individual incurs expenses

on behar: of a political co=mittee 'and receives a subsequent ° 0 rei:nol:.=se:tent. ..

Responsive doc~en:s are reGuested :0 be produced in their

entirety, including all attachments, enclosures, and eXhibits.

In the event :ha: i: is de:e=mined that a document contains ~a:erial or in:o~ation which falls within the statutory exemptions

to ~andatory disclosure; it is expressly requested that such

=a:erial or information be reviewed for possible discretionary disclosure. Similarly, in the even: :hat it is determined that a dcc~~ent contains material or information which falls wi:hin the sta:~:ory exemptions to mandatcry disclosure. it is expressly rec~es:ed that, in accordance with the ~rovisions of 5 U.S.C.

§ 552{~), any and all reasonab~y segregable portions 0: such docu-

=.en: be ~roc~ced.

:~ :he'event that it is deter=ined that you= agency has no ccc~=c~~s =eS?O~Si7e :0 a~y in:ivicual =eques: i~e~ (or jc:~icn

t~:=eo:), written ccnfir:a::cn 0: such fact is s?ecificail~

:-ac-..;es:ec.

~~~s =e~~=s: co~s~i:~:es ~c:~ce c: ce~anc :c:' ?=oc~c~io~ of :~e a~o~e-cescribeci dec~ents for purposes of inspec:icn and CO?y- ~~g. != :c~ any ~easc~ ~~ is de~e~1~ec ~~a~ a~y coc~e~~ 0= .

?c:::~~ :~ereof will net be :ade available to the undersigned, or =~a~ ~~~s :eq~es: will ~o:, i~ ~~cle C~ ~n ?a=~t be coc?l~ed wi~h,

;=~=?: notice 0: ar.y action ta~en is solicited. I~ addition, ~t

~s_ c~e~~:;~a'~v _~ • -e~ues-o~ _ '-_'" -~-- '-.'G.'- G._'., --v doc"~e~- ........ .... 0-_ ~~~-;en :-,-,Y. __ -he~eof t.__ ~~:l nee ~e ?roduced :or inspection or co?ying be individually. i=e~:i:ied a~c described, an~ t~e basis :0= no~?roduc:ion ex?lained

:y =e:e=ence to both t~e statueory a~:hority fc: and the factual. c~:=~~s:ances =elied upen in :~e deter~ina::on co withheld access.

:~e ~~ce=sig~ec ~e==:y ag~ce5 :c ~a: :~e ~~i:ec S:a:es al~

c~=:c~ ccs~s ~~:~r~ec ~~ce= a;?l~=ab:e =eg~:a~io~s ~~ :he sea=ch

::= a~= ~~?l~ca:~c~ c: :~e =e~~es~=c c~c~=e~:s. Eeca~se 0: :~e

..

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~~a: :C~= age~=: ac~e=e ~: :~e ~~~e ~~=~:a:~OhS se: :c=~~ a: :

:_-.2.:. :::~=~(~:~.:._: :.~ =~s~:~.c::",.,;:c -::::'s =e~t:es~.

-.'

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IICII " ••·7640

HAND JELIVERED

ti I JUL20 p ~: 53 "'_0. .'.'C·'I~."""",,", __,.-

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July 20, 1981

'••0 "'u.s TOWCII

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CA...C 600'C'e: "CIlC"COOO.. _ ...oc

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~.w orrlce.

Mc;K£NNA, CONNER & CUNEO

'.,. e'Pc .T_C"'..... w. W....INOTON. O. Co .000.

11011 ' •••'.00

A~l a;ency =ccc=ds sa:c:ng ~orth any pol:'cy, ?=oc~c~~es. or ~~~~e::'~es :0= che Javc:c?~cn: CC~~lSS~C~ C~ :~S S:3:: ~= subs:a~:~~e ~~:e=­ ~:'-~·::.~i:;:s 0: 2 U.S.C. ':'.:.la a:&c

fl ,1 ; ::J 7 (b) .

J.

=~l~s.

K_ _ r-.

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c"" . --~ .._.... ~, c... ~"I,"""" ·C_ C........•.•_u__..

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Pursuant to the Freedoc of !n=o~ation Act, 5 U.S.C. §

552. as a~ended, and the regulatio~s appea=i~g at 11 C.F.R.

Part 4. request is hereby made on behalf of The Reagan Bush

Committee and The Reagan Bush Compliance Fund for disclosure

and production for inspection and copying of the doc~~ents cesC=ibed below:

1. All agency records setting fo~th the substantive standards applied by the Commission and

its staff in rendering repayment dete=rninations ?~rsuan: to 26 U.S.C. § 9007(b) and 11 C.F.R. § 900i.2.

_"".

......

................ '.-eIVCI

'·••e..

-

FOIA Officer Fede~al Election Comcission

1325 K St~eet. N.W.

Washington, D.C. 20463

Re: FreedoQ of Information Act Recues:

2. All agency records setting forth any ?o~~cy, ru:es, or gui:lelines fcllowed ~y the Co=:'::~:'ss io~ a~c i:s stat: in i~plement:'ng t~e provisions 0: 2 u.~.C. § ~~:~ ~~C ~j r.s.:. ~~ :-~~ a~~ ~~:~.:~\

•

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:~~s =~~.~~~: ::~~:::~:~~ ~~:~:e :~ ~~~a~~ ~,= =~~~~::~:~

:: :::-.e a:·:".:e-':esc=:.:-:·': c(:c"..:::-:e:1:s. :or pt,;:?cses c: :":-:~~ec:ic:: a~"c -""'_ .._-- -~ :'""'.... -_.. -i':)-- .... ".. .:s ...Ie.. o .......-.;--...: ·t-a ...... :-:-•• :. -- ..:l,•••• ... .::'-:~ :. .. _ .'- .:._,.:=-: .... ,"

_ a ··'" o'oc"-e9"- . _......• " .:= ;c==:":~ :~.e=ec: -"".:':: ~~: :-: 7:ace a,,::a:.la.:le co :~= -"::-lce:'s:.~:-:e=.

~= :~a: :~~s =e~~~s: ~~ __ ~C:. :..~ .hc:e c= :~ ~~=~, ~e cc~~:~ec

i. All agency records 'setting forth any substantive interpretations by the Co~ission or its staff

of the re;u~atiens appearing at 11 C.F.R. Parts

9004 and ~007.

5. All agency records setting forth the circumstances and consice::oations underlying the develop~

mene and promulgation of the regulations appearing

at 11 C.F.R. Parts 9004 and 9007.

6. All agency reco::ods setting forth any policy. rulus. procedures, or guidelines fo::o the development by the Commission or its staff of substantive interpretations of the regulations appearing at 11 C.F.R.

?arts 9004 and 9007.

Res?o~sive doc~ments are requested to be ?roduced in :~eir e~tirety, incl~ding all attacheer.:s, enclosures, and ex~ibi:s. In the even: that it is deter~i~ed that a document =o~:ains ~a:erial cr i~=~r~atien which :alls ~i:hin the seatueery exe~ptions to ~andatory disclosure, it is expressly requested that such material or infor~aticn be reviewed for ?ossi- ~le discretionary disclesure. Similarly, in the event that i:

is determined that a document contains material or informati~n ~hich falls within the statutory exe~tions to mandatory disclosure, it is expressly requested that, in accordance with the

previsions 0: 5 C.S.C. § 552(b) , any and all reasonably segre- gable portions of such docu~ent be produced.

4. All agency ::oecords setting forth any substantive interpretations bv the Commission or its staff

of the provisions of 2-U.S.C. § 441a and 26 U.S.C.

§§ 9004 and 9007{b).

!~ :~e even: :~at ~: is ce:erm~~ec tha: :ou~ age~cy has ~o ~c~·_·=e- - ..-_s "esT""'-s~"·e - • :.· ...·L. _'II -,:7.... .... :::~'.~. .. ~~,..:.:,,.-fo···:~ _., .... _~_ --.__ "'_eo'~es~ _ _ i-.. e~ (or o.~" _ .. :i"'_~

:~e=g~:), ~~~t:en ccn=~=~atlcn e: such :ac: is speci:ically =e- :~este=.

:O!A Of~ice::o

July 20, 1981

Page T·.o

LAW C""'CCS

M'; KENNA, CONNER & C... NC·O

'0

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July 20, 1981

JUL ZZ

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':

Ron. John w. McGarry CbairQan, Federal Election

Cott=ission

1325 K Screec,N.w. ~as~ingcon, D.C. 20463

Re: Interi~ Audic Repor~ of c~e Reagan Bush

Coem:.::ee, R.ea~an Bush Cotlp1iance F\:r.c. and De:ccracs ror Reagan

P~'m DELIVERED

I~ accc~dance W~:~ the request by ~~. Costa of yo~r s~a:ft

the Reagan Bush Cocmittee and the Reagan Bush Ccc?liance Fund (~ereina=:er, c~e Co~ictee) have filed this dace a res~onse :0 :~e interiQ findings and recommendaticns ~re~ared bv che Commis- sio~'s audic staff. For the reasons discussed below, the Committee objects to certain actions taken by the Co~ission which ~ave seriously and i:~roperly i:paired the Comeit:ee's ability :0 res?cnd :0 the matters raised in the in:eri= re~ort. !he

Cc::ittee requests that t~e Co~ssion stay any fur~~er action ~~ the :~:eri= report ur.~il :~e C~==i::ee ~as been acoordec a :~:: anc ;roper cp?or:~n~ty to ~e heard.

, .

..•. '11I'- Chai=man:

. As you k~cw, t~e ~nte:i= :~~di~gs a~~ ~eec~~~ca~ions . =a~sa $e7e~a~ ~~est~:~s :=nce~~~5 cac;a~g~ ex?~~~~~~=es a~c

:~~a~~~a: a=:~~~:~=s =: :~e ~~aga~ =~~~ ~c==~::=~ ~~~ :~~

~ea4a~ =~3~ Co=~:~a~ee :~~e. ~e z=a~~:v 0: ~~e :a::e= ~s .--

_..oe_so .- __ C1 ...••: :'''-!e ••• -_.:~--.;-!~- ...._ ••l!!I 0_: t,_:?:-a.e .-.- - :.: '1_o.a._o... .':"5 o.....

~.:.,e ':"-"':e"'-~ • ,= __ Go_ :r-~ -:--7--Wi.-. oS,..·- -~ ·"..!!

V~::........ a.:_~ ~o- ",:__.. O~~_. as --'e-c·o': .. ":"' .: If a""lo· .-•••.•_ ==c:==e~ca:~:~ :~a: :== :~e a_~ege~ s:a:~:c=y ~~c~a:~o~s :~e

-..
Committee be reaui~ed to repay to the United States Treasu.~ a

total of The issues are thus substantial in

financial terms and for their potential tmpact upon the per- sonal reputations of the individuals involved in this campaign. The Committee's response to the tntertm report clearly demenstrates that the findings 'and recommendations of the Commission's

audit staff a:e defective in fact and in law. It is equally clear. however, that the Committee's ability to respond fully to

some of the matters raised in the interim report has been unfairly and tMproperly restricted.

It is our understanding that the interi:D report and the

Committee's response will fo~ the basis upon which the Commission will 'make a final determination as to the existence of any violations of law and the requirement of any repayment of funds.

11 C.F.R. Part 9007. Upon ~he pa~ticular facts of t:his case.

such a ?rocedu~e plai~lY'is inaQequate. L~d fails to protect the

legitimate rights 'and interests of the Committee.

L~e Cea=ittee's ability to respond full] to the i~terim

:indings a~d recom=encations necessarily is af:ected by, (i) the

availability of full access to the fact~l recor~ underlying the i~:er~ repert. (ii) :~e opportunity to test t:he' partic~la~ facts

and L~alysis relied upon by the audit staf: in preparing the interi: report. and (iii) the availability of sufficient t~e to

analy:e the record and the interic report and ?repare a response

te disputed fac.t~al :atters L~d issues of law.

The i~teri~ repor: :erely reflec:s the conclusions of the Cc~ssion's audit staff as to certain :i~ancial transactions.

It does not identify all of the individual documents. interviews,

and other sources of informat:ion relied upon by the audit staff,

er prOVide a detailed ex?lL~ation of the audit te~~niques and

accounting methods eQployed in reaching the disputed conclusions. ~oreover, t~e procedures apparently conteoplated by the Commission -:_: ~~ -~~s ...: __ ,-a_-e· ....... -: _ e~~ec-~~Ye'v __ .._v -:-_ ~~su'a-e _ •• _ ... -'ne .... _ a"~~- ...~_': s-a~~ .... a~c' •• -~e~· ~.1 __

:~~c~~gs a~a recc~endat~ens :rom any :e~ 0: ?arti:ula.r~zed

sc~~tiny. Fi~ally, to ::arshal the facts pertinent to the ?ar:i- c~~ar ~a~ters raised i~ :~e report reGuires ~he review and ana~y·

sis of :~ousa~ds of ~aEes c: :i~ancial records and ~he i~:erview

.:: :.a:.-.:.- :.: ::-.e ~:':'::'~::;·":s :.:-..:::.·..·:.c·..:.a.:s ......:-.:: ...=== :..:-..;~:.\:-=~ :.:: -:~e

~a:~aizn. (!: ~s ou= u~ee:s:an~i~2 :~a:. ~~ cc~t=as~ :0 :~e .• "0)· ,.. .. .- • .. . •. :~~rty (~ cays a_.o~ec. :~e Co==~ttee. :~e auc~: ana ~a~ys~s

:y :~e C~~iss~c~'s sta:: =eq~i=ed seve:a~ =o~:~s ~o cc:?le:e, Q.

.. _a..... - ~_":"ca.-""'" ••'-- We., ""'e--a-s ':" _•• :' , '-'..__·-e•• -'ae--"·"":e _ =..__ ..... o~_ ·-e •.. -as!..) '- 1'10. ~e• ••

C~==i::ee :~us ~a.s :ee~ :cr:ed :0 ?repare i:s res?onse :0 t~e

. "\

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•...

,"". o~"'cc. .

M~K£NN"', CONNER & CUNEO

Hon. John W. McGarry July 20. 1981

Page Two

• ,.
-

"e... ::--a ':--a...-.: _~a~';,,_.:..• ,..A9'llc ..w.: A__--e':' "._. -~a- I.•• '- -.'.-.~_ a..:c .... ...w-_··_·c ..... ~_.: _ -.::e ·_·-•• ~a-_ _ .._·-

=e;::;=~ '.,:= a:l:.· ;·..:.=l;.,ca:~o~ -..::..::\ ':'esr;ec~ :~e=e:= ·~c\:.:c. ·se·:e:el: ~=e; ·~=:'ce :;'.e :.:r.:::':-:ee a.~c:. :":5 s:a.::.

-r/

Accordi:lgly, the Co:=i::ee ~ereby requests that, (i) the . ..Cacission taice no furt~e~ action i::. this matter (and '::nakeno "' r-"'W-- ••~, .: C "*_~.: sc' ._oS"-es ...... •....._~': -•••• ... -es"ec- _ :: __ -~e-e~o', .... - .... ' •• t.:, __ -l..e ....1 Co-': .. -~ee w,,_, h'es .cit

jeen ac=o~ced a :~ll L~~ :a~= .O?po=~~~~:y ~o :es?cn~,~o e~e'i~-

'-.e.-...I _.: ... -e-o-- _ wi __ , *1 C':__oj) e 'C"'~':_ ss.;_\.i.' "'n -ec'c _ ....

a..s.: o'e- ""nc," " e-G. ---..,- "~e. 4 • " - - ~"" , .......

.~c==~::ee s request :or a~c~t~o~a_ :~~e ~~ wn~cn :0 secu=e a .'" . d" ~... .... :~o=c~g~. acco~:~~g a~ Qt~e= ex~e=~ ana~ys~s L'C :0 :~~e a ~~~:~e~ s~~~~e=e~~ ~o ~~e =es~e~se :~~=~:~ec :~is :a:e, a~e .; ,: ~. -'- .:. ....-.; .... .: -..... . .: .. ,_ .... --.:-- ,:- .; _... -... ..: -;_. _....-.. .---.•..- ----.;:.:._ _-'- "::_--"':' _ -_•• :.=..- -- -•.: • .:.-_.:: _..- a=~'~e~~s ;e=:~~e~: :: :~e a::eged s:a:~:c=: v~c:a:~~~s :ay be

se~ious allegaeions coneained in the inter~ repore in an un- ~easonably shore period of time without fUll and equal access

to the record or any meaningful opportunity to test the analy- sis and conclusions of ehe audie staff. ,

By lette~s dated. July 6, 1981, the Committee sough.t access

under the F~eedom of Information Act to the documentary record

underlying the i.."'1te~im ~eport, and, pursuant to 11 C. F. Ro. §

9007.2(c), requested a thirty (30) day extension of the time

within which to respond eo the repore. By telephone conversa- ' tion on July 13, 1981, ene Committee's application for exeension

of time was denied, and the Commission's deadline for the Committee's response remained Monday, July 20, 1981. None of ene " materials responsive to cheCommiteee's disclosure request we~e , . received ,.until the close of busi..,ess , F~iday, July 17. In lighe 'of the breadth and complexity of the financial e~ansactions sub~

,jectto the Cocm~ssion's audit, it cannot be said that the Comait:ee has been given a full and fair oP?or:~ity to respond to 't~e allegations of statuto=: violations.

As t!:le :atter now stanes, the record, before the' CoD:mission' -',

',. consists 0: the \::lt~ied. cc u~:estec allegations set .:orth i:l t~ein:er~ re~ort and such res~onse thereto as the C6=ci:tee ~resentlv is able to ~rovide under the above-descri:ed constraints.'

!he Coccit:ee believes that the response filed toeay clearly , ' . cie:cr.stra:es the de:ects in the 'interi:l repore. Nevertheless 'it

is equally clear that :0 proceee:c a final dete~nation concerning the allegee statutory violations and the ce~dsfor

repay:en: upon the ?resent record would :ra:lsgress both the . : clear res?onsi~ilities 0: the Commission' and the f-..:nda::ental . rights of the Comeit:ee .

: ~w'0 ~"'CC.

M~KENN...,CONNEA & CUNEO

Hon. John W. McGarry July 20" 1981

Page Th~ee

.: .... .. ..

( ~.

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.to,

U>W O....ICC.

M;K£NNA. CONNER & CUNEO

Son. John W. ~Garry

July 20, 1981

Page Four

presented and prope:ly teseed. Such ~eas\::"es are consiseene

wieh ehe Comcdssion's auehority and :esponsibiliey, and required b~ ehe :ac~s of this dispuee and ehe applicable prin- ciples 0: law.

:'1:st, the meas\::es :equeseed by ehe Commietee fall well

wiehin ehe Commission's en:orce=ene auehority and :esponsibility uncie: the Federal Eleceion Campaign Ace. The pereinene staeutory pro~~sions clearly coneemplaee that ehe Cocmission's enforcement aceions shall be taken upon a full and proper :aceual

:ecord, developed, where app:opriate, through ehe use of hearings and the adversarial process. See 2 U.S.C. §§ 43ic(b)(1)

and 43 id. Although the Commission uecpowered "to conduct investigations and hearings expeditiously" (2 U.S.C.§ 437d(a)(9», . -.nothing in the general provisions of the Act 0:" the specific pro- visions ?e:~aining to :epai~ents (see 26 U.S.C. § 9007) suggests that c~e Co=cission's dete~inacion-on Qatte:s such as those

:aisad in the inte:i~ :epo:t must be :endered precipieously be-

• . .:.,.. ,... . b - l' . :o:e :~e ?e:"t~en: :acts ana a:guments 0: ~aw nave een:~_1

~evelcped. Indeed, t~e Ccc:ission's o~~ :e~~latio~s p:"ovide :0: extensions of ti~e to ensu:e a proper p:esencation of the

issues. 11 C.F.R. § 9007.2.

Second, the =easu:es =e~uested ~y the Comci:cee a:e ccnsistent ~ith che ~:ovisions of the Ac:inist:a:i~e ::oced\:re

Act. De:e:~ina:ions by the Co~issicn unaa: 26 U.S.C. § 9007(b)

that a ~a:t? has violated the ~rovisions of the Federal Election Ca~pai~ Ac~ L~d cust repay ce~tain funds a:e clearly acjudicato:y in ~a:~:e, ~~d thus appea: to be subject to the provisions 0: 5 U.S.C. § 554, as a~enaed.*1 :a:ticularly inaswuch as there

exist issues 0: fact and the Co~ission's dete~ination shall ~e final, s\:oject only to review by the Cou:t 0: Appeals (see

26 U.S.C. §§ 900i(b) and 9011(a», the Co~it:ee should be---

-::! !~e Ad::l:'~:"s~=a::,·,fe ?=ocec.~=e ~_c: ee:i:les "adjuc:.ea.:ion" as

"--e-c·' c:.~ .... --""cess ~_.... _':0-....... -'I.,ei ':o-'·a-~on __...... __ 01:_ Go-n.. c-":e- _ ... _. " a-": ...~ "o-a'e-" ... _

as ··t~..e ·...::-.ole 0:- ;»a=: 0: a ::":1&1 d~s?csi::'on t ·~:te:~e:' a':::"::a-

:=..·:e t :":.c£a::'ve t :':1; ~":"~c::'·,e, c= cec:ara::o=v :.~ :0=:1 . . • . It

; .:.~.:.-~ ;::.::) a::": ~7:. ·:;;;=-:a:':-.::: a. =~;:a:.-::;:::' "i'~':===:':::l3.::':~" : ... :~e ::~=:'SS:"=:t ':t:-=3~a~: :0 ~5 U.S.C. :-CC7(:) ccn- .. ': .:.. It.::.:..,_' .... ...... .:~.: " ••..: .:...- .. _ .. .:..,,,. .:: _. ,':)~ 5 ... .. _5 a __••4 .. C_S?,-,s on _......e ..ea••_••!t ~_ ....e l'\.••~.

See, :.z. I ::'1:e~ae:'~~a: :e:"er~c~e. 5& :e:"eg~a?~ C~=? .:. :'ocal

:!=. ~~a=:'=~a: 3=o:~e=~ccc c: Elec:=~=a~ ~c=ke=s, ~:9 C.S . --.w, .... --~ "._'::l ~~ (~i:-::'. _.I.,~. __

C::"'e G. -~C:" __ \,.; .-'-e-':"a- ':'v-.-~ss"'o _ :'__ ,"".'., 'O-':-e': __ ....

S~a-=:s: ~;: :.Zd _:'J:C_. ~.:~, "(C.C.?.;. 1973).
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( .....

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M~K£NNA,CONNEA& CUNEO

FoOn. John W. McGarrr

July 20, 1981 • Pale Five

provided with a full =easu:e of the procedural protections set

forth in the APA. See, e.a., Seacoast Anti-Pollution Lea~e v.

Costle, 512 F.2d 81~s~r.), cer~. aeniea, 439 U.s. 624

(1918). See also Bricklavers. Masons. ana ?1as~erers International Union v. NtRi, 4'5 F.zd 1316 (D.C. cir. 1973).

Third, the measures requested by the Committee are consistent w~th and necessary ~o the fundamental principles of due

process. Tha~ is, the cour~s have held that where, as here,

the govern=ent seeks to recoup ~hrough administra~ive proceed- ings alleged overpayments of public funds, t~e party from whom

the recovery is sough: is entitled to a hearing or otherwise

clearly adequate oppor:u.~ity to be heard and dispute the govern- :ent's claics. See,~, Califano v. Yamasaki, 442 U.S. 682,

·693-97 (1979). DiVrne v. Cleland, 616 i.td 1080 (9th Cir. 1980).

See also State of Colorado v. Veterans Admi~istration, 602 :.2d 9~b (10th cir. 1979). Absent the ~ini$al safeguards sough: by ·.:he Co~t:ee, it will be improperly subject to the Co~ittee's

:i~al ceeer:i~ation en t~e :erits of :~is dispute without any

=aans c: adequately testing and countering ene factual and legal ~l1der?inni~gs of the govemeer.:'s clai:. !n light 0: the catters ~: s:ake in this c~ntroversy. ~d e~e constraints t~us far tm-

?osed ~pon :~e Co:mit:ee's a~ili:y to respond to the allegations, i: is difficult :0 iQagL~e a ~ore egregious deprivation 0: due

?rocess rights. See 2enerallv Gcldber, v. Kellv, 394 U.S. 254,

253-71 (~9iO). !ncee~, the ~~mi:eQ ~easures sough: by the Com-

:i:tee are likely :0 be the or.ly means of sec~ring a prompt and '::lrc~er resolution of this dis'::lute. See Cali:ano v. Ya~saki,

s~t)ra, 442 U.S. at 693 (ltthe nature orthe statutorV standa=ds

:akes a hearing essential"). Examined in light of :he private interests a: stake, the risk c: erroneo~s deprivation of rights, ~~d :he gove~ent's interests i~ the ~tter, administrative . en:orce~en: proceeeings under 26 U.S.C. § 9007(b) clearly ~~st

ac~ere to t~e :~da=ental pr~~ciples 0: cue process. See Elliott ~. ~e~~be~£er, 564 :.2d 1219,1230-35 (9:h C~~. 1977),-a:fi~ in ~.... .. i,.: J.. ......... ••'-' <111\"" r ~.:.: _~ • v... _.': .. .. ... a._ .•ev __.. ",a._ s_ 1:1 .....a G ..o '.l • • a.:asc.:<_, SU'::l.a, ,....,c _i c...,....... e _..". lit""'.. ::e~··· :--. ....a.., s··...:-, _ , a _.,

iQ~":t.,.,...... c: t:.--'-' _,;.._.,~ \ttl oJ _ •

• ':".f"'a~ : _ •• __......'11 -~e "'._, ':' _._".... -,:s"': ~'--e-s··-es Go -.._ -:,'-";-s -...... -~-..... ""':..• -l.e ••• Co--'-': .......__--ee 1. •

=_-:~:.-=_.~ ;,-:-a :.~ -::':'! :-=S~ :':I:::-=:-::S-:= :: :.::::. -::-.= I::==:":~:= a~.: :~'!

:~==:'.33:,:::. 3:: ::=o·~·7.:':":"'.g ::.-: =-=;'':'c~::~ ;=~I:=~::.=a:' sa:=g'.:.a:':'s, :~e Cc==~ss~~~ ca~ e~hance :~e :~~e~~~ccc t~a: :~~s cis?~:e ~~l: .. ..... .. ... . .. .. - .. .. .. :e =aso~~ec ~~:~cu: :~e =~t~a~ e:~e~se ~c ~~co~~e~~ence 0: J~c~-

::,.=.-. . .

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• ..... orl'lcca

M;KENNA,CONNER & CUNEO

Hon. John W. McGar:y July 20, 1981 . Page Six

For the foregotng reasons, the Committee requests a stay of fu:ther Commission action in this matter, an opportunity

to supplement the written response filed this date, and a

hearing before the Commission on the merits of this dispute. As demonstrated above, the requested procedural safeguards are

well-warranted on t~e particular facts of this case an~ amply supported by applicable law and policy. In the event, however,

that :he Commission deter=dnes to deny any aspect of the Committee's request, a prompt and specific notice thereof is requested, together with a written statement of the grounds upon which the

Comaission's decision is based.

Should you have any questions, please contact the undersigned.

Sincerely yours,

~~~~I1~;,~~L

'.'

C~arles N. Steele, Esq. Mr. Reber: J. Costa

,.._ ..

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e. Miscellaneet:s JAucH !'inci~~s :: A. anc!

I!: !. (1, 2 • f»). .[,b1 TaJ:) 51.

. support documentatien, in regard to five areas addre.see! 1n the

audi~ report:

Tbe a.aganBusb Comaittee ana the ~eagan Bush Compliance

rune! hereby :espcna to the: Fe4eral Elec~ien Cc::maisaien's Interim

Campai9n tour prof~ts (Audit rine!in~s

III B.). [See Tab 3], --- Capital assets (Audit r1~di~S

!. (3)). [s•• ~a= 411 anc -

Trans~er ef fund.~etweenthe Rea~an

Bush Ccmmi~tee ane! t~e aepublican ~atiQnal Ccm=ittee (Audi~ ri~cinss II

A., III A•• 3. ana III !. (4) ) • [See 'rab 111 ---

b.

a.

c.

c.

UAGAlt Bosa CCMMIT'l'D AND REAGAR

Bosa COMJILIANCZ J'mn) ..

aES;cRSZ '%'0 ftDDA:. z:.zCTION COMMISSION I~'%'~:UM UiOll': OF ':9 AUI)I':' CIVISIONON TEZ

eAGAN Besa C;CM.'tITTD, 'rU REAGAN 305i1 COMPLIANCZ FOI!) . ANp m plt'!9CWS lOit mGAN

..

aepertof the Aue!it Division on th~ aeagan Bush Ccmmitte., the

aeagan BusbCompliance Fund ana the !)emocrats for aeagan dated.

Jun. 18, 1981. This-response .ets·. ferth~th. Ceaitte.'•. initial

...-. positions,' taken witheut benefit of. a review of most audit '..


•

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the $301,179.04 added by the audi~ to

4x-er'!c·;"u"es -.::' .• -'- - s";-,':ec'" ,:---J -.'-"0 -;_."-:'---_ ,:-; ...... ;064."-'_ .. ~--

~lscella~eous :tems ceta~lec C~ ~aqe 4 o~ "he aud~" -oco~" ~a~1 -~ a~-eo w~ ... - '- .. -- -:- -- - '*- -.... ":1- _- -.-.~

asc reccrcs anc no explanatlon :0: t~e

d::=e:~~c; :3 ?:~~!=ec.

the $46,617.93 increase in value of

capital assets reported by the ~C on

its Statement of Net Outstanding . Qualified Campaign Expenses reflected

as a decrease of expenditures subject

to limitation is incorrect because the

increase includes the value of assets

not owned or on hand as of the date of

the statement and is the result of an

improper valuation method~ and

e.

b.

the $50,588.48 added by the audit to

RaC exper.ditures subject to limitation

because they represent inco~e realized

from campaiqn tours, is an i~correc~

addition because the oampaisn tours

qene:ated a loss~

a. the $1,138,891.24 added by the audit to

ABC expenditures subject to limitation

because they "represented payments to

the Reaqan Bush Committee based' on •• • ~~C expendit~res,n in act~ality

represent a proper offset of expenditures incurred by the RaC and the RNC

in furtherance of aonald Reaqan's

candidacy and in conformance with the

agency relationship that existed

between the RSC and the RNC;

r~ coo:dina:ed campaign expenditures.

~.~ may have made campaign expenditures in excess of its statutory

~~~ ~C-l'~'~c~n ~a-~o~~' Co--~··e. and the Reagan :aush Commit~ee _ •• _ :'.._:,ww __ ...., 1.-. l.lIiiiiIo ..." ..1 _

~c coo:di~ate thei: ex?e~di:u:es in a~ e::o:: :0 fur:her :he

TRANSFE~ OF FUNeS B!~~E!~ RNC ANO RaC

lii:\itatior. in violation of 2 iJ.S.C. S 441a(0) (1) (:a). This

•

A principal allegation of the audit':epo:t is :hat the RBC

O!SCUSSION:

allegation challenges the 1e;a11y pe:~issible ar:angementbetween

nC: does not. prohicit each Co~~ittee from :epor:i~g its sha:e o~

CONCLUSION:

election.

The RSC permissibly managed RNC funds pursuan: to an agency

:elation5hip authorized oy law. In such circumstances the

c~ange, i~ any, should be made to the principal's account. 'The

Whet.her t.he Rea9an Bush Commit.t.ee ("RaC") excee4e4 its

statutory spending limit.at.ion by managing ~~publican National

Commit.tee (":WC") funds for the 1980 ~residenta1 general

Audit Findings II A., III A. & S. and II! !(4)

ISSUE:

'-- "

.'..
"''',

(~ transportit:'on services provided. !er convenience and to

'. '

'''Na:icnal Committee' :':\eans the organization which, by

virt~e of the by-laws 0: a political party, is respensible

:or :he daY-':o-cay o?era::'en of a peli:~cal pa:ty at "the ~at:'~~·!l le'-"el, as ce~e:::i:-1ec ~y the Cc~~issie~.." 11 .. - - _....... _ • : • :".. .,; _ 'w \,. • _ •

"'~·~-o~-s' •• ":' ••• • :t~- ~a--s:cn "- ."':"'-- WI C~-~~~~AA' • "'It'e:'. ---- ,_.. me~~s a -o~:~:ca' _.... _ c~..-"~ ,Hi.."_~~... .. o_e :e$:;~~:ec !~C a~:~e:::~~ :y a ea~ci=a~e ;u:suan~ :0 1:

c. :- . ?~. 5 : IJ: .:.. a~d :!. 02. :. II 11 C.::'. R. § :.a0 • 5 (e) (l) •

the R3C. These items included certain tour charges. It is

,. I

passengers for the appropriate reimbursements due. The result of

charges designated by the RaC, and the RSC billed the paying

T~e Committees determined that the RNC would assume

and secret service, te oe charged for their pro rata share of the

I. FACTS

coordinate their campaign efforts, the RNC paid the air fare

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responsioility for those campaign expenditure i~ems designated by

". .. ' --_/

cc~~en practice for nencampaign personnel, p:~marily the press

At the outset of the 1990 Presidential camp~ign, the RNC

and the RBC were committed to spend the legally permissiole

amount to promote the candidacy of the nominee of the Republican

Party. As the national eommitte~ of the Republican party, the

~~C was limited by law to expenditures of $4,637,653.76. 2

U.S.C. S 441a(d) (2). As the principal campaign committe~ of

Mr. Reagan, the RBC's spending limitation was $29,440,000. 2

U.S.C. S 441a(0) (l)(B).

....
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wi~h t~e =~les and :egu:ations of the Co~mission.

... .:. ...

ac~inist=ation 0: R~C :u~cs.

no net change in the financial positions of the committees.

did achieve a reduction in paperwork and a more ef=icient

amend~ent concerni~g the treat~ent of reimbursed funds was ~iled

!nitially, the :uac presented the R~tC wi th i:nvoices for

T~e ~rocedure followed by the RNC and the a=c resulted in

the RNC and paid by the RSC. This procedure saved time and

an error in the RSC's treatment of the RNC related reimbursements

discussed above: ~, Schedule A-P, ~ine 21. A corrective .

that the same result would be achieved if the RBC oredited

reimbursements received against expenses incurred on behalf of

accounting treatment for the reimbursements, it was determined

:y the R=~ on ~pril 1, 1991 in a, timely manner and i~ accordance

this procedure was that the campaign incurred air fare charges

expenses incurred by the R3C. The RNC would in turn make payment

to the designated vendor. In order to provide an appropriate

only ~or those personnel involved in t~e campaisn.

.p'a~erwork in the crucial period of the campaign.

~he ~~C 1950 year-end repOrt filed with the ~EC reflected

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It was not relevan~ to the Commit~ees that fun~s would be

physically move~ cetween them. Ccnse~uently, the exchange of

identical sums· between -the RSC and theitNC would have -- been a

meaningless transaction. Rather, the pu:pose of the amendment

was merely to reflect the fact that by matching reimbursements

with expenses, the financial position of neither committee was

affected, each making campaign ex~enditures within its statutory

li:nit.

aased on the above, it is clear that the amend:nent to the

~~easan Bush Co~~ittee's 1980 year end report is valid and should

ce recogni:ed as such.
Pages 1 thru 7 of Part 2 have been

deleted from this .reading file.

2

r-

\

- 9 -,

cc=pliance cests. Fo: all 0: these reasor-s, the :esul:.s of the

a~di: 0: :.he Ccm?liance Fund shoulc be rejected.

final acecu~ti~g results provided by the RaC.

':'he a~di:. fails to comply wi~: standard auditing procedures

beca~se t~e audit results are cased on what appear :'0 be faulty

investigative tech~iques (~.c., 1n£0:=al interViewing of

employees), ~~ classi:ications o~ ex;enses, and improper

alloca:.icn =ases. In additicn, t~e auditors ignored the fact

that all ccsts incurred after November 4, 1980 ~ust be treated as

legal and accounting'services per~or=ed solely to ensure

compliance wit: the Act. (11 C.!.R. 9002.3(a) (2) (ii) (C).) The

regulations do not aefine "selely to ensure compliance" nor are

any 9uiceli~es provided for accounting for expenses of the

Compliance Funa. Therefore, generally acceptea accounting

principles =ust be utilized to account for the expenses' ana

standard auditing procedures must ~e usea when testing the

propriety of the Compliance Funa's accounting practices.

The accounting for the expenses 0: the Compliance !und as

.~djusted to reflect the $137,883.67 allocable to the RaC complies

with generallY accepted acco~nting principles. However, the

~ethodologies used by the auditors do not comply with standard

auditing ~rccedu:es. ~hus, the audit has no ~asis to coritest the

o

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was profit which had t~e ef~eet of :uneerstati~g RSC' 5 :eportee

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~.. es_'-e ...; ••,.. ..'.:,.~ .....c._ - ,,, ....and a ~~""_~ c:".=" "0"'"_u "-e~' ..a o,n :'"....e ••'f/_~,~-=,_es_ ...a --- ;<5e••

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ex~eneitu:e~~ ,To .ejust ~his allege~understate=ent, t~. audit

sta~~asse:ts,t~atthis~~eun~ should now =e ap;liedagainst f~e

~u:es exceedec! tour reimbursements. ~""_.'-.~ - ~,.. "-'

, ,

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Was a profit 'r'ealizec5 'from the'reiMbursements reC:eiv.~ ~or

tou~ travel ~u:ing the 1980 Presidential general ~l.ction

camp~lgn?

'«--' _ .. - . '

',CaMPA!;NTcya PROFITS

CONCLUSION:

~:SCt:SS!CN: '

wi ~~ :e:'::l~ursements:eceived from t~e19S0 :?:esicental'c&''''ftpaign -'!:.I' ' , , , tcu:. . (Aue! t Re,port, p. 11) • The report clai::ls this amount '

. . AudIt 1in~ini III. a

ISsui:,

:. The::ieegan.3ush 'Com."'1l1 ttee ,~ic! not realize a· profi tc!uitng. - - .."...... . '....

. t~e. preS~den-tial elec-:iQn campaign- because actual tour ~xpend'i::'"
. ,.~

- 2 -

T~e method by which the a~dit report calc~lated loss and

profit'on the ca~?aign tour m~st be rejected. It fails to

ack~owledge the fact that act~al tour costs exceeded tour

rei~bursements. A review of the tour expenditures associated

with the ?residential campaign demonstrates this result. Only

these figures need be examined as both the audit staff and the

RSC acknowledge that a'loss was incurred on the Vice-presidential

tour.

total of $2,251,213.99 was spent on the 1980 presi-

·dential ca~paign tours.~ This figure becomes the basis for

deter~ini~g whether or not a prOfit was realized fro~ the

ca~pa:gn to~=s. That is, were paying passengers c~arged more

than ~~eir pro rata share for travel expenses and, if so, dld

such cverpa~~en~s constituted excessive income to the ca~?aign.

t~ ~he ~C's :igures clearly demonstrate that: (1) the press, secret

~. service and o:her paying passengers were not overcharged for

c

.' ... ".,

f..-:;,

transpor:a~ion costs; and (2) the campaig~ incurred to~r expenses

over and above tour reimbursements, th~s resulting in a loss on

~/ :: should be noted that the ~=CIS toe: cost :igur~s differ :rc~ those cited in ~he audit report anc the s~~rna:y shee: 0: :~e aucitor's wo:~ papers. ~cwever, beca~se ~e have ~~e~ ~~a~:e ~~ ~~~~:~ :~:~~~ a~~ =~~~ew ~~i ~a=~ ~~

c=c~~e~:s :0: :he auc:t :e:o::'S :i~ci~gs, i: ~s i~?cssi~le

:== ~s ~o asce:~ain hew suc~ :iS~tes ~e:e ce:e=~i~ec. As S~=~, i~ :es?o~se ~o t~e al~:sa~:c~ t~a: a ::c:~: was ~~c~=:ec en :he ca~?a~;~ :ou:, :he Co~~ittee :elies ~:cn :_- f""'..'"'''' ~~-"""Al:: __ -= W1ft~ •• --':::f----.
. "

mernebers traveling on the tours ($~93,434.14) was then subtractee

,;.

.""'". Clearly -'-'-- no prcfi~ was rea~ized by RSC ::c~ campaign

R=C'S overall li~itaticn on expenditures.

~:cfit is unsupporta:le given the above facts and calculations.

That amoun: should not be considered as an expenditure subject to

were the~ s~b~racted from tha~ amount resulting i~ an actual to~r

- 3 -

from the'act~al out-o~-pocketcost, reflecti~g a loss of

bringing the total costs for the 1980 Presidential tour to

~our travel. !n fac~, a loss of more than $18,000 was incurred

chartered planes for each leg o~ the tour, to~aled $2,045,771.87.

Ground costs for each tour were also determined ($205,442.12),

The ~ollowing ~rocedure was used by R!C :0 ·ascertain .

whether or not a profit was made on the presidential tour.

First, airplane costs were determined for each of the 15 presiden~ial ~ours. These costs, which reflect the ~otal cost of the

$:5,429.10 for :he presidential carnpaign to~: of 1980.

. . "," '" on ~~e ~res~~en~~a_ ~ou~s.

.~2,251,213.99. The total tour reimbursements of Sl,739,350.57

reimbursements. ~he audit reports' determination of a $50,000

".1 ~ost of SS:-1,663.2·L The :ro rata costs allocable to campaign



Th.~.!o:., th.-.udit :.po~t inco~:.c~ly includ.d c.:tai~

capit.l ••••t. in it. valu.~lon and .1.0 incc::ectly valu.d tho••

••••t. included in the fin.l v.lu.tion. Fo~ tb••• :•••cn., this

.udi~ !i~din, mu.t be :.jected•

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All agency records setting for:h t~e Com- ~ission's policy, procecures, a~c ?rac:ice ~ith

res?ec: to t~e de~elop~en: and iss~ance 0: in~e=irn

c= ~n:~~al =e?c=~s of :~e findi~gs a~c =eco~enda­

:ions by :he Ccrr~issic~'s audi: sta== purs~an: to

4 C.:.R. § 9007.1.

:orA Officer

:ederal Eleccion Commission

:325 K S=:eec, ~w

hashingcon. DC 20463

P~rsuan~ to ~he Freedom 0= Informa~ion Act, 5 U.S.C. §

552, as ame~ded. and the :egulacions appea.ing a: 11 C.r.K. ?ar~ 4, request is herebv made on behal= of The Reagan Bush Co~i:~ee and :he Reagan"Bush Compliance F~~d fer d!sclosure and ?roduc:ion for inspec~ion and copying 0= the documents describe~ below:

·.,,1" •• 1" ••, ""

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I'••". oeu _ .... .I Ol'IL'CC'

.......ce. ,,-C' au..c: '--C•••t•••• _...,M Io.".,t,. -eN....'I••• ..",,'1ft'.. .._c••e" ""IIIVO. etC...... ,,,'1 .......' ••"IC.. •._01·'·."·· ....U~.•·".......• aue- •.••U .. -e...e... G.,...... 1.__••ClIo -ell

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:e:.; O::icer

?a;e 2

J ....1; ii, 1981

wn~cn ~he subject of ~he examination and audit

lliUS: s~bmit to the Co~ission its response to

to the inter~rn or init~al report, (ii).the avail- abil~ty of extensions 0: time for the submission

to the Commission of the response to the interim

or initial report, (iii) the criteria applied by :he Co=.rnission or its staff in determining the

time in which the subject of the exa~ination

and audit must sub~it its res~onse to the interim

or initial report, and (iv) the criteria applied

by the Commission or its staff in determining

whether to grant a request for an·extension of

time for such submission.

3, All materials setting for:~ t~e Commis- s~on's policy, procedures, and pract~ce fer allowir.g the s~bject 0: the exa~ination and audit to s~pple~ent its response to the inter~m or initial

report by ~he Cc~~ission's audit staff.

~~ All =a~e=~als setti~z fo=:~ :he Cc~isS~C~1S policy. ?rccecu=es, a~d ~rac:ice ~~~h

respect to cer.s~deration by the audit sta::, the Ge~e=a: Cc~nselt a~c ~he Cc=~iss~c~e=s of :~e

=es~c~se :c :~e ~~:e~i~ c= i~i:~al =e?o~c (and a~y' suppleme~:s t~ereto) submitted ~y the subject

c: che exawi~ation 0= a~di~.

5. Al~ ~ater:als 5e:ti~g for~~ :~e Cc~ission's po:icy, procedures, and practice fer

prOViding an e??or:~nity :o~~eard to the su~jec: 0: a~ exam~nation and audit ~ursua~t co C.F.R.

§ 9007.1 ~rior :0 anv ~ublic'disclcs~re 0: anv :indi~gs,·=eccl.~endatior.s. and/or conclusions' =: :~e Cc~ission cr any of its s:a:f co~cerni~g

:~e s~b~ec: of :~e exa~ir.a:i=~ and a~di:.

~es=c~s~~e dcc~=e~:s a=e =e~~es~ec :0 be ?=ociucec ~~ ~~e~=

€~:~=et:t :~cl~c~~g all a:~ac~~e~ts, e~c:os~=es. and- ex~i~i:s.

:~ ~~e eve~: :ha~ ~: ~s ce:e==~~ed ~hat a coc~~e~~ conta~ns

~a=e=~al ~= ~~~o=~at~c~ ~~~c~ ia:ls wi~~~~ :~e stat~:c:y exs=~­

:~=~5 :: =a~~~:==:: ~is=::s~=e.. ~: ~~ ex;=~s;::~ =e~~~s:~~ ~~a:

E'~~~ ~~:~=~~_ c= ~~::~~2:~~~ :e =~v:~~~c :== ;:~~~:_e =~~:=~-

::'0:-.a=:: :':"5:,::s-.;::e. S:'=i:a.=:':: J :":1 :::'e -a"·:e~~ -;:-:a: i: :'s de:e=- ~~~~C ~~a: a ccc~=~: ::~:a:~s =ate=~a~ c= ~~:~~a:~c~ ~hict



.

•

Documents C 4/1 th=euch

C 3/1a, C 3/2, C 3/3,-

Report a~endment =;led

- - ..

in operat~na expenditu=es f~ow<

515,438.18.

Capital assets on hand to be liquidated: $46,617.93.

. f. Monies received relating to expenditures made by the

Reoublican National Co~~ittee (see :inding I!I.B. (2)~):

S1: 13 a,a91. 24, ana ..

g. Income realized from campaign tours (see finding III. 3.

(1»: $50,588.48.

. ~~tter to ~dward L. Weidenfeld, tsqui=e

rage ':'~ree

See ~ec~? a~ ~/:.~ ~~ne l3, wh:c~ is c=c~$-=e=e:enced ~o - A J 4 eo:: • an": - :. 6t1 tot, ;~.;c;. -' .w •

...

. Work paper schedules appear at Auditor

C 4/16. See also C 2/8, C 2/9, C 3/1,

C 3/4, C 3/4a, C 3/5, C 3/5-1, C 3/6.

by Co~~i~~ee ap~ears at C 2/9 •

At tne clc5e of the Pri~ary Elec~ion Period, the Audit

Division ciscussec their valuation of capital assets on ~anc ~;i:.~ tl1e Cor:r.li~tee :'reasu-::e:-, anc he ac:.-eed tHi:.h ~~ei=

::.c:t.:=es. _. --=-= c::-- --no"" ~':.'" __ o~.. C....,WI ,.. me"-s ••• 0-= "i'-ea __ $ur...-__- a-'- ::' _ .,:;/":_ Qnc - .

! ~/~.l, a~~ pos~-pri~ary records a~ 0 S/22.: and S/22.:.

, . .

See Sc~edule at E 6/7-0.1, which is ,cross re~erenced to E 3/2, E 3/3, E 6/7.1 and E 6/12 •

':'he s~urce of these figu~es are the Committee's billings and

accounts receivable. The Commission does not have copies of

all pertinent documents. They were pulled from Committee

files during the audit, =eviewed, the amounts noted, and then

the documents were retu=ned to the Committee files•

,h. Vc:.ced cheeks incluciec

'5/1/80 thr~us~ 1~/31/eO:

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Letter co Edwar~ Weiden~eld, esquire

Page Five

6. Any and all other documents that are ~elevant to

the interim audit findings and recor.~endat~ons

referenced in paragraphs 1 through 5 above~

I am advised that by providing the documents listed

in part 1, above, we are providing all audito~ docu~ents

which are relevancto the interim audit findings and re- co~mendations referenced in 'your first five requests.

As you are aware, we initially had proposed that a

representative of your office sit in on our search for the

records which had been called for in your FOIA request.

In a te1eohone conversation on the evening of July 15,

1981, \lith Daniel J.Blessingten, Jr., and Vincent J.

Convery, Jr., of our Office of General Counsel, you

declined to be present, but requested that our records

search preceed as expeditiously as possible in that the docu~ents were needed in the ;orrnulation of a response

to the Co..~ission in another regard. Mr. Convery agreed that, in view 0: the unique circurnstances surrounding

vour recuest, it would be considered ahead of all other ~equest~ and appeals then pending, an~ that we would ~a}:e <:very atter.lpt to conplece the reviel.J \;it.hin a co~­

~ressed t i::'!e:ra~e. I trust tha-c, in process in; your re~ues~ as quickly as we did, ue did ~ot cverlook or c~i: any ?erti~ent records., !~ ;;e did, ?lease call ~e

and we will attenpt to correct any error.

Cur records search vas conducted by :lve staff mecbers

whe expended a total of fourteen hours in the process. The Co~nission assesses a fee of $2.50 per hal: hour with the

firs-c half hour free. We are producing 60a pages, for

Which the Coc~ission assesses a duplication fee of .05 per

raCJE:. Yeur check in the ar.lOl:nt $97.90, r.\;!de payable to the ~reasurer of the United States, should be foruarded to ne

at t::is office.





• \

.

FEDERAL ELECTION COMMISSION

WASHINCTON. 0 c. ::a.63

July 8, 1981

MEMORANDUM

TO:

TSROUGH:

FROM:

SU3JECT:

THE CO~L~ISSIONERS

B. ALLEN CLUTTER

STAFF DIRECT~..

BOB COSTA ,/L/~

REQUEST FOR EXTENSION TO RESPOND TO

INTERIM AUDIT REPORT - REAGAN BUSH CO~~ITTEE, REAG&~ 3USH COMPLIANCE

FUND, AND DE}10CRATS FOR REAGAN

. )

"

..

• 0 ••

On Julv 7, 1981, the Co~~ssion received a letter from the

"above narned·Co~~ittees (see Exhibit A). The letter concerned

the Ccmmittees' response to the Co~~ission approved interim audit

report =o~;arded on June 19, 1981.

T~e Corr=ittees' re'~onse is due on July 20, 1981 (30 days

from receipt of the in~eriili report). The Corr~ittees are

requesting a 30 day extension of time in order to respond on

or befcre Aucust 19, 19S1. The Com~ittees' at~ornev has cited

various reasons in the request ~ncluding a FOIA request recently

submittec requesting the disclosure, inspections, and cop~inq of

workpapers generated or relied upon with respect to several

findings and reco~~endations contained in'~~e interim report (see

Exhibit 3) •

It should be noted that photocopies of workpapers pertinent

to the audit findings were presented to the Treasurer at the e~~~ co~ference on March 27, 1981. Further, pursuant to a request ~ace by the Co~~ittees' a~torney o~ July 2, 1981 photocopies

''''ere ~ade of ~he sa.-ne ''''o=k~a~ers· associated withtour reir..burse- ~en~s, legal and co~pliance expenditures, and capi~al asse~s,

a~c we:e give~ to ~he a~torney.

~~~ C=~~i~~~cn ~as ~e~~3~ s~=~:!= =eq~es~s ~i~~ =~~~ect ~=

:~~ ~~~s=i~ ~.:=~~~c:~ ~~d~t =a?o=~3 c~ t~e Reagan F:: ?reside~~

:~c =~S~ =C~ ?=esice~~ ~c~~i~~ees a~d ~~e interim pcst-prima=y a~d~t =;~C=~ c: ~~e :c:e :C= ?~es~de~~ Cc~~~~~ee, Inc.

:~ ~s ~~e c~i~~c~ ~= the A~ci~ ~ivisio~ ~~at the ex~e~sic~

=eq~es~ s~o~l~ ~ot :e ;=a~~ed. On Oc~obe= 25, 19i9, the Cc~~iss~on

=~;=o~ed ?rocec~~es :~= ~~e processing 0= ?=es~den~ial Audi~

~~~c=~s ~hic~ s~a~e:

Chairman John W. McGarry Federal Elections Commission

1325 K Street. N.W . v:ashington, D. C.

Dear ~.r. Chairman:

Costa's

which

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=easons:

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:1.:1. W'~."'.C .o"'~cv...o

~o.....oucs. CA~lroa",,, .0010

•11:1. :1••':1.00 • :1 ••·.:111

July 6, 1981

HAND DELIVERED

•

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Mc;KENNA,CONNER & CUNEO

'.7. CYC .TIICCT. N. W.

W.SHINGYON, O· C. 2000S

1202' 7••-7.00

Interim Audit Re~ort of the

Reagan Bush Cocmittee. Reagan Bush Compliance Fund and

Democrats For Rea£an

I =espectfully recuest an extension of

to the interim audit for the following

1. ~~ has.b;en ext~emely difficult to lo~ate the. I~nanc~a~ recorcs of the Reagan ca=?a~gn ~n~c~

are relevant to findings and reco~endatio~s

s=~ =c~~~ -- ~~= ?~:'s ~~:==~= a~~~= ~=~=~~.

The cao?aign co~i~tee is no ~o~ge= s7a==ec

and obtaining interviews and ~n:cr~a~~cn f=o~

=Orllier staff ~eQbers has proved :0 ~e a ti~eccns~~~ng task. In addition, c~e :0 :~e =ac:

Re:

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=espond

I am writing in response to ~.r. Robert J.

letter dated June 18, 1981 to }~. Scott Mackenzie

enclosed the above-referenced audit report.

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M~K'tNN",CONNER& CUNEO

Chairman John W. McGarry

July 6, 1981

Page Two

that many of the matters highlighted in the

audit report occurred quite some time ago, it

has been particularly difficult to acquire the information necessary to prepare a response

to the FEC.

2. A Freedom of Information Act request was recently submitted to the FEC requesting the disclosure

and inspection and copying of the auditors' work

papers generated or relied upon with respect to

several of the findings and recormendations contained in the interim audit report. The Committee

will not be able to prepare an adequate response

to the audit report until the requested materials

have been reviewed.

Due to the difficulty to date in loca:ing t~e financial

recorcs relevant to the subj~ct matters discussed in t~e FEC's . int=riw audit report, it is im?erative that the Committee be

granted a 30-day extension within ~hich to respond. Additional

time is essential in order for the Cc:mittee to locate and review

the relevant recorcs and prepare an effective reply to the FEC's

initial findings.

T~e Co~ittee's res?onse to the !nteriQ Audit Report

is currently due July 20, 1981. In lig~t of the above justifi- cations, however, a 30-day extension for submitting a response . ·on or before August 19, 1981 is hereby requested.

Sincerely,

Edward L. Weidenfeld

.. cc: Charles:L Steele, Esq. ·?ccert J. Costa

, . ."





•

.....

B. ALLEN CLUTT~R, III

STAFF DIRECTOR

ROBERT J. COSTA

REQUEST FOR POSTPONEM~NT OF THE START OF

THE AUDIT OF THE REAGAN/BUSH CO~~ITTEE

THE COMMISSIONERS

FEDERAL ELECTION COMMISSION

WASHINCTON. 0 C. 2~63

C~a=:es ~;. S~eele, ~~~e=a~ C=~~se:

~~~e ~~isse~bc=~, CGC

:a~ =:ess~~g~c~, CGC

-_. --.

~he C=:~ce 0= Ge~e=al C:u~sel ~as i~:c=~ally. con~acted a~d

advised 0: ~~e request and t~e i~tention 0: the Audit Division

to =ecc~~e~c ~~a~ ~~e =equest :e g=an~ed. A copy 0: t~is ~ernc­

=a~d~~ ~as bee~ =~~~~shec ~c t~a~ C:=~ce :0= co~siceration.

IV. Staff Coor~ination

II. Backaround

January 16, 1981

I. Summarv of Issue-and Recor.~endation

Since ~~e Inauguration and subsequent festivities will . probably co=mand most of the Co~~ittee officials' working hours

during the week January 19,-23, 1981, the Aueit staff believes

the Cor.~ittee's request to be reasonable.

!n its letter ~he Committee cites Inaugural festivities as

its reason for requesting the pos~ponement.

II!. Su~~ort . for t~e Recor.~endation

On January 15, 1981, the Aueit Division received a letter

from the Reagan/Bush Co~~ittee (see Exhibit A). The letter

contains a request to postpone t~e start 0: the general election

aueit from January 19, 1981, to January 26, 1981. The Audit

Division reco~mends that the postponement requested be granted.

SUBJ~CT:

'1'0:

THROUGH:

FROM:

MEMORANDUM

,. '.,

....

.~.
c..;

Due to the Inaugural festivities, ?lease grant the Reagan Bush

General Election audit an extensio~ =rom January 19 to January

26, 1?81 •

/@~ Bay Buchanan

National Treasurer

Dear Charlie:

ReaganBush Committee

901 South Highland Street. Arlinpn. Virginia 22204 1'7031685·3400

~r. Charles Henshaw

Federal Election Commission

1325 K Street, ~~

Washi~gton, D.JC. 20463

January 15, 1981

.. f'·'

. "'

....


............-

.!uly 24, 19.80

W"SHISCTOS. 0 C :!().l&3

FEDERAL ELECTION COMMISSION

.- "·_~·:'-~-·.--I --." •.'----- .. """\- ..,- ..

----..

Since::-ely,

Shou~d you have a~y questicns regarding these ma~te::-s, please cc~tac: ei~he= Mr. Cha:les Hans~aw or Mr. Thcmas Nu=~~en o~ t~e

Audit ~ivision at (202) 52~-4155 or toll free (800) 424-9530.

•

This letter is to advise you that, pursuant to 26 U.S.C.

Section 9005 and 11 C.F.R. Section 143.1, on July 24, 1980,

the Commission approved a staff report which states that you,

as a Vice ?residential Candidate and Honorable Ronald Reagan

as the Presiden~ial Candidate, in the general election, have

satisfied the elicibilitv recuirements 0: 26 U.S.C. Section

9003(a) and (bl and 11 C:F.R: Section 141.1 and 141.2. In a~orovinc this reDort, the Co~~issicn has for~allv established

eilgibility to receive a pa~~ent in ~he full amOUnt of

$29,440,000.00, f::-om t~e ?residentia~ ~lection Campaign Fund

under t~e provisions 0: 26 U.S.C. Section 9006(b) and 11 C.F.R.

Section 143.2. A copy of t~e report is enclosed for your lnrorrnatior: .

Dear ~1::-.· 3ush:

Honorable George Bush

710 Nor~h Post Oak Road

Suite 208 Hous~on, Texas 77024

..

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....

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....
.~ ~_ ..- .

(

July 24, 1980

( •

W~SHI~CTON. D C :~63

FEDERAL ELECTION CO,\t'MISSION

., .

:.~. 3a~' E~=~a~a~

-:::-eas·~=-==

' • ...., .... .---~••r",.",.,._••-.-, __... _. __ • __ ....... _ ...........,-_ .. _.0

--. --'

S~ould vou have a~y ~ues~ions re~ar~~..g t~ese ~a~ters, please cc~tact eithe= ~r. Cha=les ~anshaw or Mr. Thomas ~u:then 0: the Audi~ ~ivis~on a~ (2J2) 523-4155 or toll free (80C) 424-9530 .

Dear Gov~rnor Reagan:

This letter is to advise you that, pursuant to 26 U.S.C.

Section 9005 and 11 C.F.R. Section 143.1, on July 24, 1980,

the Commission approved a staff" report which states that you,

as a Presidential Candidate in the general election and Ho~orable George Bush, as the Vice Presidential Candidate, ~ave satisfied the eligibility require~ents of 26 U.S.C.

Section 9003(a) and (b) and 11 C.~.R. Section 141.1 and 141.2. I~ approving this report, the Commission has formally established yo~r eligibility to receive a payment in the full amount of S:S,~40,000.00, from the Presidential Election Campaign Fund

u..der the provisions of 26 U.S.C. Sec~ion 9006(b) and 11 C.F.R. Sectio~ 143.2. A copy of the report is e~closed for your ~~formatio~.

Honorable Ronald Reaaan

10960 Wilshire Boulevard ~os Anqeles, California 90024

-. "'i" ,.. •. ,....--

,....--..

.:....
Reagan For P~esiden~ General E~e~tion Commit~ee

RECEIPT FROM THE UNITED STATES DEPARTMENT OF TREASURY

Oa~e: J'ulv 24, 19130

~.moun~: S29,41.10,OOO.OO

CERTIFICATION FOR PAYMENT

Honorable Ronald ~eaqan

WASHINCTOS D C 2~b3

liono~able George 3ush

and

•

FEDERAL ELECTION COMMISSION

Pursuant to 26 U.S.C. Section 9005 and 11 C.F.R. Section

Federal Election Co~~ission for:

Elec~ion c~~paiqn ru~d was ~eceived on this date :~orn ~he

143.1, a Certification for Payment from the Presidential

'. ~'."

'0,

'" ..,

',,",
Ms. Bay Buchanan, Treasurer

901 S. Highland Street

Arlington, Virginia 22204

!~ accordance with 11 C.F.R. Section l41.l(d), these

Candidates have designated the following person who is entitled

to receive the payment from the Fund:

Ac.V'V'. \.. \/\

July 24, 1980

FEDERAL ELECTION COMMISSION

WASMINCTON. 0 C. ~~&l

•

Accordingly, the Co~~ission certifies to you that the two ~a~ed Candidates are entitled under 26 C.S.C. Section 9004 and 11

C.F.R. Section 143.2 to receive a payment in the amount of

529,440,000.00 :rom the .Presidential Election Ca~~aian Fund

established purs~ant to 26 U.S.C. Section 9006. This amount re~resents the :ull entitlement for the 1980 ?residentia1 General El~ctio~ as speci:ied at 2 U.S.C. Sections ~41a(~) (1) (B)and 44la(c).

Dear Mr. Secretary:

Honorable G. William Miller

Secretary.

Department of the U.S. Treasury Washington, D.C. 20220

Pursuant to 26 U.S.C. Section 900S(a) and the Commission's

regulations at 11 C.F.R. Section 143.1, on July 24, 1980,

the Federal Election Commission determined that Honorable

'Ronald Reagan and Honorable George Bush, respectively, the 1980 Re~ublican Presidential and Vice Presidential Candidates, have

satisfied the provisions of 26 U.S.C. Section 9003 and 11 C.F.R. . Section 141.1 and 141.2 for eligibility to recei~e public funds

:or use in their Presidential and Vice Presieentia1 campaigns.

.. ,......

....

.'.

.......

~~e Cc~~issic~ deter~i~ed ~y a voteo~ 6-0 t~at the

$29,440,000.00

\\'ASMISCTOo,;, 0 C :(\463

FEDERAL ELECTIO~ ·COMMISSION

At-cest:

~, ~arjorie w. E~~ons, Secreta=y to the Fede=al Election

Hcno=able Ronald Reagan Honorable Georqe Bush

Reagan for President General Election

Committee

Approval 0: Payment:

CERTIFICATION

•

s=~o~; THE FEDERAL ELECTION COM.~ISSION

?a~~e~t frcm the Presidential Election Campaign Fund in the

~c~cra=:e Ro~alc Reagan and Honorable George Bush/Reagan For

arnou~~ 0: $29,440,000.00.

Corr~issicn, do here~ycertify that on July 24, 1980,

In the Matte= of

:resicen~ Gene=al Election Cor.~ittee are entitled to a

:-''''.

~~~aehrnen~ as s-:.a~ed

.. This memorandum is to advise you that on,Friday, July lS,

1980, the letter 0: aqreements and certfications siqned by. . -Governor-Reagan and-George- Bush was hand~deliveied to the ~udit

Civisior..Attae~ed is a.cepy of that letter•.

.....- _.. - -~ .._...

! .

,

July 18, 1980

,

,

BILL LOUGHREY ..

~~B .C~~TA ~. ~CEIPT :OF :CANDIDATES' LETTER OF .,

AGAEEMENTS' FOR CERTIFICATIONS FROM

RONALD REAGAN AND GEORGE auSH

THE COMMISSIONERS

•

FEOERALElECTICN COMMfsSION

\\·.'S~i:-';CTOS.D:C. ::0.&6)

...

.-

. _.

•

FROM:

SUBJECT: .

MEMORANDUM

TO:

THROUGH:

.. Upon conc~==enee 0: the Office of General Counsel tha~ . -:'~e le-:.ter :nee-:.s ":~e reCiui=ernen~s 0: the. Act and theCor.'.mission '.5-.

Regulations the: ~li9ibility Report and docu:nents pertaininq to' '.

'the -ee=ti:ication.-. for ?a~'ment· of $29,440,000.00 -will" be :orwarded

via 'p=ocedures si:nilar ~o those used for P=esidential ?rirnary ~atehinc Pav~e~-:.s• . - .

" '"'

..

.. '.