Report of the

Audit Division on the

AFL-CIO Cope Political

Contributions Committee

January 1, 2005 - December 31, 2006

Why the Audit

Was Done

Federal law permits the

Commission to conduct

audits and field

investigations of any

political committee that is

required to file reports

under the Federal

Election Campaign Act

(the Act). The

Commission generally

conducts such audits

when a committee

appears not to have met

the threshold

requirements for

substantial compliance

with the Act.1 The audit

determines whether the

committee complied with

the limitations,

prohibitions and

disclosure requirements

of the Act.

Future Action

The Commission may

initiate an enforcement

action, at a later time,

with respect to any of the

matters discussed in this

report.

About the Committee (p. 2)

AFL-CIO COPE Political Contributions Committee is a separate

segregated fund of AFL-CIO and is headquartered in Washington,

DC. For more information, see the chart on the Committee

Organization, p.3.

Financial Activity (p. 2)

• Receipts

o From Individuals

o From Other Political Committees

o Transfers from Affiliated Committees

o Other Receipts

o Total Receipts

• Disbursements

o Contributions to Candidates/Committees

o Other Disbursements

o Total Disbursements

$ 193,546

48,250

1,168,138

8,004

$ 1,417,938

$1,304,452

166,520

$ 1,470,972

Findings and Recommendations (p. 3)

• Misstatement of Financial Activity (Finding 1)

• Transfers Received from Separate Segregated Funds (Finding 2)

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

on the

AFL-CIO COPE Political

Contributions Committee

January 1, 2005 - December 31, 2006
Table of Contents

Page

Part I. Background

Authority for Audit 1

Scope of Audit 1

Part II. Overview of Committee

Committee Organization 2

Overview of Financial Activity 2

Part III. Summaries

Findings and Recommendations 3

Part IV. Findings and Recommendations

Finding!. Misstatement of Financial Activity 4

Finding 2. Transfers Received from Separate Segregated Funds 6
Parti

Background

Authority for Audit

This report is based on an audit of the AFL-C1O COPE Political Contributions

Committee (AFL-CIO COPE), undertaken by the Audit Division of the Federal Election

Commission (the Commission) in accordance with the Federal Election Campaign Act of

1971, as amended (the Act). The Audit Division conducte^tfie audit pursuant to 2

U.S.C. §438(b), which permits the Commission to conjjuggaudits and field investigations

of any political committee that is required to file a itdjg^^ityer 2 U.S.C. §434. Prior to

conducting any audit under this subsection, the Corqmissioi^liust perform an internal

review of reports filed by selected committees|o|peterrnine ifihefireports filed by a

particular committee meet the threshold requirements for substanfitkcpmpliance with the

Act. 2 U.S.C. §438(b).

Scope of Audit

Following Commission approve

and as a result, this audit examine!

1. The consistency between repor

2. The disclosure of individual

«rf|W|!«Kj'i>jfcfc

3. The receipt of trahsfersireceived

ff evaluated various factors

e of employer,

d funds.
Part II

Overview of Committee

Committee Organization

Important Dates

Date of Registration

Audit Coverage -December 31,2006

Headquarters

Bank Information

Bank Depositories

p&s Account and lousiness

Moneke t Account)

Treasurer When Audit^as.Conducte L. Tronaka

\i?;"

Treasurer During,] gred by jumkmeat

Management Information

• Attended FEC Campgilhlf inaiiclepSjeminar

Management SoTO^PacEBfe

WlrSRandled Accounting and

Recordfeeping Tasks

[

Paid Staff

>yervij|w of Financial Activity

(Audited Amounts)

'^s!r>

Cash on hand @ January 1, 2005

o From Individuals

o From Other Political Committees

o Transfers from Affiliated Committees

o Other Receipts

Total Receipts

o Contributions to Candidates/Committees

o Other Disbursements

Total Disbursements

Cash on hand @ December 31, 2006

$ 122,740

193,546

48,250

1,168,138

8,004

$ 1,417,938

1,304,452

166,520

$ 1,470,972

$ 69,706
Part III

Summaries

Findings and Recommendations

Finding 1. Misstatement of Financial Activity

A comparison of AFL-CIO COPE's reported activity to ban^records revealed a

misstatement of cash on hand and disbursements in yearilOt)5 and 2006. It was

recommended that AFL-CIO COPE file amended rigns^tcporrect the misstatement. In

response to the interim audit report, AFL-CIO COP^iied amended reports to correct the

misstatements. AFL-CIO COPE also correcte|Ji|s?cash balance-wijts September 2009

monthly report. (For more detail, see p. 4)

Finding 2. Transfers Receive

Funds

During the audit period, AFL-C

separate segregated funds. AFLtwo separate segregated funds, CW

COPE) and American.Rederation of

Education (AFT

collecting agen

and that they are

recommended that

to ensurejtle^r&per ac

fbrlK^^if^Rres]

staled :that it declinesfeacce

"!$••'!>Vn <az*jaunfaiftoXimpose new

regulatioli^ (For more

arate Segregated

1 hers

¥sf»

ave met

JPE stat

pliancSwith the Co

1O

&&&&&*&.

,~.

 an

tothelfT^

tjie Audit stl

totaling $1,100,000 from two

le to demonstrate that the

ions Committee (CWA

:ee on Political

ordkeeping requirements for

;fei^|are a longstanding practice

ssion's regulations. The Audit staff

ports and implement new procedures

prdkeeping procedures are followed

report, counsel for AFL-CIO COPE

recommendation and believes that it is

luirements without a change in the governing
Part IV

Findings and Recommendations

| Finding 1. Misstatement of Financial Activity

Summary

A comparison of AFL-CIO COPE's reported activity to

misstatement of cash on hand and disbursements in yea:

recommended that AFL-CIO COPE file amended re

response to the interim audit report, AFL-CIO C

misstatements. AFL-CIO COPE also correcte&its, cash bala

monthly report.

ords revealed a

and 2006. It was

correct the misstatement. In

ended reports to correct the

its September 2009

Legal Standard

Contents of Reports. Each report must discli

• The amount of cash on hand at^the beginning

• The total amount of receif

• The total amount of disbursern^tFfo^^iereportinl

• Certain transactions that requirellemizatiS^n Sche

the reporting

id for the calendar year; and

ripd and for the calendar year;

(Itemized Receipts) or

Facts and Analysis

The Audit staff reconciled the

2006. It was determilfilthei

>rted finar

for the'

|1 activity to the bank records for 2005 and

lisstated cash on hand and

outline the discrepancies for both

tivity.

activity

Reported Bank Records Discrepancy

Opening'0ish Balance $105,571 $122,740 $17,169

Understated

Receipts $481,104 $480,675 $429

Overstated

Disbursements $513,314 $530,093 $16,779

Understated

Ending Cash Balance $70,861 $73,322 $2,461

Understated

The net understatement of disbursements was the result of the following:

• Disbursements not reported + $15,294

• Reported disbursements that did not clear bank + 1,500

• Disbursements reported with incorrect amounts : 15.

• Net Understatement of Disbursements $ 16,779
2006 Activity

Opening Cash Balance

Receipts

Disbursements

Ending Cash Balance

Reported

$70,861

$931,728

$912,308

$90,282

j&Sb*

Bank Records

$73,322

$937,263

^

J|pK),879

ffi*jj8P>TM

Discrepancy

$2,461 .

Understated

$5,535

Understated

$28,572

Understated

$20,576

Overstated

„ ^cash bal

knowhtaliustment

was overstated by

sentativ

s did n

at they

The net understatement of disbursements

• Disbursements reported incorrectly

• Disbursements reported with incorrect ai

• Unexplained differences

• Net Understatement of Diisl

Cash Balances:

AFL-CIO COPE

outlined above

2006, the cash ba

This matt!

confi

.A&3&L' , misstatements but

^*t,

erro

2006 due to the errors

periods. On December 31,

r AFL-CIO COPE during the exit

e

v

any comments to explain the

file amended reports to correct these

i^**-^ ^"E!

Interim^&iidit ReporJptecommendation and Committee's Response 'sfr-fits^ • W£*-$JL TM

The Audit sta^ce.commend&.^hat AFL-CIO COPE file amended reports to correct the

misstatements ndfeft above./dl Jvas also recommended that, AFL-CIO COPE amend the

^VW* *•* >« • ~1! .

cash balance of itsliiptrecjen! report with an explanation that it resulted from audit

adjustments from a prior^riod. In response to the interim audit report, AFL-CIO COPE

stated that it concurred tfiat its reported figures for calendar years 2005 and 2006 were

inaccurate, and filed amended reports to correct the misstatements. AFL-CIO COPE also

corrected its cash balance on an amended September 2009 monthly report.
Finding 2. Transfers Received from Separate Segregated

Funds

Summary

During the audit period, AFL-CIO COPE received transfers totaling $1,100,000 from two

separate segregated funds. AFL-CJO COPE has not been able to demonstrate that the

two separate segregated funds, CWA COPE Political Contributions Committee (CWA

COPE) and American Federation of Teachers AFL-CIO Co

Education (AFT AFL-CIO), have met the transmittal an

collecting agents. AFL-CIO COPE stated that such ti

and that they are in compliance with the Commissi

recommended that AFL-CIO COPE amend past^replrts an

to ensure the proper accounting, reporting, and|

for these transfers. In response to the interii

ittee on Political

irdkeeping requirements for

are a longstanding practice

itions. The Audit staff

lament new procedures

rdkeeping"p|pcedures are followed

it report, counsellor, AFL-CIO COPE

stated that it declines to accept the Audit sta

unfair to impose new reporting requirement

regulations.

'-s recommendation an

Without a change in the

Legal Standard

A. Affiliated Definition. Established,,

vPif

organization. Affiliatedjx>litical committees

purposes of contributiSSfirnits. Committees

jd$*if$i&&-'*'&£8is&'-*. \ established, financedpmairitained or con _

and/or its local unions or otherisubordinat

by an organization dSnational opjnternation

^Bf^Sstr ^MSS^Mh?

med to^gva.iJ"iMtjggS^.frl 1 iati

itjonal otiniSrnatiohaiUriion

bodies are

.^""

organiz

or controlled by the same

political committee for

be aSiated include those

tional or international union

izations. l^lso, committees established

nions and/or all its State or local central

not presumed between unions and

1 CFR §§100.5(g) and 110.3(a).

B. Collecting Agentefinition^A col lectingf agent is an organization or committee that

collects;and transmits cWribution7s^;pne or more separate segregated funds to which

the collecting agent is relaS;, A coffe.cting agent may be the separate segregated fund's

connected organization or aWprganization or committee affiliated with the SSF, or a

i*"5l" 353V

local, national, ^intemationaluinion collecting contributions on behalf of the separate

segregated fund ofcany, federStion with which the local, national, or international union is

affiliated. 1 1 CFR io

C. Requirements for Collecting Agents. The separate segregated fund (SSF) is

responsible for ensuring that the recordkeeping, reporting, and transmittal requirements

are met.

1 . Collecting agent may solicit only those individuals who are eligible for

solicitation under the law, and pay the expenses of soliciting.

2. Collecting agent may include a solicitation for contributions to an SSF in a bill for

another payment.

3. Collecting agent may establish a separate transmittal account solely for the SSF's

contributions or use its own account for the temporary deposit and transmittal of
contributions to the SSF. The agent must keep separate records of all receipts and

deposits that represent contributions to the SSF.

4. Collecting agent must transfer the funds within 10 days for all contributions over

$50 and within 30 days for contributions $50 or less.

5. Collecting agent must forward the required recordkeeping information to the SSF

along with the collected contributions, and maintain records of SSF contribution

deposits and transmittals for three years.

6. The SSF receiving contributions collected by a collecting agent shall report the

full amount of each contribution received as a contribution from the original

contributor to the extent required by 11 CFR §1^§^ 11 CFR §§102.6(c) and

102.8(b).

D. When to Itemize. Political committees oth^thah authorize*!candidate committees

must itemize:

• Any contribution from an individuaj|pf exceeds $200 perlajendar year, either

by itself or when aggregated with othereBhtributions from the sam&ontributor; and

• Every contribution from any political iSMmittee^ifgardless of tllekmount.

• Every transfer from anoth||political partyBftgjJfttee, regardless onlpether the

committees are affiliated. 2Tl^§434(b)(3)(^pl) and (D).

£. Definition of Itemization. Itemizatjon

recipient committee discloses, on a searate sc

• The

• The date offSceipt (tfie^ate the

• The full nam||nd addre of the

Injhecase of

.and

itributions

the fol

jceived means that the

ig information:

pi

l^total

receivedilhe contribution);

>utor;

lal contributors, the contributor's

j; and

>ntributions from the same contributor. 11

fTs.C. §434(b)(3)(A) and (B).

Facts aii&Analysis t&

During theliuJJitjjeriod, APC|CIO COPE received four transfers from AFT AFL-CIO

totaling $800^(®and four tl^sfers from CWA COPE totaling $300,000. These

transfers were reported by/AjE-CIO COPE on Line 12 (Transfers from Affiliated/Other fT

'described as joint fundraising transfers or as payroll deductions

on its Schedules A (Itemized Receipts). The transfers were received and reported by

AFL-CIO COPE without detail as to which individual contributors made up each

transfer, or how much was given by each contributor.

CWA COPE is the separate segregated fund of the international union Communications

Workers of America (CWA). AFT AFL-CIO is the separate segregated fund of the

international union American Federation of Teachers (AFT). Both CWA and AFT are

members of the federation of unions AFL-CIO and, as such, may serve as collecting

agents for AFL-CIO COPE. The separate segregated funds of these unions (CWA

COPE, AFT AFL-CIO and AFL-CIO COPE) are not considered "affiliated" within the
meaning of 1 1 CFR §1 10.3 and, therefore, are subject to separate contribution limitations

and must independently report individual contributions to their respective organizations.

CWA COPE and AFT AFL-CIO initially receive and report contributions for their

respective committees as well as AFL-CIO COPE. These contributions are often

received from individuals who sign voluntary payroll deduction authorization cards. The

authorization cards contain a statement that the contributions will be used in a "joint

fundraising" effort and that a portion of their contributions would go to AFL-CIO COPE.

The contributors do not designate specific or separate contribution amounts for AFL-CIO

COPE. Likewise, the timing and amounts transferred toJ^l^ClO COPE were based on

periodic discussions with officers of CWA COPE and^fc AFL-CIO.

In accordance with 11 C.F.R. §102.6(c)(l), AFJ|gitf COP1

that both AFT AFL-CIO and CWA COPE &$$$?& with the

Under these rules, CWA COPE and AFT ^iB-tlO must:

• Operate a separate transmittal account1

or maintain records of aU|Such receipts ai

transfers from their own

• Transfer funds to AFL-C1

within 30 days for contributi

• Forward all recOTdkeeping in

COPE andUmaintai^qcumenta

jtfte&te- "^ss&i.

years.

Since AFL-CIO COJ

^responsible for ensuring

ting agent rules.

tributions,

O COPE

r contributions over $50 and

sfers to AFL-CIO

nsmittals for three

)unts trar

itation that identified the individual

>r any documentation that detailed the

"'did not ensure that the collecting agent

met. AFHpJjp COTSpalso did riofeproperly report contributions collected by

collecfing; agents since t||>^ reported;|hese contributions on Line 12 as transfers from the

collecting;:agents rather tnan|pn Lineft^(Receipts from Individuals/Persons) as

contributiorisllrom the original^contributor.

The Audit staff pre|ented tlrj|^matter to AFL-CIO COPE representatives during the exit

conference. In resjfee^tirtsel for AFL-CIO COPE challenged the conclusion of the

Audit staff with the following arguments.

First, counsel for AFL-CIO COPE addressed the timing of the transfers and argued that

the requirements at 11 CFR §102.6(c)(4) are not applicable to the situation because of a

joint fundraising arrangement among the separate segregated funds and their connected

organizations. However, no joint fundraising agreement was presented.

Counsel contends that if 11 CFR §102.6(c)(4) was applicable, the transfers did conform

to the timing requirements. In support of his argument, counsel provided data showing

average daily receipts for both CWA COPE and AFT AFL-CIO. Since contributions

were predominately $50 or less, counsel believes that within the 30 days prior to each of
the transfers to AFL-CIO COPE, both CWA COPE and AFT AFL-CIO received far more

contributions from individuals than was transferred.

Based on its own analysis, the Audit staff concurs that both AFT AFL-CIO and CWA

COPE received sufficient contributions within 30 days prior to each transfer to AFL-CIO

COPE. However, based on the available records, the Audit staff was not able to identify

which contributions were included in the transfers. The Audit staff maintains that the

requirements at 11 CFR §102.6(c)(4) and 11 CFR §102.8(b) are applicable and the

amount of each contribution being transferred is required tpjbe. provided to AFL-CIO

COPE within the appropriate time frame along with the^jfjuired records supporting the

contributions.

Second, counsel discusses the issue of having a^sepafate accou|v|solely for AFL-CIO

COPE contributions. Counsel confirms tha^ol|?AFT AFL-ClS^nd CWA COPE did

not maintain a separate account solely fbr^gpGIO COPE contributions, did not keep

separate records of contributions attributabRojts transfers, or give tra||infbrmation to

AFL-CIO COPE. Again, counsel argues tha?

11 CFR §102.6 does not recognize%the dual role

collecting agents for AFL-CIO (SgJ&Hand as

receiving contributions for thems

COPE records and reports all disclol

because the contributors, authorize theftetual

AFT AFL-CIO an

These cards alsor m cont

acknowledge thareBntribution<

v a

ents are noraD|jJcable since

L-CIO and CV^COPE as

separatiflpregated funds soliciting and

rding toBjnsel, AFT AFL-CIO and CWA

iatipn for /i|j|^CJO COPE contributions

of thefecontributions only to

ctionWuthorization cards.

iint^tunciraisiii;^arrangementand

[0K"politicaI purposes."

"IK

?•&

without detailing the associated

tors isHSient un1S'e^||gF]i§104.3(a) and that the regulations do

nol^ajnly require %sbft.to A^H^CIO COPllrSf the responsibility to report the individual

contributors. Accordingjo,couffs"%the current practice "underscores that these transfers

are mosf accurately vieweWas comprised of funds that are not attributable to any

particular individual, but afe^comprised of unitemized aggregate portion of all of them".

* «{.:•«;>, p'M*^

The Audit stafifilfiieyes thajf CFR § 102.6(c)(4) requires AFT AFL-CIO and CWA

COPE to record the^fujl arnbunt and details of each contribution on behalf of AFL-CIO

COPE. Such information's necessary in order to specifically track what amounts are

contributed to the respective organizations, as well as to monitor itemization and

limitation requirements. It is further noted that by viewing the transfer amount as being

comprised of a portion of each contribution instead of the full amount of those

contributions received prior to the transfer would likely not support the argument that the

transfers were made timely.

Finally, counsel explains how the proposed changes would cause a significant

administrative burden on all affected committees and would ultimately result in a

reduction of contributor information on the public record. According to counsel, the

number of individual contributors itemized by AFT AFL-CIO and CWA COPE would be

fewer since a portion of their contributions would be attributed to AFL-CIO COPE.
10

Jn summary, the Audit staff accepts that both AFT AFL-CJO and CWA COPE can

function as collecting agents for AFL-C1O COPE. However, as collecting agents, AFT

AFL-C1O and CWA COPE must abide by the rules governing collecting agents at 11

CFR §102.6(c). During the period covered by the audit, AFT AFL-C1O and CWA COPE

did not have separate transmittal accounts or keep separate records of all receipts and

deposits that represent contributions to AFL-C1O COPE, or distinguish these

contributions at the individual level. Given that these records were not kept, the

arrangements with AFT AFL-CIO and CWA COPE did notj|atisry the requirements of

the collecting agent regulations. AFL-CIO COPE did nojlpire that both AFT AFLCIO and CWA COPE complied with the collecting ageSrules in accordance with 11

C.F.R. §102.6(c)(l).

Interim Audit Report Recommendation and Committee Response

The Audit staff recommended that AFL-OlM^pOPE document that^pocedures have been

implemented to ensure the proper accountiri^eporting, and recordke%ing in accordance

with 11 CFR §102.6(b)(l) and (c).

ods should be corrected to

ibutions on Line 1 1 (Receipts

Reports covering the audit perio

reflect all amounts received from

from Individuals/Persons) instead o

Committees). Contributions aggrega

supporting Line 1 j^§P^&e aggre

reported on Lin

subseque

AFL-CIO COPE is

and all-eontriButor and cli

com

to retained for tfireejkears.

[gents as

insfers

.over $20should

Lamoiihnteni z

mized on Schedule A

ontributions should be

collecting agents forward contributions

Jo AFL-CIO COPE within 10 or 30

rds for such contributions are required

fe)(5) and (6) and 11 CFR §102.8.

o the interirritaudit repot;|cpunsel for AFL-CIO COPE stated that it concurs

FL-ClO anl^WA d*0PE may act as collecting agents for AFL-CIO

COPE and th%the transfersVnjiade complied with the timing requirements of 1 1 CFR

§102.6(c)(4), although it disagrees that this regulation is applicable to its situation.

~

In respoh

that both

,

Further, counsel disagfe£s>tHat the separate segregated funds must establish separate

transmittal accounts solely for AFL-CIO COPE contributions, or must maintain

contribution records of the contributions that comprise the transfers. Also, counsel

disagrees that the separate segregated funds are required to forward all recordkeeping

information to AFL-CIO COPE, and having AFL-CIO COPE report the incoming

transfers on Line 1 1 (Receipts from Individuals/Persons), itemizing individual

contributions that exceed $200. Counsel explains that the joint fundraising nature makes

the individual attribution to, and reporting by AFL-CIO COPE unnecessary. It states that

the transfers themselves provide the necessary information because individual

CWA/AFL-CIO members authorize all of their contributions to be remitted to CWA

COPE and then delegate to the two separate segregated funds the authority to apportion

the total receipts between them.
11

As such, AFL-C1O COPE declines to accept the recommendation that it amend its reports

for the audit period and any subsequent periods. It points out that if a reallocation was

applied to the contributions being transferred in 2005 and 2006, no individual member

would have contributed over $200 to AFL-C1O COPE and therefore, no itemization of

the contributions would be necessary on its reports. AFL-C1O COPE maintains that

amending reports would not provide any public benefit and would be a highly

burdensome undertaking.

In closing, counsel states that the arrangement at issue

years and has been regularly reported by all participat

submits that, absent a change in the governing reg

continue under the current arrangement and it is|maififestly

requirements now.

in place for at least 25

>arate segregated funds. It

should be entitled to

to impose new

AFL-CIO COPE's response to the interim audit report reiterates the arguments made

^is£i^t A" ^Srif^:'

earlier. However, unlimited transfers betweem^ornmittee^re permitteM||£ry limited

circumstances. Those relevant toithis situation wo^jd|^;Be transfers betw^n affiliated

committees, the transfer of joinrfonlFaising proceea^^d the transfer of funds received

via a collecting agent. Each has spg^i^^uirementsl^irst, AFT AFL-CJO and CWA

COPE are not affiliated with AFL-GI&C6lB|unde lr Commission regulations. If they *85 "ifc *^V tBq'y^JSftiili— '^*lLifc"'¥"l

l:Sii

were affiliated they wgul^share a singJej^ontribu|j|^imitaliqn^Second, the prospect of

is also

tsas

iittees ap

er,AF

ftha

ajoint fundraisin

not joint fundrai

relationship betw

described at 11

se cmmittees since they were

$2.17. As noted above, the

o be a collecting agent relationship as

-CIO, CWA COPE and AFL-CIO

ulation.