MEMORANDUM

TO:

FROM:

FEDERAL ELECTION COMtvUSSION

December

FRED S. EILAND

PRESS OFFICER $-

ROBERT J. COSTA -' ,f

ASSISTANT STAFF DIRE TOR

AUDIT DIVISION

1 .,

J. I ,

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON DUKAKIS FOR

PRESIDENT COMMITTEE, INC.!/

Attached please find a cop~o~ the Final Audit Report on the

Dukakis for President Committee, Inc.- whTch'~wasapproved'--by"thEr

Co.mission on Deceaber 9, 1991.

Informational copies of the report have been received by all

parties involved and the report may be released to the public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Reports Analysis Division

FEe Library

!/ This report replaces the report included in Agenda Document

#91-99 considered by the Committee at its October 10, 1991

meeting. The legal analysis performed by the Commission's

Office of General Counsel may be found at Exhibit A, Agenda

Document 191-99.
MJOOOS49

FEDERAL ELECTION COMMISSION

.\ --SHINe TO~ 0 ( .:04&3

December 5, 1991

KBIIORANDUJII

TO: THE COMMISSIONERS

THROUGH: JOHN C. SURINA

STAFF DIRECTOR

rROM: ROBERT J. COSTA

ASSISTANT STAFF ;I~~;O;­ AUDIT DIVISION

SUBJECT: FINAL AUDIT REPORT - OUKAKIS

FOR PRESIDENT COMMITTEE, INC.

Please find attached the revised final audit teport for ~he

-Oukakisfo,r President COaJllittee#Inc-.- --P--U~SuaAt-- to--the

Co.mission's det~r.i"~ti~~ ~n C=~~~~r 1~, ~991t r~?isi~rs ~~~~

been made with respect to Finding III.C. Statesent of Net

OUstanding Caapalgn Obligations and Repay.ent of Surplus Funds.

Tbe a.aunt now considered as cash in bank (joint escrow account)

is $636,052.05 ($894,627.90 less 258,575.85). This reduction

represents contributions considered to be redesignated by the

contributors to GELAC within 60 day. of' the date of the

contributor's check. The discussion at pa9- 29 provides a

breakdown of the $258,575.85, which flows throuqh to the NOCO

state.ent on page 30, and the repayaent calculation on page 31.

As was noted at the Comaission's meeting of October 10, 1991,

as a result of the Coaaission's actions, so•• of the a.ounts

discussed required verification and refineaent. Further, as you

are aware it was the understanding of both the Committee and the

Audit staff that redesignation letters associated with these

contributions were not dated to allow a determination whether the

redesignation was accomplished within 60 days. The review

necessary to verify the amounts contained in the attached report

involved the examination of approximately 3,200 contribution

records!/ representing contributions totalling $894,621.90.

!/ Each contribution record conslsts, on average, of four

separate documents. 1 - letter to contributor requesting

redesignation/refund. 2 - copy of the contributor check.

3 - copy of solicitation. 4 - copy of authorized

redesignation letter.
Meaorandua to the Commissioners

paqe 2

Among these records, 440 redesignation letters were located that

were either date stamped by the Committee as to its date of

receipt or dated by the contributors.

Further, in order to ensure that all dated redesignation

letters were considered, the Audit staff reviewed an additional

1,300 contribution records relevant to contributions dated post

7/20/88 deposited into the joint escrow account.

Although the Committee's statement that ~it was not the

practice of the Committee to date stamp correspondence when received~ was substantially correct as well as the Audit staff's

understanding, the Audit staff has adjusted the amounts in the

attached report to give the Committee "credit" for the small

percentage of redesignation letters that contained a date of

receipt by the Committee, or a date entered by the contributor indic~tin9 th~~ t~= :zde$19~a~:cn ~~~,;r~~d ~~thin nO day&.

This matter is being circulated for a 48 hou~ tally vote. If

vou have any questIons please call-Tom-Nurthen or RlckHalter at

219-3120.

Attachment:

Revised Final Audit Report on the

Oukakis for President Committee, Inc.
B5002652

FEDERAL ELECTION COMMISSION

REPORT OF THE AUDIT DIVISION

ON THE

DUKARIS FOR PRESIDENT COMMITTEE, INC.

I. Background

A. Overview

This report is based on an audit of the Dukakis for

President Committee, Inc. ("the Committee") to determine whether

there has been compliance with the provisions of the Federal

Election Campaiqn Act of 1971, as amended ("the Act") and the

Presidential Primary Matchinq Payment Account Act. The audit was conduct~d ~urs~an~ to 26 U.S.C. § 9038(a) which stat~s thdL -After

each matching payment period, the Commission shall conduct a

--tha-r-ough -examination --and -_Audi_t 0 f __th_e qua_l if_i ed_ c_alllPaJ 9_n_ _~_~p_~n ~_ e 5

of every candidate and his authorized committees who r~~~ivprl

payments under Section 9037."

In addition, 26 u.s.c. S 9039(b) and 11 C.F.R.

S 9038.1(a)(2) state, in relevant part, that the Comaission may

conduct other exaainations and audits fro. time to time as it

deems necessary, and to require the keeping and submission of any

books, records, and inforaation, which it determines to be

necessary to carry out its responsibilities.

The Co.-ittee re9istered with the Federal Election

Co••ission on April 6, 1987. The Committee maintains its

headquarters in Boston, Kassachusetts.

The audit covered the period March 25, 1987 through

November 30, 1988. In addition, certain other financial activity

relating to the Committee's Statement of Net Outstanding Campaign

Obligations was reviewed through June, 1991.

The Committee reported an opening cash balance of $-0-,

total receipts of $31,557,820.38, total disbursements of

$30,826,181.15 and a closing cash balance of $731,833.23 as of

No~~~L~( 30, lS88. i l Undet 11 C.t.~. §-~038.1(b)(3) and (eJ\4)

additional audit work may be conducted and addenda to this report

issued as necessary.

~/ Due to math errors made by the Committee, the totals do not

foot.
2

This report is based upon documents and work papers

which support each of its factual statements. They form part of

the record upon which the Commission based its decisions on the

matters in the report and were available to Commissioners and

appropriate staff for review.

B. Key Personnel

The Treasurer of the Committee during the period covered

by the audit was Mr. Robert A. Farmer.

c. Scope

The audit included such tests as verification of total

reported receipts, disbursements and individual transactions;

review of required supporting documentation; analysis of Committee

debts and obligations; review of contribution and expenditure

limitations: and such other audit procedures as deemed necessary

under the circumstances.

II. Audit Findings and Recommendations Related to Title 2 of the ~n:ted S~ate$ COGe

A. Media Commission

Sectlon 441b(a) ot Tl~le 2 ot the United States Code

states, in part, that it is unlawful for any corporation to make a

contribution or expenditure in connection with any ptimary

election held to select candidates for president or for any

candidate, political committee or other person knowingly to accept

or receive any contributions prohibited by this section.

The Committee entered into a contract with Daniel B.

Payne a.k.a. payne and Company ("payne") which covered, amon9

other services, media placement. The contract provided for

specific payments durinq a three phase period. The contract did

not delineate commissions for media placement except durin9 the

second phase which provided for a fee of 5 percent of media

placement but no less than $50,000. Payne subcontracted the buys

to Yellin Media, Inc. ("Yellin") which billed the Committee

directly for television and radio time buys at the same amount

Yellin was billed by the individual television and radio stations.

The television and radio station invoices contained a gross amount

less a lS percent commission to arrive at the net amount billed

Yellin. The Audit staff could not find any Committee payments to

Yellin which represented commissions for media placement, however,

thp Com~i~t~~ ~!i~ $4.~O~,399 t~ Y~lli~ ~e!~tiv~ t~ th~ ~~:t uf

broadcast time for television and radio ads. In addition, $~08,aOO in fees ~ere paid to Payne fot lt~ Services.

The Committee provided the Audit staff with a statement

signed by Yellin which stated that Yellin received a set sum of

money for services during the early primaries up to the Super
r3

Tuesday primaries. Yellin did not disclose the amount received,

however, the statement goes on to say that although it is

impossible to retroactively determine the percentage of the

amount that was intended as compensation for the Iowa and New

Hampshire primaries, that 2 percent of the media purchased within

those states would be accurate.·/ Yellin justifies the 2 percent

fee by comparing it with the fees it charged to the 1986 Oukakis

gubernatorial campaign, the 1988 Oukakis/Bentsen general election

campaign, and the Democratic National Committee for the 1988

general election.

During the course of reviewing media commissions billed

to committees during past presidential campaigns, the Audit staff

has noted various percentages charged by media firms which are

based, in most cases, upon the level of work involved. For

example, less work is involved by the media buyer in placing

network buys as opposed to spot buys made at local TV and radio

stations. A review of the media buys made by the media buyer

shows that almost all of the buys made by Yellin except for a

small amount of cable television were at local radio and TV

stations. Therefore, it appears that substantial resources were

expended by Yellin in order to place and track the Committee's

t.t'levisi0n and Ladio buys. A!== rated abo-,:a, dut'ing di'l~ ~hb~t'- of

the contract the fee was at least 5 percent. It is the opinion of

the Audit staff that a 2 percent commission is unreasonably low

and that ~the COlllmi ttee and- Yellin have -not provided just~if-icat.-iQnas ~o lts reasonableness.

In the interia audit report, the Audit staff recommended

that within 30 calendar days of service of the report the

Committee:

1. obtain from Yellin the total amount received as fees for

media placement;

2. provide justification to include copies of contracts

with naaed 1988 clients, invoices, and a breakdown of spot vs.

network buys; that the amount paid to Yellin is reasonable: and

that a prohibited contribution has not been received.

In response to the interim audit report, the Committee

provided a detailed description of the services provided by Payne

with a letter from Yellin explaining the relationship with Payne.

The Committee explained that Payne was responsible for " ... all facets of media services including creative concepts,

copy, design, supervision of production, media planning and pl~c~m~nt: ~~~r~i~n ~t~~t~~7 3~ i~ ~~~~t~~ t~ ~~di~ ~~~ ~n~~

~/ Yellin in its statement referred specifically to Iowa and New

Hampshire, since the respective media commissions would be

allocable to those states and increase total allocable

expenditures.
4

copywriting services for direct mail." Accordingly, for these

services Payne was paid in three phases: $250,000 covering from

April, 1987 through February, 1988; S percent of media placements

but no less than $50,000 from the end of February through Super

Tuesday, March 8, 1988; and for the period post Super Tuesday, the

Committee believed that the parties agreed to continue the

comoensation soecified in the second ohase (S\ of media olacem~nts

but" ~Q - i~s~ than $50,000) even though" it was not confirmed i~ ------

writing. In addition, Payne was compensated for other

reimbursable expenses, i.e., air fare, lodging, etc. According to

the Committee, payne was paid $501,300 for its services and

$105,314.54 in reimbursable expenses.

In a letter dated June 14, 1990 to Committee Counsel,

Yellin states that she worked as a consultant to Payne with

responsibility for placing media buys. For her services, she was

paid $5,000 per month by Payne during the period April, 1987

through June, 1988. Just prior to Super Tuesday (March 8, 1988),

Yellin subcontracted media buys to Konjolka and Company who agreed

to place buys for 2 percent of the placements. According to

Yellin, she paid $75,709.75 to Konjolka and Company and that cost

was billed to Payne.

Finally, the Committee provided access to the records

maintained by its media buyers. The review of these records

---diselosed that the Committee paid $1-5-0,709 .. 75- ($7-S,OOG---to- ¥-el-l-in

and $7S,lO~.7S to Konjolka and Company) in fees for net placements

totaling $4,292,629.62. The fees paid represent 3.5 percent of

the buys placed.

Based on the review of the media firms' records and

commissions paid by other presidential candidate committees deemed

reasonable by the Commission, the commissions paid to the media

firm appear reasonable and therefore no prohibited contribution

resulted.

Recommendation II

The Audit staff recommends no further action on this matter.

B. Disclosure of Contributions Received from Political

Committees

Section 434(b)(3)(B) of Title 2 of the United States

Code states that each report under this section shall disclose the

identification of each political committee which makes a

contribution to the reporting committee during the reporting r~ri~~. ~~~~th~~ ~~~h Lhe ~atc ~nd ~=c~~t c! ~~1 3~C~

contribution.

Section l04.3(a)(4)(ii) of Title 11 of the Code of

Federal Regulations states, in part, that each report shall

disclose the total amount of receipts for the reporting period and

for the calendar year and the aggregate year-to-date total for
5

each contributor (includinq political committees and committees

which do not qualify as political committees under the Act).

A review of COmmittee reports and related records,

indicated that four contributions, totalin9 $2,600, apparently

received from political committees were not itemized on the

Committee's disclosure reports. In the case of three

contributions, totaling $2,500, it does not appear that the value

of these contributions was included in reported totals.

During the exit conference, Committee officials were

provided with a schedule that identified the four contributions

mentioned above. Committee officials responded that they

inadvertently reported the contributions as if received from

individuals but would file amended reports.

In the interim audit report, the Audit staff recommended

that the Committee file amended Schedules A-P to correct the

itemization problem noted above.

On April 18, 1990 and July 14, 1990, the Committee filed

amended disclosure reports correctly itemizing three of the

r: n t: r i bll t ions, t :)l ali nlJ S1 t €(, ~, a s po 1. i ticale 0 mm1 t tee

contributions. The remaining $1,000 contribution was ori9inally

reported on April 26, 1988, by the political committee which made -the--contribu-tion; however, acco-rding to--a Commit-tee -offi-c-la-l, the

contributlon was never received and therefore not reported.

on-August 25, 1989, the political committee wrote a new

$1,000 check which was forwarded to the candidate's General

Election Leqal and Accounting Compliance Fund.

Recommendation 12

Based on the above, the Audit staff recommends no further

action on this .atter.

c. Other Matters

Certain matters noted during the course of the audit

have been referred to the Office of General Counsel.

III. Audit Findings and Recommendations Related to Title 26 of

the United States Code

A. Calculation of Repayment Ratio

~e~ti~n 9039~~~~2~~~~ Jf ~~t~: :6 vf the ~niL~d 5~dte~

Code states that if the Commission determines that any amount of

any paymerat mdde to a candidaLe from the matching payment account

was used for any purpose other than to defray the qualified

campaign expenses with respect to which such payment was made, It
6

shall notify such candidate of the amount so used, and the

candidate shall pay to the Secretary an amount equal to such

amount.

Section 9038.2(b)(2)(iii} of Title 11 of the Code of

Federal Regulations states that the amount of any repayment sought

under this section shall bear the same ratio to the total amount

determined to have been used for non-qualified campaign expenses

as the amount of matching funds certified to the candidate bears

to the total amounts of deposits of contributions and matchinq

funds, as of the candidate's date of ineligibility.

The formula and appropriate calculation with respect to

the Committee's receipt activity is as follows:

Total Matching Funds Certified through

the Date of Ineligibility - 7/20/88

Numerator plus Private Contributions Received

through 7/20/88

$8,725,387.98

- ~296590

$29,418,987.63

Thus, the repayment ratio for non-qualified campaign expenses is

29.6590 percent.

8. Use of Funds for Non-Qualified Campaign Expenses - Allocation of Expenditures to States

Section 9035(a) of Title 26 of the United States Code

states, in part, that no candidate shall knowin91y incur qualified

caapaign expenses in excess of the expenditure liaitation

applicable under Section 441a(b)(1){A) of Title 2 of the united

states Code.

Section 9038.2(b)(2){i)(A) of Title 11 of the Code of

Federal Re9ulations provides, in part, that the Commission may

determine that amount(s) of any payments made to a candidate from

the matching payment account were used for purposes other than to

defray qualified campaign expenses.

Secti=~ 9Q38.::~~~~;~ii~~A: ~f 7it:a 1: of t~c ~u~~ u~

Federal Regulations states that an example of a Commission

repayment a~te,mination under paragraph (b)(2) of this sectlon

includes determinations that a candidate, a candidate's authorized

committee(s) or agents have made expenditures in excess of the

limitations set forth in 11 C.F.R. S903S. Under 11 C.F.R.

S9033.11(a), each candidate has the burden of proving that
7

disbursements made by the candidate or his authorized committee

are qualified campaign expenses.

Sections 441a(b}(1)(A) and 441a(c) of Title 2 of the

United States Code provide that no candidate for the office of

President of the United States who is eligible under Section 9033

of Title 26 to receive payments frem the Secretary of the Treasury

may make expenditures in anyone State aggregating in excess of

the greater of 16 cents multiplied by the voting age population of

the State, or 5200,000, as adjusted by the change in the Consumer

Price Index.

Section l06.2{a)(1) of Title 11 of the Code of Federal

Regulations states, in part, that expenditures incurred by a

candidate'S authorized committee(s) for the purpose of influencing

the nomination of that candidate for the office of the President

with respect to a particular State shall be allocated, to that

State"

1. Introduction

The Committee reported on FEe Form 3P that through

Novembe: ~G, 1188, expend~tures totaling $i56,~~:.Ol ~ere

allocable to Iowa and $438,667.46 to New Hampshire. These totals

were net of an amendment filed on March 15, 1988, reducing

expertdi tutes- alloc-able to Iowa bVS90, 890. 70 and- an --amendment

cilea on April 18, 1988, reducing the expenditures allocable to

Iowa by $67,743.59 and New Hampshire by $64,596.55.*/ The Audit

staff reviewed all of the Committee's work papers related to the

original allocations as well as work papers related to the

amendments filed. This review revealed a number of areas where

the Audit staff disagrees with the Committee'S method of

allocation and/or computations. Detailed below are the

differences between the Committee's totals and the Audit staff's

totals.

2 • Media

Section 100.8(b)(21) of Title 11 of the Code of

Federal Regulations states, in part, that the term "expenditure"

does not include costs incurred by a candidate or his or her

authorized committee(s) in connection with the solicitation of

contributions if incurred by a candidate who has been certified to

receive Presidential Primary Matching Fund Payments to the extent

that the aggregate of such costs does not exceed 20 percent of

the expenditure limitation applicable to the candidate. The

fundraising expenditures need not be allocated on a State by State

~/ It should be noted that prior to filing the amendments, the

Committee reported itself over the Iowa and New Hampshire

state limitations by $140,011.70 and $44,384.82 respectively.
8

basis, except where the fundraising activity is aimed at a

particular state and takes place within 28 days prior to a primary

election.

Section 110.8(c){2) of Title 11 of the Code of

Federal Regulations states that expenditures for fundraising

activities targeted at a particular State and occurring within 28

days before that State's primary election, convention, or caucus

shall be presumed to be attributable to the expenditure limitation

for that State.

In its original filings, the Committee attributed

50 percent of the allocable amounts paid to TV and radio stations

(see Section 3 for a discussion of media commissions) for time

buys to exempt fundraising; however, the full allocable amounts

relative to time buys run within 28 days of the Iowa caucus and

New Hampshire primary were attributed to the respective States.~'

On April 18, 1988, the Committee filed amendments

to its monthly reports covering January and February 1988. The

amendments reduced the amounts related to media allocable to Iowa

by $67,743.59 and New Hampshire by $61,502.87. The reductions

werp the resu:t of the ~0~mlttee applying SO percent or the

amounts paid to TV and radio stations for media ads run within 28

days of the Iowa caucus and New Hampshire primary to exempt

ftihdtaisiiig.

The Committee prOVided the Audit staff with a

memorandua explaining the adjustments to the media allocation

contained in the April 18, 1988 amendments. The memorandum states

that the Committee continued to raise money in both Iowa and New

Hampshire during the last month of the campaign (30 days prior to

the dates of the Iowa caucus (2/8/88) and New Hampshire primary

(2/16/88)] and that they believe these contributions were a direct

result of the paid advertising and therefore the advertising in

the last 28 days of the elections was just as much fundraising

advertising as those ads placed prior to the 28 days.

The Audit staff does not disagree with the

Committee's contentions that the ads represented fundraising

expenditures; however, the Committee appears to be completely

ignoring 11 C.F.R. lOO.8(b)(21), which clearly requires that

fundraising activities targeted at a particular State and

occurring within 28 days of a State's primary are chargeable to

that State's expenditure limitation.

~n Advisory Opinion 1988-6, the Commission permitted a

committee to allocate SO percent of the cost of media ads to

fundraising , if the ad contained a solicitation for

contributions and if it were broadcast more than 28 days

prior to the date of the primary election.
9

As noted, Advisory Opinion 1988-6 permitted 4

committee to attribute to fundraisinq 50 percent of the costs of

media ads allocable to a particular State because the ads

contained a solicitation for funds. The Committee states in their

memorandum that "all of our advertisements in both Iowa and New

Hampshire solicited contributions up until the day of the

elections." In order to verify that a solicitation was included

on all advertisements, the Audit staff viewed all television

commercials run by the Committee. The review revealed that one

commercial did not contain any solicitation for contributions; a

second commercial ended with the statement "to help call 1-800-

USA-MIKE"; and the Committee was unable to provide a copy of a

third commercial. These three commercials were only run within 28

days of an election.

The Committee was unable to provide the Audit staff

with copies of its New Hampshire radio advertisements which were

needed in order to confirm that a solicitation was contained in

the radio advertisements; however, all New Hampshire radio

advertisements ($20,172.00) occurred within 28 days of the New

Hampshire primary. Thus, the Committee has been unable to J~~o~sl,ate ~hat gedi~ vithi~ 28 day~ of th~ primary election

contained solicitations. Further, had that demonstration been

made, the provisions of 11 C.F.R. §100.8(b)(21) would prevent a

--rundr-cfising exemptfotr-for -tnffsff 11fedla ejtpense-s.-

In the interim audit report, the Audit staff

concluded that the Committee had not provided sufficient

justification to support the reductions noted above. The Audit

staff therefore increased the expenditures allocable to Iowa by

$67,743.59 and New Hampshire by $61,502.87.

In response to the interim audit report, the

Coaaittee restates the Audit staff's position re9ardinq 11 C.F.R.

S100.8(b){21) and explains that subsection (iii) of 11 C.P.R.

S100.8(b)(21) directs the reader to 11 C.P.R. S110.8(c), which

states "Expenditures for fundraising activities targeted at a

particular State and occurring within 28 days before that State's

primary election, convention or caucus shall be presumed to be

attributable to the expenditure limit for that State, 11 C.F.R.

SlOO.8(b)(21) (relating to the 20 percent fundraising exemption)

notwithstanding." (Emphasis in original.) The Committee argues

that there is no basis in the Act for any limitation on

fundraising expenditures occurring within 28 days of an election.

The response goes on to state that " ... the validity of the FEC's

'28 day rule' rests on a dubious foundation. In the FECA, 2 tT.~ t:'. S~?1(9~!9~!·:i~, it is ~~e~i.ri.~Qlly 1JLovided that. the term

'expenditure' does not include "any costs incurred by an authori~ed committee-Qr candidate in connection with the

solicitation of contributions on behalf of such candidate, except

that this clause shall not apply with respect to costs incurred by

an authorized committee of the candidate in excess of an amount

equal to 20 percent of the expenditure limitation applicable to
.,""

10

such candidate under S441a(b), but all such costs shall be

reported in accordance with S434(b)."

The Committee argues that the statutory lanquage

does not contain a presumption that fundraising expenditures

incurred within 28 days of a primary election do not qualify for

the fundraisin9 exemption. The Committee states that the FEC is

overstepping lts rulemaking process by limiting the exemption to

only fundraisinq costs incurred outside the 28 days by creating a

regulatory presumption. The Committee feels that it has met the

presumption with respect to the advertisements which carried the

fundraising solicitation. The Committee provided printouts of

fundraising activity which show that over 20 percent ($6,566) of

the funds raised in Iowa and approximately 9 percent (SlO,12S) of

the funds raised in New Hampshire were raised after the 28 day

period began ..

As noted above, the Audit staff disagrees with the

Committee's argument that the expenditures, although fundraising

in nature, are not allocable to the States' expenditure

limitations. In past Commission action regarding challenges to

the "28 day rule", there has not been any precedent established

f.'":.;: n L. ()B\!41 t. tee r e bu t. t i 09 t.he r~ s umtJt i. C~ t: h" 1" '!xpt:: ~ld \ tl! t:~ S t!l"dt;

within 28 days of a primary should be allocated to a state.~/

Finally, as noted above the Committee has failed to establish the

fundt-aTSin-9--component of-- the -expenses- -at -- i-ssue-. -

As a result, the Audit staff has not adjusted the

expenditures allocated in the interia audit report (Iowa

$67,743.59; New Hampshire $61,502.87).

3. Media Commission

Section l06.2(b)(2){i)(B) of Title 11 of the Code

of Federal Requlations states that except for expenditures

exempted under 11 C.F.R. 106.2(c), expenditures for radio,

television and siailar types of advertisements purchased in a

particular media market that covers more than one State shall be

allocated to each State in proportion to the estimated audience.

This allocation of expenditures, including any commission charged

for the purchase of broadcast media, shall be made using industry

market data.

The Audit staff reviewed all payments to the

Committee'S media firm and media buyers relating to services

provided, media placement, and commissions. The review revealed

that the Committee did not allocate any media commission to the ct~t~ ~Yr~~d~ture li~it5._ Basc~ O~ i~f~=~~ti=~ ~==~i=c= ~l t~:

Committee and the media buyers at the close of fieldwork it was

JatcLl1lintd t~lc::.t at a minlmum a 2 percent commission was paid tut

~/ The "28 day rule" as found at 11 C.F.R. S110.8(c)(2) was

promulgated on April 13, 1977.
11

media placed in Iowa and New Hampshire. The amount of the actual

commission paid to the media buyers was not verified, since the

Committee had not provided complete information on total media

buys made by one of the media buyers. Once this information was

received and reviewed, any change to the commission amount

relative to Iowa and New Hampshire would be computed.

Using a 2 percent commission, the Audit staff

computed an additional $3,705.08 allocable to Iowa and $1,929.82

allocable to New Hampshire. On July 14, 1990, the Committee filed

an amended report disclosing the above amounts as allocable to

Iowa and New Hampshire.

Subsequently, the media firm made available all

records relative to media time buys, including those records not

available for review during the audit. The Audit staff determined

that the Committee paid $150,709.75 in fees/commissions for media

time buys. This amount represents 3.5 percent of the total net

media placed ($150,709.75 + $4,292,629.62).

Based on the above, the amounts allocable to Iowa

and New Hampshire have been revised. A 3.5 percent commission has

been app~i~d to all s:locdb:& medla buys for Iowa ~~d ~~W

Hampshire. This percentage replaces the estimated 2 percent noted

in the interim audit report. As a result, a total of $6,483.89 is

allocable to Iowa and $3,-371.-18 to New Hampshire for me_dia

cOllUDissions.

4. Adjustments to Media Buyer'S Allocations

The Committee's media buyer provided the Committee

with the amounts of television buys allocable to each State using

percentaqes reported in "Arbitron Ratinqs Television 1986-87

Universe Estimate Summary" (Arbitron). The majority of radio bUyS

were allocated 100 percent to the State in which the radio station

was located.

The Audit staff reviewed the allocations prepared

by the media buyer and determined that in some instances the

Arbitron percentages for New Hampshire used by the media buyer

were outdated and in other instances, the percentages were revised

by the media buyer for both television and radio. The Audit staff

recalculated the allocations using the updated Arbitron data and

determined that media allocable to New Hampshire should be reduced

by $33,517.46. Committee officials were provided with the Audit

staff's adjustments.

Tn ~~~iti0" t~ ~h~ ab~v~ ~~tte:s, ~h~ ~u~it ~t~~f

noted other miscellaneous errors which require an increase in the

media allocations t~ rowe vi $3,354.18. The acijus~ments were

discussed with Committee officials who agreed with the

calculations.
"'.

12

In response to the interim audit report, the

Committee filed an amended report on July 14, 1990 which reflected

the adjustments noted above.

s. Fundraising

The Committee reduced the amounts allocable to the

Iowa and New Hampshire expenditure limitations by an amount equal

to SO percent of the costs of events held in these States.*/ The

Committee provided the Audit staff with memoranda which stated

that funds were solicited at the events. A sample of literature

which the Committee states was distributed at many Iowa events was

also provided to the Audit staff. The literature did have a

request for funds on the back page.

The Committee also provided a sworn affidavit from

Governor Oukakis' Executive Assistant in which he states that he

attended in excess of 90 percent of the Governor's public

appearances in Iowa and that the Iowa literature was handed out at

most events. The Committee provided the Audit staff with a

written statement which describes the Committee'S fundraising

efroct.::. ':l N.:.;t q~~,~hirll!~ ';ccor~in9 (n L'lt! sL~tement, the

Committee emphasized grassroots fundraising and that collections

were taken at all events.

In requestinq that 50 percent of -the- costs at-the

events in question be allocated to fundraising, the Committee

appears to be relying-on the Coaaission's decision in Advisory

Opinion 1988-6, which dealt specifically with television

advertisements. As peraissible under the Re9ulations, the

Coamittee has allocated to fundraising the costs of events which

were strictly fundraisin9 in nature (11 C.F.R. SlOO.8(b)(21» and

also 10 percent of overhead and payroll in the State (11 C.F.R.

Sl06.2(c)(S}). In the interia audit report, the Audit staff

stated that no justification could be found in the Regulations for

allowing an additional SO percent allocation to fundraising as

proposed by the Committee. As a result, the Audit staff increased

the amount allocable to Iowa by $36,344.32 and to New Hampshire by

$3,093.68.

In response to the interim audit report, the

Committee argues that the Audit staff's position is legally

insupportable. The Committee states that 2 U.S.C. S431(9)(B)(vi)

broadly excludes from the national spending limit "any costs

incurred by ••. {a presidential candidate who accepts matching

funds 1 in connection wi th the sol i c i tati on 0 f cant r i but ions ... tl

Th~ ~~~~ittee ~ttc~pt~ tc f~!the! z~~~c~t i~~ ~~~~~e~~ by

~/ The costs related to other events which were initially viewed

as strictly fundraising in nature were excluded from

allocation by the Committee in accordance with 11 C.F.R.

S100.8(b)(21).
13

referring to 11 C.F.R. §lOO.8(b)(2)(i) and (ii), along with

Advisory Opinion 1988-6 and the 1984 John Glenn for President

Audit Report. The above referenced materials provided the

committees a basis for allocating a portion of disbursements to

the fundraising limit.

In order to accept the Committee's position in this

matter, the Commission would have to agree that across the board,

all events attended by the Candidate were fundraising in nature.

The Audit staff does not agree with the Committee that it has

shown in this case that a substantial fundraising purpose has been

shown for the expenditures in question. The affidavit, stating

that the distribution of a piece of campaign literature contaloing

a request for funds was distributed at most events is not

sufficient to demonstrate that the events in question were in fact

of a substantial fundraising nature. Further, the affidavit

states that the literature piece entitled "Iowans Rate Mike

Dukakis" was a standard piece typical of the literature

distributed at Iowa Oukakis events. It should be noted that the

above piece of literature was the only sample submitted for Iowa

events. This piece of literature appears to be a copy of a

newspaper article which requests funds. However, it is not event ~?:::":,fic dnG appeaLs to be d~ted F~~t"'~,;)ry R, 13eS i t:h~ day =i ~~e

Iowa caucus). The distribution of campaign material containing a

solicitation at an event, rally or other gathering does not

convert the occasion into a fundraising event. Naturally-, ~the

case ot ~he campaign material would be 100\ fundraisinq and would

have been so treated.

Finally, it is obvious that the Committee continues

to disregard the "28 day rule" (see 111.8.2. - Media). Should the

Committee demonstrate that the SO percent fundraising exeaption is

permissible, such exemption would only apply to the cost of events

held outside the 28 day periods. Therefore, the amounts allocated

to the Iowa ($36,344.32) and New Hampshire ($3,093.68) expenditure

limitations remain unchanged.

6. Iowa Expenses Allocated to National

Headquarters

Section 106.2(b)(2)(vi) of Title 11 of the Code of

Federal Regulations states, in part, that expenditures incurred

for the taking of a public opinion poll covering only one State

shall be allocated to that State.

In February and

conducted two polls in Iowa at

first poll wa~ p"'irt fnr- in t:..,o

first payment was allocated to

payment w~s allocated lu Iowa.

invoice which indicated it was

allocated in full to Iowa.

August 1987, the Committee

a cost of $14,000 and $6,000. The

Massachusetts and the second

The second poll was paid from an

an Iowa poll and the payment was
'<.. --

"-- --

14

In its March 1S, 1988 amendment, the Committee

reduced its allocations to Iowa for the second quarter report by

$1,032.00 and the third quarter report by $3,421.50. According to

workpapers maintained by the Committee, the reductions represented

SO percent of the cost of the two Iowa polls conducted in the

spring and summer of 1987. In a memorandum explaining the

amendment, the Committee states that the polls assisted the Iowa

campaign effort in developing strategies for the Iowa caucus and

were used as the basis for the campaign's national strategy. For

this reason, the Committee amended its reports to allocate SO

percent of the cost of the two polls to the national campaiqn.

Committee officials could not provide the Audit

staff with copies of the questions asked during the polls;

however, they do not dispute the fact that the polls were

conducted in Iowa.

The interim audit report stated that it was the

0plnlon of the Audit staff that the Committee did not provide

sufficient justification for allocating 50 percent of the costs of

the polls to the national campaign. Therefore, the Audit staff

inc:cased the a~~~~l 4~~o~able to th~ Io~a eho~ndi~~lre limit by

$17,453.50 l$14,032.00~/ + $3,421.50).

In response- to th-e inte-rim audit re-port.---thecommittee st~cea tnat copies of tne tWO polls have no~ been

located; however, " ...fro. the me.aries of those involved we

believe they would demonstrate the national scope of the questions

asked." The Com.ittee further restates that the data obtained from

the polls was used to plan national strategy. However, the

Commission's requlations on polling are very clear. If the poll

was conducted within a state, the cost is allocable to that state.

It is the opinion of the Audit staff that the

Committee has not provided any additional justification to warrant

reducing the amounts allocable to Iowa. Therefore, the amount

allocated to Iowa ($17,453.50) remains unchanged.

7. Allocation of State Offices' Overhead to

National Campaign

Section 106.2(b)(2)(iv)(A) of Title 11 of the Code

of Federal Regulations states, in part, that except for

expenditures exempted under 11 C.F.R. 106.2(c), overhead

expenditures of committee offices located in a particular

State shall be allocated to that State. For purposes of this ~~t.--t;nn~ nVllrh@lt\ti fi\Vpp"rlirnl:es in,..1'.1ri~; 1"1d: ~rp nnt l;.~jt:.~ri t('\.

~/ Since only $7,000 of the $14,000 cost of the first poll was

allocated to Iowa, it is necessary to increase the Iowa

allocation by $14,032 ($7,000 not allocated and the $7,032

reduction from the March 15, 1988 amendment).
lS

rent, utilities, office equipment, furniture, supplies, and

telephone service base charges.

a. Iowa Office Overhead

The Committee amended its reports on March 15,

1988, to allocate SO percent of the overhead costs ($14,837.82) of

its Iowa office to the national campaign. The Committee based the

reallocation on the fact that the Iowa office served as "an

extension of the Boston office for reasons of geographical

convenience." In a memorandum explaining the reallocation, the

Committee states that a substantial amount of the Iowa office

staff's time was spent working with and answering inquiries not

directly related to the Iowa caucus. The Governor's national

field staff and scheduling staff also spent a great deal of time

in Iowa, however, they often were involved with responsibilities

for other States.

In the interim audit report, the Audit staff

stated that no justification in the regulations existed for

exempting the overhead costs of the Iowa office to the national

campaign. To accept the Committee's position would in effect Lre3t~ a ~~w "~~tion~l ~a~pai9n" ~xemp~lcn not contemplated in tl~C

Act or Regulations. As a result, the Audit staff increased the

amount allocable to the Iowa expenditure limitation by $14,837.82.

In response to the interim audit report, the

Committee restates its position that it vas necessary to equip the

Iowa office similarly to the national headquarters, since the

candidate spent an extended period of time there. The Committee

did not provide any additional information to justify the

allocation, therefore, the amount allocable to the Iowa

expenditure limitation ($14,837.82) remains unchanged.

b. Iowa Press Staff - Payroll

In addition to the overhead costs mentioned

above, the Committee also reallocated SO percent of the payroll

costs of the Iowa press staff to the national campaign

($40,398.41). In a memorandum explaining the reallocation the

Committee states that "the Iowa press staff spent a great deal of

their time overall working with non-Iowa based press. The Iowa

campaign was extensively covered by press from allover the

country. This coverage was not intended to, and did not,

influence the results of the Iowa Caucus." The Committee also

provided an affidavit signed by the Committee's Iowa Press

Secretary in which she states "Whenever Governor Oukakis visited Tow~ he w~! f~11o~ed by !3r;= ~~~b~: :! ~=~ :~~a ?rSS5 a~d ~h~

press office staff would spend a great deal of their time working

wi \:.h th~ nOtl-Iowa based press."

The Commission dealt with the issue of

exempting a portion of Committee staff salaries from allocation to

the state expenditure limits for staff members who worked with the
16

national press durinq the 1980 lennedy for President Committee

audit. In that matter, the Commission aqreed with the Audit staff

that since the salaries were for staff services in the states and

do not relate directly to the national headquarters that there was

no basis for exempting the salaries from the state expenditure

limitations. As a result, the Audit staff increased the amount

allocable to the Iowa expenditure limitation by $40:398.41.

In response to the interim audit report, the

Committee restated its position on the matter, but did not provide

the Audit staff with any additional information for its

allocation. Therefore, the Audit staff's allocation to the Iowa

expenditure limitation ($40,398.41) remains unchanged.

c. FAX Machine

The Committee also reallocated the cost of the

fax machine maintained in the Iowa state office to the national

office ($1,921.92). According to a memorandum prepared by the

Committee, the fax machine was used solely as a means of

interstate communication with the national headquarters. To

support the argument, Committee officials supplied the Audit staff

lI\fi tla a fiovehtDet 1~o i al"d J3nuar.:y 1988 t~lcphon~ bi. J 1 ~UL It,t: rdx.

machine which shows that the majority of the use was for

interstate communication.

It 1S the opInion of the Audit statf tnat

costs associated with a fax machine be allocated in the same

.anner as State office telephone costs. Under 11 C.F.R.

l06.2(b)(2)(iv)(A), telephone service base charqes are considered

overhead costs and allocable to the State limits while charges for

interstate calls are not allocable (11 C.F.R. l06.2(b)(2)(v).

The $1,921.92 in payDlents the Comaittee 'is attempting to

reallocate are equipment costs and do not include the telephone

co.pany charges for the trans.ission of the correspondence. As a

result, the Audit staff has allocated $1,921.92 to the Iowa

expenditure limitation.

In response to the interim audit report, the

Committee restated their position that the fax machine costs

should not be counted toward the Iowa limit, however, the

Committee did not provide any additional information. Therefore,

it remains the opinion of the Audit staff that the $1,921.92 in

costs associated with the Iowa fax machine be allocated to the

Iowa expenditure limitation.

8. Payroll

Section 106.2{c)(S) of Title 11 of the Code of red~cal Reyulatlons states that an amount equal to iO pe,c~l.t c~

caspaiqn workers' salaries and overhead expenditures in a

particular State may be excluded from allocation to that State as

an exempt compliance cost and as an exempt fundraising

expenditure.
17

The Committee classified costs associated with

reimbursements for campaign housing and individual travel

subsidies in Iowa as payroll costs. These costs were combined

with actual payroll, payroll taxes, and health insurance costs to

establish a broad category of "payroll" costs. The Committee then

excluded 10 percent of these total "payroll" costs from allocation

to the Iowa expenditure limitation as both fundraising and

compliance costs. These additional "payroll" classifications

resulted in a reduction to the Iowa expenditure limitation by

exempting $2,043.18 in fundraising costs and $2,485.25 in

compliance costs.

The Committee did not have any written employment

contracts which indicated that expense reimbursements would be

considered salary nor could they confirm whether the employees on

whose behalf the payments were made were instructed to report the

payments as income. As a result, the Audit staff allocated an

additional $4,528.43 ($2,043.18 • 2,485.25) to the Iowa

expenditure limitation.

In response to the interim audit report, the

c: ~!llm itt'.e e t Ci ~. :; i t had nowr itten emp loylr. ~:", t \.. (;n t :' ;) c t s with 1 t s

senior or junior staff. The Committee explains that the payment

of travel expenses was considered a supplement to individuals' salaries~ and for that -reason, the Committee viewed the payment of

expense reimbursements as salary.

It is the opinion of the Audit staff-that the

Committee has no justification for categorizing the costs noted

above as payroll costs. Therefore, the Audit staff's allocation

to the Iowa expenditure limitation ($4,528.43) remains unchanged.

9. Travel, Subsistence, and Salary

Sections l06.2(b)(2)(ii) and (iii) of Title 11 of

the Code of Federal Regulations state, in part, that salaries and

travel and subsistence expenditures for persons workinq in a State

for five consecutive days or more shall be allocated to the State

in proportion to the amount of time spent in each State during a

payroll period.

A review of hotel bills and expense reimbursements

revealed various instances where individuals spent five or more

consecutive days in Iowa or New Hampshire; however, the associated

salary and subsistence costs were not allocated to the respective

State ($50,914.58 - Iowa; $18,662.70 - New Hampshire). In

~~ditio~. i~ ~~~~ i~5t~~=€: h:tcl cha:;e~ ~ara nc~~cl on credit

card bills, however, documentation on the length of stay by the individua~\5) was not dVdilable ($18,587.10 - Iowa; $6,614.47 -

New Hampshire). The auditors also noted that 34 cars were leased

from rental agencies located in Illinois and Nebraska.

Generally, the term of the lease was late January to mid February

and the associated expenses were not allocated to the Iowa
. '\

18

expenditure limitation ($18,828.49).~/ Committee officials were

provided with a list of the expenditures at the exit conference.

Based on the activity noted above, the Audit staff identified

$88,330.17 ($50,914.58 + $18,587.10 + $18,828.49) in expenses in

Iowa and $25,277.17 ($18,662.10 + $6,614.47) in New Hampshire and

have increased the amount allocable to each state.

In response to the interim audit report, the

Committee allocated $64,226.52 to Iowa and $22,443.40 to New

Hampshire. However, the Committee disagreed with the Audit

staff's allocation of $24,103.65 ($88,330.17 - 64,226.52) to Iowa

and $2,833.77 ($25,277.17 - 22,443.40) to New Hampshire.

Regarding the expenditures which the Committee

states 'were properly allocated (i.e., not requiring allocation to

Iowa or New Hampshire) in instances involving seven individuals

($2,731.14), the Committee explained that they had been working

under a "previous interpretation" of the 5 day rule. Prior to

September, 1987, the Committee interpreted the rule as alloWing an

allocation to interstate travel as long as the individual spent

less than 120 hours in a particular state and subsequently left

the state for at least 24 hours. The Committee proposes that any

@xpe:-.. :!i.t"1"'O~ al1oc;;.t~d under thE "tJte"ious lnc.etpret.dtion~ LEI

accepted as properly allocated. For the majority of the remaining

amount, the Committee obtained affidavits stating that the

individuals rented- cars and hotel rooms in their own names- but--did

not use thea, and other individuals stated that they could not

recall remaining in a state for more. than four consecutive days.

The Coaaittee did not support the stateaents in the affidavits

with sufficient documentation or any other contemporaneous

evidence. In the case of a number of individuals who the

Coaaittee stated accompanied the candidate on an Iowa trip, the

Committee, in response to the interim audit report, provided the

Candidate'S itinerary. A flight manifest prepared by the travel

agency handling Committee travel arrangements for the period in

question was reviewed by the Audit staff during fieldwork;

however, neither the itinerary nor the flight manifest contains

the naaes of the individuals involved.

It is the opinion of the Audit staff that the

Committee's response and information submitted along with the

response do not prOVide sufficient evidence to exempt the

expenditures from the states' spending limits. Further, with

respect to statements that people other than those indicated in

the records used cars or hotel accommodations, nothing is provided

to support this assertion. Absent such support, the Audit staff

must rely on the information documented in Committee records. The ~~di~ ~~3~f ~~~! n~t b~liev~ !h~t ~isi~~~cp~~~~t~c~ ~f th~ 5 j~i·

rule justified the Committee exempting allocable expenditures from

the slJt:nd i lHJ 1i mi t s .

~/ The dates of the Illinois and Nebraska primary elections were

3/15/88 and 5/10/88, respectively.
19

Based on a review of the Committee's response, the

Audit staff's original allocations remain unchanged ($88,330.17

Iowa; $25,277.17 New Hampshire).

10. Democratic Party List

The Committee purchased an Iowa supporter list from

the Iowa state party for $10,000. At the time of purchase, the

Committee allocated $3,000 to fundraising and $7,000 to the Iowa

spending limitation. In a March 15, 1988 amendment, the Commlttee

allocated an additional $2,000 to fundraising and reduced the Iowa

expenditure limitation by $2,000. In a memorandum explaining the

March 15, 1988 amendment, the Committee states that when the list

was purchased, it was estimated that it would be used 30 percent

for fundraising. However, at this point a 50-50 split is more

accurate.

Based on the above, the Audit staff has allocated

an additional $5,000 to the Iowa expenditure limitation.

In response to the interim audit report, the

CotalDi ~'Ct:e tJl ovidt:d ~n affid:\\·i t' {rt'M \..~le Oi ~e~to" 0: 01 r~ct Mai 1

Fundraisinq in which he states, "the Committee used this list for,

among other things, fundraising letters directed to Iowa

D-emocrat-s."--{Eaphasis- no~--i-n -oriq-inal. )-H-e- -fu-rther -s-tates---t-h-at

tne iis~ was weil main~alned and that the value ot the list for

fundraising purposes was approximately $55 per 1,000 naaes or

$ 4 , 950 (90, 000 name s). .

It is the opinion of the Audit staff that the

stateaents and estimate of the value of the list provided by the

Director of Direct Mail rundraisin9 do not provide support for

allocating SO percent of the cost of the list to fundraising,

since no evidence has been provided that the list was used

substantially for fundraisin9.~/

Since the Committee has not provided any

justification for allocatin9 a portion of the list to fundraising,

the Audit staff's allocation to the Iowa expenditure limitation

($5,000) remains unchanged.

However, on September 26, 1991, the Commission

determined that the cost of the list was an exempt fundraising

expense and does not require allocation to Iowa. Consistent with

*/ A~~nrd,~~ t~ ~~e rc~~ittc='~ ~~t~ b~z=, ~~g =~~t=i=~::~~~,

totaling $44,777.25, were recorded as received from

indiviJuals whose adoress is listed in Iowa. Ot ~nlS

amount, 295 contributions, totaling $7,849.50, are recorded

with a source code (OM ... ) apparently denoting the

contributions were received in response to a direct mail

effort.
20

that determination, the Audit staff has adjusted the amount

allocable to the Iowa limitation.

11. Phone Bank Services

During the campaign, the Committee entered into an

agreement with the American Federation of State, County and

Municipal Employees (AFSCME) for phone bank services and related

space. Based on correspondence from AFSCME, the Committee

allocated $9,244.55 to Iowa and $7,152.50 to New Hampshire for

these services. The Audit staff reviewed the available records

maintained at AFSCME headquarters regarding the phone banks and

leases and identified additional allocations to Iowa and New

Hampshire.

AFSCME provided space and phone bank services in 10

cities in Iowa and 10 cities in New Hampshire. Complete phone

bills were not available regarding charges during the period

covered by the leases, and, in one instance, a lease was not

available for a phone bank location. The Commission issued

subpoenas to the Iowa and New Hampshire phone companies to produce

the missing phone bills. A review of the bills and other related

documents ~~~cived as a re~ult of ~ha sub?oen~~ disclosE~ that an

additional $15,561.88*/ is allocable to Iowa and an additional

$17,852.34 is allocable to New Hampshire. The value of these

alloc-atlons is viewed as- an -in-kind contribution. -The- Iowa

t.e.lepnoue coapany was unable to provide lnfotmation on the phone

location for which a lease was not available.

12. Miscellaneous

In addition to the matters noted above, the Audit

staff identified various errors in the Committee's computations

relating to the Iowa and New Hampshire allocations. These errors

included refunds charqed back to the Iowa limitation when the

original expenditure was not allocated to Iowa, and various

~/ An additional amount may be allocable relative to leased

premises in Iowa, Nebraska, Minnesota, Illinois and Vermont

for which documentation has yet to be provided. Further,

interstate phone calls made from phone banks located in

Nebraska, Minnesota, Illinois and Vermont to Iowa and New

Hampshire were noted during our review. Approximately

$17,600 in interstate charges for calls to Iowa and ~nnr~~im~~~lv S~.~0n ~o N~w ~a~n~hir~ ~r~ ~~~ rnn~;~~rpn

aiiocable based ~n the Commissi~n's determination in the

Cola ~O~ Pr~5~jant finai audit report (i.e., the calls mad~

from a given phone bank were not made exclusively to a

single state). Approximately $2,900 in calls or about 11\

of the toll charges were made to states other than Iowa and

New Hampshire.
21

calculation errors. These errors resulted in an underalloclticn

of expenditures to Iowa totalinq $7,655.21 and to New Hampshire totaling $3,581.97.

In response to the interim audit report, on July 14, 1990, the Committee filed an amended disclosure report

increasing the expenditures subject to the Iowa limitation by

$7,655.21 and the New Hampshire limitation by $3,581.97.
22

Summary of Expenditures Allocable

to Iowa and New Hampshire

Iowa

Reported Totals as amended

at 3/15/88 and 4/18/88 $ 7S1/59S.01~1

Media Adjustments:

Cost of Media Buys within

28 days of Primary Charged

to Fundraising (III.B.2.) 67,743.59

Media Commission (III.B.3.) 6,483.89

Adjustments to Media Buyer's

Allocations (111.8.4.) -0-

Miscellaneous Media Adjustments

(111.8.4.) 3,364.18

Fundraising Adjustments:

50\ of Event Costs Allocated

tv fundrdisin~ i!T!.B.5 , 35,344.31

New Hampshire

$ 438,667.46

61,502.87

3,377.18

(33,517.46)

-0-

E~pe~ses Allocated to Headquarters:

Poll ing (I-ft~ a .6.'

Overhead (II1.S.7.a.)

Payroll (III.B.7.b.)

Fax Machine (III.B.7.c.)

11-;-453-~-50---

14,837.82

40,398.41

1,921.92

---0---

-0-

-0-

-0-

Payroll:

Allocation to Fundraising and

Compliance for Expenses included

as - payroll (III.B.8.)

Fundraisinq

Compliance

Travel, Subsistence and Salary:

Not Allocated (III.a.9.)

Phone Bank Services (III.B.11.)

Miscellaneous (III.B.12.)

Total Expenditures Subject to

Limit

h~ount in Ex~~ss uf State

Limitation

2,043.18 -0-

2,485.25 -0-

88,330.17 25,277.17

15,561.88 17,852.34

7,655.21 3,581.97

$1,056,218.33 $519,835.21

,.,it:.

" - I

,'i

-- • -

~n,.... (4~1.00~.l)n~

$ 281.000.73 ...

.) "'8 """',.. ""~ ;) ,O..cJ." •

*/The Audit staff adjusted this reported total by ($5,000), see

section III.B.10.
23

Shown below is the calculation of the amount

repayable to the United States Treasury as a result of the

expenditures in excess of the Iowa and New Hampshire state

limitations.

Iowa New Hampshir~

Amount in Excess of $ 281,000 .. 73 $ 58,835 .. 21

the Limitation

Less Accounts Payable 3,947.98 442.92

at 7/20/88

Amounts Paid in Excess 277,052.75 58,392.29

of Limitation

Repayment Ratio from .. 296590 .296590

Finding III.A.

--.. Repayment Amount S 82,171.08 S 17,318.57

Recommendation 13

-On- Oetober -10-, -1991;----the ColUlission --made--- an-- in-it.i-al---

determination that the pro rata portion, $99,489.65 ($82,171.08 +

17,318.57), of the a.aunt paid in excess of the Iowa and New

Haapshire expenditure ii.itationa, as calculated by the Audit

staff, is repayable to the United States Treasury in accordance

with Section 9038.2(b)(2) of Title 11 of the Code of Federal

Requlations.

If the candidate does not dispute this determination within

30 days of service of this report, the initial determination will

be considered final.

Repayment Amount: $99,489.65

c. Statement of Net Outstanding Campaign Obligations

and Repayment of Surplus Funds

Section 9034.5(a) of Title 11 of the Code of Federal

Regulations states, in part, that within 15 calendar days after

the candidate's date of ineligibility, as determined under 11 CFR

9033.5, the candidate shall submit a statement of net outstanding

campaign obligations (NOCO).

The NOCO statement shall contain, in addition to other it=~=, ca&h 0~ ~and as of the close of business on the last day Ot

eligibility (including all contributions dated on or before that

date whether or not submitted for matching).
24

Section 9038.3(c)(1) of Title 11 of the Code of Federal

Requlations requires a candidate whose net outstanding campaign

obligations reflect a surplus on the date of ineligibility to

repay to the Secretary, within 30 calendar days of the

ineliqibility date, an amount which represents the amount of

matching funds contained in the surplus. The amount shall be an

amount equal to that portion of the surplus which bears the same

ratio to the total surplus that the total amount received by the

candidate from the matching payment account bears to the total

deposits made to the candidate's account.

Section 9038(b)(3) of Title 26 of the United States Code

states that amounts received by a candidate from the matching

payment account may be retained for the liquidation of all

obligations to pay qualified campaign expenses incurred for a

period not exceeding 6 months after the end of the matching

payment period. After all obligations have been liquidated, that

portion of any unexpended balance remaining in the candidate's

accounts which bears the same ratio to the total unexpended

balance as the total amount received from the matching payment

account bears to the total of all deposits made into the r~ndidat~': account~ j~Ql: ~e ~(ompLly repaid co Lhe mat~hin~

payment account.

On August 5, 198a, the candidate submitted a __NOCO __

s~atement WhlCh inalca~ed cnat tne Commlttee was in a detlcl~

position at July 20, 1988, Governor Dukakis' date of

ineligibility. During audit fieldwork conducted in 1989,' the

Audit staff reviewed the components of the NOCO statement and

reached aqreement with Committee officials on all of the

components except the cash on hand total as discussed belovo

Joint Escrow Account

Section 110.1{b)(2)(ii) of Title 11 of the Code of

Federal Regulations states that in the case of a contribution not

designated in writing by the contributor for a particular

election, the contribution shall be considered made with respect

to the next election after the contribution is made.

The Committee opened a checking account entitled

"joint escrow account" on June 10, 1988. A review of the joint

escrow account revealed that $896,627.90 of the $1,447,750.42

deposited into the account represented contributions dated on or

before July 20, 1988.*/ It is the opinion of the Audit staff that

these contributions represent contributions to Governor Dukakis'

p i !" t!' !' ~~ t:" " r" ;'] n "f"~ C h ('" 1 ri h p ; T"\ ':1,,~~ ri i '" t: ': S h ':'n h" !'Ii t:. to ::- 1

at July 20, 1988, which would result in the campaign being in a s~,plu& po&ition O~ that date.

~/ Of the $896,627.90, checks representing approximately

61 percent, or $551,241.35, were dated prior to June 1, 1988.
2S

The Committee disagreed with the Audit staff's

position and provided a letter outlining th~ir position. In the

letter the Committee contends that it halted its primary election

fundraising efforts in June 1988, because it was likely to raise

more than it could legally spend and it was evident that after the

California primary (June 7, 1988l, Governor Oukakis was assured of

the Democratic Party presidential nomination. The letter further

states that tt[slince both of these facts were generally known, the

Committee believed that there was a strong likelihood that

subsequent contributions received were, in fact, intended by the

contributors to be designated for the benefit of Mike Dukakis'

general election campaign, or the Dukakis General Election Legal

and Compliance (GELAC) Fund."*/ The letter continues that "(tlhe

Committee believes that it has, without the guidance of

Regulations, acted prudently and reasonably to confirm what it

reasonably believed to be the intentions of the post primary

election donors whose contributions could 'influence~ only the

general election." The Committee refers to MUR 2154 and states

that the inferred intent of the contributors was ultimately

confirmed in writing.

~~g('rriing the :ommittee's :;tatcuie.lt t~ld.C it halL~u

its primary fundraising in June of 1988, the evidence appears to

refute that contention. During the period June la, 1988 through

July -20, 1988, approximately 1.1 mil-lion was received -by---the-- Commic~ee and deposited to the Joint escrow account. Of this

amount, only $27,135.00 could be associated with a solicitation to

the GELAC.**/ The Comaittee's arguaent that" it acted prudently

without guIaance of regulations is also without merit. The

regulations are clear in this instance and relate specifically to

the issue at hand. Under 11 C.F.R. S110.1(b){2)(ii), a

contribution received by the Committee which is not designated in

writing for a particular election shall be considered made with

respect to the next election; in this case, the nomination of

Governor Oukakis at the Democratic National Convention, which

marks the end of the primary election.

Regarding the reference to MUR 2154, in that case,

the question was whether excessive primary contributions were

redesignated to a committee's general election compliance fund

within a reasonable amount of time. The regulations at 11 C.F.R.

S110.1{b)(3), which were not in effect at the time MUR 2154 was

~/ The apparent inference drawn by the Committee relative to the

contributions at issue is, in the opinion of the Audit staff,

\J;:r'""'t "'~!'it:.

*1</ ril ,-alculating the eotal 'epcesenti.... g til. imacy ~cntribution~,

the Audit staff did not include checks made payable to the

GELAC, checks accompanied by a GELAC solicitation, or

contributions which would have been excessive during the

primary.
26

opened, offer specific guidance for redesignating excessive

contributions to another election. In the case at hand, we are

not dealinq with excessive contributions but rather contributions

received which were within the individual's $1,000 contributlon

limitation. Therefore, the facts in MUR 2154 are not analo90us to

the present situation.

It should also be noted that in May 1988, a member

of the Committee's legal staff contacted a Commission Audit staff

member to inquire whether the operation of the joint escrow

account was acceptable. The Committee was notified that it was

the position of the Audit Division that the contributions

represented contributions to the primary campaign and would be

considered a part of the surplus at the date of ineligibility.

Based on the facts noted above, it is apparent that

upon becoming aware that the Committee would most likely have a

surplus at the date of ineligibility, the Committee attempted to

eliminate the surplus by virtue of transmittals via the joint

escrow account to the GELAC. The Audit staff has included as cash

on hand on the date of ineligibility all contributions dated on or

before July 20, 1988, which were deposited into the joint escrow dt,;CO\lU~, except l:nose designated ~ot' tlote GELAC.

The Commissioners discussed the activity related to

the to-int--escr-ov- account and resultant -r-epayment-i-mpli-eations-- in -4

meeting on January 23, 1~90. The following 1S a quote of a

statement made by one of the Commissioners prior to the Commission

reachin9 its decision on the recommendation contained in the

interim audit report.

"The Commission's regulations do not address

this issue. The regulations do sanction the

redesignation of excessive contributions to the legal

and accounting compliance fund (11 c.r.R.

S9003.3(a)(1)(iii» and the redesiqnation of

contributions made after the beqinning of the general

election expenditure report period but designated for

the primary ('post-primary designated contributions')

(id.). The latter provision is somewhat analogous to

the situation at hand because it permits the

redesignation of otherwise permissible primary

contributions. On its face, the regulation would seem

to allow the redesignation of post-primary designated

contributions even if the primary would have a debt

afterward. However, it would be inconsistent with the

Commission's congressional mandate to allow a committee ~~, i~ gs~en~e, :r~3tc debt th~t ~c~ld le~~ to

entitlement for post ineligibility matching funds. In

otheL word~, a committee should not be ~ble to claim a

net debt, and hence entitlement to post ineligibility

matching funds, if it dissipated its permissible

primary contributions to do so. Taken to its extreme,

a committee could redesignate all of its unmatched
27

contributions (The redesignation of matched

contributions would result in other problems, such as

loss of entitlement.) and unnecessarily create a huge

deficit with a resulting claim for matching funds."

"The current language of §9003.3(a)(1)(iii)

pertaining to redesignation of post-primary designated

contributions, effective April 8, 1987, evoived from a

somewhat similar provision in the previous version of

11 C.F.R. S9003.3. However, the prior version made

clear that such redesignations were permissible only if

the primary committee retained sufficient funds to pay

its remaining debts."

"Contributions which are made after the

beginning of the expenditure report period but which

are designated for the primary election may be . deposited in the legal and accounting compliance fund:

Provided, that the candidate already has sufficient

funds to pay any outstanding campaign obligations

incurred during the primary campaign .... [11 C.F.R.

S9003.3(a)(1){iii) (effective July 11, 1983).)"

"Though the current language did not retain

this protective phrasing, there appears to have been no

intent to ai-ter the pr ior approach. See -52 f!e-d.- -Req.

20865, l0866 (June 3, 1987). Indeed, as noted, it

would be contrary to public policy to allow the

creation of debt and the consequent entitlement to post

ineligibility matching funds. Accordingly, the

Co..ittee should be permitted to redesignate and

transfer-out to the GELAC only so much of the

contributions as would not leave the Committee in a net

debt position ($686,282.26 worth). The remaining

amount in question, $210,345.64 ($896,627.90 -

$686,282.26), cannot be redesignated and transferredout, must be repaid by GELAC, and must therefore be

included in Committee's cash on hand figure."

"Because the Committee did not keep records

sufficient to enable the auditors to determine whether

the redesignations in question took place within 60

days as the regulations at 11 C.F.R. SllO.l(b)(S) would

require, and because the 60 day time period has been

incorporated for other redesignation situations under

S9003.3(a)(1)(iii), the Committee still has the burden

of demonstrating that the contributions it wishes to

t: r C! t ? ! !." d =i ; a t: c d ".t/C : e ~:- c c c s J ',: i t h i haGC d "i

time frame. For now, the Commission should treat the

full $896,627.30 as Ptl~Q'Y contributions and hence as

part of the cash on hand totals,,"

The Commission further determined that

redesignations of contributions would be considered timely
28

received if it can be demonstrated that a written redesignation

was received no later than 60 days from the date on the

contributor's check. The date on the contributor's check is used

because it was not possible to determine the date of receipt or

the date of deposit into the joint escrow account based on Our

review of the records made available.

Absent such evidence, the contributions in question

will remain as part of cash on hand for NOCO purposes.

As noted on the NOCO statement contained in the

interim audit report, the Committee was in a surplus position on

Governor Oukakis' date of ineligibility. Application of the

repayment ratio contained at 11 C.F.R. §9038.3(c)(1) to the then

calculated surplus equated to a repayment figure of $204,288.50.

It was also noted that any adjustments to the NOCO statement due

to a change in winding down costs, etc., may result in a change In

this figure. In addition, after receipt of the Committee'S

response concerning other issues in the report, a revised NOCO

statement, including a change in the surplus repayment, if

warranted, would be included in the final audit report.

~hp interi..~ audit r.-!.cc\,. tec";lnmendeu t:nat withln 3J

calendar days of service the Committee should provide evidence

that the contribution checks dated prior to July 21, 1988,

I-ncluded in Audi t # S cash-on-handforNOCO purposes, were--

redesi9nated to the GELAC within bO days at receipt. The Commlttee

was to consider the date on the contribution check as the receipt

date and provide the Audit staff with evidence as to the date of

receipt of the contributor's redesignation.

In response to the interim audit report, the

Committee stated that it was not the practice of the Committee to

date stamp correspondence when received. An affidavit of the

former Compliance Fund Director explains that contributions were

not transferred from the joint escrow account until a contributor

form redesignating the contributions was received. It should be

noted that in a few instances, the Audit staff identified

contributions transferred from the joint escrow account to the

Compliance Fund without a letter authorizing the redesignation.

It is the opinion of the Audit staff that the

Committee's response does not contain sufficient competent

evidential matter to establish the date of receipt of the

contributor's redesignation. The Audit staff cannot accept, as

evidence of the date of receipt of a redesignation letter, the

statement of one individual that transfers were not made until a

The Committ.ee also aLgues Lhat Lh~ time periud In

which action must be taken on the contributions is more

appropriately 80 days rather than the 60 days allowed in the

interim report. The Committee cites 11 C.F.R. SSl02.8(a) and

103.3(a), which provide 10 days for persons receiving
29

contributions to forward them to the treasurer and a second 10 day

period from the date of the treasurer's receipt to deposit of

the contributions. The Committee proposes to add this 20 day

period onto the 60 day period provided in the interim audit

report. The Committee also continues to argue that the

contributions were properly redesignated, however, if the

Commission accepts the 80 day time period, the Committee will

accept the Commission's determination in this matter. In other

words, if the Commission accepts as valid the removal of

$318,047.22*/ from the cash balance at the candidate's date of

ineligibility, which in turn reduces the surplus repayment by

$94,329.62 based on information currently available, the Committee

will recede from further argument on this issue.

During its consideration of this matter on October lOt

1991, the Commission determined that the Committee demonstrated

that $210,362.85 in contributions were transferred to GELAC within

60 days from the date on the contributors' checks (see Interim

Response, Appendix 11). In addition, our review identified

30,798 in contributions that were supported by dated redesignation

letters, such redesignations occurring within 60 days of the date

of the contributor's check. Finally, our review also identified $~:. 415 in conl:t ibutions ,-,hich, b'\4Sftd on the ':om.missithl#

determination, are not includable as cash in bank on the NOCO

statement.

As a result of tne Commission*s OctOber 10, !~~i

determination, contributions totaling $258,575.85 ($210,362.85 +

30,198 + 17,415) have been excluded fro. cash in bank (joint

escrow account) on the NOCO statement. The Committee'S NOCO

statement, as amended by the Audit staff, appears below.

~/ The Committee did provide copies of two checks, totalling $2,000, that

contained a notation indicating that the contributions were intended

for the Compliance Fund. The Audit staff has adjusted the NOCO

statement accordingly.
Dukakis for President Committee, Inc.

NOCO Statement as of 7/20/88a/

Audit Analysis

Assets

Cash in Bank

Other Accounts

Joint Escrow Account

Accounts Receivable

Capital Assets

Total Assets

Obligations

Accounts payable for

Oualified Campaign

Expenses

Refunds of

Contributions Due

Amount Due U.S. Treasury

for Stale Dated ChecKs

winding Down Costs

3/1/89 - 6/30/91

Estimated winding Down

Costs 7/1/91 - 12/31/91

Total Obligations

Surplus

$1,236,937.92

636,052.05 B,/

884,948.45

51,000.00

2,117,937.22 £1

18,685.00

11,610 .. 00 ~/

484,910.~:)

49,650.00 ,!/

$2,808,938.42

2,688,792.17

~/

£/

~/

Fi9ures represent a review of actual activity throu9b 2/28/89 and

reported activity fros 3/1/89 through 6 '0/91.

Includes contributions deposited into joint escrow account dated

on or before 7/20/88 net of excessive contributions refunded. The

amount ($896,627.90) cited in the interim report has been reduced

by $2,000 based on the Coaaittee's response and by $258,575.85

based on the Commission's 10/10/91 determination (see page 29).

Does not include $4,390.90 in payments made post 7/20/88 in excess

of state limits.

This amount represents refunds of excessive contributions made

after the canJidaLe's d&le o[ ineli~ibility that ~ere not cashad

by the contributors or reissued by the Committee (see Finding

III.E.2.).

This estimate was provided by the Committee on November 21, 1991.

Reports and records, as necessary, will be reviewed to compare

actual costs to estimated.
31

Recommendation 14

On , the Commission made an initial

deteraination that the pro rata portion, $35,634 ($120,145.65 x

.296590), of the surplus, as calculated by the Audit staff, is

repayable to the United States Treasury in accordance with Section

9038.2{b)(4) of Title 11 of the Code of Federal Regulations.

If the candidate does not dispute this determination within

30 days of service of this report, the initial determination will

be considered final.

Repayment Amount: $35,634.00

o. Matching Funds Received in Excess of Entitlement

Section 9038(b)(1} of Title 26 of the United States Code

states that if the Commission determines that any portion of the

payments made to a candidate from the matching payment account was

in excess of the aggregate amount of payment to which such

candidate was entitled under section 9034, it shall notify the

candidate, and the candidate shall pay to the Secretary an amount

3qual t~ ~h~ amount ~f excess ~~Jmc"t:.

Section 9038.2(b)(1)(i) of Title 11 of the Code of ~ederal Re9ulation$states that the Commission may determine that

certain portions of the paymel1~s made -to a candida-ce -from-t-he

matching payment account were in excess of the a99reqate amount of

payaents to which such candidate was entitled. Included are

payaents aade to the candidate after the candidate's date of

ineligibility, where it is later determined that the candidate had

no net outstanding campai9n obligations as defined in 11 C.F.R.

59034.5.

Section 9034.1(b) of Title 11 the Code of Federal

Regulations states, in part, that if on the date of ineligibility

a candidate has net outstanding caapaign obligations as defined

under 11 erR 9034.5, that candidate may continue to receive

matchin9 payaents for matchable contributions received and

deposited on or before December 31 of the Presidential election

year, provided that on the date of payment there are remaining net

outstanding campaign obligations.

As noted in Finding III.C., based on the Audit staff's

adjusted NOCO statement, the Committee was in a surplus cash

position at the candidate's date of ineligibility (July 20, 1988).

On August 10, 1988, the Commission certified $314,640.35 in

"r!di t i. -::'~~ 1 TI'~ t~h;. ng f'.1nn i n("p t hp rommi to to.: ~e wa s i. n tl su "'pl\J S

position at the date of ineligibility, this payment was in excess

of the ~6ndidate's entitlement.

In a letter dated June 12, 1989 the Committee contends

that they are entitled to the matching fund payment since the
32

submission was made on July 16, 1988.:1 The letter goes on to say

"that the intent of the FECA cannot be to deprive candidate. of

matchinq funds for contributions both received by the Committee

and properly documented to the FEC before the candidate's date of

ineligibility."

It is the opinion of the Audit staff that the

controlling date in this instance is not the date of receipt of

the submission but rather the submission payment date as noted in

11 c.r.R. S9038.2(b)(1)(i). Regarding the processing of the

submission, the Audit staff followed all procedures set forth in

the Commission's Guideline for Presentation in Good Order;

procedures which the Committee was well aware of and which the

candidate agreed to comply with under 11 C.F.R. §9033.1(b)(8).

As an alternative, the Committee argues that the

submission should be looked upon as a Letter Request which amends

its prior Letter Request of July 11, 1988. The Commission's

Guideline for Presentation in Good Order outlines the specific

requirements for Letter Requests which may be submitted in lieu of

regular submissions (see Guideline, Chapter IV), and the

Committee's submission did not meet these requirements.

In summary, since the Committee had enough funds at the

date of ineligibility (7/20/88) to settle all of its debts and

winding down expenses, the candidate had no entitlement to further

matcninq funds on the date of payment t August lv, -f988 (see

Finding III.C.).

In the interim audit report, the Audit staff recoamended

that within 30 calendar days of service of the report, the

Comaittee deaonstrate that it had not received matching funds in

excess of its entitlement. Absent such a shoving, the Audit staff

will [eeoaaend that the Coaaission make an initial determination

that the Committee was not entitled to $314,640.35 in aatchin9

funds received on Auqust 10, 1988 pursuant to 11 c.r.R.

S9038.2{b)(1)(i), and that the Co••ittee repay $314,640.35 to the

United states Treasury pursuant to 26 u.s.c. S9038(b)(1).

In response to the interim audit report, the Committee

stated that the submission was received by the Commission on July

16, 1988, which was prior to the candidate's date of

ineligibility, and that the Audit staff is wrong to deprive the

candidate matching funds for eligible contributions. The

Committee argues that if the submission had been accepted on

Monday, July 18, 1988, it would have been "routinely approved" by

the Commissioners, the necessary papers delivered to Treasury by

• I

-' Althougii a mewber of ene ~ommission's stafe L0tJK pos~e::tsion

of the submission on Saturday, July 16, 1988, it was not

considered received until July 25, 1988 which was the

Committee's next scheduled submission date pursuant to the

Commission Guideline for Presentation in Good Order.
33

July 20, 1988, and Treasury would immediately wire the money to

the Committee's account.

The Audit staff disagrees with the hypothetical scenario

posed by the Committee. Had the submission been actually received

and accepted for processing on Monday, July 18, 1988, Commission

procedures for the processing of matching fund payments would have

resulted in the certification papers being forwarded to Treasury

on Thursday, July 21, 1988, one day after the candidate's date of

ineligibility. The actual scenario would have been: Submission

received Monday, July 18, 1988; Certification documents circulated

to Commissioners for tally vote by 4:00 P.M., Tuesday, July 19,

1988; Commissioners' vote sheets due in Commission Secretary'S

office by 4:00 P.M., wednesday, July 20, 1988; Certification for

payment hand delivered by the Audit Division to the United States

Treasury between 10:00 A.M. and 12:00 P.M., Thursday, July 21,

1988.

The Committee further argues that even if the Commission

were to agree with the Audit staff regarding the submission, the

Committee was allowed to make a letter request. The Committee

states that if the Commission considers the submission a late

letter i~q~~~t. ~nder the CommIssion's ~,ocedur~s, th~

certification would have been delivered to Treasury on July 18,

1988.*/ The regulations at 11 C.F.R. S9036.2(b)(2) state that a

Comlllit_te__e_ .a_y _make_ a letter :r_t!q\1es t_ in lieu o_f__a tJ!g1-1la__r

SUba1S&IOn, however the regulation 90es on to say that a Committee

may not sub.it two consecutive letter requests. In this case,

since the Coaaittee had sade a letter request on July 11, 1988, it

could not follow with another letter request until a full

subaission had been made. As stated above, the next scheduled

submission date was July 25, 1988.~/

Recommendation IS

On October 10, 1991, the Commission made an initial

determination that the amount of the matchinq fund payment in

excess of the Candidate's entitlement ($314,640.35) is repayable

to the United States Treasury in accordance with Section

9038.2(b)(1) of Title 11 of the Code of Federal Regulations.

~/ In actuality, if a letter request was received on Monday,

July 18, 1988, the certification papers would have been

nIDI; v_!"An tC' '!'~~~5::ri· en TII"'( .:;ddy, Juiy ~j" 1;is6.

~/ The =and.idclLei~owmittee was notified in writing in September

1981, that letter requests could only be made during calendar

year 1988, on the second Monday of each month, provided the

candidate did not become ineligible (Governor Dukakis' date

of ineligibility was July 20, 1988).
"', .

34

If the Candidate does not dispute this determination Within

30 days of service of this report, the initial determination will

be considered final.

Repayment Amount: $314,640.35

E. Stale-Dated Checks

Section 9038.6 of Title 11 of the Code of Federal

Regulations states that, if the committee has checks outstanding

to creditors or contributors that have not been cashed, the

committee shall notify the Commission. The committee shall inform

the Commission of its efforts to locate the payees, if such

efforts have been necessary, and its efforts to encourage the

payees to cash the outstanding checks. The committee shall also

submit a check for the total amount of such outstanding checks,

payable to the United States Treasury.

1. A review of the Committee's outstanding checks

indicated that committee checks totaling $29,150.14 from its

operating and payroll accounts were stale-dated.

At the exit conference, Committee officials were

provided a schedule of the stale-dated checks. Committee

of£icials resp~nded that they would research the checks.

In the interim audit report, the Audit staff

recommended that within 30 calendar days of service of the report

the Coaaittee:

(a) provide photocopies (front and back)

of any of the above mentioned checks

which have now cleared the banks;

(b) inform the Commission of its efforts to

encourage the payees to cash these checks

or provide evidence documenting the

Committee's efforts to resolve these

items;

(c) submit a check payable to the United

States Treasury for the total amount of

such checks which are still outstanding

at the conclusion of the response

period.

Tn r,:)c.!:'n"sto ton ~h,:) ; nt"pr; -'='1\n~ t r~~')rt:. t:h~

Committee provided copies of four checks, totalling $3,460.01,

whi C~l have been cashed. Ali:,the' c:heck u r $ 90v wab vo id~d, s i nl:t:

it had been issued in error. The Committee stated that a check

for the remaining balance ($24,790.13), payable to the United

States Treasury, will be forwarded.
3S

2_ A review of disclosure reports revealed that the

Committee voided $17,610 in checKs issued subsequent to its date

of ineli9ibility. The voided checks represented refunds of

excessive contributions that were not cashed by the contributors

and were outstanding in excess of one year.

A committee representative informed the Audit staff

that the voided refund checks will not be reissued to the

contributors; rather, the amount will be forwarded to the United

states Treasury.

Recommendation 16

On October 10, 1991, the Commission made an initial

determination that the amount of stale-dated checks, $42,400.13

(24,790.13 + 17,610), be paid to the United States Treasury in

accordance with Section 9038.6 of Title 11 of the Code of Federal

Regulations.

Amount: $42,400.13

Amount Paid in Excess of

the Iowa and New HampShire

state Limitation

Surplus Funds

Matching Funds Received in

Excess of Entitleaent

Stale-dated Checks

Total

Less Partial Repayment

Received April 1, 1991

Remaining Amount Due

$ 99,489.65

35,634.00

314,640.35

42,400.13

492,164.13 V

485,000.00

S 7,164.13

~/ This amount is subject to change based on the review of

additional records (see Finding III.B.), as well as the

disposition of other matters related to the NOCO statement.