FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM 

TO: 

FROM: 

Patricia Carmona 

Chief Compliance Officer 

Joseph F. Stoltz 

Assistant Staff Director 

Christopher Hughey -r^ 

Acting General Counsel > 

Lawrence L. Calvert, 

Associate General Coun oun^er i \ —" 

Lorenzo HoUoway ^^L_ > 

Assistant General Counsel 

For Public Finance and Audit Advice 

Delanie DeWitt Painter 

Attomey 

SUBJECT: Interim Audit Report on tiie Maine Republican Party (LRA 817) 

The Office of the General Counsel has reviewed the proposed Interim Audit 

Report ("proposed report") on the Maine Republican Party ("the Committee"). Our 

comments focus on Finding 3 - Disclosure of Disbursements. Generally, we recommend 

that the Audit staff provide more explanation of why it categorized expenses as allocable 

administrative expenses, federal expenses or federal election activity ("FEA"). We make 

several comments and specific recommendations on this finding. If you have any 

questions, please contact Delanie DeWitt Painter, the attomey assigned to this audit.' 

The proposed report concludes tiiat the Committee incorrectly disclosed different 

categories of disbursements totaling $818,330, including: 1) $94,019 in disbursements, 

apparentiy for administrative expenses and FEA, that were paid from non-federal 

accounts but which the auditors conclude should have been paid from the federal 

account; 2) an apparent coordinated party expenditure of $12,500 for a television 

' This Office recommends that the Commission consider this document in executive session 

because the Commission may eventually decide to pursue an investigation of matters contained in the 

proposed report. 11 C.F.R. §§ 2.4(a). 2.4(b)(6). 
Memorandum to Joseph F. Stoltz 

Interim Audit Report Maine Republican Party (LRA 817) 

Page 2 

advertisement reported as an operating expense;^ and 3) $711,811 in disbursements from 

the federal account that the Committee reported on the summary page and Schedule B as 

line 21(b) federal operating expenses but which the auditors conclude should have been 

reported on line 30(b) as FEA paid entirely with federal funds, including disbursements 

for payroll, travel reimbursements and printed materials. The auditors recommend that 

the Committee amend its reports to correct these disclosure problems. 

Generally, we recommend that you expand Finding 3 to include more information 

about all of the categories of expenses and more explanation about why the Audit staff 

categorized expenses as allocable administrative expenses, federal expenses, or FEA. 

The analysis of the various expenses differs based on the type of expense. The auditors 

provided spreadsheets of the non-fedeial account and federal account expenses for our 

review. We reviewed the spreadsheets and found that some types of expenses included in 

the spreadsheets are not specifically discussed in the proposed report, such as expenses 

for state conventions and events. We suggest that the Audit staff include in the finding 

the infonnation about all of the expenses from those spreadsheets and explain the reasons 

for your categorizations of the expenses. The finding should state the amount of each 

type of expense in each category (payroll, printed materials, etc.) and note where 

documentation was not available for the auditors to review. Charts of the expenses 

broken down by category would be helpful to the Commission. 

Administrative Costs 

The auditors conclude that the Committee paid apparent allocable administrative 

costs from its non-federal accounts totaling $48,520. These costs include postage, 

consulting, travel reimbursements, printing, accounting fees and other expenses. Because 

the available infonnation does not indicate that these expenses were solely non-federal, 

the auditors conclude that they were allocable admmistrative expenses that should have 

been reported on Schedule H-4 using a 36/64% allocation ratio. 

We agree that based on the available infonnation, these costs appear to be 

allocable administrative costs. Administrative costs include rent, utilities, office 

equipment and supplies, postage for other than mass mailings, and routine building 

maintenance, unless those costs are directiy attributable to a clearly identified candidate. 

11 C.F.R. § 106.7(c)(2). Some of the costs at issue here, such as postage, consulting and 

travel reimbursements, might or might not be allocable administrative expenses 

depending on whether they were related to activity on behalf of a clearly identified 

candidate. The Committee should be given the opportunity to demonstrate that these 

were non-federal expenses. In the absence of such a demonstration, we concur with the 

auditors that these appear to be the type of ordinary overhead expenses that can be 

^ We concur that the Committee's payment of $ 12,S00 for a television advertisement appears to be a 

coordinated party expenditure on behalf of Charlie Summers for Congress. The advertisement appears to 

be a public communication that refers to a clearly identified House candidate and that was publicly 

disseminated in the candidate's jurisdiction within 90 days of the election. See 11 C.F.R. § 109.37. The 

candidate appears in the advertisement and the advertisement states that it was approved by the candidate. 
Memorandum to Joseph F. Stoltz 

Interim Audit Report Maine Republican Party (LRA 817) 

Page 3 

considered administrative expenses and that the Committee should have allocated them 

on a 36% federal basis and reported accordingly. 

Possible FEA 

The auditors also conclude that certain expenses paid fiom the non-federal 

account, as well as expenses paid from the federal account and reported as federal 

operating expenses, were apparent Federal Election Activity ("FEA"). The expenses paid 

firom the non-federal account totaled $45,499 and included payroll and associated costs, 

costs of voter identification, and costs of and printed materials. Copies of the printed 

materials were not available for the auditors to review. The auditors conclude that unless 

the committee provides documentation that these expenses were solely non-federal, it 

should disclose these transactions as FEA. 

With respect to the federal account, the auditors conclude that payments totaling 

$711,811 reported as federal operating expenditures appear to be non-allocable FEA that 

should have been reported on tiie summaiy page and Schedule B for line 30(b) instead of 

Schedule B for line 21(b). These disbursements were for payroll and associated costs, 

reimbursements of travel expenses, printed materials, telemarketing and other expenses. 

The Committee coded $390,000 of tiiese disbursements as FEA on its database. Copies 

of the printed materials and the telemarketing script were unavailable for review. For the 

payroll expenses, there were no records mdicating that less than 25% of the employees' 

compensated time was for federal activity. The auditors recommend that the Committee 

demonstrate that the payments from the federal account were for federal opeiating 

expenses or amend its reports. 

FEA means four types of federal expenses that meet certain requirements: 1) 

voter registration activity within 120 days of the federal election ("Type I FEA"); 2) voter 

identification, generic campaign activity or get-out-the-vote C*GOTV") activity in 

connection with an election where a federal candidate is on the ballot ("Type II FEA"); 3) 

a public communication that refers to a clearly identified federal candidate and promotes 

or supports or attacks or opposes ("PASO") a federal candidate ("Type III FEA"); or 4) 

services of a state or local party committee employee who spends more than 25% of 

compensated time during a month on activities in connection with a federal election 

("Type IV FEA"). See 2 U.S.C. § 431(20); 11 C.F.R. § 100.24. 

We do not agree that there is sufficient information to conclude that all of these 

expenses were FEA. More infonnation than we have here is needed to support an audit 

finding that an expense meets the requirements to be considered one of the four types of 

FEA. If the printed materials were public communications that referred to a clearly 

identified candidate for federal office, and promoted, supported, attacked, or opposed a 

candidate for tiiat office, tiiey would be Type IH FEA. See 2 U.S.C. § 431(20); 11 C.F.R. 

§ 100.24. But since the printed materials are not available for review, it is not possible to 

examine their form or content to determine whether they were public communications, or 

if so, whether they PASO-ed a clearly identified federal candidate. Without reviewing 
Memorandum to Joseph F. Stoltz 

Interim Audit Report Maine Republican Party (LRA 817) 

Page 4 

the printed materials, it would also be difiicult to determine whether they constituted 

Type II FEA for voter identification, generic campaign activity or GOTV, or whether any 

exemptions apply to them. See Legal Analysis Memorandum to the Audit Division, 

"Proposed Audit Division Recommendation Memorandum on the Kansas Republican 

Party (LRA 801)" (Oct. 5,2010). Similarly, although tfie auditors note tiiat tiie 

telemarketing expense was paid to the same vendor that had previously been paid for 

GOTV activity, tiiere is no available script or other documentation indicating that the 

specific telemarketing that is the subject of the proposed finding was FEA; it is possible 

that the same vendor engaged in telemarketing that was for GOTV and telemarketing that 

was not FEA at all. 

To address this situation, we recommend that the expenses for printed materials 

that are unavailable for review should not be categorized as FEA. Instead, the printed 

materials paid from the non-federal account should be treated as a separate new category 

of apparent federal expenses for which the Committee has not provided sufficient 

documentation to clarify the nature of the expense or to demonstrate that the expense was 

solely non-federal. This approach is consistent with this Office's advice conceming 

similar undocumented expenses in the Kansas Republican Party audit. 

We also recommend a somewhat different approach than the proposed report with 

respect to the printed materials and telemarketing expenses paid from the federal account. 

With respect to the printed materials, we note that some of tiie costs that are the subject of 

this finding were coded in the Committee's intemal records as FEA but were reported as 

operating expenses, and some were not coded as FEA at all. The finding might note, for 

instance, that the $170,315 in printed materials costs tiiat the Committee coded as FEA 

represents potential FEA because the Committee recorded it as such in its intemal 

records, but tiiat the Committee should clarify the discrepancy between its reports and its 

internal records. As for the $70,032 in printing expenses not coded FEA at all, it is 

unclear to us why the auditors would assume that tiiese expenses were for FEA when 

FEA is only one of several types of expenses, even within the broad category of federal 

expenses, which the materials could have been. With respect to the telemarketing 

expense ($23,029), as noted, payments to the same vendor for GOTV are not sufficient 

indication that this telemarketing expense was also for GOTV. 

With respect to payroll, we suggest that the proposed report explain why the 

auditors concluded that payroll and associated expenses paid from the non-federal 

account were related to employees who spent more than 25% of their compensated time 

each month in activities in connection with a federal election (Type IV FEA). You 

explained to us that where the Committee has provided affidavits that staff spent less than 

25% of their time on federal activity, the auditors excluded those payroll costs. This 

information should be noted in the proposed report. 

We agree that payroll costs paid from the federal account appear to be Type IV 

FEA. Payroll for employees who spend more than 25 percent of their compensated time 

in a given month on activity in connection with a federal election is Type IV FEA and 
Memorandum to Joseph F. Stoltz 

biterim Audit Report Maine Republican Party (LRA 817) 

Page 5 

must be paid entirely with federal fiinds. 2 U.S.C. § 431(20)(A)(iv), 2 U.S.C. 

§ 44li(b)(l). Payroll for employees who engage in some activity in connection with a 

Federal election in a given month, but spend 25 percent or less of their compensated time 

doing so, may be allocated as an administrative expense between a party committee's 

federal and non-federal accounts. 11 C.F.R. § 106.7(c)(1). Payroll for employees who 

engage in no activity in connection with a federal election in a given month may be paid 

entirely with funds permissible under state law. 11 C.F.R. § 300.33(d)(1). We agree that 

at this stage of the audit it is permissible to assume that if the Committee paid 100% of a 

payroll expense with federal funds, that expense was for Type IV FEA and should be 

reported as such. The Committee's reporting would be conect only if those payroll 

expenses reported as line 21(b) operating expenses were for expenses that the Committee 

could have allocated, or paid entirely with non-federal funds, but chose not to. However, 

we understand that thus far, the Committee has not provided documentation such as a log 

or affidavits demonstrating that the payroll costs paid from the federal account related to 

staff who spent less than 25% of their time on activities in connection with a federal 

election. Moreover, we understand some of these expenses were coded in the 

Committee's internal records as FEA and were not rq)orted as such. The Conimittee 

should be given the opportunity to explain the discrepancies between its intemal records 

and its reporting. 

The chart provided by the Audit staff lists other expenses paid with 100% federal 

fiinds that were coded as FEA on the Committee's database including per diem ($3,050), 

equipment ($36,933), travel ($38,192) and miscellaneous ($3,702). The chart also lists 

expenses that were not coded as FEA including travel ($61,500) and state convention and 

other events ($31,341). We suggest that the finding provide more information about 

these expenses and why the auditors concluded they were FEA. 

Specifically, determining whether travel and per diem costs were FEA would 

depend upon what activities the individuals were doing when they incuned these 

expenses and whether their activities were related to a clearly identified federal 

candidate. For the travel and per diem expenses coded as FEA by the Committee, we 

suggest that the finding note that these expenses were potential FEA, but the Committee 

should clarify the discrepancy between its reports and its internal records. However, we 

question whether there is any basis to conclude that travel costs not coded as FEA by the 

Committee were also FEA rather than federal operating expenses or allocable 

admmistrative costs. 

Equipment costs also might or might not be FEA depending upon the type of 

equipment and how the equipment was used. Again, since the Committee coded the 

equipment costs as FEA, tiie finding should note that these costs were potentially FEA 

and give the Committee the opportunity to explain the discrepancy between its records 

and its reports. Similarly, the miscellaneous expenses coded as FEA were potential FEA 

depending on the nature of the expenses. 

We do not agree, however, that expenses described on the spreadsheet as state 

convention and other events were necessarily FEA. Expenses for a state party political 
Memorandum to Joseph F. Stoltz 

Interim Audit Report Maine Republican Party (LRA 817) 

Page 6 

convention, meeting or conference are exceptions to the definition of FEA. 11 C.F.R. 

§ 100.24(c)(3). You informed us that there was no external documentation or samples to 

confirm that these expenses were for the state convention and that previous payments to 

the same vendor were for McCain Palin yard signs. But we note that yard signs are 

similar to the kinds of signs commonly waved by delegates to state and national political 

conventions. Assuming that these payments were to a printer of signs, we do not believe 

the mere fact that other expenses to the same vendor were for yard signs provides a 

sufficient basis for determining that these particular expenses were not for expenses 

associated with a state convention. Therefore, we recommend that you do not include 

these expenses in the finding as potential FEA. 

Finally, we suggest that the proposed report provide more information about the 

expenses paid from the non-federal account categorized as voter identification costs. The 

spreadsheet you provided indicates a payment of $19,000 to "National Republican" on 

April 25,2008 for Voter ID and states that the Committee's records indicated "volunteer 

connect." The spreadsheet notes that this expense was considered FEA because it was 

for voter identification and was incuned within the FEA period for voter identification 

(March 15,2008-November 4,2008). In order to pay this expense as a non-federal 

expense, the Committee would have to demonstrate that it qualified under section 

100.24(a)(l)(iii). Absent such a demonstration, the expense is potential Type II FEA and 

could be paid with a combination of federal and Levin funds. See 11 C.F.R. 

§ 300.32(b)(l)(ii).