Part I
Background

Authority for Audit

This report is based on an audit of Diane E. Watson for Congress (the Watson Committee),
undertaken by the Audit Division of the Federal Election Commission (the Commission) in
accordance with the Federal Election Campaign Act of 1971, as amended (the Act). The Audit
Division conducted the audit pursuant to 2 U.S.C. §438(b), which permits the Commission to
conduct audits and field investigations of any political committee that is required to file a report
under 2 U.S.C. §434. Prior to conducting any audit under this subsection, the Commission must
perform an internal review of reports filed by selected committees to determine if the reports
filed by a particular committee meet the threshold requirements for substantial compliance with
the Act. 2 U.S.C. §438(b).

Scope of Audit

Following Commission approved procedures, the Audit staff evaluated various factors and as a
result, this audit examined:

. The disclosure of disbursements, debts, and obligations.

. The consistency between reported figures and bank records.
. The completeness of records.

. Other committee operations necessary to the review.

BWNe

Changes to the Law

On March 27, 2002, President Bush signed into law the Bipartisan Campaign Reform Act of
2002 (BCRA). The BCRA contains many substantial and technical changes to the federal
campaign finance law. Most of the changes became effective November 6, 2002. Except for
November 7, 2002, through December 31, 2002, the period covered by this audit pre-dates these
changes. Therefore, the statutory and regulatory requirements cited in this report are primarily
those that were in effect prior to November 7, 2002.


Part IV
Finding and Recommendation

Disclosure of Debts and Obligations

Summary

The Watson Committee failed to disclose the purpose for debts and obligations totaling $82,932.
In addition, for some debts and obligations, incorrect balances were disclosed. These errors total
$11,915. The Watson Committee filed amended Schedules D. The Audit staff recommends no
further action.

Legal Standard

¢ Contents of Reports. Each report filed under 11 CFR 104.1 shall, on Schedule C or D, as
appropriate, disclose the amount and nature of outstanding debts and obligations owed by or
to the reporting committee. 11 CFR §104.3(d).

Ttemizing Debts and Obligations

© A debt of $500 or less must be reported once it has been outstanding 60 days from the date
incurred (the date of the transaction); the committee reports it on the next regularly scheduled
report.

¢ A debt exceeding $500 must be disclosed in the report that covers the date on which the debt
was incurred. 11 CFR §104.11(b).

Facts and Analysis

Reports filed by the Watson Committee failed to properly disclose the purpose for debts and
obligations totaling $82,932. The amounts were owed to eight vendors. In addition, incorrect
balances were disclosed for other debts and obligations. These errors totaled $11,915.

The Watson Committee representatives were informed of this at the exit conference and
responded that due to a software error, the purpose of the debts on Schedule D did not appear on
several reports. They stated further that the software problem had been corrected. In response to
the Audit staff’s exit conference recommendation, the Watson Committee filed amended reports
which materially corrected the problems noted above.


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Changes to the Law

Part II. Overview of Campaign
Campaign Organization
Overview of Financial Activity

Part III. Summary

Finding and Recommendation

Part IV. Finding and Recommendation
Disclosure of Debts and Obligations

Page


Part II
Overview of Campaign

i)

Campaign Organization

Important Dates

Diane E. Watson for Congress

e Date of Registration

January 30, 2001

e Audit Coverage

February 7, 2001 — December 31, 2002

Headquarters

Burbank, California

Bank Information

« Bank Depositories 3
«Bank Accounts 3 checking
Treasurer
e Treasurer When Audit Was Conducted Kinde Durkee
¢ Treasurer During Period Covered by Audit _| Kinde Durkee
Management Information
¢ Attended FEC Campaign Finance Seminar __| No

Yes

¢ Used Commonly Available Campaign
Management Software Package

¢ Who Handled Accounting, Recordkeeping
Tasks and Other Day to Day Operations

Paid Consultant




FEDERAL ELECTION COMMISSION
Washington, DC 20463

October 9, 2003

MEMORANDUM

TO: RON M. HARRIS
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ ; Zs
ASSISTANT STAFF) ‘CTOR
AUDIT DIVISION

SUBJECT: | PUBLIC ISSUANCE OF THE AUDIT REPORT ON DIANE E. WATSON
FOR CONGRESS

Attached please find a copy of the audit report and related documents on
Diane E. Watson for Congress, which was approved by the Commission on October |,
2003.

The report may be released to the public on October 9, 2003.

Attachment as stated

cc: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library
DSDD Website


Overview of Financial Activity
(Audited Amounts)

Cash on hand @ February 7, 2001 $0
Receipts
o Total Contributions $ 1,031,096
o All Other Receipts 15,355
o_ Total Receipts $1,046,451
Disbursements
o__Operating Expenditures $ 1,022,710
o Refunds of Contributions 2,750
o Other Disbursements 15,650
o Total Disbursements $ 1,041,110
Cash on hand @ December 31, 2002 $ 5,341
Part III

Summary

Finding and Recommendation

Disclosure of Debts and Obligations

The Watson Committee failed to disclose the purpose for debts and obligations totaling $82,932.
In addition, for some debts and obligations, incorrect balances were disclosed. These errors total
$11,915. The Watson Committee filed amended Schedules D. The Audit staff recommends no
further action. (For more detail, see p. 4)


Report of the Audit Division on

Diane E. Watson For Congress
February 7, 2001 - December 31, 2002

Why the Audit

Was Done

Federal law permits the
Commission to conduct
audits and field
investigations of any
political committee that is
required to file reports
under the Federal
Election Campaign Act
(the Act). The
Commission generally
conducts such audits
when a committee
appears not to have met
the threshold
requirements for
substantial compliance
with the Act.' The audit
determines whether the
committee complied with
the limitations,
prohibitions and
disclosure requirements
of the Act.

Future Action
The Commission may
initiate an enforcement
action, at a later time,
with respect to any of the
matters discussed in this
report.

About the Committee (p. 2)

Diane E. Watson for Congress is the principal campaign
committee for Diane E. Watson, Democratic candidate for the
U.S. House of Representatives from the state of California, 32"
District, and is headquartered in Burbank, California. For more
information, see the chart on the Campaign Organization, p.2.

Financial Activity (p. 2)

« Receipts
o Total Contributions $ 1,031,096
o All Other Receipts 15,355
o Total Receipts $ 1,046,451

¢ Disbursements

o Operating Expenditures $ 1,022,710
o Refunds of Contributions 2,750
o Other Disbursements 15,650
o Total Disbursements $1,041,110

Finding and Recommendation (p. 3)
e Disclosure of Debts and Obligations

' 2 U.S.C. §438(b).


Report of the
Audit Division on
Diane E. Watson for Congress

February 7, 2001- December 31, 2002