Part II
Overview of Campaign

Campaign Organization

Important Dates
e Date of Registration” June 21, 2011
e Audit Coverage January 1, 2015 - December 31, 2016
Headquarters Long Beach, California
Bank Information
e Bank Depositories One
e Bank Accounts One Checking
Treasurer
e Treasurer When Audit Was Conducted David Gould
e Treasurer During Period Covered by Audit _| David Gould (6/20/11 — present)
Management Information
e Attended FEC Campaign Finance Seminar__| Yes
e Who Handled Accounting and Paid Staff
Recordkeeping Tasks

Overview of Financial Activity

(Audited Amounts)

Cash on hand @ January 1, 2015 $ 67,109
Receipts

o Contributions from Individuals 1,144,755
o Contributions from Political Committees 734,986
o Offsets to Operating Expenditures 1,643
Total Receipts $ 1,881,384
Disbursements

o Operating Expenditures 1,913,514
© Contribution Refunds 25,155
co Other Disbursements 2,950
Total Disbursements $ 1,941,619
Cash on hand @ December 31, 2016 $ 6,874

> The committee changed its name from Hall for Congress Exploratory Committee to Hall for Congress on
January 14, 2016.


stated that any presumptive letters sent in response to the exit conference would resolve
the excessive contributions, albeit untimely.

In response to the exit conference, HFC submitted the following documentation:

Corrective Action Taken in Response to the Exit Conference

Presumptive Letters Sent — Untimely $44,500

In response to the exit conference, the Audit staff concluded that of the $61,683 in
excessive contributions, HFC demonstrated that it resolved contributions totaling $44,500
in an untimely manner. As such, HFC has materially resolved the excessive
contributions, albeit untimely.

The Interim Audit Report recommended that HFC provide any comments it deemed
relevant to this matter.

D. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, HFC stated it did not send
presumptive redesignation letters when contributions were received. HFC stated that it
reviewed regulations with fundraisers as they were hired, and instructed them about the
tules and regulations. HFC required the fundraisers to contact contributors to verify
information for all questionable contributions. In response to the audit, HFC and its
fundraisers have obtained such letters.

The Audit staff concluded, HFC has materially resolved the excessive contributions,
albeit untimely.

E. Draft Final Audit Report
The Draft Final Audit Report acknowledged that HFC untimely resolved all of the
excessive contributions identified by the Audit staff.

F, Committee Response to the Draft Final Audit Report
HFC did not respond to the Draft Final Audit Report.

Commission Conclusion

On March 27, 2019, the Commission considered the Audit Division Recommendation
Memorandum in which the Audit staff recommended that the Commission find that HFC
received excessive contributions totaling $61,683.

The Commission approved the Audit staff’s recommendation.


Part IV
Commission Findings

| Finding 1. Receipt of Contributions in Excess of the Limit

Summary

During audit fieldwork, the Audit staff reviewed contributions from individuals to
determine if any exceeded the contribution limit. This review indicated that HFC
received apparent excessive contributions totaling $61,683. These errors occurred as a
result of HFC not resolving the excessive portions of contributions by forwarding
presumptive redesignation letters to its contributors in a timely manner. In response to
the exit conference, HFC untimely resolved excessive contributions from individuals
totaling $44,500. In response to the Interim Audit Report recommendation, HFC stated it
did not send presumptive redesignation letters when contributions were received
however, it has done so in response to the audit. HFC did not respond to the Draft Final
Audit Report. The Audit staff concluded that HFC received excessive contributions
totaling $61,683, which were untimely resolved.

The Commission approved a finding that HFC received excessive contributions totaling
$61,683.

Legal Standard

A. Authorized Committee Limits. An authorized committee may not receive more
than a total of $2,700 per election from any one person or $5,000 per election from a
multi-candidate political committee. 52 U.S.C §30116(a)(1)(A); 11 CFR §§110.1(a)
and (b) and 110.9.

B. Handling Contributions That Appear Excessive. If a committee receives a
contribution that appears to be excessive, the committee must either:
e Return the questionable check to the donor; or
e Deposit the check into its federal account and:
= Keep enough money in the account to cover all potential refunds or
establish a separate account in a campaign depository for such
contributions;
= Keep a written record explaining why the contribution may be illegal;
= Include this explanation on Schedule A if the contribution has to be
itemized before its legality is established;
= Seek a reattribution or a redesignation of the excessive portion, following
the instructions provided in the Commission regulations (sce below for
explanations of reattribution and redesignation); and
= Ifthe committee does not receive a proper reattribution or redesignation
within 60 days after receiving the excessive contribution, refund the
excessive portion to the donor. 11 CFR §§103.3(b)(3), (4) and (5) and
110.1(k)(3)(ii)(B).


Part III
Summaries

Commission Findings

Finding 1. Receipt of Contributions in Excess of the Limit
During audit fieldwork, the Audit staff reviewed contributions from individuals to
determine if any exceeded the contribution limit. This review indicated that HFC
received apparent excessive contributions totaling $61,683. These errors occurred as a
result of HFC not resolving the excessive portions of contributions by forwarding
presumptive redesignation letters to its contributors in a timely manner. In response to
the exit conference, HFC untimely resolved excessive contributions from individuals
totaling $44,500. In response to the Interim Audit Report recommendation, HFC stated it
did not send presumptive redesignation letters when contributions were received
however, it has done so in response to the audit. HFC did not respond to the Draft Final
Audit Report. The Audit staff concluded that HFC received excessive contributions
totaling $61,683, which were untimely resolved.

The Commission approved a finding that HFC received excessive contributions totaling
$61,683. (For more detail, see p. 4.)

Finding 2. Use of General Election Contributions for

Primary Expenditures

During audit fieldwork, a review of contributions received before the primary election
identified that HFC spent general election contributions totaling $71,407 on primary
election expenses. As such, HFC did not meet the requirements that general election
contributions not be used for primary election expenses. In response to the exit
conference, HFC submitted expenses for fundraising and compliance that it stated should
be allocated between the primary and general election. The Audit staff agreed with this
assessment and adjusted the calculated amount of general contributions used to pay for
primary expenses.

In response to the Interim Audit Report recommendation, HFC stated that it expected
both elections to be costly and contested. HFC stated the costs associated with setting up
campaign offices (equipment, supplies, stationary, etc.) was “greater than the amount
identified by the Audit staff or at least equal to the amount in question.” However,
documentation to support this assertion was not submitted. HFC did not respond to the
Draft Final Audit Report. The Audit staff concluded that HFC spent general election
contributions totaling $71,407 on primary election expenses.

The Commission approved a finding that HFC spent general election contributions
totaling $71,407 on primary election expenses. (For more detail, see p. 8)


§§103.3(b)(3) and 110.1(b)(5)(ii)(A). Further, a political committee must retain
written records concerning the redesignation in order for it to be effective. 11 CFR

§110.1(1)(5).

F. Presumptive Redesignation- When an individual makes an excessive contribution to
a candidate’s authorized committee, the campaign may presumptively redesignate the
excessive portion to the general election if the contribution:

e Is made before that candidate’s primary election;

e Is not designated in writing for a particular election;

© Would be excessive if treated as a primary election contribution; and

e As redesignated, does not cause the contributor to exceed any other contribution
limit. 11 CFR §110.1(b)(5)G@i)(B)(1)-(4).

The committee is required to notify the contributor by any written method including
electronic mail, of the redesignation within 60 days of the treasurer’s receipt of the
contribution, and must offer the contributor the option to receive a refund instead. 11
CFR §110.1(6)(5)Gi)(B)(5) and (6).

Facts and Analysis

A. Facets

The Audit staff utilized sample testing and a review of other contributions not included in
the sample population to identify apparent excessive contributions from individuals.

Excessive Contributions-Testing Method

Sample Projection Amount? $61,683

Total Amount of Excessive Contributions $61,683

Reasons for Excessive Contributions

Excessive Contributions not resolved via
: aa $61,683
presumptive notification or refund

Total Amount of Excessive Contributions $61,683

B. Additional Information

HFC did not maintain a separate account for questionable contributions. Based on its
cash on hand at the end of the audit period ($6,874), it appears that HFC did not maintain
sufficient funds to make refunds of the apparent excessive contributions.

C. Interim Audit Report & Audit Division Recommendation

During fieldwork, the Audit staff discussed this matter with HFC. At the exit conference,
schedules of the apparent excessive contributions were provided. HFC asked if
presumptive reattribution/redesignation letters could still be issued. The Audit staff

3 The sample error amount ($61,683) was projected using a Monetary Unit Sample with a 95 percent
confidence level. The sample estimate could be as low as $35,479 or as high as $87,887.


Final Audit Report of the

Commission on Hall for Congress
(January 1, 2015 — December 31, 2016)

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.

1 52 U.S.C. §30111().

About the Campaign (p. 2)

Hall for Congress is the principal campaign committee for
Isadore Hall, III, Democratic candidate for the United States
House of Representatives from the state of California, 44"
District, and is headquartered in Long Beach, California. For
more information, see the Campaign Organization chart, p.2.

Financial Activity (p. 2)
e Receipts

o Contributions from Individuals $ 1,144,755
o Contributions from Political

Committees 734,986
o Offsets to Operating

Expenditures 1,643
Total Receipts $ 1,881,384

¢ Disbursements

o Operating Expenditures $ 1,913,514
o Contribution Refunds 25,155
o Other Disbursements 2,950
Total Disbursements $ 1,941,619

Commission Findings (p. 3)

e Receipt of Contributions in Excess of the Limit (Finding 1)

e Use of General Election Contributions for Primary
Expenditures (Finding 2)


D. Definition of Election. A primary election and general election are each considered
a separate “election” under the Act. 52 U.S.C. §30101(1).

E. Prohibited Contributions and Expenditures. Candidates and political committees
are prohibited from knowingly accepting excessive contributions. 52 U.S.C.
§30116(£).

Facts and Analysis

A. Facts

During audit fieldwork, the Audit staff compared contributions received to disbursements
made before the primary election to determine if general election contributions were used
by HFC to pay primary election expenses. The primary election for the state of
California was held on June 7, 2016. The amount of primary election contributions HFC
raised prior to the primary election was $902,925 and the amount of general election
contributions raised was $155,358.4 The Audit staff identified $71,4075 of general
election contributions that were spent on primary election expenditures. HFC began
spending general election contributions on primary election expenditures on April 21,
2016 and for 48 days, continued through the primary election on June 7, 2016.

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with HFC at the exit conference and provided
schedules detailing the general election contributions that were used for primary election
expenses. In response to the exit conference, HFC submitted expenses for fundraising
and compliance that it stated should be allocated between the primary and general
election. The Audit staff agreed with this assessment and adjusted the calculated amount
of general contributions used to pay for primary expenses

The Interim Audit Report recommended that HFC provide documentation to demonstrate
that general election contributions totaling $71,407 were not used to fund primary
election activity and provide any additional comments it considered necessary with
respect to this matter.

C. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, HFC stated that from the start
of the campaign, the candidates in the 2016 election knew they would be facing each
other in both the primary and general elections. HFC stated that many decisions were
made such as ordering signs and literature that were placed throughout the district for the
entire campaign for what it expected to be a very costly and contested election. HFC
reiterated that the cost of setting up campaign offices (equipment, supplies, stationary,
etc.) for both elections was “greater than the amount identified by the Audit staff or at
least equal to the amount in question.”

4 These amounts are net of contribution refunds.
* This amount does not include $32,854 in general election expenses submitted to the Audit staff by the
committee, in response to the exit conference.


Finding 2. Use of General Election Contributions for
Primary Expenditures

Summary

During audit fieldwork, a review of contributions received before the primary election
identified that HFC spent general election contributions totaling $71,407 on primary
election expenses. As such, HFC did not meet the requirements that general election
contributions not be used for primary election expenses. In response to the exit
conference, HFC submitted expenses for fundraising and compliance that it stated should
be allocated between the primary and general election. The Audit staff agreed with this
assessment and adjusted the calculated amount of general contributions used to pay for
primary expenses.

In response to the Interim Audit Report recommendation, HFC stated that it expected
both elections to be costly and contested. HFC stated the costs associated with setting up
campaign offices (equipment, supplies, stationary, etc.) was “greater than the amount
identified by the Audit staff or at least equal to the amount in question.” However,
documentation to support this assertion was not submitted. HFC did not respond to the
Draft Final Audit Report. The Audit staff concluded that HFC spent general election
contributions totaling $71,407 on primary election expenses.

The Commission approved a finding that HFC spent general election contributions
totaling $71,407 on primary election expenses.

Legal Standard

A. Accounting for Contributions and Expenditures. If a candidate, or his or her
authorized committee(s), receives contributions that are designated for use in
connection with the general election pursuant to 11 CFR §110.1(b) prior to the date of
the primary election, such candidate or such committee(s) shall use an acceptable
accounting method to distinguish between contributions received for the primary
election and contributions received for the general election. Acceptable accounting
methods include, but are not limited to:
1. The designation of separate accounts for each election, caucus or convention; or
2. The establishment of separate books and records for each election. 11 CFR
102.9(e).

B. Limitations, Contributions, and Expenditures. The contribution limits are applied
separately with respect to each election. 52 U.S.C. §30116(a)(6); 11 CFR. §$100.2
and 110.1(j).

C. Limitations, Contributions, and Expenditures. Under the Act, an individual may
not make a contribution to a candidate with respect to any election in excess of the
limit, which was $2,700 per election during the 2016 election cycle. 52 U.S.C.
§30116(a)(1)(A), and 11 CFR §110.1(b)(1).


C. Joint Contributions. Any contribution made by more than one person, except for a
contribution made by a partnership, must include the signature of each contributor on
the check, money order, or other negotiable instrument or in a separate writing. A
joint contribution is attributed equally to each donor unless a statement indicates that
the funds should be divided differently. 11 CFR §110.1(k)(1) and (2).

D. Reattribution of Excessive Contributions. The Commission regulations permit
committees to ask contributors of excessive contributions (or contributions that
exceed the committee’s net debts outstanding) whether they had intended their
contribution to be a joint contribution from more than one person and whether they
would like to reattribute the excess amount to the other contributor. The committee
must inform the contributor that:

e The reattribution must be signed by both contributors;

e The reattribution must be received by the committee within 60 days after the
committee received the original contribution; and

e The contributor may instead request a refund of the excessive amount. 11 CFR
§110.1(k)(3).

Within 60 days after receiving the excessive contribution, the committee must either
receive the proper reattribution or refund the excessive portion to the donor. 11 CFR
§§103.3(b)(3) and 110.1(k)(3)(ii)(B). Further, a political committee must retain
written records concerning the reattribution in order for it to be effective. 11 CFR

§110.1(1)(5).

Notwithstanding the above, any excessive contribution that was made on a written

instrument that is imprinted with the names of more than one individual may be

presumptively attributed among the individuals listed unless instructed otherwise by

the contributor(s). The committee must inform each contributor:

e How the contribution was attributed; and

e The contributor may instead request a refund of the excessive amount. 11 CFR
§110.1(K)(3)(B).

E. Redesignation of Excessive Contributions. When an authorized candidate
committee receives an excessive contribution (or a contribution that exceeds the
committee’s net debts outstanding), the committee may ask the contributor to
redesignate the excess portion of the contribution for use in another election. The
committee must inform the contributor that:

e The redesignation must be signed by the contributor;

© The redesignation must be received by the committee within 60 days after the
committee received the original contribution; and

¢ The contributor may instead request a refund of the excessive amount. 11 CFR
§110.1(b)(5).

Within 60 days after receiving the excessive contribution, the committee must either
receive the proper redesignation or refund the excessive portion to the donor. 11 CFR


Part I
Background

Authority for Audit

This report is based on an audit of Hall for Congress (HFC), 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 52 U.S.C. §30111(b), which permits the Commission to
conduct audits and field investigations of any political committee that is required to file a
report under 52 U.S.C. §30104. 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. 52 U.S.C. §30111(b).

Scope of Audit

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

the receipt of excessive contributions;

the receipt of contributions from prohibited sources;

the disclosure of contributions received;

the disclosure of individual contributors’ occupation and name of employer;
the consistency between reported figures and bank records;

the completeness of records; and

other committee operations necessary to the review.

ASS ee

Audit Hearing
HFC declined the opportunity for a hearing before the Commission on the matters
presented in this report.


Table of Contents

Page

Part I. Background

Authority for Audit 1

Scope of Audit 1

Audit Hearing 1
Part II. Overview of Campaign

Campaign Organization 2

Overview of Financial Activity 2
Part III. Summaries

Commission Findings 3

Part IV. Commission Findings
Finding 1. Receipt of Contributions in Excess of the Limit 4
Finding 2. Use of General Election Contributions for Primary Expenditures 8


Final Audit Report of the
Commission on Hall for Congress

(January 1, 2015 - December 31, 2016)


10

HFC did not provide documentation which demonstrated that the general election
contributions were not used to fund primary election activity. As such, the Audit staff
concluded that HFC spent general election contributions totaling $71,407 on primary
election expenses.

D. Draft Final Audit Report

The Draft Final Audit Report identified that HFC did not provide documentation to
demonstrate that general election contributions were not used to fund primary election
activity.

E. Committee Response to the Draft Final Audit Report
HFC did not respond to the Draft Final Audit Report.

Commission Conclusion

On March 27, 2019, the Commission considered the Audit Division Recommendation
Memorandum in which the Audit staff recommended that the Commission find that HFC
spent general election contributions totaling $71,407 on primary election expenses.

The Commission approved the Audit staffs recommendation.