Final Audit Report of tlie 

Commission on the Maine 

Republican Party 

January 1, 2007 - December 31, 2008 

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 Conunission 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) 

The Maine Republican Party is a state party committee 

headquartered in Augusta, Maine. For more information, see the 

chart on the Committee Organization, p. 2. 

Financial Activity (p. 2) 

Receipts 

o Contributions from Individuals $ 422,772 

o Contributions from Political Party 

Committees 778,500 

o Contributions from Other 

Political Committees 172,044 

o Transfers from Non-federal 

Account 48,381 

o All Other Receipts 887 

Total Receipts $ 1,422,584 

Disbursements 

o Operating Disbursements $ 806,455 

o Coordinated Party Expenditures 12,500 

o Federal Election Activity 519,305 

o Independent Expenditures 56,601 

Total Disbursements $ 1,394,861 

Commission Findings (p. 3) 

• Misstatement of Fmancial Activity (Fmding 1) 

• Reporting of Debts and Obligations (Findmg 2) 

• Disclosure of Disbursements (Finding 3) 

• Failure to File Notices and Properly Disclose Independent 

Expenditures (Finding 4) 

Additional Issue (p. 4) 

• Reporting Payments from Non-federal Accounts 

2 US.C. §438(b). 
Final Audit Report of the 

Commission on the 

Maine Republican Party 

January 1, 2007 - December 31, 2008 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Audit Hearing 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Commission Findings 3 

Additional Issue 4 

Part IV. Commission Findings 

Finding 1. Misstatement of Financial Activity 5 

Finding 2. Reporting of Debts and Obligations 8 

Finding 3. Disclosure of Disbursements 9 

Finding 4. Failure to File Notices and Properly Disclose Independent 

Expenditures 15 

Part V. Additional Issue 

Reporting Payments from Non-federal Accounts 18 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Maine Republican Party (MRP), undertaken by the 

Audit Division of the Federal Election Conunission (the Conunission) in accordance with 

the Federal Election Campaign Act of 1971, as amended (the Act). Hie Audit Division 

conducted the audit pursuant to 2 U.S.C. §438(b), which permits the Conimission 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 intemal review of reports filed by selected committees to 

determine whether 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 risk 

factors and, as a result, this audit examined: 

1. the disclosure of disbursements, debts and obligations; 

2. the disclosure of expenses allocated between federal and non-federal accounts; 

3. the disclosure of individual contributors' occupation and name of employer; 

4. the consistency between reported figures and bank records; 

5. the completeness of records; and 

6. other committee operations necessary to the review. 

Audit Hearing 

MRP declined the opportunity for an audit hearing before the Commission. 
Part II 

Overview of Committee 

Coinmittee Organization 

Important Dates 

• Date of Registration April 19,1976 

• Audit Coverage January 1,2007 - December 31,2008 

Headquarters Augusta, Maine 

Bank Information 

• Bank Depositories One 

• Bank Accounts Two federal and four non-federal 

Treasurer 

• Treasurer When Audit Was Conducted William Logan 

• Treasurer During Period Covered by Audit Phillip Roy 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid/volunteer staff and accounting firm 

Overview of Financial Activity 

(Audited Amoimts) 

Cash-on-hand @ January 1,2007 $ 1,888 

Receipts 

o Contributions from Individuals 422,772 

o Contributions from Political Party Coinmittees 778,500 

o Contributions from Other Political Conunittees 172,044 

o Transfers from Non-federal Account 48,381 

o All Other Receipts 887 

Total Receipts $ 1,422,584 

Disbursements 

o Operating Disbursements 806,455 

o Coordinated Party Expenditures 12,500 

o Federal Election Activity 519,305 

0 Independent Expenditures 56,601 

Total Disbursements $ 1,394,861 

Cash-on-hand @ December 31,2008 $ 29,611 
Part III 

Summaries 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of MRP's reported figures with bank records revealed a 

misstatement of receipts, disbursements and cash-on-hand in both 2007 and 2008. For 2007, 

MRP overstated beginning cash-on-hand by $5,636, understated receipts by $22,461, understated 

disbursements by $29,346 and overstated ending cash-on-hand by $12,521. For 2008, MRP 

overstated receipts, disbursements and ending cash-on-hand by $53,727, $46,985 and $19,263, 

respectively. In its response to the Interim Audit Report, MRP stated that it had amended its 

reports as requested. However, those amendments did not materially correct the misstatements. 

In response to the Draft Final Audit Report, MRP filed amended reports tiiat were materially 

misstated. MRP indicated that the remaining misstatements will be corrected and amended reports 

will be filed. MRP subsequentiy filed additional amendments that materially corrected the 

misstatements. 

The Commission approved a finding that MRP misstated its financial activity for calendar years 

2007 and 2008. (For more detail, see p. 5.) 

Finding 2. Reporting of Debts and Obligations 

During audit fieldwork, tiie Audit staff noted tiiat MRP failed to report debts and obligations 

totaling $103,721. In response to the Interim Audit Report, MRP amended its reports to 

materially correct tiie disclosure of these debts. 

The Commission approved a finding that MRP improperly disclosed debts and obligations 

totaling $103,721. (For more detail, see p. 8.) 

Finding 3. Disclosure of Disbursements 

During audit fieldwork, the Audit staff identified disbursements, totaling $625,824, which 

appeared to be improperly disclosed. Audit staff opined tiiat $94,019 in disbursements made by 

MRP from a non-federal account were federal in nature. In addition. Audit staff opined that 

coordinated expenditures on behalf of a federal candidate ($12,500) and payments for federal 

election activity ($519,305) were improperly disclosed. In its response to the Interim Audit 

Report, MRP cited difficulties in locating documentation to clarify the non-federal nature of 

some expenses, but it filed amended reports disclosing disbursements according to the schedules 

provided by tiie Audit staff. 

In response to the Draft Final Audit Report, MRP provided documentation to demonstrate that a 

$200 payment for administrative costs was non-federal in nature. 

The Commission approved a finding that, MRP failed to disclose $19,000 m disbursements from 

its non-federal account for voter identification and improperly disclosed $531,805 in payments 

from its federal account. (For more detail, see p. 9.) 
Finding 4. Failure to File Notices and Properly Disclose 

Independent Expenditures 

During audit fieldwork, the Audit staff reviewed disbursements and noted expenditures for 

printed materials totaling $56,601, which appeared to be independent expenditures that MRP 

disclosed as operating expenditures. In its response to the Interim Audit Report, MRP agreed 

that these are independent expenditures. However, due to software issues, MRP was only 

partially able to correct the disclosure of these payments. 

In response to the Draft Final Audit Report, MRP complied with the Audit staffs 

recommendation by filing amended reports that disclosed the remaining $28,300 as independent 

expenditures. 

The Conunission approved a findmg that MRP improperly disclosed independent expenditures 

totaling $56,601. (For more detail, see p. 15.) 

Additional Issue 

Reporting Payments from Non-federal Accounts 

As detailed in Finding 3, Section A above, the Audit staff initially identified $94,019 in 

payments from non-federal accounts that could be federal in nature and require disclosure by 

MRP. For $74,819 of the $94,019 in expenditures, tiie Audit staff did not have sufficient 

information to be able to conclude that the expenditures included a federal component and 

therefore required reporting. The Commission could not reach a consensus on whether payments 

for administrative costs ($48,320), payroll and associated costs ($14,999) and printed materials 

($11,500) were potentially federal or allocable expenses that required disclosure. Thus, the 

Conunission did not approve by the required four votes the Audit staffs recommended finding 

that these disbursements, totaling $74,819, did not require reporting. 

Pursuant to Commission Directive 70,^ this matter is discussed in the "Additional Issue" section. 

(For more detail, see p. 18.) 

Available at http://www.fec.gov/directives/directive_70.pdf. 
Part IV 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of MRP's reported figures with bank records revealed a 

misstatement of receipts, disbursements and cash-on-hand in both 2007 and 2008. For 2007, 

MRP overstated begmning cash-on-hand by $5,636, understated receipts by $22,461, understated 

disbursements by $29,346 and overstated ending cash-on-hand by $12,521. For 2008, MRP 

overstated receipts, disbursements and ending cash-on-hand by $53,727, $46,985 and $19,263, 

respectively. In its response to the Interim Audit Report, MRP stated that it had amended its 

reports as requested. However, those amendments did not materially correct the misstatements. 

In response to the Draft Final Audit Report, MRP filed amended reports that were materially 

misstated. MRP indicated that the remaining misstatements will be corrected and amended reports 

will be filed. MRP subsequentiy filed additional amendments that materially corrected the 

misstatements. 

The Commission approved a finding that MRP misstated its financial activity for calendar years 

2007 and 2008. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• the amount of cash-on-hand at the begiiming and end of the reporting period; 

• the total amount of receipts for the reporting period and for the calendar year; 

• the total amount of disbursements for the reporting period and for the calendar year; and 

• certain transactions that require itemization on Schedule A (Itemized Receipts) or Schedule B 

(Itemized Disbursements). 2 U.S.C. §434(b)(l), (2), (3), (4) and (5). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reconciled MRP's reported activity with bank records for 

calendar years 2007 and 2008. The following charts outiine tiie discrepancies for tiie beginning 

cash balances, receipts, disbursements and ending cash balances for each year. Succeeding 

paragraphs address the reasons for the misstatements. 

2007 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance @ 

January 1,2007 

$7,524 $1,888 $5,636 

Overstated 

Receipts $223,515 $245,976 $22,461 

Understated 

Disbursements $209,782 $239,128 $29,346 

Understated 

Ending Cash Balance @ 

December 31,2007 

$21,257 $8,736 $12,521 

Overstated 
MRP overstated begiiming cash-on-hand by $5,636. This overstatement is unexplained but it 

likely resulted from prior-period discrepancies. 

The understatement of receipts was the result of the following: 

• Receipts reported, not supported by a credit or deposit 

• Deposited receipts, not reported 

• Interest from non-federal account reported 

• Unexplained difference 

Net Understatement of Receipts 

The understatement of disbursements was the result of the following: 

• Disbursements not reported 

• Disbursements reported, not supported by check or debit 

• Disbursement from non-federal account reported in error 

• Disbursement amoimts incorrectiy reported 

• Unexplained difference 

Net Understatement of Disbursements 

(186) 

22,533 

(28) 

142 

$ 22.461 

$ 36,506 

(4,006) 

(3,165) 

227 

(2161 

$ 29.346 

The $12,521 overstatement of the ending cash-on-hand was the result of the misstatements 

described above. 

2008 Committee Activity 

Reported Bank Records Discrepancy 

Begiiming Cash Balance 

@ January 1,2008 

$21,257 $8,736 $12,521 

Overstated 

Receipts $1,230,335 $1,176,608 $53,727 

Overstated 

Disbursements $1,202,718 $1,155,733 $46,985 

Overstated 

Ending Cash Balance @ 

December 31,2008 

$48,874 $29,611 $19,263 

Overstated 

MRP overstated beginning cash-on-hand by $12,521, a carryover of the misstatement of 

ending cash-on-hand for 2007. 

The overstatement of receipts resulted from the following: 

• Receipts reported but deposited in non-federal account 

• Unexplained difference 

Overstatement of Receipts 

The overstatement of disbursements resulted from the following: 

• Disbursements reported, not supported by check or debit 

• Disbursements not reported 

• Disbursement from non-federal account reported in error 

• Debit to reverse deposited contribution reported 

• Disbursement reported twice 

• Disbursement amount incorrectly reported 

• Unexplained difference 

Net Overstatement of Disbursements 

52,353 

1.374 

$ 53.727 

$ (32,736) 

26,881 

(42,916) 

(5,000) 

(56) 

(1,200) 

8.042 

$ 46.985 
The $19,263 overstatement of the ending cash-on-hand resulted from tiie misstatements 

described above. 

Prior to the audit, MRP made the Commission aware that an employee of the accounting firm it 

used had embezzled $48,000. The individual, who had kept MRP's books for both its federal 

and non-federal accounts and prepared the reports to the Commission, pleaded guilty to the 

embezzlement. As of tiie time of tiie audit, the individual had paid restitution of $39,531 and 

MRP had filed reports disclosing the embezzlement. MRP conducted a full audit of its books 

and intemal controls and, as reconunended by its auditor, has instituted improved intemal 

controls. In addition, MRP has hired a different accounting firm. 

The Audit staffs 2008 reconciliation included adjustments related to tiie embezzlement. 

Specifically, the adjustment for unreported disbursements of $26,881 includes $5,997 in 

disbursements that were associated witii the embezzlement and not reported by MRP. In 

addition, the adjustment for disbursements reported tiiat were not supported by a check or debit 

($32,736) includes disbursements of $14,316 tiiat were associated witii the embezzlement. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the misstatements for 2007 and 2008 with MRP representatives during 

the exit conference and provided copies of relevant work papers detailing the misstatements. 

The MRP representatives stated that necessary amended reports would be filed. 

The Interim Audit Report reconunended that MRP: 

• amend its reports to correct the misstatements for 2007 and 2008 as noted above; and, 

• amend its most recently filed report to correct the cash-on-hand balance with an 

explanation tiiat the change resulted from a prior period audit adjustment. 

Further, MRP should have reconciled the cash balance of its most recent report to identify any 

subsequent discrepancies that may have affected the adjustment reconunended by the Audit 

staff. 

C. Committee Response to Interim Audit Report 

In its response to the Interim Audit Report, MRP stated it had amended its reports as requested. 

However, tiiose amendments did not materially correct tiie misstatements. The Audit staff 

advised MRP of the additional corrections that needed to be made. 

D. Draft Final Audit Report 

In tiie Draft Final Audit Report, the Audit staff acknowledged tiiat MRP filed amended reports to 

correct tiie misstatements. Those amendments, however, did not materially correct tiie 

misstatements. 

E. Committee Response to the Draft Final Audit Report 

In response to tiie Draft Final Audit Report, MRP filed amended reports tiiat were materially 

misstated. MRP indicated that the remaining misstatements would be corrected and amended reports 

would be filed. MRP subsequently filed additional amendments that materially corrected the 

misstatements. 
Commission Conclusion 

On November 15,2012, the Coinmission considered the Audit Division Recommendation 

Memorandum in which the Audit Division recommended that the Conunission adopt a finding 

tiiat MRP misstated its financial activity for calendar years 2007 and 2008. 

The Conunission approved the Audit staffs recommendation. 

Finding 2. Reporting of Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff noted tiiat MRP failed to report debts and obligations 

totaling $103,721. In response to the Interim Audit Report, MRP amended its reports to 

materially correct the disclosure of these debts. 

The Coinmission approved a finding that MRP improperly disclosed debts and obligations 

totaling $103,721. 

Legal Standard 

A. Continuous Reporting Required. A political committee must disclose the amount and 

nature of outstanding debts and obligations until those debts are extinguished. 2 U.S.C 

§434(b)(8) and 11 CFR §§ 104.3(d) and 104.11(a). 

B. Itemizing 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 

A. Facts 

During audit fieldwork, the Audit staff identified debts owed to four vendors totaling $103,721 

that MRP did not report on Schedule D (Debts & Obligations). 

Although MRP reported debt totaling $45,669 relative to three of the four vendors during the 

audit period, the reported amounts did not accurately reflect the outstanding debt. Beginning 

with the 2008 July Quarterly Report, the debt reporting for these tiiree vendors continued to be 

inaccurate for the remainder of 2008. MRP did not report debt with respect to tiie fourth vendor. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff presented this matter during the exit conference to MRP's representatives and 

provided them with workpapers detailing the debts. The representatives indicated that MRP 

would file the necessary amended reports. 

^ Each debt in this amount was counted once, even if it required disclosure over multiple reporting periods. In order 

for MRP to file amended reports correctiy, the schedule provided included the amount of each debt required to be 

reported for each reporting period. 
The Interim Audit Report reconunended that MRP file amended reports to disclose these debts 

and obligations on Schedule D. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report, MRP amended its reports to materially correct the 

disclosure of these debts. 

D. Draft Final Audit Report 

In the Draft Final Audit Report, tiie Audit staff acknowledged that MRP filed amended reports to 

materially correct the disclosure of these debts. 

E. Committee Response to the Draft Final Audit Report 

MRP's response to the Draft Final Audit Report did not address this finding. 

Commission Conclusion 

On November 15,2012, the Conunission considered the Audit Division Recommendation 

Memorandum in which the Audit Division recommended that tiie Commission adopt a finding 

that MRP improperly disclosed debts and obligations totaling $103,721. 

The Conunission approved the Audit staffs recommendation. 

I Finding 3. Disclosure of Disbursements 

Summary 

During audit fieldwork, the Audit staff identified disbursements, totaling $625,824, which 

appeared to be improperly disclosed. Audit staff opined that $94,019 in disbursements made by 

MRP from a non-federal account were federal in nature. In addition. Audit staff opined that 

coordinated expenditures on behalf of a federal candidate ($12,500) and payments for federal 

election activity ($519,305) were improperly disclosed. In its response to the Interim Audit 

Report, MRP cited difficulties in locating dociunentation to clarify the non-federal nature of 

some expenses, but it filed amended reports disclosing disbursements according to the schedules 

provided by the Audit staff. 

In response to the Draft Final Audit Report, MRP provided documentation to demonstrate that a 

$200 payment for administrative costs was non-federal in nature. 

The Conunission approved a finding tiiat MRP failed to. disclose $19,000 in disbursements from 

its non-federal account for voter identification and improperly disclosed $531,805 in payments 

from its federal account. 

Legal Standard 

A. Reporting Allocable Expenses. A political committee that allocates federal/non-federal 

expenses must report each disbursement it makes from its federal account (or separate allocation 

account) to pay for a shared federal/non-federal expense. Committees report these kinds of 

disbursements on Schedule H-4 (Joint Federal/Non-federal Activity Schedule). 

llCFR§104.17(b)(3). 
10 

B. Allocation Ratio for Administrative & Non-Candidate Specific Voter Drive Costs. State 

and local party conimittees must allocate tiieir administrative expenses and non-candidate 

specific voter drive costs according to the fixed percentage ratio. Under this method, if a 

Presidential candidate and Senate candidate appear on the ballot, the conunittees must allocate at 

least 36 percent of expenses to their federal fiinds. 11 CFR §106.7(d)(2)(ii) and (3)(ii). 

C. Coordinated Party Expenditures. A political conunittee that coordinates expenditures on 

behalf of a federal candidate must report the name, address, date, amount and purpose, as well as 

the name of the candidate for which the expenditure is made. 2 U.S.C. §434(b)(6)(B)(iv). 

D. Federal Election Activity Expenditures. For each such disbursement, the committee must 

report the full name and address, date, amount and purpose of the disbursement. Committees 

report these kinds of disbursements on Schedule B (Itemized Disbursements), which provides 

space for the disclosure of the candidate's name to which the activity relates, if applicable. 

11 CFR §300.36(b)(2). 

E. Salaries and Wages. Committees must keep a monthly log of the percentage of time each 

employee spends in coimection with a Federal election. Employees who spend 25 percent or less 

of tiieir compensated time in a given month on Federal election activity or on activities in 

connection with a Federal election must either be paid only from the Federal account or have 

their salaries allocated as an administrative cost. 11 CFR § 106.7(d)(1). 

Facts and Analsrsis 

A. Payments from Non-federal Accounts 

1. Facts 

MRP made payments, totaling $94,019 (see Chart A), from its non-federal accounts for 

activity that Audit staff identified as potentially federal in nature. Payments totaling 

$48,520 from MRP's non-federal accounts appeared to the Audit staff to be for allocable 

administrative expenses that should have been paid from a federal account. Also, 

payments totaling $45,499 were made from the non-federal account and sufficient 

records were not available to clarify the nature of the expense or to demonstrate that tiie 

expense was solely non-federal. Below is a discussion of these expenses. As calculated 

at the end of the two-year audit period, MRP did not fund federal activity with nonfederal funds. 

• Administrative Costs: MRP paid expenses totaling $48,520 from a non-federal 

account for postage, consulting, travel reimbursements, printing, and accounting 

fees that appear to be allocable administrative costs. Available documentation 

does not indicate that any of these payments were solely for non-federal activities. 

Since Audit staff identified these as allocable administrative expenses. Audit staff 

reconunended that MRP pay these from a federal account and reported on 

Schedule H-4 using an allocation ratio of at least 36 percent federal and 64 

percent non-federal in accordance with 11 CFR §106.7(d)(2)(ii) and (3)(ii). Audit 

staff recommended that MRP should provide documentation to demonstrate that 

these were solely non-federal expenses. 
11 

• Payroll and Associated Costs: MRP paid expenses totaling $14,999 from a nonfederal account for payroll and associated costs. MRP did not provide monthly 

logs, timesheets or affidavits demonstrating that costs were solely non-federal in 

nature. It is noted that MRP did provide affidavits for some employees indicating 

no time was spent relative to federal activity. Audit staff excluded payroll and 

related costs associated with those employees from payroll costs in the amounts 

presented above. Audit staff recommended that MRP should provide 

documentation to demonstrate that the payroll and associated expenses of $14,999 

were solely non-federal. 

• Voter Identification: MRP's database described a $19,000 payment to "National 

Republican" on April 25,2008, as made for Voter ID, and the available invoice 

noted "volunteer connect." Audit staff advised that unless MRP provides 

documentation to indicate that tiiese expenditures are solely non-federal in nature, 

MRP should disclose tiiese transactions on its federal disclosure reports. 

• Printed Materials: MRP disbursed $11,500 from a non-federal account for printed 

materials; copies of these records were not available to assess the nature of these 

expenditures or to demonstrate that these payments were solely for non-federal 

activities. Audit staff recommended tiiat MRP should provide sufficient 

documentation to clarify the nature of these expenses. 

2. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff addressed this matter and provided a schedule 

identifying the transactions in question to MRP representatives. MRP representatives 

stated that they would look into these items and send documentation to try to resolve the 

proper classification of the transactions. MRP representatives subsequently provided 

materials, including affidavits addressing time employees spent on non-federal election 

activity, that resolved some of the items that the Audit staff considered in its analysis. 

The Interim Audit Report reconunended that MRP demonstrate that the identified 

disbursements paid from the non-federal account were solely non-federal expenses. 

Audit staff recommended that MRP provide monthly logs, timesheets or affidavits 

demonstrating that payroll costs were solely non-federal in nature. In addition, Audit 

staff recommended that MRP obtain and provide samples of printed materials ($11,500). 

The Audit staff further recommended that, as necessary, MRP amend its reports to 

disclose, as memo entries, the above disbursements on Schedules B or H-4. 

3. Committee Response to Interim Audit Report 

In response to tiie Interim Audit Report, MRP amended its reports to disclose one of tiie 

identified payments from its non-federal account. In the response, MRP stated that it was 

unable to locate documentation to demonstrate any of these expenditures were solely 

non-federal in nature, to include the one payment for voter identification that was 

disclosed in its amended reports. With respect to payroll and associated costs paid from 

non-federal accounts, MRP explained that no federal candidates were on the ballot in 

2007 and therefore, MRP paid the payroll and associated costs properly as non-federal 

disbursements. As a result, MRP did not amend its reports to disclose tiiese transactions. 
12 

4. Draft Final Audit Report 

In tiie Draft Final Audit Report, tiie Audit staff acknowledged MRP's response and noted 

that it had amended its reports to disclose the $19,000 disbursement for voter 

identification. 

5. Committee Response to the Draft Final Audit Report 

In response to tiie Draft Final Audit Report, MRP submitted documentation supporting 

the non-federal nature of one $200 expenditure included above as an administrative cost. 

Furtiier, an affidavit submitted by MRP addressed individuals already considered nonfederal by the Audit staff, but clarified that none were involved with federal electionrelated activities. MRP did not disclose tiie remaining administrative costs ($48,320), tiie 

payroll expenditures ($14,999) or printed materials ($11,500) on the amended reports 

filed in response to the DFAR. 

Commission Conclusion 

On November 15,2012, the Conunission considered tiie Audit Division Recommendation 

Memorandum, in which the Audit Division recommended that for $75,019 of the $94,019 in 

expenditures above, it did not have sufficient information to conclude that the expenditures, 

paid entirely with non-federal funds, included a federal component and therefore required 

reporting. However, tiie Audit staff maintained tiiat MRP should provide tiie records 

necessary to verify whether these transactions required reporting. Given the lack of 

sufficient information for tiiese expenditures, the Audit staff recommended that the 

Conunission find these expenditures not be included in tiie disclosure finding. With respect 

to the voter identification expense noted above, the Audit staff recommended that the 

Conunission find that MRP did not disclose tiie $19,000 expenditure for voter identification. 

The Conunission approved this finding with respect to the payment of $19,000 for voter 

identification. {See Additional Issue below). 

B. Payments from the Federal Account 

1. Facts 

MRP incorrectiy disclosed payments, totaling $531,805 (See Chart B, Page 1), made 

from its federal account. MRP disclosed these payments on FEC reports but they 

appeared to have been reported on the incorrect line number and itemized on the wrong 

schedule. These payments were for apparent non-allocable FEA ($519,305) or apparent 

coordinated party expenditures ($12,500). As indicated below, in some cases, the Audit 

staff did not have sufficient records to determine the proper classification. For 

approximately $330,000 of these disbursements, MSCP coded tiie disbursements on its 

database as FEA. 

• Possible Federal Election Activity: MRP reported payments totaling $326,688 

as federal operating expenditures, but they appeared to have been made for nonallocable FEA, which should have been reported on Schedule B for Line 30(b). A 

discussion of these expenditures by category follows: 

Get-Out-the-Vote (GOTV)/Public Communications: MRP made payments 

totaling $183,747 for printed materials, of which MRP coded $88,241 on its 

database as FEA. The remaining $95,506 was not coded on MRP's database as 
13 

FEA. However, an MRP representative stated during field work that all activity 

with this vendor was FEA on behalf of the Republican presidential candidate. In 

addition, copies of the printed materials support that they were for GOTV activity 

or were public communications in support of a clearly identified federal 

candidate. As such, the Audit staff considered all these payments FEA. (See 

Chart B, Page 1, A.) 

Payroll Expenses: MRP made expenditures for payroll expenses totaling 

$142,941 from its federal account. Documentation detailing the percentage of the 

individual's time that related to federal activity was not available; however, MRP 

submitted affidavits indicating that the individuals worked solely in connection 

with federal elections during 2008. In addition, these individuals received at least 

one payment that MRP coded on its database as FEA. As such, the Audit staff 

classified these expenditures as FEA. Audit staff recommended that MRP should 

explain the discrepancy between its reports and its intemal records. (See Chart B, 

Page 1, B.) 

Documentation Insufficient to Determine Nature of Expense: MRP reported 

payments totaling $192,617 as federal operating expenditures, but documentation 

was insufficient to determme the nature of these expenses. Most of these 

expenditures were coded on MRP's database as FEA. 

Consulting Expenses: Altiiough MRP coded consulting expenses ($20,000) FEA 

on its database, MRP has not provided any affidavit or other documentation. The 

Audit staff classified these expenditures as potential FEA since MRP coded these 

expenditures on its database as FEA. Audit staff recommended that MRP should 

explain the discrepancy between its reports and its intemal records. (See Chart B, 

Page 1, B.) 

Travel and Per Diem Expenses: MRP made expenditures for travel ($38,192) and 

per diem ($3,050). Documentation was not available to detail the activities the 

individuals were involved with and whether these activities were related to a 

clearly identified federal candidate. The Audit staff classified these expenditures 

as potential FEA since MRP coded these expenditures as such on its database. 

Audit staff recommended tiiat MRP should clarify tiie discrepancy between its 

reports and its intemal records. (See Chart B, Page 2, A. & B.) 

Equipment and Miscellaneous Costs: MRP made expenditures for equipment 

($36,933) and miscellaneous costs ($3,702). MRP's records detailed tiiat, for tiie 

most part, the equipment consisted of computers and phone equipment, as well as 

copier rental. Documentation detailing how the equipment was used was not 

available. Most of the miscellaneous costs were for shipping, with no indication 

of what was shipped. However, MRP coded these expenditures as FEA in its 

database. The Audit staff considered these potential FEA expenses, and 

recommended that MRP clarify the discrepancy between its reports and its 

intemal records. (See Chart B, Page 2, C. & D.) 

Printed Materials. Copies Not Available: MRP made payments totaling $67,711 

for printed materials. Copies of these prmted materials were not available for 
14 

review by tiie Audit staff. Of tiiese payments, MRP coded $24,417 as FEA, and 

tiiese payments were for such purposes as Voter ID ($11,228) and GOTV 

($13,189). The remaining $43,294 in payments were for apparent GOTV-related 

activities, although none of them were coded FEA. (See Chart B, Page 2, E.) 

Telemarketing Expenses: MRP made expenditlires to FLS Connect for 

telemarketing totaling $23,029, none of which were coded on MRP's database as 

FEA. MRP disclosed the purpose for these expenditures as: GOTV ($6,097), 

Voter ID ($3,117), state campaign activity ($4,460), and telemarketing ($9,355). 

Although MRP made invoices available to the Audit staff, copies of 

scripts/printed materials that would help determine the nature of these 

expenditures were not available. (See Chart B, Page 2, F.) 

• Payment of Apparent Coordinated Party Expenditures: MRP made payments 

totaling $12,500 during tiie period October 30-31, 2008, for a television 

advertisement for Charlie Summers for Congress. The advertisement appears to 

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

was publicly disseminated in the candidate's jurisdiction within 90 days of the 

election. The candidate appears in the advertisement and the advertisement states 

that it was approved by the candidate. MRP reported these payments on Schedule 

B (Itemized Disbursements) as other federal operating expenditures rather than on 

Schedule F (Itemized Coordinated Party Expenditures) as coordinated party 

expenditures. (See Chart B, Page 3.) 

2. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff addressed this matter and provided a schedule 

identifying the transactions in question to MRP representatives. MRP representatives 

stated that they would look into these items and send documentation to try to resolve the 

proper classification of the transactions. MRP representatives subsequently provided 

materials, including affidavits addressing time employees spent on federal election 

activity, which resolved some of tiie items that the Audit staff considered in its analysis 

above. 

The Interim Audit Report recommended that MRP demonstrate that it had correctly 

reported the payments from tiie federal account as federal operating expenditures. 

Further information was needed for the Audit staff to verify the classification of 

disbursements totaling $192,617. MRP should have explained the discrepancies 

between expenditures coded on its database as FEA and its reporting of those 

expenditures as operating expenditures. In addition, MRP should have obtained and 

provided monthly logs, timesheets or affidavits ($20,000), samples of printed materials 

($67,711) and telemarketing scripts ($23,029). MRP should have amended its reports to 

disclose the noted disbursements on Schedule B or Schedule F, as necessary. 

3. Committee Response to Interim Audit Report 

For payments from its federal account (Part B above), MRP filed amended reports 

disclosing disbursements as FEA or coordinated party expenditures according to the 

schedules provided by the Audit staff. Although MRP has amended its reports, the nature 

of some disbursements remains unclear because of a lack of documentation. As a result. 
15 

the Audit staff does not have a basis for determining whether either the audited reports or 

the amended reports filed are correct. 

4. Draft Final Audit Report 

In the Draft Final Audit Report, the Audit staff acknowledged that MRP filed amended 

reports to materially correct the disclosure of these disbursements. 

5. Committee Response to the Draft Final Audit Report 

MRP's response to the Draft Final Audit Report did not address this finding. 

Conmiission Conclusion 

On November 15, 2012, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit Division recommended that the Commission adopt a 

finding tiiat MRP improperly disclosed disbursements totaling $531,805. 

The Conunission approved the Audit staff's recommendation. 

Finding 4. Failure to File Notices and Properly Disclose 

Independent Expenditures 

Summary 

During audit fieldwork, the Audit staff reviewed disbursements and noted expenditures for 

printed materials totaling $56,601, which appeared to be uidependent expenditures that MRP 

disclosed as operating expenditures. In its response to the Interim Audit Report, MRP agreed 

that these are independent expenditures. However, due to software issues, MRP was able to 

correct the disclosure of these payments only partially. 

In response to the Draft Final Audit Report, MRP complied with the Audit staffs 

recommendation by filing amended reports tiiat disclosed tiie remaining $28,300 as independent 

expenditures. 

The Commission approved a finding that MRP improperly disclosed independent expenditures 

totaling $56,601. 

Legal standard 

A. Definition of Independent Expenditures. The term "independent expenditure" means an 

expenditure by a person for a communication expressly advocating the election or defeat of a 

clearly identified candidate that is not made in coordination with any candidate or autiiorized 

conunittee or agent of a candidate. 11 CFR § 100.16. 

B. Disclosure Requirements - General Guidelines. An independent expenditure shall be 

reported on Schedule E (Itemized Independent Expenditures) if, when added to other 

independent expenditures made to the same payee during the same calendar year, it exceeds 

$200. Independent expenditures made (i.e., publicly disseminated) prior to payment should be 

disclosed as "memo" entries on Schedule E and as a reportable debt on Schedule D. Independent 

expenditures of $200 or less do not need to be itemized, though the committee must report the 

total of tiiose expenditures on line (b) on Schedule E. 11 CFR §§104.3(b)(3)(vii), 104.4(a) and 

104.11. 
16 

C. Last-Minute Independent Expenditure Reports (24-Hour Notices). Any independent 

expenditures aggregating $1,000 or more, with respect to any given election, and made after the 

20 day but more than 24 hours before tiie day of an election, must be reported and the report 

must be received by the Commission within 24 hours after the expenditure is made. A 24-hour 

notice is required each time additional independent expenditures aggregate $1,000 or more. The 

date that a conununication is publicly disseminated serves as the date that the committee must 

use to determine whether the total amount of independent expenditures has, in the aggregate, 

reached or exceeded the threshold reporting amount of $1,000. 11 CFR §§ 104.4(f) and 

104.5(g)(2). 

D. Last-Minute Independent Expenditure Reports (48-Hour Notices). Any independent 

expenditure aggregating $10,000 or more with respect to any given election, at any time durmg a 

calendar year, up to and including the 20th day before an election, must be disclosed witiiin 48 

hours each time the expenditures aggregate $10,000 or more. The notices must be filed with the 

Commission within 48 hours after the expenditure is made. 11 CFR §§ 104.4(f) and 104.5(g)(1). 

E. Allocation of Expenses Between Candidates. Expenditures made on behalf of more than 

one clearly identified federal candidate shall be attributed to each such candidate according to the 

benefit expected to be derived. In the case of a publication or broadcast communication, the 

attribution shall be determined by the proportion of space or time devoted to all candidates. This 

method shall be used to allocate payments involving both clearly identified federal candidates 

and one or more clearly identified non-federal candidates. 11 CFR §106.1(a). 

Facts and Analsrsis 

A. Facts 

During audit fieldwork, the Audit staff reviewed MRP's disbursements and identified a payment 

of $84,902 for printed materials reported as an operating expenditure. Of this amount, it was 

calculated that $56,601 appeared to be apparent independent expenditures. A review of tiie 

printed materials revealed the following: 

• The "Absentee Ballot Application Self Mailer" invoice billed MRP for two mailers. Both 

mailers pictured Presidential candidate Senator John McCain and Vice-Presidential 

candidate Govemor Sarah Palin on a sample absentee ballot with checked boxes below 

their pictures, advocating their election. 

• In addition, one sample mailer also pictured Susan Collins, candidate for the U. S. Senate 

and Charlie Summers, candidate for the U. S. House of Representatives. The other 

sample provided a picture only of Susan Collins, but provided space for a congressional 

candidate. 

• Both mailers had space provided for a state senate candidate and a state house candidate. 

• Above tiie pictures of tiie candidates, botii samples state "Good Jobs. A Strong Economy. 

Independence from Foreign Oil." In addition, tiie mailers state, "Help Team Maine 

Today by Signing Up to.. .Canvass a local precinct door to door." 

Since the documents contain a statement of the candidates' positions on several issues and 

include the solicitation of volunteer canvassing, they go beyond the limitations of the slate card 
17 

exemption^. As a result, the Audit staff concluded that a portion of each mailer was an 

independent expenditure that should have been reported as such and that appropriate 24/48-hour 

notices should have been filed. The amount of independent expenditures ($56,601) was 

determined by the space allotted to federal candidates versus non-federal candidates on the 

mailers. The remaining $28,301 ($84,902 - $56,601) should have been reported as FEA. 

B. Interim Audit Report & Audit Division Recommendation 

At an exit conference, tiie Audit staff addressed this matter, having previously provided MRP 

with the materials for discussion. MRP representatives stated that they would look into this 

matter, examine the materials, and address the "slate card" exemption. In response to the exit 

conference, MRP's Treasurer stated that the materials in question were slate cards and, as such, 

were exempt from independent expenditure mles. 

The Interim Audit Report recommended tiiat MRP take tiie following action: 

• Provide evidence that would demonstrate that these disbursements were not independent 

expenditures and therefore did not require disclosure as such. 

• Absent such a demonstration, MRP should have amended its reports to disclose 

disbursements of $56,601 as independent expenditures on Schedule E; and, disclosed the 

remaining $28,301 on Schedule B as FEA; and 

• Submit and implement revised procedures for recognizing and reporting independent 

expenditures, to allow for timely filing of 24/48-hour reporting notices, as required. 

C. Committee Response to Interim Audit Report 

In its response to the Interim Audit Report, MRP stated that the expenditure in question was an 

"Absentee Ballot Application Self Mailer," which included at least three federal and non-federal 

candidates, and that tiie previous treasurer apparentiy believed this qualified for the "slate card" 

exemption. After review of these materials, MRP agreed that the "slate card" exemption did not 

apply. MRP amended its reports to disclose part of these independent expenditures. MRP cited 

its software's inability to process the required disclosure information for the remaining 

independent expenditures. MRP data staff were working on the problem. 

D. Draft Final Audit Report 

In the Draft Final Audit Report, the Audit staff acknowledged tiiat MRP filed amended reports to 

partially disclose tiiese independent expenditures and that it was still working to disclose tiie 

remaining independent expenditures. 

E. Committee Response to the Draft Final Audit Report 

In response to tiie Draft Final Audit Report, MRP materially complied witii the Audit staffs 

recommendation by filing amended reports that disclosed the remaining $28,300 as independent 

expenditures. 

Comniission Conclusion 

On November 15,2012, the Commission considered the Audit Division Reconunendation 

Memorandum in which tiie Audit Division recommended tiiat the Coinmission adopt a finding 

that MRP improperly disclosed independent expenditures totaling $56,601. 

The Commission approved the Audit staffs reconunendation. 

^ Seell C.F.R. §§ 100.80,100.140, Advisory Opinions 2008-06 (Democratic Party of Virginia), 1978-89 (Withers 

for Congress), 1978-9 (Republican State Central Committee of Iowa). 
18 

Partv 

Additional Issue 

I Reporting Pajrments from Non-federal Accounts I 

Summary 

As detailed in Findmg 3, Section A above, the Audit staff initially identified $94,019 in 

payments from non-federal accounts that could be federal in nature and require disclosure by 

MRP. For $74,819 of tiie $94,019 in expenditures, tfie Audit staff did not have sufficient 

information to be able to conclude that the expenditlires included a federal component and 

therefore required reporting. The Coinmission could not reach a consensus on whether payments 

for administrative costs ($48,320), payroll and associated costs ($14,999) and prmted materials 

($11,500) were potentially federal or allocable expenses that required disclosure. Thus, the 

Commission did not approve by the required four votes tiie Audit staffs recommended finding 

that tiiese disbursements, totaling $74,819, did not require reporting. 

Pursuant to Conimission Directive 70,^ this matter is discussed in the "Additional Issue" section. 

Legal standard 

A. Reporting Allocable Expenses. A political committee that allocates federal/non-federal 

expenses must report each disbursement it makes from its federal account (or separate allocation 

account) to pay for a shared federal/non-federal expense. Conunittees report these kinds of 

disbursements on Schedule H-4 (Joint Federal/Non-federal Activity Schedule). 11 CFR 

§104.17(b)(3). 

B. Allocation Ratio for Administrative & Non-Candidate Specific Voter Drive Costs. State 

and local party conimittees must allocate their administrative expenses and non-candidate 

specific voter drive costs according to the fixed percentage ratio. Under this method, if a 

Presidential candidate and Senate candidate appear on the ballot, the conimittees must allocate at 

least 36 percent of expenses to tiieir federal fimds. 11 CFR § 106.7(d)(2)(ii) and (3)(ii). 

C. Federal Election Activity Expenditures. For each such disbursement, the committee must 

report the fiill name and address, date, amount and purpose of the disbursement. Committees 

report these kinds of disbursements on Schedule B (Itemized Disbursements), which provides 

space for the disclosure of the candidate's name to which the activity relates, if applicable. 

llCFR§300.36(b)(2). 

D. Salaries and Wages. Committees must keep a monthly log of the percentage of time each 

employee spends in connection with a Federal election. Employees who spend 25 percent or less 

of their compensated time in a given month on Federal election activity or on activities in 

connection with a Federal election must eitiier be paid only from the Federal account or have 

their salaries allocated as an administrative cost. 11 CFR § 106.7(d)(1). 

Available at http://www.fec.gov/directives/directive_70.pdf. 
19 

Facts and Analjrsis 

A. Facts 

As detailed in Finding 3, Section A above, the Audit staff initially identified $94,019 in 

payments from non-federal accounts that could have been federal in nature and required 

disclosure by MRP. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff addressed this matter and provided a schedule identifying 

the transactions in question to MRP representatives. MRP representatives stated that they would 

look into these items and send documentation to try to resolve the proper classification of the 

transactions. MRP representatives subsequently provided materials, including affidavits 

addressing the amount of time employees spent on non-federal election activity, that resolved 

some of the items that the Audit staff considered in its analysis. 

The Interim Audit Report recommended that MRP demonstrate that the identified disbursements 

paid from the non-federal account were solely non-federal expenses. The Audit staff 

recommended that MRP provide monthly logs, timesheets or affidavits demonstrating that 

payroll costs were solely non-federal in nature. In addition, the Audit staff recommended that 

MRP obtain and provide samples of printed materials ($11,500). The Audit staff further 

recommended that, as necessary, MRP amend its reports to disclose, as memo entries, the above 

disbursements on Schedules B or H-4. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report, MRP amended its reports to disclose one of tiie 

payments from its non-federal account identified by the Audit staff. MRP's response stated that 

it was unable to locate documentation to demonstrate any of these expenditures were solely nonfederal in nature, to include the one payment for voter id that was disclosed in its amended 

reports. With respect to payroll and associated costs paid from non-federal accounts, MRP 

explained that no federal candidates were on the ballot in 2007 and therefore the payroll and 

associated costs were properly paid as non-federal disbursements; as a result, MRP did not 

amend its reports to disclose these transactions. 

D. Draft Final Audit Report 

In the Draft Final Audit Report, the Audit staff acknowledged MRP's response. 

E. Committee Response to the Draft Final Audit Report 

In response to tiie Draft Final Audit Report, MRP submitted documentation supporting tiie nonfederal nature of one $200 expenditure included above as an administrative cost. MRP did not 

disclose the remaining administrative costs ($48,320) on amended reports filed in response to the 

Draft Final Audit Report. Those amended reports did not disclose the payroll expenditures 

($14,999). Furtiier, an affidavit submitted by MRP addressed individuals already considered 

non-federal by tiie Audit staff, but clarified that none were involved witii federal election-related 

activities. Finally, MRP's response did not address the payments for printed materials ($11,500). 

Commission Conclusion 

On November 15,2012, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit Division recommended that the Commission adopt a finding 
20 

tiiat expenditures totaling $74,819, paid entirely from the non-federal account, not be included in 

Finding 3. Disclosure of Disbursements. 

The Conunission did not approve by the required four votes the Audit staffs reconunended 

finding that these expenditures did not requure reporting. Some Commissioners voted to approve 

the finding, consistent with the Coinmission's failure to reach a consensus in a previous audit of 

a state party that made similar payments from its non-federal account. See infra note 6. 

Other Commissioners, however, supported a finding that for the Administrative Costs ($48,520), 

Payroll & Associated Costs ($14,999), and Printed Materials ($11,500), tiie Maine Republican 

Party made potentially federal or allocable expenses from a non-federal account in the amount of 

$75,019 which required reporting. In the view of these Commissioners, this determmation is 

consistent with the approach reconunended by the Audit staff and supported by those 

Commissioners in a recent audit where a state party coinmittee made similar payments from the 

non-federal account and for which available documentation was limited.^ The Conimission 

could not reach a consensus on whetiier these payments required disclosure as potentially federal 

or allocable expenses. 

Pursuant to Coinmission Directive 70, this matter is discussed in the "Additional Issue" section. 

^ See Final Audit Report of the Commission on the Kansas Republican Party, Additional Issue 3. The Commission 

failed to reach a consensus regarding the aforementioned proposed finding. 
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