FEDERAL ELECTION COMMISSION 

WASHINGTON, O.Cr.20463 

May 2,2017 

MEMORANDUM 

To: The Commission 

Through: Alec Palmer 

Staff Director 

From: Patricia C. Orrock 

Chief Compliance Officer 

Thomas E. Hintermister-^ 

Assistant Staff Director 

Audit Division 

Zuzana O. PaciousjcgC 

Audit Manager 0 

By: Mary Moss 

Lead Auditor 

Subject: Resubmission: Audit Division Recommendation Memorandum on the 

Colorado Republican Conunittee (CRC) (A13-12) 

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit Rq)orts), 

the Audit staff presents its recommendations below and discusses the findings in the 

attached Draft Final Audit Rqmrt (DFAR). The Office of General Counsel has reviewed 

this memorandum and concurs with the recommendations. 

Finding 1. Misstatement of Financial Activity 

A. Misstatement of Financial Activity - Most Recent Reports Filed Prior 

to the Audit 

The Audit staff determined that, for 2011, CRC understated its disbursements 

by $38,529 and overstated its e^ing cash-on-hand by $44,431. For 2012, . 

CRC understated its receipts and disbursements by $210,996 and $145,201, 

respectively. In response to the Interim Audit Report GAR), CRC fiied 

amendments that materially corrected the misstatements for 2011. In response 

to the DFAR, CRC filed amended reports and materially corrected the 

misstatements for 2012. CRC materially complied with the recorxunendation, 

however, it has yet to reconcile the cash balance on its most recent report. 
The Audit staff recommends that the Commission find that CRC misstated its 

financial activity for calendar years 2011 and 2012 as stated above. 

B. Misstatement of Financial Activity - Original Reports Filed 

The Audit staff determined that CRC also materially misstated its financial 

activity for the originally filed reports. In response to the lAR, CRC stated it 

agreed with the Audit stafTs reconunendations regarding this finding, but 

provided no further comments regarding the misstatement of financial activity 

for the original reports filed. CRC did not address this finding in its response 

to the DEAR. 

The Audit staff reconunends that the Commission find that CRC materially 

misstated its financial activi^r in its original reports filed for calendar years 

2011 and 2012. 

C. Misstatement of Financial Activity - Unreported Bank Account 

During the period covered by the audit, CRC provided bank statements and 

other related banking documentation for a ba^ account titled 'the Colorado 

State Republican Central Committee Republican National Convention Expense 

Account' (Convention Account). The total activity and the cash balance were 

as follows; $87,354 in receipts; $86,428 in disbursements; and the ending 

cash-on-lmd brdance was $926. CRC did not report this financial activity. 

In response to the lAR and DEAR, CRC disagreed that the Convention 

Account was a federal account and that the issue of account ownership 

remained unresolved. The legal counsel for CRC (Counsel) requested an audit 

hearing before the Commission^ to restate that CRC did not control the 

Convention Account and therefore was not required to report the financial 

activity associated with this account. Counsel agreed during the hearing to 

provide documentation fiom the financial depository to verify that CRC's 

Employee Identification Number (EIN) was not opened and/or associated with 

the Convention Account during the audit period. In a written response 

received fiom CRC on March 20,2017, Imwever, Counsel stated CRC had not 

obtained the requested documentation concerning the EIN number from the 

bank. 

The Audit staff recommends that the Commission find that, based on the 

documentation provided, the Convention Account was a federal account and 

CRC should have reported the financial activity associated with this account. 

Finding 2. Reporting of Apparent Independent Expenditures 

A. Reporting of Apparent Independent Expenditures 

During audit fieldwork, foe Audit staff review^ expenditures totaling 

$357,895 that CRC disclosed on Schedule B (Operating Expenditures). The 

Audit staff noted that these expenditures appeared to be media-related 

independent expenditures that CRC should have disclosed on Schedule E 

The hearing was held on December 6,20I6» 
(Independent Expenditures). CRC also did not provide invoices associated 

with 77 direct mail communications that contained express advocacy as 

defined under 11 CFR 100.22(a) or (b). In response to the lAR, CRC 

disagreed with the recommendation. CRC stated that the conununicatiQns at 

issue were not reportable as independent expenditures because they were 

subject to the volunteer materials exemption (VME). This included the 22 

volunteer forms signed by volunteers on direct mailers of $93,090. The Audit 

staff subsequently reexamined these forms and determined that the 

documentation provided in support of the VME was consistent with such 

evidence in the past audits. The Audit staff considered the remaining 

expenditures toeing $264,805^, as independent expenditures. In response to 

the DEAR, CRC agreed that the $153,900 of the remaining mount which was 

spent on radio conununications, did not qualify for the VME CRC 

maintained, however, that the remaining apparent independent expenditures 

totaling $110,905^ were not independent expenditures and that CRC provided 

sufficient documentation to demonstrate the VME. CRC did not address the 

77 mailers with no associated invoices in response to the DEAR. 

On March 20,2017, CRC provided additional documentation that included two 

invoices and four direct mail communications. The documentation also 

associated some of the previously provided invoices with direct mail 

communications. As a result, the Audit staff identified additional ^iparent 

independent expenditures totiding $666,789. These expenditures were not 

supported by the VME documentation CRC provided during fieldwoik. This 

new information also reduced the number of mailers with no associated 

invoices to 68.^ 

The Audit staff recommends that the Commission find that CRC failed to 

properly disclose independent expenditures totaling $931,594.' Eurther, the 

Au^t staff recommends that the Commission find that CRC fiuled to properly 

disclose independent expenditures associated with 68 direct mailers which 

contained express advocacy. 

B. Failure to File 24/48 Hour Reports for Apparent Independent 

Expenditures 

Based upon the analysis of the response received fiem CRC on March 20, 

2017, the Audit staff identified a total of $931,594^ in apparent independent 

expenditures for which CRC did not file 24/48 hour reports, as required. In 

response to the lAR, CRC stated it disagreed with the recommendation and 

reiterated its belief that the communications at issue were not reportable as 

independent expenditures because they were subject to the VME. In response 

2 $264,803 = $337,893 - $93,090 

^ $110,903 = $264,803-$133,900 

* Within the nine direct mailers (77 - 68 = 9), two mailers contained language that encouraged the reader to 

vote fin- Republicans and help repeal "Obamacare" and were discussed in Finding 2.A.l.b.ii.. 

' $931,394 = $110,903+ $133,900+ $666,789. 

' At the time of the DEAR, Oiis amount was $264,803, wMi $110,903 pertaining lo direct mail 

communications. In its March 20,2017 response, CRC did not specifical^ respond to the fiiiliire to Gle 

24/48 hour reports. 
to the DFAR, CRC agreed that the $153,900 spent on radio communications 

did not qualify for the VME, and therefore, would require filing of 24/48 hour 

reports totaling $32,164. CRC continued to maintain that no 24/48 hour 

reports were requir^ for the remaining expenditures. 

The Audit staff recommends that the Commission find that CRC did not file 

24/48 hour reports totaling $32,164 for apparent independent expenditures 

totaling $153,900. The Audit staff further recommends that the Commission 

find that CRC did not file 24/48 hour reports for additional apparent 

independent expenditures totaling $931,594 as well as 68 mailers with no 

invoices. 

Finding 3. Recordkeeping for Communications 

During audit fieldwork, the Audit staff reviewed disbursements to verify the 

accuracy of the information and proper classification of transactions disclosed 

on reports. CRC reported 28 expenditures totaling $5,812,448 on Schedule B, 

Line 21b (Operating Expenditures) with purposes of "direct mail," "direct 

mail advertising" or "party direct mail." Documentation that was provided by 

CRC was insufRcient to r^e a determination pertaining to the purpose for 

these disbursements and verification as an operating expense. In response to 

the lAR, CRC stated it disagreed with the recommendation and explained it 

provided all the requested documentation in its possession in a series of 

letters, USB thumb-drives and online file site li^ to the Audit staff. CRC 

indicated that it was working to associate the provided invoices and 

communications with each other and would provide the final record 

associating all communications with invoices. In response to the DFAR, CRC 

related that associating the invoices to the communications was a time 

consuming task that was stiU in process. CRC stated it would provide a final 

record associating all communications with invoices no later than December. 

31,2016. 

On March 20,2017, CRC provided additional documentation that included 

two new invoices and four new direct mail communications. The 

documentation also associated some of the previously provided invoices with 

direct mail communications. This new documentation and information 

resulted in a $1,376,698 reduction in missing records. 

The Audit staff recotrunends that the Commission find that CRC did not 

provide the necessary records pertaining to disbursements totaling 

$4,435,750.' 

Finding 4. Failure to Itemize Debts and Obligations 

During audit fieldwork, the Audit staff noted that CRC foiled to disclose debts 

and obligations to three vendors totaling $235,968. In response to the lAR, 

CRC amended its disclosure reports and materially disclosed debt to two 

vendors totaling $102,481. CRC stated that the debt totaling $133,487 owed 

to its GOTV vendor was not a debt as foe contract has been terminated. In 

^ $4,435,750 = 5,812,448 - $1,376,698 
response to the DFAR, CRC continued to disagree that the disclosure of the 

aforementioned debt was required since it was CRC's opinion that the statute 

oflimitations for any breach of the agreement has expir^. With respect to 

this matter, Counsel requested an audit hearing before die Comimssion to 

restate that the contract with the GOTV vendor was terminated. Counsel 

stated that although there mi^ have been an unknown amount of disputed 

debt at the time, the statute ohimitations for any breach of the agreement has 

expired. As such, any remaining amounts owed to this vendor were no longer 

debt and, therefore, did not require any reporting. 

The Audit staff recommends that the Commission find that CRC failed to 

itemize debts and obligations totaling $235,968. 

If this memorandum is approved, a Proposed Final Audit Report will be prepared within 

30 days of the Commission's vote. 

In case of an objection. Directive 70 states that the Audit Division Recommendation 

Memorandum will be placed on the next regularly scheduled open session agenda. 

Documents related to this audit report can be viewed in the Voting Ballot Matters folder.;. 

Should you have any questions, please contact Mary Moss or Zuzana Pacious at 694-

1200. 

Attachments: 

- Draft Final Audit Report of the Audit Division on the Colorado Republican 

Committee 

- LRA 961 (CRC) DFAR Comments - Revised 

cc: Office of Gen^ Counsel 
Draft Final Audit Report of the 

Audit Division on the Colorado 

Republican Committee 

(January 1, 2011 - December 31, 2012) 

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 h it 

the threshold . 

requirements for 

substanya^^pliam. k. 

withj^^^Ml^^gud it^ 

detemines whet 

; complied^ 

About the Com 

The Colorado Republ\. 

headquartered in Gi:g.i-i.'A -

information, see thl 

(A. 

e(p. 3) 

mittee is a state party committee 

yillage, Colorado. For more 

Committee Organization, p. 3. 

FinanciM Activity (p. 3) 

the li: 

prohibits 

disclosure 

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. 

Receipts 

Contribi 

littees 

1 .lividuals 

Political 

DM . 

o Opera^jg Expenditures 

Federal Election Activity 

funds of Contributions 

Disbursements 

$ 1,975,834 

61,630 

8,332,317 

1,940 

235,765 

S 10,607,486 

$ 8,863,660 

1,374,497 

3,050 

$ 10,241,207 

Findings and Recommendations (p. 4) 

Misstatement of Financial Activity (Finding 1) 

Reporting of Apparent Independent Expenditures (Finding 2) 

Recordkeeping for Communications (Finding 3) 

Failure to Itemize Debts and Obligations (Finding 4) 

52 U.S.C. §30111(b). 
Draft Final Audit Report of the 

Audit Division on the 

Colorado Republican Committee 

(January 1, 2011 - December 31, 2012) 

4 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Commission Guidance 1 

Limitations 2 

A. 

Part II. Overview of Committee 

Committee Organization 3 

Overview of Financial Activity . " T 3 

Part III. Summaries ^ ^ .3^ 

Findings and Recommendations ii . 4 

Part IV. Findings an^Recommendatipns ^ 

Finding 1. Misstatement of Activity v—TM 6 

Finding 2. Reporting of Appl^w'^^gident E^^ditures 11 

Finding 3. Recordkeeping for 17 

Finding 4. Failure to Itemize Dei^^nd OB^rations 19 

Nf • T 

ikh. 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Colorado Republican Committee (CRC), 

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 S2 U.S.C. §30111(b), which permits 

the Commission to conduct audits and field investigations 

is required to file a report under 52 U.S.C. §30104. Pn| 

this subsection, the Commission must perform an ir 

selected committees to determine if the reports file^ATa j 

threshold requirements for substantial compl'.!.-^- with the 

Scope of Audit 

Following Commission-approved procedui 

factors and as a result, this audit examined: 

1. the receipt of contributions f^^pjohibited 

2. the disclosure of individual 

3. the disclosure of disbursemi 

4. the disclosure of expenses alloc^ 

5. the consistency b^^^n^ported 

6. the completen^^^^^; and 

other commif^^peratiom • .-cessary 

Com: 

Requ^iprislSjBfflM-'om 

!tothe 

Cor^jeration of Lej 

consi^^ripn of a legal 

ly political committee that 

inducting any audit under 

iew of reports filed by 

lar committee meet the 

U.S.C. §30111(b). 

evaluate£^Eious risk 

id name of employer; 

-federal accounts; 

in Col 

iohll^olicy St 

lestii^^y the Commission," CRC requested early 

tion^^d.during the audit. Specifically, CRC questioned 

n of a Legal Question 

Establishing a Program for Requesting 

whether i 

Schedule D* 

related to outs! 

luirement u^r 11 CF>^ 104.3(d) to disclose outstanding debt on 

and Obli^^ns) violated attorney - client privilege when the debt 

legal presentation services. 

The Commission coll^^u, jy a vote of 6-0, that the Colorado rules of confidentiality 

do not preclude the Commission from requiring CRC to report an outstanding debt and/or 

obligation owed by or to CRC from its legal counsel under 52 U.S.C. §30104(b)(8) and 

11 C.F.R. § 104.3(d). The Audit staff informed CRC's Counsel of the Commission's 

decision on CRC's request. This audit report includes findings and recommendations 

with respect to CRC's failure to disclose outstanding debt owed to its legal 

representative. (See Finding 4, p. 19.) 
Limitations 

CRC satisfied the minimum disbursement recordkeeping requirements of 11 CFR§ 102.9. 

However, in response to the Interna! Control Questionnaire (ICQ) presented by the Audit 

staff at the beginning of the audit, CRC representatives identified a federal bank account 

titled "Federal Transfer Account" but did not provide bank statements from the audit 

period pertaining to that account. Without these statements, the Audit staff could not 

determine if federal activity related to this account was properly reported. 

V 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration February 17,1976 

• Audit Coverage January 1,2^1 - December 31,2012 

Headquarters Greenwopi^^ilage. Colorado 

Bank Information 

• Bank Depositories Two«rm. 

• Bank Accounts JH^'Sral, 8 M8lfederal 

Treasurer 

Treasurer When Audit Was Conducted 

• Who Handled 

Recordkeeping 

Treasurer During Period Coven .""•» \udit 

Management Information 

• Attended Commission Campaign Fii 

Seminar 

Neilson (1 l^^Ql 5 - present) 

obert Balink (S/9/2dT§jkl 1/19/2015) 

astinejj^tin (6/10/2^^5/8/2014) 

RlgMga^estfall f8/15/2¥0^-

6/9/ 

Oversew of 

(Audit 

Activity 

ounts) 

Cash-on-hal'lISS^ January 1^0-11 S 70,571 

Receipts 

o Contributions Ifi^hiJndividuais 1,975,834 

o Contributions frorl^|i3litic.^S^mmittees . 61,630 

o Transfers from AfTi Other Party 

Committees 

8,332,317 

o Transfers from Non-Federal Accounts 1,940 

o Other Receipts 235.765 

Total Recieipts S 10,607,486 

Disbursements 

o Operating Expenditures 8,863,660 

o Federal Election Activity 1,374,497 

o Refunds of Contributions 3,050 

Total Disbursements $ 10^41,207 

Cash-on-hand @ December 31,2012 $ 436,850 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

A comparison of CRC's bank activity with its most recent amended reports prior to the 

audit revealed material misstatements in both 2011 and 2j 

of CRC's bank activity with its original reports for 20 

misstatements. In response to the Interim Audit R^ 

the misstatements were inadvertent and agreed 

CRC subsequently amended its reports to 

for 2011. As of the date of this report, ho' 

the recommendations to correct the misi 

to reconcile the cash balance on its most rei 

!n addition, a comparison 

012 also revealed material 

mendation, CRC stated that 

Its to the relevant reports, 

y correct tRI^isstatements identified 

RC has not ml^|lly complied with 

in 2012, nor hasi^^e an adjustment 

rt. A. 

During audit fieldwork, CRC al 

documentation for a Republican 

federal account. CRC did not 

pertaining to this account on its 

Report recommen.^ :i. P,-i' ningto 

Account, CRC : • n^ously 

controlled by CR^nd, as suc^s not an 

documentation thaf^^firms was 

Audit staff considers!^ i;; unsolved 

2. 

Mditures 

During^Mit fieldwork. 1-^ 

$357,895^||£RC disclo? 

appeared to Direct mail oi 

been disclosed^^chedule 

md other relat 

inse Account, an apparent 

d disbursement activity 

respSn^o the Interim Audit 

itionSii'onvention Expense 

this account was not 

lunt. Absent bank 

with the Convention Account, the 

more detail, see p. 6.) 

of Independent 

viewed operating expenditures totaling 

n bcnesule B, Line 2Ib (Operating Expenditures) that 

ia-related independent expenditures that should have 

temized Independent Expenditures). 

Additionally, of the^^^95 appeared to be independent expenditures, CRC did not 

provide sufEcient documentation pertaining to dissemination dates to verify whether 

24/48-hour reports were required to be filed for the apparent independent expenditures 

totaling $203,995. CRC also did not provide invoices associated with 77 direct mail 

communications that contained express advocacy as. defined under 11 CFR 100.22 (a) or 

(b). 

In response to the Interim Audit Report recommendation, CRC stated it disagreed with 

the recommendation. CRC reiterated its belief that the communications at issue were not 

reportable as independent expenditures because they were subject to the volunteer 
material exemption. CRC further stated it has provided all such documentation in its 

possession to substantiate application of the volunteer material exemption. 

The Audit staff reexamined the documentation provided related to the volunteer materials 

exemption for specific communications totaling $93,090 and determined the 

disbursements were not independent expenditures. For the remaining communications 

(consisting of $110,905 and 77 mailers with no invoices) that CRC claims the volunteer 

materials exemptions is applicable, the Audit staff again recommends that CRC provide 

further evidence to support the application of the volunteer materials exemption to the 

specific communications involved. The Audit staff considered the disbursements for 

radio advertisements for $153,900 to be independent exoeM^res that also required 

filing of 24 hour reports totaling $32,164. (For more-dSu -ee p. 11.) 

Finding 3. Recordkeeping for 

During audit fieldwork, the Audit staff revi 

the information and proper classification 

imported 28 expenditures totaling $5,812, 

Expenditures) with purposes of "direct mail,' 

mail." Documentation that was provided by C 

determination pertaining to the piiv-'se^r these 

operating expense. ^ 

In response to the Int 

the recommendati 

possession in a 

staff. CRC indie 

communications wi 

commumMtioin&with 

the 

(For -Sre infoi 

mmunii^tions 

sbursement^lgrerify the accuracy of 

tions disclosed^^ports. CRC 

Schedule B, Line ^foperating 

ct mai^tivertising'%- irty direct 

- iii-^icient to ma-^j . k 

<.-ments and verification as an 

Finding. Fail 

During auHt^gldwork, th( 

obligations three vi 

Report recommen^tion. 

period and disclose^ 

not amend its reports 

ited it disagreed with 

cumentation in its 

file site links to the Audit 

vided invoices and 

ide the final record associating all 

of records, the Audit staff considers 

lentsatll CFR §104.14(b)(1). 

:o ivmized Debts and Obligations 

lit staf^oted that CRC failed to disclose debts and 

>rs totaling $235,968. In response to the Interim Audit 

;reed to amend its disclosure reports for the applicable 

red to CRC's former legal counsel. CRC stated it would 

Hose the debt owed to its former get-out-the-vote (GOTV) 

vendor due to the termination of the contract. CRC subsequently filed amended reports 

to disclose debt owed to the two non-GOTV vendors. Absent the filing of amended 

reports to include the debt owed to the GOTV vendor, the Audit staff considers the matter 

unresolved. (For more detail, see p. 19.) 
Part IV 

Findings and Recommendations 

I Ftndlng 1. Misstatement of Financial Activity 

Summary 

A comparison of CRC's bank activity with its most recent amended reports prior to the 

audit revealed materia! misstatements in both 2011 and 

of CRC's bank activity with its original reports for 2011 

misstatements. In response to the Interim Audit Rep^ 

the misstatements were inadvertent and agreed to 

CRC subsequently amended its reports to 

for 2011. As of the date of this report, ho' 

the recommendations to correct the misstaj 

to reconcile the cash balance on its most 

20i: 

During audit fieldwork, CRC al: 

documentation for a Republii 

federal account. CRC did not re] 

perteining to this account on its di 

Report recommendation pertaining 

Account, CRC state^^^^eviousl^ 

controlled by CR^SaS^^. is not 

documentation tn^^nfirms^^C was no 

Audit staff conside^jllis matteMnresolvi 

n addition, a comparison 

12 also revealed material 

imendation, CRC stated that 

lents to the relevant reports, 

isstatements identified 

C has nof^^rially complied with 

2012, nor fi^^made an adjustment 

-eport. 

^B^nd other relati 

nse Account, an ^parent 

and disbursement activity 

the Interim Audit 

invention Expense 

this account was not 

iunt. Absent bank 

Convention Account, the 

iofRe[ 

fiount of ( 

amount ofl 

The tot^amount of diS 

and 

: must diS 

le beginnihg and end of the reporting period; 

^porting period and for the calendar year; 

3r the reporting period and for the calendar year; 

Certain ms thafi^uire itemization on Schedule A (Itemized Receipts) or 

Schedule B T^^fursements). 52 U.S.C. §30104(b)(l), (2), (3), (4) and (5). 

Facts and Analysil^ 

A. Misstatement of Financial Activity- Most Recent Reports Filed Prior to the 

Audit 

1. Facts 

The Audit staff reconciled CRC's reported financial activity with its bank records for 

calendar years 2011 and 2012. The following charts outline the discrepancies 
between CRC's disclosure reports and its bank records. Succeeding paragraphs 

explain why the discrepancies occurred. 

2011 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand @ 

January 1,2011 

$71,745 $70,571 ($ 1.174) 

Overstated 

Receipts $722,469 $717,741 ($4,728) 

Overstated 

Disbursements $634,792 ^^3,321 ($38,529) 

Understated 

Ending Cash-on-Hand @ 

December 31,2011 

$ 159,422 

; 

($ 44,431) 

Overstated 

The beginning cash balance was ovei 

unexplained, but likely resulted from 

py $1,174 and tw^jiscrepancy is 

period discrepancies^ 

The understatement of disbursements result^&omJ-^pellowing: 

• Transfers to non-federal^i§^unts. not repo^'.-.- y $35,80^ • * 

• Disbursements not report.-.:. 2,448 

Unexplained difference 18k ""©k 276 

Understatement of Disbursements ^ ^ mm 

The overstai of the 

discrepancii 

of receipts. 

131 

isbursen..-: ts desci iveas 

jwas a result of the reporting 

the $4,728 overstatement 

^ ^ 

20M ( oiiiiiiiiivv %£tiviii TM 

IMir RepoT^ Bank Records^ Discrepancy 

Be^l^c^g Cash-on-H'^'tJanuaT^^012 

ik $159,422 $114,991 ($44,431) 

Overstated 

Receipts'" $9T678,749 $9,889,745 $210,996 

Understated 

Disbursementslf^ $9,422,685 $9,567,886 ($145,201) 

Understated 

Ending Cash-on-Haii'd V 

December 31,2012 

$415,486 $ 436,850 $21,364 

Understated 

^ Correct reportable activity includes an adjustment to the bank account for $9,146 itemized by CRC on 

Schedule A (Itemized Receipts) to correct the cash balance as recommended in a prior audit of CRC. See 

the Final Audit Report on the Colorado Republican Federal Campaign Committee, 2008 election cycle, 

Finding 1 - Misstatement of Financial Activity, Audit Division Recommendation, page 8. 
The understatement of receipts resulted from the following: 

• In-kind contributions, not reported as receipts^ 

• Receipts from an individual and a PAC, not reported 

• Unexplained difference 

Understatement of Receipts 

$162,099 

25,000 

23,897 

W19.996 

The understatement of disbursements resulted from the following: 

In-kind contributions, not reported as disbursements^ 

Disbursements in bank, not on reports 

Disbursements on reports, not in bank ^ 

Incorrect or duplicate disbursement amounts w:-.-: «..r 

Unexplained difference 

Understatement of Disbursements 

The $21,364 understatement of the en.'i 

discrepancies noted above. 

balance was 

r 

$162,099 

27,666 

(13,336) 

(23,228) 

(8,000) 

i-ii" of the reporting 

2. Interim Audit Report & Audit Divisi 

The Audit staff provided wQjpl^apers and dis 

activity at the exit conferenc^^^^resentatn 

during the discussion, howeve^hey^ratnot orovii!.-

disbursements or receipts missta^aent'*' 

The Interim AdH l<»j--• 

correct the nu^atements' 

recent report ti^^ntify an 

recommended ad^^eiii'.: 

( ommt 

.-'Ponse to 

tn^^dit Division 

the m^atements 

repoits'^^^sistent with 

to material^^onect the 

report, howev@ICRC 

correct the mi 

balance on its mos 

dation ^ 

misstatement ofl^ncial 

sked questions for clarification 

.•-:-onse to either the 

ncile'^^ash balance on its most 

repancies that may affect the 

the Inie^mAwit Report 

m Report rilfmmendation. CRC stated it agreed with 

mm^iyions regarding Finding 1 A. CRC explained that 

Iver^^^nd that it would file amendments to the relevant 

mmendation. CRC subsequently amended its reports 

istatements identified for 2011. As of the date of this 

iot materially complied with the recommendations to 

i^n 2012, nor has it made an adjustment to reconcile the cash 

It report. 

^ The unreported in-kind transactions discussed above were for disbursements paid on behalf of CRC for 

equipment and software licensing by the Republican National Committee (RNC) and the Republican 

Party of Wisconsin (RPW). Both the RNC and the RPW reported these transactions as in-kind 

contributions made to CRC. 
B. Misstatement of Financial Activity - Original Reports Filed 

1. Facts 

During audit fieldwork, in addition to examining CRC's most recent reports filed 

prior to audit notification, the Audit staff compared CRC's originally filed reports 

with, its bank records. The purpose of this additional reconciliation was to identify 

•the degree to which CRC had misstated its original filings. 

The Audit staff calculated that CRC understated the sum 

the original reports filed by $803,097 and the sum of tl 

the original reports filed by $637,688 over the two-; 

figures include the $4,728 and $38,529 understai 

respectively from 2011, and the $210,996 and 

receipts and disbursements, respectively, fro^S^2 di: 

(Misstatement of Financial Activity - Mo^^bent Re; 

of the reported receipts on 

rted disbursements on 

iod (2011-2012). These 

f receipts and disbursements, 

f the understatement of 

in Section A above 

l.-.l Prior to the Audit). 

2. Interim Audit Report & Audit Recommendatioi 

The Audit staff discussed the understaten^teof recels^nd disbufS^^ts on its 

original reports during the exj^conference an!|rom^^roopies of releMntechedules 

detailing the receipts and di^^^ments not reo^^'^CRC representati^ asked 

questions for clarification, an(iPre!^^v understl^^the finding, but related that 

they inadvertently filed incorre^rimrS^Dorts. 

The Interim A 

it deemed m 

3. Committee 

In responsei^ the 

viuj j,..y additional comments 

dit Report 

lendation, CRC stated it agreed with 

g Finding IB but provided no further 

icial activity for the original reports 

C. Missiiii^ent of Fimiiicial Activity - Unreported Bank Account 

I 

1. Facts 

During audit^rawpr^tRC representatives provided bank statements and other 

banking documeni^p^r a bank account that was identified on the bank statements 

as the Colorado StatFRepublican Central Committee Republican National 

Convention Expense Account (Convention Account).^ This account was maintained 

at the same financial depository used by CRC for other federal and non-federal bank 

Net disbursement adjustments identified in Section A above (Misstatement of Financial Activity - Most 

Recent Reports Filed Prior to the Audit), totaling S9,686, were correctly disclosed on the original reports 

in 2012. 

As noted in the scope section of this report, CRC representatives also identified an additional federal 

bank account in its written response to the Internal Control Questionnaire, but have not yet provided 

bank statements or other documentation pertaining to this account to indicate whether there was 

reportable activity during the audit period. See p. 2. 
10 

accounts. The bank statements reflected that the Convention Account was active in 

January 2012, although it had a zero balance until April 20,2012, at which time a 

deposit of $1,000 was made.^ Although CRC provided, copies of bank statements, 

deposit tickets and cancelled checks pertaining to this account, none of the receipts or 

disbursements appeared to have been reported. For the calendar year 2012, the total 

activity and the cash balance were as follows: receipts, $87,354; disbursements, 

$86,428; and ending cash-on-hand, $926.^ 

In response to an Audit staff query, CRC's Chairman (Chairman) explained that the 

financial activity from this account did not need to be reported since it was a bank 

account that belonged to a separate legal entity ident^^K^ the Colorado Chairman's 

Host Committee for the Republican National Con^^^ (Colorado RNC Host) and 

neither CRC or any of its officers or agents man^^im?ontrolled that committee's 

activities. The Chairman also provided a 

reflected the Colorado RNC Host was ini 

Profit SO 1(c)(4) corporation on June 

accept contributions and pay for certaii 

their guests from Colorado and other stai 

National Convention in Tamia. Florida. TKl 

Colorado Secretary of State ^^Site and rel 

the Colorado RNC Host shoulll^^^g.ted to thai 

The Chairman did not explain I 

statements and othj 

why the bank 

Committee, 

requested, C 

confirm the Emj 

accountsnor did C 

th -

inking docn 

ame inci 

I an I 

ume 

le At^li^of Incorporation that 

ited in the^^jof Colorado as a Nonand was establilraH^dependently to 

Its and promotion it^^for delegates and 

nnectiSn with the 2^^.epublican 

rovided a linfi 

itional questions'fertaining to 

ittee's legal representatives, 

le to be i^B^session of the bank 

cewise^^^hairman did not explain 

> St£^^epublican Central 

unt. Although 

ff to sul^it a request to the bank to 

(EIN)® that was associated with this 

ion from the bank that would clarify 

iterim Aud 

Th'^^dit staff disc 

provia^mlevant schi 

At that t^p^e Audit 

the bank or^l^the Aui 

associated wi 

pertaining to the 

Republican National 

idit Division Recommendation 

ition Account during the exit conference and 

the financial activity pertaining to this account, 

again requested that CRC provide documentation from 

itaff authority to contact the bank to confirm the EIN 

[t. The CRC representatives provided documentation 

the Colorado Chairman's Host Committee for the 

invention, but did not provide additional documentation from 

the bank to verify that the Convention Account was assigned to this EIN. 

The next deposit into this account was not made until June 13,2012 (SS,2S0). The first debit (by wire) 

occurred on August 10,2012 ($10,000). 

The tables and charts presented in Part A (Most Recent Reports Filed Prior to the Audit) do not include 

an analysis of the Convention Account. 

The EIN is a unique nine-digit number that the Internal Revenue Service and other federal agencies use 

to identify a business. Banks will not allow a business entity to open an account without providing an 

EIN. 
11 

The Interim Audit Report recommended that CRC provide additional documentation 

to resolve the question of ownership and control of the Convention Account. To 

support its position, CRC should have obtained pertinent bank documentation 

confirming that the CRC's BIN was not associated with the Convention Account and, 

therefore, CRC was not required to report the financial activity associated with this 

account. 

3. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendation, CRC expressed its 

disagreement regarding Finding IC. CRC stated that it^ previously provided 

documentation demonstrating that the account in gu^s^^was not controlled by CRC 

and, as such, was not an unreported federal .iiu>iiiii. ( KC's position is that it has, by 

its prior correspondence, sufficiently demonsii.iicihliiii i^oes not control the 

Convention Account. With its response, CK(' CIK 1I>M.-(I •'^PV of the prior 

correspondence. . ^ 

The Audit staff maintains that previou^jj rovided documentatii 

question of ownership and control of the 

documentation that confirm^CRC was not 

the Audit staff considers thisi". 'ler unresolvi 

Finding 2. Reporting of^Ap 

Expenditures 

Summary 

During audit field 

$357,895 that CRC 

appear^MeMi-rect 

"lOl 

Ad(fifi^^, of the 

provide^mcient documi 

24/48-hou^^orts were rei 

totaling S203^^>. CRC al 

communication^rat contai 

lunt. Ab-.-:^ 

the Convei 

ndent 

lot resolve the 

nk 

ccount. 

ip operating expenditures totaling 

ip 21b (Operating Expenditures) that 

dent expenditures that should have 

It Expenditures). 

to be independent expenditures, CRC did not 

ing to dissemination dates to verify whether 

to billed for the apparent independent expenditures 

d not provide invoices associated with 77 direct mail 

express advocacy as defined under 11 CFR 100.22 (a) or 

In response to the Interim Audit Report recommendation, CRC stated it disagreed with 

the recommendation. CRC reiterated its belief that the communications at issue were not 

reportable as independent expenditures because they were subject to the volunteer 

material exemption. CRC further stated it has provided all such documentation in its 

possession to substantiate application of the volunteer material exemption. 

The Audit staff reexamined the documentation provided during fieldwork related to the 

volunteer materials exemption for specific communications totaling $93,090 and 

determined the disbursements were not independent expenditures. For the remaining 

1 
12 

communications (consisting of $110,905 and 77 mailers with-no invoices) that CRC 

claims the volunteer materials exemptions is applicable, the Audit staff again 

recommends that CRC provide further evidence to support the application of the 

volunteer materials exemption to the specific communications involved. The Audit staff 

considered the disbursements for radio advertisements for $153,900 to be independent 

expenditures that also required filing of 24 hour reports totaling $32,164. 

Legal Standard 

A. Definition of Independent Expenditures. An independent expenditure is an 

expenditure made for a communication expressly advocating^e election or defeat of a 

clearly identified candidate that is not made in cooperatiofSensultation, or concert with, 

or at the request or suggestion of, a candidate, a can.! .11 luthorized committee, or 

their agents, or a political party or its agents. 

A clearly identified candidate is one whose 

appears, or whose identity is apparent th: 

Congressman," or through an unambiguoi 

such as "the Democratic presidential nomim 

this state." -

Expressly advocating means an> .. 

ickname, pi 

imbiguous refc 

rence to his or her 

RepuJ^l^n candid; 

h or drawing -

such as "your 

s a candidate. 

Senate in 

tion that 

Uses phrases such as "vote 

communications of campaigi{^ 

It" or 

can have m 

more cl 

When 

proximity 

in( 

nable m^^ng i 

ndidat^pir^ 

ii.l with lir 

..quid be ir 

.of onl 

'••i.l7i 

: your Congressman" or 

j(s), which in context 

1 or defeat of one or 

Terences to extemal events, such as 

eted by a reasonable person only as 

fiore clearly identified candidates. 

B. Di^felpsure Requirements 

be repdl^^n Schedule^ 

same pay^ramng the i 

made (i.e., dissemi^ 

on Schedule Ea^jas adet 

need not be itemia 

line (b) on Schedule' 

eral Guidelines. An independent expenditure shall 

whei^Pdgd to other independent expenditures made to the 

lendarj^r, it exceeds $200. Independent expenditures 

1) prior to payment should be disclosed as memo entries 

Schedule D. Independent expenditures of $200 or less 

le committee must report the total of those expenditures on 

R§§104.3(b)(3)(vii), 104.4(a) and 104.11. 

C. Last-Minute Independent Expenditure Reports (24-Hour Reports). 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 the 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 report is required each time additional independent 

expenditures aggregate $1,000 or more. The date that a communication is publicly 

disseminated serves as the date that the committee must use to determine whether the 
13 

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. Independent Expenditure Reports (48-Hour Reports). Any independent 

expenditures aggregating $10,000 or more with respect to any given election, at any time 

during a calendar year, up to and including the 20th day before an election, must be 

disclosed within 48 hours each time the expenditures aggregate $10,000 or more. The 

reports 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. Formal Requirements Regarding Reports and Si 

committee shall maintain records with respect to the 

which shall provide in sufficient detail the necei 

filed reports may be verified, explained, clarified, 

completeness. 11 CFR §104.14(b)(1). 

its. Each political 

required to be reported 

and data from which the 

r accuracy and 

F. Volunteer Activity. The payment by 

costs of campaign materials (such as pins, 

party tabloids or newsletters, andj^ signs) ui 

volunteer activities on behalf o; 

provided that the following com 

1. Such payment is not for co 

newspaper, magazine, bill bol 

commuiiicatidfiteiBlitical ad 

mailingO 

2. Theportii 

paid from 

3. SuGh»Davment 

'^uch matSFi^are d 

: committee of a po 

' stickei 

^^arty of the 

Ibills, ^^^^res, posters, 

immittee incH^ction with 

is not a contribution. 

iai venc 

luchi 

>ject to thS 

contrif 

5. 

6. 

^ith any broadcasting, 

^pe of general public 

lil means any 

Je from commercial lists, 

rederal candidates must be 

litatipns and prohibitions of the Act. 

pns designated by the donor to be spent 

il office. 

1 and not by commercial or for-profit 

-erations. 

^nade by a policy conrmt^^ee, such payments shall be reported by the political 

Mttee as a disa^ementl&ccordance with 11 CFR §104.3 but need not be 

allo^^^to specific^mdidates in committee reports. 

The exertion is no^plicable to campaign materials purchased by the national 

party com^ees. JyFR § 100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR 

§100.147 (al?^^(d),(e) and (g). 
14 

Facts and Analysis 

A. Reporting of Apparent Independent Expenditures 

1. Facts 

During audit fieldwork, the Audit staff reviewed disbursements to ensure proper 

reporting. The Audit staff noted that CRC did not disclose any independent 

expenditures on Schedule E, however, made apparent media-related expenditures 

totaling $357,895 and disclosed them as operating expenditures. These 

communications, as well as others that are not associ^d with invoices, were 

identified as possible independent expenditures. Ae^^kdown analysis of these 

expenditures is as follows: ^ " 

Independent Expenditures Reportg^^C 

(Associated Invoice Provided) 

a. 

CRC made nine apparent indi 

were documented as follows: 

i. CRC made six disbursemi 

direct mail totaling $203,995 

mailer with an a^^i^d invoice 

these direct mail^ffi^mSined langui 

It expenditures 

Expenditures 

$357,895 that 

idepender.i c^enditures for 

ivided a cop^^^e direct 

ing to the Audit slm, each of 

• «-xpressly advocating the election 

or defeat of a clearl ^.!. .- didatS^ >1.1ned under 11 CFR 

§ 100.22(a). 

[dependent expenditures 

r which l^'^pPovided supporting 

reconciliations, airing dates, scripts and 

of the audio files included the voice of 

upon this portion of the audio 

red this radio ad expressly 

or def^ of a clearly identified candidate as 

00.22(b). 

inditures Reported as Operating Expenditures (No 

iifferent direct mail communications that contained 

express a^^p^, as defined under 11 CFR 100.22(a) or (b). The 

communiMOHons are as follows: 

i. 72 direct mail communications contained language expressly 

advocating the election or defeat of clearly identified candidates, as 

defined under 11 CFR 100.22(a). 

ii. Five direct mail communications contained language that encouraged 

the reader to vote for Republicans and help repeal "Obamacare", with 

various reasons why Obamacare was bad for Colorado and/or 

America's economy. Based on the definition of express advocacy 

under 11 CFR 100.22(b), these communications could only be 
15 

interpreted by a reasonable person as advocating the election or defeat 

of clearly identified candidates. 

CRC did not provide sufficient information to allow each of the 77 

communications to be associated with an invoice. Without this additional 

information, the Audit staff is unable to calculate the disbursement amount 

for each communication. (See Finding 3.) 

Volunteer Material Exemption 

In response to the Audit staffs request during 

to support that volunteers participated in exi 

forms signed by 22 different mail procesj 

reflected the volunteer's name, site I 

The mail piece section was left bl 

which a candidate's last name wj 

forms, it appeared most of thi.-1.. 

to the 2012 General Election. D,. 

ified. Ba: 

iteer activity 

Iwbrk for documentation 

ivity,® CRC provided 

unteers. These forms 

n most forms, the date, 

one exception, in 

the dates on the 

immediately prior 

consj 

^, of the voluntg^fiaterials 

rizona RepublicanTarty, the 

the Tennessee Republican 

a lack of clarity 

emption. The 

licy regarding what 

e purpose of applying the 

leved. Sin^a lack of clarity exists 

[unteer materials exemption, it follows 

ion needed to support volunteer 

regarding the amount of volunteer involvement 

lunteer materials exemption, as well as the 

itioif^quired to support such an exemption, the Audit 

at the conclusion of fieldwork that CRC provide more 

and documentation for any volunteer involvement 

The Commission hajj|ddressed the 

exemption in the Reports 

Democratic Executiv^^fl^EiSee of Floi 

Party. In these reports, 

regarding t^ applicatiori'*gBJhe vi 

Commj^^^^attemptempjormi 

voluni 

ivas nev 

1 of th 

sC-docu: 

associl^' »• •j- -• ich mailer. 

2. Interim Audit ^IfSort and Audit Division Recommendation 

At the exit conference, the Audit staff presented the schedule of disclosure errors for 

independent expenditures. CRC representatives provided a listing of additional 

invoice numbers and invoice amounts in response to the exit conference but did not 

provide any copies of communications or further information that would allow the 

available invoices to be associated with the copies of the communications. 

' CRC has not claimed that any exemptions apply with respect to any expenditures discussed above such 

as, for example, volunteer material exemption, slate cards exemptions, etc. 

10 Proposed Interim Enforcement Policy, Agenda document No. 10-16. 
16 

The Interim Audit Report recommended that CRC: 

• Provide additional invoices and/or infotmation associating the 77 direct mail 

communications containing express advocacy v^ith an invoice; and 

• Provide documentation and evidence that apparent independent expenditures 

totaling $357,895 and the 77 direct mail communications containing express 

advocacy, did not require reporting as independent expenditures. Evidence 

should have included any documentation such as volunteer timesheets and 

photographs to support the involvement of volunteers in the processing or 

distribution of the communications noted above. 

• Absent such evidence, CRC should have amen^Uts reports to disclose these 

disbursements as independent expenditures^^p^dule E and submit revised 

procedures for reporting independent exnerauures. 

3. Committee Response to the Interim 

In response to the Interim Audit Report 

with the recommendation. CRC reitei 

were not reportable as independent 

volunteer material exemption. CRC furtlil 

in its possession substantiatingf^olunteer invl 

U^Report' 

endation, Cl^^ated it disagreed 

belief that the conmmications at issue 

res because they wS^ubiect to the 

it h^provided anKeumentation 

luding the vol^per names. 

the location where the work 

CRC stated it had never been 

photographs, and that it did 

"...it has providedjgn^h infoi 

material exemp<^^^^^t it woii 

disbursementsjii. • restid^^ind 

I and the da^^the volunteer involvement, 

^provide^^teer timesheets and 

iformatm^^RC further stated that 

I ap^jbation of the volunteer 

Its to disclose the 

The Audit staft majfltains 

spect to 

Audit SI 

docum^|tion providd 

with suci9^^nce proy 

considered m^sndem 

of $110,905 ad 

materials exempt]' 

I $153,9Cj^pent on radio communications should be 

sinceipe volunteer materials exemptions does 

licationS?^ 

[prms signed by volunteers on direct mailers of 

uned the documentation and believes the 

suppofrof the volunteer materials exemption is consistent 

in past audits. As a result, these disbursements are not 

mditures. For the remaining communications (consisting 

lilers without invoices) that CRC claims the volunteer 

ipplicable, the Audit staff again recommends that CRC 

provide further evidence to support the application of the volunteer materials 

exemption to the specific communications involved. Such evidence will assist the 

Commission in determining if the volunteer materials exemption is applicable to 

these communications. 
17 

B. Failure to File 24/48 Hour Reports for Apparent Independent Expenditures 

1. Facts 

In addition to not reporting any independent expenditures during the audit period, 

CRC also did not file 24 or 48-hour reports for any independent expenditures. 

Therefore, the apparent independent expenditures identified above by the Audit staff 

may also have required such a filing. 

2. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided CRC schedule of possible 

undisclosed 24/48-hour reports. CRC representativ^^^mot offer any comments 

regarding this matter. 

The Interim Audit Report recommended tha 

apparent independent expenditures totalir 

communications containing express i 

independent expenditures (per Part A i 

the date of public dissemination for each^i 

filing of a 24/48-hour report^jsfgs required. 

3. Committee Response to the Inii 

In response to the Interim Audit 

with the recommenda^n. CRCi 

were not reporte^^^^endent'^ 

volunteer ma^^H^xem^^p Fori 

hour reports ^^^ecessa: . r these ( 

^sent doc^^tation and evidence that 

7,895 and m^^direct mailer 

did not requireTj^rting as 

, CRC provide docim^^tion to support 

lunicatigrLto determm^idiether a 

stated it disagreed 

immunications at issue 

were subject to the 

not believe any 24 or 48-

advertisements are independent 

ng $32,164. 

less further evidence of the volunteer involvement 

ivided, the Commission may conclude the 

'I..J \udit staff mii 

witl®especific 

remaiSiMirect mallei^''.-' iling^W0,905 as well as the 77 direct mailers without 

invoices^^p^e reporta'-^ j .is independent expenditures and may require 24 or 48-

hbur reports 

I Finding 3. Ree^^eeping for Communications 

Summsuy 

During audit fieldwork, the Audit staff reviewed disbursements to verify the accuracy of 

the information and proper classification of transactions disclosed on reports. CRC 

reported 28 expenditures totaling $5,812,448, on Schedule B, Line 21b (Operating 

Expenditures) with purposes of "direct mail," "direct mail advertising" or "party direct 

mail." Documentation that was provided by CRC was insufficient to make a 

determination pertaining to the purpose for these disbursements and verification as an 

operating expense. 
18 

In response to the Interim Audit Report recommendation, CRC stated it disagreed with 

the recommendation and explained it provided all the requested documentation in its 

possession in a series of letters, USB thumb-drives and online file site links to the Audit 

staff. CRC indicated that it was working to associate the provided invoices and 

communications with each other and would provide the final record associating all 

communications with invoices. Absent the provision of records, the Audit staff considers 

the matter a violation of the recordkeeping requirements at 11 CFR §104.14(b)(1). 

Legal Standard • 

A. Formal Requirements Regarding Reports and Si 

committee shall maintain records with respect to the 

which shall provide in sufficient detail the neces 

filed reports may be verified, explained, clarified, 

completeness. 11 CFR §104.14(b)(1). 

ts. Each political 

required to be reported 

and data from which the 

ir accuracy and 

B. Preserving Records and Copies of 

must preserve all records and copies of repd 

U.S.C. §30102(d). 

Facts and Anal3rsis 

A. Facts 

During audit field 

the information 

28 expenditures 

determination pertal 

Schedule^BnLine 21 b 

The treasurer of a 

r^ye-:- -"^erthe 

ical committee 

- iled. 52 

It stattwvie' 

ification 

8 fpr wl 

[er these di 

:ii «• arei 

lenl^ verify the accuracy of 

loffSi^i^bsed on reports. CRC made 

cumentat^ was insufficient to make a 

lements were correctly reported on 

\'!.lit staffs 

>nrsementsL41^ 

r Conies of Communications Provided 

DisSS^ments totaliiiu.82,156,415 were paid to two direct mail vendors, and 

were dUfeed on Sclicclule B with purposes of "direct mail", "direct mail 

advertisin^E^l^x '(Jirect mail", but no invoices or associated communications 

were provide^^Mlinui sufficient details, the Audit staff is unable to verify 

CRC's reportin^T these amounts as operating expenditures. The Audit staff 

requested.copies of the invoices and the associated direct mail piece for each of 

the disbursements. To date, these invoices or other information to associate the 

payments to a particular communication have not been provided. 
19 

ii. Disbursements- Invoices Provided - Not Able to Associate with Copies of 

Communications fS3.656.033^ 

Disbursements totaling $3,656,033 were paid to direct mail vendors and were 

disclosed on Schedule B with purposes of "direct mail," "direct mail advertising" 

or "party direct mail." For these disbursements, CRC provided invoices but did 

not provide information about the related mail communications. Without 

sufficient details, the Audit staff is unable to verify CRC's reporting itemization 

of these amounts as operating expenditures. The Audit staff requested 

information that would allow an association between the invoice and the 

communication, however, CRC has not responded tcathis request. 

B. Interim Audit Report & Audit Division Reco 

At the exit conference, the Audit staff presented a 

which further records were necessary to verify 

Audit staff again requested that CRC providi 

would associate each invoice to the corresj 

provided a listing of additional invoice n 

exit conference but did not provide any copid 

that would allow the available irrogices to be 

communications. ^ 

ition 

the disbursements for 

iuracy'^^RC's reporting. The 

lonal invoic^^Bd information that 

g communicatiom^RC representatives 

and invoice amouii^^^sponse to the 

mmum^tions or fu^^r.. information 

the copies of 

The Interim Audit Report recomm^^dm^^M provi^^nsufficient detail, the 

necessary informationjgmm which tl^ffipor^^repating ex^^^tures totaling 

$5,812,448 may bfcrilipSg^ explaini^|Such i||i^ll^|shoulff^ included: 

• Copies o^^^ces a^l^Mentificati|^. .'V^uss^^^ communication, and 

• If the cornrfflmHcation ^^Iready Kvn provided, irwrmation associating each 

communicat^^sdth an^voice(s). 

C. (-'iiiiimiffBEI^aponse^ 

In ii.->|Niiisetothe 

the ie(.i<inmendation; 

its poss^j^ in a series' 

Audit stal^^RC was wor 

with each o^^^od would i 

invoices as soo^^he i 

staff considers th?i 

§104.14(b)(l). 

In port 

iendation, CRC stated it disagreed with 

at it has provided all the requested documentation in 

Lthumb-drives and online file site links to the 

mte the provided invoices and communications 

jfide the final record associating all communications with 

I complete. Absent the provision of records, the Audit 

ation of the recordkeeping requirements at 11 CFR 

I Finding 4. Failure to Itemize Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff noted that CRC failed to disclose debts and 

obligations owed to three vendors totaling $235,968. In response to the Interim Audit 

Report recommendation, CRC agreed to amend its disclosure reports for the applicable 

period and disclose the debt owed to CRC's former legal counsel. CRC stated it would 

not amend its reports to disclose the debt owed to its former get-out-the-vote (GOTV) 
20 

vendor due to the termination of the contract. CRC subsequently filed amended reports -

to disclose debt owed to the two non-GOTV vendors. Absent the filing of amended 

reports to include the debt owed to the GOTV-vendor, the Audit staff considers the matter 

unresolved. 

Legal Standard 

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

and nature of outstanding debts and obligations owed by or to the reporting committee 

until those debts are extinguished. 52 USC §30104(b)(8) and 11 CFR §§I04.3(d) and 

104.11(a). 

B. Separate Schedules. A political committee mi 

owed by or to the committee, together with a 

conditions under which each debt and obligati 

§104.11 (a). 

C. Itemizing Debts and Obligations. ^ 

• A debt of $500 or less, not including 

administrative expenses, 

from the date incurred (i 

next regularly scheduled 

• Regularly recuiting admini 

debts until due. 

• A debt exc^raP^mO^must 

which th^^OT was i 

schedules for debts 

iping the circumstances and 

extinguished. 11 CFR 

St be repoi 

itCKof the tran 

jve^ s, likel 

bei 

11 

T regularlg^occurring 

been outstan^^60 days 

the committee reports it on the 

do not have to be treated as 

}rt tHlii covers the date on 

D. Disputed Deblv 

and tlj ...inm'i.v .ss to' 

UntjMk'-v'-•vii'v ^jTdxComi 

SOI 

It is a bon^de disagreement between the creditor, 

debr^^e amount owed by the committee, 

resoi^^^^is^b (assuming the creditor did provide 

ng of value)f^^|comn^^ must disi^e: 

• Igie amount th^Kimit^^|mits it owes; 

• ^^mmount the crH^r clai^^ owed; and 

• An^rfepunts the c^^ittee hlipaid the creditor. 11 CFR §116.10. 

1 ^ • 

Facts and 

A. Facts 

During audit fieldwork, the Audit staff used available disbursement records to reconcile 

the accounts'' of three CRC vendors. This review identified debts owed to these three 

vendors totaling $235,968 that should have been disclosed on Schedule D.'^ 

" The recpnciliation consisted of calculating Invoiced and paid amounts for Individual reporting periods In 

the 2011 - 2012 election cycle. The Audit staff then determined whether outstanding debts were 

correctly disclosed on Schedule D. Each debt amount was counted once, even If It required disclosure 

over multiple reporting periods. 

There was no debt reported during the audit period for any of these three vendors. 
21 

One of the vendors provided legal services and had debt outstanding at the end of four 

reporting periods totaling $100,197, including an outstanding bajance at the end of the 

audit period of $13,541. A second vendor that provided accounting services had an 

outstanding balance at the end of one reporting period for $2,284, but did not have an 

outstanding balance at the end of the audit period. The last vendor had debt outstanding 

at the end of the audit period of $133,487 that pertained to the unpaid balance of a 

contract for a GOTV program. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed these disc 

representatives and provided them with schedules detaili 

reported. CRC representatives disagreed with the A 

respect to the disclosure of debts owed to the vem 

Subsequent to the exit conference, CRC requesj 

by the Commission regardirig the disclosure 

payment. CRC contended the disclosure 

privileges.'^ CRC representatives also di 

for the GOTV program, stating that CRC 

provided all contracted services. XRC represeni 

letter, sent by CRC to the 

immediate termination of the cohi 

Based on the terms of 

to make pro rata 

that it terminal 

which suggests 

the termination of 

did not 

to ClU.'pmS^plitermi 

The Inierim Audit Re] 

that c\poitditures totalin 

GOTV pT^^m vendor, 

provide info^Mtign and d 

the vendor pro^E^. before 

was not signed, 

vendor, e-mails or te 

the Interim Audit Repoi 

debts and obligations. 

ire errors with CRC 

debts that were not 

s determination with 

ided legal services, 

consid^tion of a legal question 

debt for legi^|rvices prior to 

'iolate confidentit^topmey/client 

with the requiremm^disclose debt 

inated.tBfe, contract be^^he vendor 

led a copy ofBr^nsiened 

vendor. Advised this vendor of an 

RC from the obligation 

vendor. CRC stated 

f the contracted services 

some of ttig^ontracted services before 

lent documentation provided by CRC 

. for services that the vendor provided 

l^ed that CRC provide documentation demonstrating 

lot require reporting on Schedule D. As for the 

rim AOait Report further recommended that CRC 

entation relating to debt remaining for any services that 

rmination of the contract. Since the termination letter 

ive submitted documentation such as a signed letter to the 

logs regarding the termination. Absent such documentation, 

commended that CRC amend its reports to disclose these 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendations, CRC stated that, given the 

Commission's determination that the amounts owed to CRC's former counsel were not 

privileged from disclosure, CRC agreed to amend its disclosure reports for the applicable 

period and disclose the debt owed to CRC's former legal counsel. CRC stated it would 

See Part I Background, Commission Guidance at p. 1. 
22 

not amend its reports to disclose the debt owed to its former GOTV vendor due to the 

termination of the contract. CRC provided the previously submitted unsigned 

termination letter but did not submit any documentation related to debt for any services 

prior to termination of the contract. CRC subsequently filed amended reports to disclose 

debt owed to the two non-GOTV vendors. Absent the filing of amended reports to 

include the $133,487 debt owed to the GOTV vendor, the Audit staff considers the matter 

unresolved. 

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