FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

April 11, 2012 

MEMORANDUM 

TO: Patricia Carmona 

Chief Compliance Officer 

Thomas Hintermister 

Assistant Staff Director 

Audit Division 

FROM: Christopfaer Hugfaey 

Deputy General Counsel / 

Lawrence L. Calvert, 

Associate General Counse unsel! ^ 

Lorenzo Holloway 

Assistant General Counsel 

For Public Finance and Audit Advice 

Delanie DeWitt Painter .f^Bt/ ^ 

Attomey 

SUBJECT: Draft Final Audit Report for McCain-Palin 2008, Inc. and McCain-Palin 

Compliance Fund, Inc. (LRA 759) 

I. INTRODUCTION 

The Office of the General Counsel has reviewed the proposed Draft Final Audit 

Report ("DFAR") for McCain-Palin 2008, Inc. (the "General Committee") and McCainPalin Compliance Fund (the "GELAC"). We generally concur with the frndings in the 

DFAR and specifrcally comment on Finding 1: Campaign Travel Billing for Press. If 

you faave any questions, please contact Delanie DeWitt Painter, tfae attomey assigned to 

this audit. 

II. CAMPAIGN TRAVEL BILLING FOR PRESS - BACKGROUND 

The auditors reviewed ttavel billing and press reimbursements and concluded tfaat 

the General Committee must refimd $344,892 to the press for excessive reimbursements. 
Memorandum to Thomas Hintermister 

Draft Final Audit Report McCain-Palm 2008, hic. (LRA 759) 

Page 2 

The press ttaveled witfa tfae presidential candidate on a plane chartered tfarough Swifr Air 

LLC ("Swift Air"). John McCain 2008, Inc. ("Primary Comniittee") had used tfie same 

cfaartered airplane during tfae latter part of tfae primary campaign. Tfae auditors calculated 

tfae total actual transportation cost to tfae press as $3,756,215. Tfaey determined tfaat tiie 

maximum tfaat tfae General Conunittee could bill tfae press was 110% of tfais actual cost, 

$4,131,836. The General Conunittee billed the press $4,503,658 and, m response to 

tiiose bills, received reimbursements of $4,476,728. Thus, tfae auditors conclude tfaat tfae 

General Committee must refimd tfae excessive amount of $344,982 ($4,476,728 ~ 

$4,131,836) to tfae press. The excessive reimbursements were primarily caused by tfae 

Committee's metiiod of calculating the actual travel costs on the leased airplane from 

Swift Air. 

In response to the Preliminary Audit Report ("PAR"), the General Committee 

contends tfaat it used a "reasonable process" to "predict tfae eventual, proper allocation" of 

press reimbursements between tfae General Conunittee and tfae Primary Committee. PAR 

Response at 3-5. It argues tfaat its calculation metfaod is more consistent witfa past 

Commission audits. Id. at 6-9. Furtfaer, it asserts tfaat its calculation is more consistent 

witfa Generally Accepted Accounting Principles ("GAAP"). Id. at 9-11. Finally, tiie 

General Conimittee argues tfaat to tfae extent a misallocation of press reimbursements 

between tfae committees still exists, tfae General Committee may correct tfae imbalance by 

making a payment to tfae Primary Conmiittee. /</. at 11-13. Tfae General Committee's 

arguments are discussed in more detail below. We do not frnd tfae General Conunittee's 

arguments persuasive. 

Tfae Swift Air cfaarter conttact for tfae leased aircraft covered a portion ofthe 

primary campaign and the entire general campaign and ran between June 30,2008 and 

November 15,2008. The conttact was signed on behalf of the Primary Committee, but 

tfae General Committee appeara to faave assumed the payments and terms of the contract 

and made weekly payments to Swift Air during the general election period. The total 

conttact cost was $6,384,000, to be paid in 19 weekly payments of $336,000. The 

contract entitled the campaign to 22.4 fligfat faours per week for a total of425.6 fligfat 

faours for the entire conttact. Fligfat hours in excess of 22.4 hours per week were to incur 

additional charges and unused hours could be rolled over to later weeks. Tfae Primaiy 

Committee and General Committee remained liable for tfae total conttact cost of 

$6,384,000 even if fewer tfaan 425.6 faoiurs were frown by tfae end of tfae contract, and 

were entitied to no refund or rebate for fligfat faours tfaat remained unused at tfae end of tfae 

conttact. Neitfaer tfae Primary Committee nor tfae General Coinmittee used up tfae fligifat 

faours tfaat tfaey were entitled to use; tfae Primary Committee used 111.8 fligifat faours and 

tfae General Conunittee used 140.3 fligfat faours. Tfae Primary Committee paid Swift Air 

$336,000 per week each week for nine weeks and the General Conimittee paid tfae same 

weekly amount eacfa week for ten weeks during tfae general election period. Over tfae ten 

weeks it faad the aircraft, tfae General Conimittee paid Swift Air a total of $4,047,402, 

wfaicfa included tiie conttact cost of $3,360,000 plus $687,402 for fiiel, catering, 

passenger taxes and ground faandling fees as required by tfae conttact. 
Memorandum to Thomas Hintermister 

Draft Final Audit Report McCain-Palin 2008, hic. (LRA 759) 

Page 3 

To determine tfae amount tfaat the General Committee could receive in press 

reimbursements, the General Conimittee had to calculate the pro rata share ofthe actual 

cost of travel for each passenger. The General Committee and the Audit Division used 

two different methods to calculate tfais pro rata sfaare. 

Tfae General Committee's calculation was based on the cost over the entire life of 

the conttact and included tfae entire amount tfaat tiie General Committee paid as well as a 

portion of fhe amount that the Primaiy Committee paid on tfae contract. Specifically, tfae 

General Committee's calculation is based on the combined, actual flight hours that both 

committees used during the campaign and the total conttact cost. The committees 

estimated the fligfat hours and adjusted tfae estimate on a segment-by-segment basis. 

Using this metfaod of calculating the actual ttavel cost, the General Conunittee claims that 

it received press reimbursement of only 106% of the actual cost - less than the regulatory 

maximum of 110%. 

Tfae General Conimittee asserts tfaat it was not easy to determine the actual cost of 

travel in advance because the Swift Air travel cost could be calculated only at tfae end of 

tfae conttact, wfaen tfae committees would know faow many faours faad been flown and 

could tfaen divide tfae total contract cost. PAR Response at 3. It argues tfaat because tfae 

committees could only "predict fhe proper hourly rate," they continually adjusted each 

new travel segment "based on the evolving total of estimated hours to be flown" under 

the contract. Id. at 4. The committees realized that the conttact straddled tfae primary 

and general election periods and anticipated tfaat tfaey would need to later "rebalance" tfae 

press reimbursements between tfaem wfaen the actual hourly rates were known, after tfae 

2008 election. Id. The Conunittee argues that "a particular week's fixed installment 

payment was not in exchange for that week's fright hoiurs." Id. at 5. 

Tfae Audit Division took a different approach to calculate the pro rata sfaare of tfae 

actual cost of ttavel and concludes tfaat tfae General Committee received reimbursements 

in excess of the maximiun 110%. It looked only at the actual cost paid by the General 

Conimittee to Swift Air for ttavel during the general election portion of the conttact, not 

the entne cost of the contract over its entire hfe during both the primary and general 

campaigns. The auditors' calculation was based on the $336,000 weekly payments to 

Swift Air, as well as costs for fiiel, catering, passenger taxes and ground costs and some 

reconfrguration costs. The Audit Division concluded tfaat tfae Primary Committee billed 

press travelers less tfaan tfadr pro rata sfaare ofthe total amount the Primary Coinmittee 

actually paid on tfae Swift Air contract, leaving an amount tfaat tfae Primaiy Conimittee 

faad paid on tfae conttact but did not bill. Consequently, tfae General Committee billed 

press travelers more tfaan 110% of tfaeir pro rata sfaare of tfae amount tfae General 

Committee actually paid on tfae contract because tfae General Committee's calculation 

included a portion of the entire contract that had been paid by the Primary Committee. 
Memorandum to Thomas Hintermister 

Draft Final Audit Report McCain-Palin 2008, hic. (LRA 759) 

Page 4 

III. EXCESSIVE MEDIA REIMBURSEMENTS ARE DETERMINED BY 

CALCULATING ACTUAL TRAVEL COST 

A. The General Conunittee and The Audit Division Disagree on How to 

Calculate Actual Travel Cost 

The crux of tfae disagreement between the General Committee and tfae Audit 

Division is wfaicfa accounting metfaod sfaould be used to calculate the "actual costs" 

portion of the calculation of passengers' pro rata share of actual travel costs under 11 

C.F.R. § 9004.6(a). The General Committee argues its accounting method, in combining 

tfae conttact cost of botfa committees, was more reasonable tfaan tfae auditors' accounting 

metfaod given tfaat the conttact price was not directiy proportional to the actual use of tfae 

aircraft over tfae period of die contract. While the auditors' method relied on tfae cost tfaat 

each committee paid under the conttact, the General Committee argues that the cost that 

the conimittees were paying for the contract was not directiy reflective of the frigfat hours 

that they were usmg as they proceeded through the campaign. 

As a legal matter, however, we question whetfaer tfae Commission should apply 

the General Committee's approach because it requires the Commission to combine the 

conttact cost and use of both the Primary Committee and the General Committee. The 

problem with the General Committee's argument is tfaat its metfaod may accurately refrect 

tfae comparative actual use of tfae aircraft between tfae two conunittees but it is out of 

proportion to tfae comparative actual costs paid by tfae two committees. And because, of 

tfae two committees, the General Committee is the only one that is publicly financed and 

tiie only one tiiat is tiie subject of tiiis audit, it is tiie "acttial cost," 11 C.F.R. § 9004.6(a), 

to the General Committee with which we are concerned here. 

The public financing rules allow general election committees to seek limited 

reimbursements from the media for ttavel expenses. See 11 C.F.R. § 9004.6(a)(2) and 

(3). 'The amount of reimbursement sought from a media representative... sfaall not 

exceed 110% of tiie media representative's pro rata share (or a reasonable estimate of the 

media representative's pro rata share) of the actual cost of the ttansportation and services 

made available." 11 C.F.R. § 9004.6(b)(1). The pro ratti share is calculated by "dividing 

the total actual cost of the ttansportation and services provided by the total number of 

individuals to whom sucfa ttansportation and services are made available."' 11 C.F.R. 

§ 9004.6(b)(2). While we can apply this regulation to tfae ttavel expenses of one 

committee operating m one election, neitfaer tfae regulation itself, nor its Explanation and 

Justification provide a formula for calculating tfae actual cost of air ttavel on a cfaartered 

airplane used by two committees in two different elections (primary and general). 

' The travel reimbursement rule at section 9004.6 has changed in some ways over the years, but the 

Commission has consistently stated diat coinmittees should determme the media representative's pro rata 

share ofthe "actual cost" ofthe transportation. See, e.g., Explanation and Justifications for 11 C.F.R. 

§ 9004.6,45 Fed. Reg. 43,376 (June 27,1980); 56 Fed. Reg. 3S903 (Jul. 29,1991). 60 Fed. Reg. 31,858-59 

(June 16.1995), 64 Fed. Reg. 42,581 (Aug. 5.1999). 
Memorandum to Thomas Hintermister 

Draft Final Audit Report McCain-Palin 2008, hic. (LRA 759) 

Page 5 

The auditors' calculation of tfae actual cost of tfae Swift Air contract and related 

costs is simple. Tfae auditors deteimined tfaat tfae actual cost was tfae amount paid by tfae 

General Conimittee to Swift Air for travel during tfae general election period. The 

calculation was based on the weekly installment payment of $336,000 and additional 

costs, the weekly fligifat hours, and tiie number of passengers. Tfae Audit Division's 

metfaod indicates tfaat tfae General Committee billed tfae press and received 

reimbursements firom tfae press, not only for tfae amounts the General Committee paid to 

Swift Air during the general election period, but also for a portion of the ttavel costs that 

the Primary Conimittee paid to Swift Air fbr primary campaign transportation attributable 

to the primary campaign. 

Tfae Audit staffs calculation is appropriate because tfae cost of tfae Swift Air 

contract paid for and used by botfa the primary and general campaigns should be divided 

based on tiie amount each committee actually paid for travel during tfae primary or 

general campaign. Tfae regulatory faistory provides no guidance about faow to determine 

tfae "actual cost" in a case like tfais one, wfaere a candidate's primary and general 

committees sfaared a conttact for use of tfae same leased airplane. But tfae Commission 

faas noted, in addressing wfaat types of costs could be cfaarged to tfae media as tfae "actual 

cost" of ground transportation and facilities, tfaat "campaigns sfaould already be well 

aware tfaat eacfa media representative may only be charged his or her own pro rata share 

of costs" and "coinmittees may not force the traveling press to absorb fhe costs" of 

services "used or consumed" by others. Explanation and Justification for 11 CF.R. 

§ 9004.6,64 Fed. Reg. 42,581-2 (Aug. 5,1999). Id. at 42,582. This reasoning would 

support the conclusion that media traveHng witii a candidate's general election campaign 

should pay only for general election period travel and not be forced to absoib air travel 

costs more properly viewed as attributable to tiie candidate's primary campaign, and 

specifically to the media who ttaveled with that campaign. 

B. The General Committee's Actual Cost Should Be Based On The Travel Cost 

Paid By The General Committee 

The General Committee's press billing and reimbursement calculation should be 

based only on the General Committee's payments for travel in fiirtherance of the general 

election campaign during tfae general election period. Tfae General Committee cannot 

incur primary-related travel expenses because tfaey are not in fiutfaerance of tfae general 

election campaign. 26 U.S.C. § 9002(11); 11 C.F.R. § 9002.11. AstheGeneral 

Committee cannot incur expenses for primary-related ttavel, it should not be able to 

effectively bill the press for tfaose costs eitfaer. Tfae publicly-funded General Committee 

and McCain's non-publicly funded Primary Committee sfaould keep tfaeir expenses 

separate because the two campaigns operated under different rules, requirements and 

limitations. Senator McCain agreed to use only public fiinds for his general election 

campaign; to take no contributions; and to keep his spending within the general election 

expenditure limitation, whicfa equals tfae amount of public fimds be received. See 26 

U.S.C. §§ 9002(11), 9003(b); 2 U.S.C. §§ 441a(b)(l) and (c); 11 CF.R. § 9002.11. By 
Memorandum to Thomas Hintennister 

Draft Final Audit Report McCain-Palin 2008, Inc. (LRA 759) 

Page 6 

contrast, Senator McCain opted not to participate in the primary matching payment 

program; his primary campaign was entirely privately funded. 

Because primary and general election campaign expenditures must remain 

separate, tfae Conunission created "brigfat line" rules for attributing expenses between tfae 

primary and general expenditure limitations after issues arose in prior election cycles 

about how to divide expenses that benefitted both campaigns between publicly ftmded 

primary and general committees. 11 C.F.R. § 9034.4(e); see Explanation and 

Justification for 11 CF.R. § 9034.4(e), 60 Fed. Reg. 31,854 at 31,866-68 (Jun. 16,1995). 

These rules were later revised to also apply to this situation, where the candidate received 

public fimds in only one election. Id. Many of these bright line rules are based on 

timing. Under tfae bright line attribution rules, ttavel costs are attributed based on when 

tiie ttavel occurs. 11 C.F.R. § 9034.4(e)(7). If the ttavel occura before tiie date of tiie 

nomination, the cost is a primary expense, unless the ttavel is by a person working 

exclusively on general election campaign preparations. Id. While these brigfat line rules 

are normally applied to situations to determine tfae attribution of ttavel costs to a primaiy 

and general campaign sfaaring expenses, we believe that it is appropriate for the 

Conimission to use these same rules to determine the attribution of tfae ttavel costs 

between these committees and how much these committees should bill die press for 

travel costs. 

Under the brigfat line attribution rules, tfae General Committee's weekly payments 

to Swift Air were for general expenses and tfae Primary Committee's weekly payments 

were for primary expenses because tfae weekly payments appear to be related to the 

weekly use of tiie leased plane. Althougfa tfae General Committee contends tfaat eacfa 

weekly installment payment was not in excfaange for tfaat week's flig(ht faours, PAR 

Response at 5, it has not provided any documentation or explanation demonsttating tfaat 

tfaere was no connection between tfae weekly payments and tfae weekly fligfat faoura. To 

the extent that the payments and tfae amounts billed to the press were related to ttavel 

occurring at the same time as the payments were made, those amounts were attributable 

to the Primary Committee prior to the date of the candidate's nomination and to tfae 

General Committee after the date of the candidate's nomination. See 11 C.F.R. 

§ 9034.4(e)(7). 

The regulations also allow a limited exception for qualified campaign expenses 

incurred prior to the general election expenditure report period for property, goods or 

services to be used during the expenditure rqx>rt period in connection with the general 

election campaign. 11 CF.R. § 9002.11(a)(2), 9003.4,9004.4. The Commission 

explained that this exception is "designed to permit a candidate to set up a basic 

campaign organization before the expenditure report period begins." Explanation and 

Justification for 11 C.F.R. § 9003.4,45 Fed. Reg. 43375 (Jun. 27,1980). Tfae nile lists 

examples of expenses sucfa as establisfaing financial accounting systems and 

organizational planning. 11 C.F.R. § 9003.4(a). 
Memorandum to Thomas Hintermister 

Draft Final Audit Report McCam-Palin 2008, hic. (LRA 759) 

Page 7 

The General Committee has not demonsttated that the Primary Committee's 

weekly lease payments were related to travel after tfae date of nomination or that travel 

during the primary period was by persons who were working exclusively to prepare for 

tiie general election. See 11 C.F.R. § 9034.4(e)(7). Nor has it demonsttated that tiie 

Priniary Committee was somehow pre-paying for the General Conunittee's use of tfae 

leased plane during the generai election period. See 11 C.F.R. § 9003.4(a). Botii 

campaigns paid tfae same weekly amount for tfae leased plane and botfa campaigns used 

tfae leased plane. Altfaough unused faours rolled over from week to week, neitfaer 

committee used all of the fligfat faours they could have used under the conttact.^ 

In addition, the separate reporting of expenditures by these separate conimittees 

supports the conclusion that General Committee and Primary Committee ttavel 

expenditures must remain separate. The General Coinmittee and the Primary Committee 

file separate reports and are separate committees.^ Publicly fimded authorized 

conunittees shall report all expenditures to fturther tfae candidate's general election 

campaign in reports separate firom reports of any otfaer expenditures made by tfaose 

committees with respect to other elections. 11 C.F.R. § 9006.1. 

IV. PAST COMMISSION AUDTTS DO NOT SUPPORT THE GENERAL 

COMMITTEE'S ARGUMENTS 

The draft DFAR addresses the General Committee's argument tfaat its calculation 

metiiod is more consistent witfa the General Committee's interpretation of previous audits 

including Kerry-Edwards 2004, Dole-Kemp 1996, and Bush-Cfaeney 2000.^ We agree 

with the discussion of these audits in the draft DFAR, but we suggest that the Audit 

Division sligfatiy expand the discussion of the General Committee's argument conceming 

tiie Kenry-Edwards 2004 audit. 

The Committee contends, and it is correct, that the Kerry-Edwards air cfaarter 

lease "sttaddled tfae primary- and general-election periods," like the Swift Air contract. 

PAR Response at 7. Tfae Conunittee, faowever, is incorrect in assuming that there must 

have been similar issues in calculating tiie costs for press reimbursements where the 

Kerry Edwards general committee reimbursed the primary committee for "banked" frigfat 

' If the General Committee is able to demonstrate that some portion of the Primary Committee's 

contract payments was to further the general election and should have been paid for by the General 

Coinmittee, its actual cost of travel and the amount it may bill the press might increase. We recommend 

that the Audit Division specifically note tiiis issue in the DFAR. 

^ Generally, publicly fiinded general election candidates set up a separate authorized committee for 

die general election, which diey authorize to incur expenses on their behalf, as well as a separate legal and 

compliance fimd. See 26 U.S.C. §§ 9002(1); 11 C.F.R. §§ 9002.1,9002.2,9003.3. 

The draft DFAR also addresses the General Committee's arguments based on GAAP accounting 

principles. We defer to the Audit Division's expertise in analyzing the correct application of accounting 

and auditing principles and procedures. 
Memorandum to Thomas Hintermister 

Draft Final Audit Report McCain-Palm 2008, faic. (LRA 759) 

Pages 

hours used by the general committee, id. at 8, because, according to the Audit Division, 

the Kerry-Edwards general committee did not use the plane in question to transport the 

press.^ To assist the Commission, we recommend that you include this information about 

the Kerry-Edwards audit in tfae DFAR's discussion of past Commission audits. 

Tfae General Cominittee also cites several audits tfaat it faad relied upon in prior 

responses, Dole-Kemp 1996 and Busfa-Cheney 2000. The General Committee argues 

that its calculation method was structured to match past Commission audits and that it 

used the same metfaod tfae auditors used in tfae Dole-Kemp audit, dividing tfae total 

amount of payments made under tfae lease by the number of actual fligfat faours, to predict 

the ttavel costs attributable to the General Conimittee. PAR Response at 5-6. The 

Comniittee asserts that it does not matter that the Dole-Kemp conttact only covered the 

general election period. Id. Tfae Conimittee states tfaat Bush-Cheney 2000's lease 

covered the primary and general election periods and was structured in a nearly identical 

way to tfae Swift Air contract, and tfae Busfa-Cheney campaign used the same billing 

methodology as the General Coinmittee did for the Swift Air contract. Id. at 8. It argues 

tfaat tfaere was no press finding in tfae Bush-Cheney 2000 Final Audit Report, and the 

Audit Division did not "even communicate informally any objection over calculation 

methodology." Id. It contends that even if the overbilling of the press in that audit was 

not material, tfae "Audit Division still should have given notice of methodology errors" 

and the "Commission's acquiescence in a recordkeq)ing practice has precedential value 

because silence is reasonably construed by the audited party as approval." Id 

We concur with the Audit Division's discussion of these past Commission audits 

in the draft DFAR. The General Committee seeks to apply tfae houriy calculation used in 

tiie Dole-Kemp 1996 audit to the total Swift Air costs over the life of tfae entire conttact 

for botii tfae General Comnuttee and Primary Committee, and not, as in Dole-Kemp 1996, 

to a general election committee's portion of the costs for travel during the general 

election campaign. The Busfa-Cfaeney 2000 comniittee may faave used a similar billing 

methodology to the General Committee, but that method did not result in any material 

overbilling of the press or audit finding in that audit. The absence of a finding in that 

audit does not indicate the approach or billings by tiie Bush-Cheney 2000 conunittee 

were correct. It merely indicates tfaat the difference between tfae committee's and 

auditora' calculations in that audit was not large enough to raise an issue of material 

noncompliance. 

^ Moreover, in contrast to this audit, where both committees used less than the flight hours they paid 

for, the Kerry-Edvwrds general conunittee actually paid die Kerry primary conunittee for tiie "banked" 

flight hours used by the general committee (i.e., hours originally paid by the Kerry primaiy committee, but 

not used by it). We presume that if die Kerry-Edwards general committee had used die plane to transport 

die press, die Audit Division would have included diese payments to die Kerry primary committee in the 

Kerry-Edwards general committee's "actual cost." 11 CF.R. § 9004.6(b)(1). Please advise us if diis is not 

the case. 
Memorandum to Thomas Hintennister 

Draft Final Audit Report McCain-Palin 2008, hic. (LRA 759) 

Page 9 

However, you may wish to address wfaetfaer this issue arose in any prior audits ui 

such a way tiiat tfae General Committee would faave been on notice that its choice of 

accounting method might have negative consequences. 

V. PROPOSED TRANSFER TO PRIMARY COMMITTEE WOULD NOT 

RESOLVE ISSUE 

The Genera] Committee's final argument is that if there is a "misallocation" of 

press reimbursements, it should not have to make any refunds to press entities, but 

instead may correct the imbalance with a ttansfer from the General Committee to the 

Primary Committee. PAR Response at 11-13. Tfae General Committee argues that sucfa 

a payment would not resuh in qualified campaign expenses. Id. It contends that the 

Commission has previously permitted ttansfers from publicly fiinded general committees 

to primary committees to correct similar misallocation issues and cites Kerry-Edwards 

2004 as an example of the payment by the general committee to the primary conimittee 

for a misallocation of joint reconfiguration costs and banked flight hours. Id. at 12-13. It 

asserts tfaat tfae ttansfer itself would not be any type of expense because tfae Committees 

are affiliated and may make unlimited ttansfers. Id. at 12. The General Committee also 

contends that the restriction limiting its spending to qualified campaign expenses applies 

only to tfae public funds it received, and not to funds it received from other sources, such 

as press reimbursements. Id. It contends that tfae ttansfer will not result in tfae General 

Conimittee incurring non-qualified primary expenses because three years have passed 

and any fluids ttansferred are unlikely to be used to defi^y any primary activity, and the 

Primary Committee already paid for press ttavel without recouping its fiill ttavel costs. 

Id. Last, the General Committee argues that the Commission should permit a ttansfer 

because the issue was caused by tfae Commission's failure to provide advance guidance 

on press reimbursement calculations. Id. at 13. Altematively, tfae Committee requests 

permission to disgorge the press reimbursements to the Treasury. Id. 

The General Committee's proposed transfer of funds to the Primary Committee 

will not resolve the issue that the General Committee received reimbursements from the 

press in excess of its actual travel cost. The amount of excess press reimbursements tfae 

General Committee received sfaould be retumed to tfae media representatives. 11 CF.R. 

§ 9004.6(d)(1). Tfae fact tfaat tfae General Committee oveibilled the press and the Primary 

Committee could have billed the press more than it did does not mean that the General 

Committee owes tfae excess press reimbursements it received to tfae Primary Committee. 

Moreover, as previously noted, tfae General Coinmittee faas not demonsttated tfaat tfae 

Primary Committee paid Swift Air more tfaan its sfaare of tfae conttact costs to cover 

travel costs used by the General Committee during tfae general election period. In 

previous Commission audits wfaere a general committee reimbursed a primaiy 

committee, sucfa as tfae payment for banked faours in Kerry-Edwards, tfae Conimission 

required tfae reimbursements because one committee faad paid for goods or services that 

were actually used by the other committee. But here, the General Conimittee does not 

owe any reimbursement to the Primary Committee. 
Memorandum to Thomas Hintermister 

Draft Final Audit Report McCam-Palin 2008, hic. (LRA 759) 

Page 10 

Moreover, if the General Committee's public funds are ttansferred to the Primary 

Committee and used to pay for any primary campaign expenses, the payments would be 

non-qualified campaign expenses that may be subject to repayment because they would 

not be made to fiuther McCain's campaign for tiie general election. See 26 U.S.C. 

§§ 9002(11), 9007(b)(4); 11 C.F.R. §§ 9002.11,9004.4,9007.2(b)(2). Wfaile tiie General 

Committee migfat be able to transfer ftmds to tfae Primary Committee, tfae Primary 

Conunittee could not tfaen use the funds for any primary expenses sucfa as debts witfaout 

causing the General Committee to make a non-qualified campaign expense. All of the 

General Committee's funds must be used only for qualified campaign expenses; there is 

no exception for press reimbursements received.^ See 11 C.F.R. §§ 9002.11,9004.4. 

Because press payments reimburse campaigns for some of tfae public fimds spent on 

ttavel costs, reimbursements retain tfaeir cfaaracter as public fimds. Wfaetfaer or not tfae 

Commission provided advance guidance on press reimbursement calculations, tfae 

proposed ttansfer would not resolve this issue. 

The General Committee should pay the excess reimbursements to the press. The 

regulations require committees to retum reimbursements in excess of 110% to tfae media 

representative. 11 CF.R. § 9004.6(d). Only amounts tfaat are less than 110% but exceed 

the actual cost of ttavel plus a percentage for administrative costs should be paid to the 

Treasury. Id. In otiier contexts, the regulations provide for payment to the Treasury for 

stale-dated checks, 11 CF.R. § 9007.6, and disgorgement payments for tiie amount of 

prohibited and excessive contributions identified by a sampling method m an audit. 11 

C.F.R. § 9007.1(f). Payment to the Treasury is appropriate in those instances because of 

the difficulty of resolving situations where payees faave not casfaed committee cfaecks or 

the audit sample does not identify specific contributors for refimds. Similarly, 

disgorgement to the Treasury migfat be appropriate faere if tiie General Committee is 

unable to reconstruct the precise amounts owed to each individual press entity, or if the 

payees cannot now be located. 

^ Fully publicly funded general election candidates must agree not to accept any private 

contributions, 11 C.F.R. § 9003.2(a)(2); dius, tiieir expenditures are equal to the public ftmds received. The 

only fiinds that are not subject to the public fimding use restrictions are private contributions in a general 

election legal and accounting compliance fiind. See 11 C.F.R. § 9003.3.