Draft Final Audit Report 

of the Audit Division on 

O'Malley for President 

(May 15, 2015 - December 31, 2016) 

Why the Audit 

Was Done 

Federal law requires 

the Commission to 

audit every political 

committee established 

by a candidate who 

receives public funds 

for the primary 

campaign.' llieaudit 

determines whether the 

candidate was entitled 

to all of the matching 

funds received, 

whether the campai^ 

used the matchir 

funds in accordance 

with the law,, 

the I 

to addiudnal matcRinc 

fuQ^St^d whether the 

camp^ 

complied' 

limitations, 

prohibitions, anH 

disclosure requir 

of the election law.4 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of 

the matters discussed in 

this report. 

About the Campaigir 

O'Malley for President is the.^(^ipal campaign committee for 

Martin Joseph O'Malley, ^mdidtn^*^ the Democratic Party 

nomination for the offipe^olf^^sideht^p!^ United States. The 

Committee is headqj^rtS^ in Baltim^^Maryland. For more 

information, see Jh^hart on the CampaigtuOiig^zation, p. 2. 

Financial 

• Receipts 

o ^ntributions fronJ 

o Mate^gv^unds Recei 

o L^s 

^iduals 

£C@iVe 

Conl^ibu^s-fi^hOtb^ Political 

Comm^^ 

Offset^ Operatiifg Expenditures 

otal Recelf 

ig Expenditures 

I Repayments 

intribution Reiunds 

'Other Disbursements 

Total Disbursements 

$4,574,259 

1,088,929 

500,000 

115,002 

82,577 

$ 6,360,767 

$ 5,707,052 

500,000 

78,127 

650 

$ 6,285,829 

Findings and Recommendations (p. 4) 

• Net Outstanding Campaign Obligations (Finding 1) 

• Payments of Non-Qualified Expenses (Finding 2) 

• Failure to Itemize Offsets to Expenditures (Finding 3) 

• Reporting of Debts and Obligations (Finding 4) 

• Stale-Dated Checks (Finding 5) 

26 U.S.C. §9038(a). 
Draft Final Audit Report 

of the Audit Division on 

O'Malley for President 

(May 15, 2015 - December 31, 2016) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 

Scope of Audit 

Inventory of Campaign Records 
Parti 

Background 

Authority for Audit 

This report is based on an audit of O'Mailey for President (OMFP), undertaken by the 

Audit Division of the Federal Election Commission (the Commission) as mandated by 

Section 9038(a) of Title 26 of the United States Code. That sectior^states, "After each 

matching payment period, the Commission shall conduct a thmj^h^amination and 

audit of the qualified campaign expenses of every candida^dnd.^s authorized 

committees who received [matching] payments under sectiofT^QJ^ Also, Section 

9039(b) of the United States Code and Section 9038. Ka^^ of tnb>^mmission's 

Regulations state that the Commission may conducJ/9tME.Maminatibn^nd audits from 

time to time as it deems necessary. 

Scope of Audit 

This audit examined original reports filed by OMFP^nm;^ the audit notification letter 

dated November 30,2016.^ The audi^l^ examined the^iginal filings of the 2016 

December Monthly and Year-End Rep9^>Tlje following\q«^^wgre covered by this 

audit: 

1. the campaign's compliance with limithion^oK.^ti::[b^dns and loans; 

2. the campaign's comdianc|with the liim|^ritihs for^c^mdate contributions and loans; 

3. the campiaign's co^lianqeVith the prolwition on i^epting prohibited contributions; 

4. the disclosure (^(^ributilms and loans r&eived; 

5. the disclosure%fdi^ursemei^ debts and obHgations; 

6. the consistency betwewNe^rt^figures an^ank records; 

7. the accju^^^^fthqSt^ment mNetOq^ Campaign Obligations; 

the pwipai^P^m^Hancb^tji spending limits; 

fipleteness of«r^rds; 

ipaign Of sne ' to the review. 

Inventoi^^^Camimign Records 

The Audit staff rautipely^dnducts an inventory of campaign records before it begins 

audit fieldwork. ON^^records were materially complete and fieldwork commenced 

immediately. 

^ Subsequent to the audit notification, OMFP filed amendments to these reports. These amendments were 

given a limited review to determine if issues noted in the Preliminary Audit Report were corrected by 

OMFP. 
Part II 

Overview of Campaign 

Campaign Organizatb 

Important Dates 

Date of Registration May.2^^6lS XX 

Eligibility Period^ 19,2015 ^fetyuary 1,2016 

/Kjay IS, ^QIS - December^^|pi6 

'%iltip[iore,)Mgryland \ / 

Audit Coverage^ 

Headquarters 

Bank Information 

Bank Depositories 

Bank Accounts merchant processing; 1 conduit 

H 

Treasurer 

Treasurer When Audt^ag^nducted 'Terry LgelLierman 

Treasurer During Bdfi^d Covleir^ by Audit V Terry Lee Lierman 

Management luforiftatio^ 

Attended Commission^'Gl^i 

Seminar 

S. 

iqe 

Paid Staff 

On November S, 2015, the Candidate submitted a signed letter (dated November 2,2015), to the Commission 

seeking to become eligible to receive Presidential primary matching iunds and agreeing that he and his authorized 

committee would comply with the conditions set forth in 11 CFR §9033.1(b). A threshold submission was 

submitted on November 4,2015, and the Commission certified the Candidate as eligible to receive matching 

fonds on November 19,2015. The period during which the Candidate was eligible for matching fonds ended on 

February 1,2016, the Candidate's date of ineligibility. 

The Audit staff conducted limited reviews of receipts and expenditures after December 31,2016, to determine 

whether the Candidate was eligible to receive additional matching fiinds. 
Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand ® May 15,2015 ^ $0 

Receipts 

o Contributions from Individuals^ 4,574,259 

o Matching Funds Received^ //\ \L088,929 

o Loans Received . \i \ mooo 

o Contributions from Other Political 

Committees ' 

o Offsets to Operating Expenditures \ y 82,577 ^ 

Total Receipts W y^$6360,76'a/ 

Disbursements 

o Operating Expenditures \ \ 5,707,052 

o Loan Repayments \ W .500,000 

o Contribution Refunds \ NX 78,127 

o Other Disbursements J" 650 

Total Disbursements W/. X 5 6,285,829 

Cash-on-hand @ Decejn^erS^ 2Q16^ ^ $92369 

^ OMFP received approximately 20,107 contributions from 20,011 individuals. 

' As of the Candidate's date of ineligibility, February 1,2016, OMFP had received matching funds totaling 

S946,36S. OMFP received an additional $142,564 by April 7,2016, for a total of $1,088,929. 

^ OMFP filed comprehensive amended disclosure reports on January 31,2017 along with the 2016 Year-End 

Report. These corrections created a mathematical discrepancy of $17,431 in the audited reports pertaining to the 

ending cash-on-hand. See Scope of Audit, p. 1. 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Net Outstanding Campaign Obligations 

The Audit staff's review of OMFP's financial activity through December 31,2017, and 

estimated winding down costs indicated that the Candidate did not receive matching fund 

payments in excess of his entitlement. 

In response to the Preliminary Audit Report recommenda^c 

related to this matter. (For more detail, see p. 6.) 

'P had no comments 

OMFI 

Finding 2. Pa3rments of Non 

During audit fieldwork, the Audit staffs revii 

OMFP spent $39,834 on behalf of the O' Sa; 

(OPAC). Since these funds were not spent in conn) 

nomination for election, they are centered non-qu; 

calculated repayment to the United S^fs^^reasury at a 

representatives explained that OMFP 

qualified campaign expenses and exj 

The Audit staff analyzed all documentati 

subsequent reimburseinei^^d^confirmed 

the public funds 

recommend that 

U.S. Treasury. 

result of t 

nake a deter 

In respoi 

related^this mattei^ 

Bxpei 

disbursements ihdi^ted that 

litical ActiomCommittee 

ith%ie Candic 

ipaign expenses. The 

10^23.37% is $9,309. OMFP 

^uring the oqm^i^ that these were not 

|mbursanent for these expenses, 

^these disbursements and 

OPAC^mbursed OMFP in full. Since 

reimbursement, the Audit staff will 

ion that no repayment is owed to the 

lit Repoftrecommendation, OMFP had no comments 

il.^e p. 9.) 

o Itemize Offsets to Expenditures 

The Audit sfh^qviewed vbnidor refunds OMFP disclosed on Schedule A-P, Line 20 

(Offsets to Ex^qraures ^^nds. Rebates, etc.)) and determined that OMFP did not 

itemize 14 such refi^s^raling $8,582. Subsequent to the audit notification, OMFP 

filed amended repoi^nd materially disclosed these receipts. Since OMFP's corrective 

action occurred afte^udit notification, the matter is included in this audit report. 

In response to the Preliminary Audit Report recommendation, OMFP had no comments 

related to this matter. (For more detail, see p. 11.) 

Finding 4. Reporting of Debts and Obligations 

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

obligations to one vendor totaling $ 156,019. 
In response to the Preliminary Audit Report recommendation, OMFP amended its 

disclosure reports to materially correct the disclosure of debts and obligations on 

Schedule D-P (Debts and Obligations). (For more detail, see p. 13.) 

Finding 5. Stale-Dated Checks 

The Audit stalf identified 12 stale-dated checks totaling $15,197 issued by OMFP. 

In response to the Preliminary Audit Report, OMFP made a payment of $15,197 to the 

U.S. Treasury. (For more detail, see p. 14.) 

Summary of Amounts Owed to 

States Treasury 

Finding 2. (p. 9) Payments of Non-Qualifj^^"^ 

Expenses /c v 

Finding 5. (p. 13) Stale-Dated Checks 

nited 
Part IV 

Findings and Recommendations 

Finding 1. Net Outstanding Campaign Obligations 

Summary 

The Audit staffs review of OMFP's financial activity through December 31,2017, and 

estimated winding down costs indicated that the Candidate did not receive matching fund 

payments in excess of his entitlement. 

In response to the Preliminary Audit Report recommendatioi 

related to this matter. 

Legal Standard 

A. Net Outstanding Campaign Obligations (I^ 

candidate's date of ineligibility (see definitioii 

statement of "net outstanding campaign obli^tiOr»:H. I 

among other things: 

• The total of all committee ass;ets including ca^ 

committee and capital assets lia^d.^their fair 

• The total of all outstanding obliWiQ^fot;aualified 

• An estimate of necessary windin^o^^coslis^J 1 

no comments 

amounts owed to the 

y 

'gn expenses; and 

9034.5(a). 

B. Dateof Ineligibil 

occurs first: 

• The day oi 

• The 30th day fo1 

^!ian 

' nomir 

of ineli^Wty is wh^Hever of the following dates 

the c^aidate ceases active in more than one state; 

id con^cutive primary in which the candidate 

fular vote; 

Ehihg'bayment period, which is generally the day when the 

- the general election; or 

I case of a c^didate ^^dse party does not make its selection at a national 

jon, the last day of the last national convention held by a major party in 

•year. l/CFR §§9032.6 and 9033.5. 

C. Qualified CaiiiDai|^^xpense. Each of the following expenses is a qualified 

campaign expense. 

• An expense that is: . 

o Incurred by or on behalf of the candidate (or his or her campaign) during the 

period beginning on the day the individual becomes a candidate and 

continuing through the last day of the candidate's eligibility under 11 CFR 

§9033.5; 

o Made in connection with the candidate's campaign for nomination; and 

o Not incurred or paid in violation of any federal law or the law of the state 

where the expense was incurred or paid. 11 CFR §9032.9. 
• An expense incurred for the purpose of determining whether an individual should 

become a candidate, if that individual subsequently becomes a candidate, 

regardless of when that expense is paid. 11 CFR §9034.4. 

• An expense associated with winding down the campaign and terminating political 

activity. 11 CFR §9034.4(a)(3). 

D. Entitlement to Matching Payments after Date of Ineligibility. If, on the date of 

ineligibility (see above), a candidate has net outstanding campaign obligations as defined 

under 11 CFR §9034.5, that candidate may continue to receive matching payments for 

matchable contributions received and deposited on or before Decehiber 31^ of the 

Presidential election year, provided that he or she still has neU)wStariding campaign debts 

on the day when the matching payments are made. 11 CFR/^0^.1(b). 

E. Value of Capital Assets. The fair market value ^q^phal ass^-s i^0% of the total 

original cost of the assets when acquired, except tha^sets that are requyed after the date 

of ineligibility must be valued at their fair marlul^lue on the date rec^^rebLA 

candidate may claim a lower fair market valii^4qrXcapita^»^^ by listin^^^set on 

the NOCO statement separately and demonstratii^mrpugM^umentation^tne lower 

fair market value. 11 CFR §9034.5(c)(l). 

F. Winding Down Costs. A prima 

election may receive and use matching' 

of the candidate's withdrawal from the i 

party's nominating conv^tiotL if the cand 

A primary election canmdate.^0 runs in this 

after the general eleraon beforh using any i 

regardless of whe{he^tb^andiwle receives i 

11 CFR §9034.11(d). 

1 candidate not run in the general 

^tifying^ejCommission in writing 

ll^ion or after the date of the 

I nOl>wftharawn before the convention, 

fieral eleaion must wait until 31 days 

ling funds for winding down costs, 

ling funds for the general election. 

FactSy 

A. \ \ 

The Candidas date of ineligibility (DOI) was February 1,2016. The Audit staff 

reviewed OM^s^nancial ^tivity through December 31,2016; analyzed actual and 

projected winding^oown^co^;^ and prepared the Statement of Net Outstanding 

Campaign Obligatibtj^^u appears on the next page. 

* The actual winding down costs were reviewed through April 30,2018. The projected winding down 

costs were estimated through December 31,2018. 
O'Mall^ for President 

Statement of Net Outstanding Campaign Obligations 

As of February 1,2016 

Prepared May 25,2018 

Assets 

Cash in Bank 

Accounts Receivable 

Security Deposits 

Physical Assets @ 60% depreciation 

Total Assets 

Liabilities 

Accounts Payable for Qualified Campaign Expenses as of 2/1 

Winding Down Costs: 

Actual Winding Down Costs Paid (2/2/16 - 4/30/18) 

Estimated Winding Down Costs (S/I/18 - I2/31/J 

Total Liabilities 

Amounts Payable to the US Treasury 

Stale Dated Checks (See Finding S) 

Net Outstanding Campaign Obligations 

Footnotes to NOCO Statement; 

$ 181,638 [a] 

27,074 

2,642 

$211,354 

$ (494,626) 

[a] Amount incl 

[b] Estimated winding 

adjusted accordingly.^ 

1 and deposited after DDI. 

actual winding down costs and will be 
Shown below are adjustments for funds received after the Candidate's DOl on February 

1,2016 through April 7,2016, the date OMFP received its last matching fund payment. 

Net Outstanding Campaign Obligations (Deficit) as of 2/1/16 $(298,469) 

Less: Contributions Received (2/2/16 - 4/7/16) 104,475 

Less: Matching Funds Received (2/2/16 - 4/7/16) 142,565 

Remaining Net Outstanding Campaign Obligations 

(Deficit) as of 4/7/16 y 

$(51,429) 

As presented above, OMFP has not received matching fun 

entitlement. 

B. Preliminary Audit Report & Audit Divisioiy 

The Audit staff presented a preliminary NOCO; 

OMFP representatives at the exit conference.^ 

supporting calculations for the NOCO figures. O) 

comments related to this matter. 

The Preliminaiy Audit Report recomr 

believed were required in connection' 

provide any other additional comments. 

lendatioi 

lent and related 

e Audit i 

ives did i 

lentsin excess of its 

to the 

ided the 

provide 

ibngtmte any adjustments it 

titejfNOCO statement or 

C. Committee Respi 

In its response to tj 

comments related 

it Repot 

mmendation, OMFP had no 

Fin .^Non-Qualified Expenses 

SummtU 

During audrtN^l^ork, the Xudit staffs review of OMFP's disbursements indicated that 

OMFP spent on b^alf of the O' Say Can You See Political Action Committee 

(OPAC).' Since mekejmds were not spent in connection with the Candidate's 

nomination for electipp^ey are considered non-qualified campaign expenses. The 

calculated repaymen^o the United States Treasury at a ratio of 23.37% is $9,309. OMFP 

representatives explained that OMFP was aware during the campaign that these were not 

qualified campaign expenses and expected OPAC's reimbursement for these expenses. 

The Audit staff analyzed all documentation pertaining to these disbursements and 

subsequent reimbursements and confirmed that OPAC. reimbursed OMFP in full. Since 

the public funds were restored as a result of the reimbursement, the Audit staff will 

recommend that the Commission make a determination that no repayment is owed to the 

U.S. Treasury. 

' OPAC is a qualified multi-candidate political action committee formed on July 18,2012. Initially 

OPAC supported and opposed more than one Federal candidate; however, OPAC amended its Form 1 

with the Commission on June 12,201S to identify the Candidate as the sponsor of the Leadership PAC. 

OPAC has no affiliated committees. 
10 

In response to the Preliminary Audit Report recommendation, OMFP had no comments 

related to this matter. 

Legal Standard 

A. Qualified Campaign Expense. The legal standard in Finding 1 above pertaining to 

the qualified campaign expenses is incorporated herein. 

B. Definition of Non-Qnaiified Campaign Expense. A non-qualified campaign 

expense is any expense that is not included in the definition of a qualified campaign 

expense (see above). 11 CFR §9034.4(b). 

C. Matching Funds Used for Non-Qnaiified Campaign Ex[ 

determines that a campaign used matching funds for non-qi 

the candidate must repay the Secretary of the United St 

the amount of matching funds used for the non-qualifiedx^^mpaig 

§9038(b)(2)(A). 

D. How to Determine Repayment Amonntj 

The amount of any repayment sought under t 

total amount determined to have been used for i 

amount of matching funds certified to^he candidate I 

deposits, as of 90 days after the candi^h'a.^^te of ineligil! 

§9038.2(b)(2)(iii). 

E. Notification of Repay mentObiigatio 

any repayment detenniiwtii^s^soon as ] 

close of the matching^ymeritHperiod. The i 

the candidate (undo^rCJ^R §^^8.1(d)) wilP 

section. 11 CFR §903i 

Facts 

Jf the Commission 

1 campaign expenses, 

an amount equal to 

snses. 26U.S.C. 

ified Campaign^*:^penses. 

the sameWio to the 

paign expenses as the 

the candidate's total 

11 CFR 

will notify a candidate of 

}le, but n3;>4ater than three years after the 

lission's issuance of the audit report to 

titute notification for purposes of this 

A. 

The Audhs^itff reviewed ^I))|FP's^isbursement records and identified the following 

three paymra1;^ade by Oh^P on behalf of OP AC: the first payment of $15,000 was 

made on May the^econd payment of $15,728 was made on June 1,2015; and 

the third paymenib^9$4j0o was made on June 5,2015. OMFP made these 

disbursements totaling/^9,834 to purchase social media advertising and to finance 

payroll on behalf of OP AC and confirmed that none of these expenses related to the 

presidential campaign. 

Since these expenses were not made in connection with the Candidate's campaign for the 

Democratic Party nomination for President, they would be considered non-qualified 

campaign expenses. It is apparent that OMFP used these public funds to defray nonqualified campaign expenses. When calculating a repayment determination, the Audit 

staff routinely examines all expenses regardless of when they were made. In this 

instance, in accordance with 11 CFR §9038.2(b)(2)(iii), the Audit staff calculated the 
11 

ratio of repayment at 23.37%.Applying this ratio to the total non-qualified expenses of 

$39,834, the amount of repayment to the United States Treasury would equal $9,309. 

However, based on the documentation presented by OMFP, the Audit staff confirmed 

that OPAC reimbursed OMFP in full on August 20,201S. While it may have taken 

OP AC more than two months to reimburse OMFP, it repaid the total balance of public 

funds spent on non-qualified campaign expenses of $39,834. Bj^paying all the 

borrowed funds from OMFP, OPAC restored the public funds^fh^been used for the 

non-qualified campaign expenses." This reimbursement e^urdd that OMFP was able to 

use the public funds to pay other qualified campaign exneiM^sWWepay the U.S. 

Treasuiy if OMFP had been in the position of carryin^S^lus or^had received public 

funds in excess of its entitlement. Since the public^^d^^nt on tne^t{-<iu&lif>ed 

expenses have been restored via reimbursement^fi^ OPAC, no repa}^^>^o recoup 

public funds is warranted.'^ 

B. Preliminary Audit Report & Audit Division 

The Audit staff presented this matter<toOMFP 

along with schedules detailing the finam|>C^FP 

were aware all along of the fact that th^^xp^ii 

campaign expenses. For that reason, O! 

reimbursement for these expenses in full. 

lation 

lyes at the exit conference 

ii^eyeiterated that they 

res did nbt present qualified 

d re^fived OPAC's 

The Preliminary A 

relevant to this 

that no repayment is o 

OMFP submit any comments it deemed 

lend that the Commission determine 

I Finding 3. 

iminary Audit Report 

eport recommendation, OMFP had no 

to Itemize Offsets to Eatpenditures | 

Summauy 

The Audit staff reviewed vendor refunds OMFP disclosed on Schedule A-P, Line 20 

(Offsets to Expenditures (Refunds, Rebates, etc.)) and determined that OMFP did not 

itemize 14 such refunds totaling $8,582. Subsequent to the audit notification, OMFP 

filed amended reports and materially disclosed these receipts. Since OMFP's corrective 

action occurred after audit notification, the matter is included in this audit report. 

Matching funds certified as of 90 days post-DOI divided by deposits for the Primary election as of 90 

days post-DOI ($1,088,929/$4,6S9,221 =.2337). 

" OMPP's payment of $39,834 deemed as non-qualified campaign expenses less OPAC's full repayment 

of $39,834 equals zero. Since these activities occurred prior to the DOI, they are not reflected on the 

NOCO statement. 

' A repayment determination is meant for the government to recoup money that was spent in violation of 

the conditions of receiving matching funds, not to be a penalty. Since OMPP's funds were restored via 

OPAC's reimbursement, any repayment determination would be a penalty. Kenneify for President 

Committee v. Federtd Election Commission, 734 P.2d 1SS8,1562 (D.C. Cir. 1984). 
12 

In response to the Preliminary Audit Report recommendation, OMFP had no comments 

related to this matter. 

Legal Standard 

A. When to Itemize. Authorized candidate committees must itemize: 

Any person who provides a rebate, refund, or other offset to operating expenditures to the 

reporting committee in an aggregate amount or value in excess of $200 within the 

election cycle, together with the date and amount of such receipt. 52 U.S.C. 

§30104(b)(3)(F). 

B. Election Cycle. The election cycle begins on the first day following the date of the 

previous general election and ends on the date of the next genejtd^el^tion. 11 CFR 

§ 100.3(b). 

C. Definition of Itemization. Itemization of contributii 

recipient committee discloses, on a separate schedu 

• The amount of the contribution; 

• The date of receipt (the date the com^tteeirecei 

• The full name and address of the contri 

• In the case of contributions from individual 

occupation and the name of lus.or her empio; 

• The election cycle-to-date total oflalLcontributioi 

11 CFR §§100.12 and 104.3(a: 

Facts and Ana!3rsis 

A. Facts 

During audit fiel 

by OMFP, and identifn 

Schedule 

OMF 

leans that the 

ion: 

rs, the contributor's 

le same contributor. 

vendor refunds and rebates received 

$8,582 that were not itemized on 

>rts, as required. 

ure^pOrtS-subsequent to the audit notification and 

izattoiierrors. Since OMFP's corrective action occurred 

ir IS included in this audit report. 

B. Preiiminary\Audit R|^rt & Audit Division Recommendation 

The Audit staff presem^^is matter to OMFP representatives at the exit conference 

along with schedule^nailing the finding. OMFP representatives stated that OMFP 

amended its disclosure reports after the audit notification and disclosed the majority of 

these refunds. 

The Preliminary Audit Report recommended that OMFP provide any comments that it 

deemed necessary with respect to this matter. 

C. Committee Response to Preliminary Audit Report 

In response to the Preliminary Audit Report recommendation, OMFP had no comments 

related to this matter. 
13 

Finding 4. Reporting of Debts and Obligations 

Summary 

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

obligations to one vendor totaling $156,019. 

In response to the Preliminary Audit Report recommendation; OMFP amended its 

disclosure reports to materially correct the disclosure of debts apd^D^Hgations on 

Schedule D-P (Debts and Obligations). 

Legal Standard 

A. Continuous Reporting Required. Apolitical) 

and nature of outstanding debts and obligations im^Hh^ 

U.S.C. §30104(b) and 11 CFR §§ 104.3(d) and^l 1(a). • 

B. Separate Schedules. A political committee nu 

owed by the committee and debts ow^ to the commit 

explaining the circumstances and conditions under whic 

incurred or extinguished. 11 CFR §10X.^4^ 

must 

debts are i 

Jose the amount 

lished. 52 

ate scheduleS'for debts 

pgether with a statement 

1 debt and obligation was 

C. Itemizing Debts and Obligations. 

• A debt of $500 orlesS^ust be repoV 

the date incurr^d^die^tevof the i 

regularly rej: 

A debt exceedmg SSiOO^ustbe disclos 

jn)! 

^once it Ites'been outstanding 60 days from 

tion); the committee reports it on the next 

An the report that covers the date on 

104.11(b). 

A. Fac 

During audit^bldwork, the Audit staff used available disbursement records to reconcile'^ 

the account o^^e of theyOMFP's largest vendors, American Express. The vendor 

provided the credltxb^^^ices that OMFP used on a daily basis to purchase various goods 

and services includii^advertising, ballot access consulting, compliance consulting, 

database managemei^ digital consulting, direct mail, food and beverage, office equipment, 

etc. The unreported debt balances totaling $156,019 should initially have been disclosed 

on Schedule D-P for the 2015 October Quarterly Report and the 2016 February Monthly 

Report.'^ 

" The reconciliation consisted of calculating invoiced and paid amounts for individual reporting periods in 

the 2015-2016 campaign cycle. The Audit staff then determined whether any outstanding debts were 

correctly disclosed on Schedule D-P. Each debt amount was counted once, even if it required disclosure 

over multiple'reporting periods. 

These reports covered periods July 1,2015 - September 30,2015 and January 1,2016 - January 31, 

2016, respectively. OMFP paid off the balances in the subsequent reporting periods; the 2015 Year-End 

Report and the 2016 March Monthly Report. 
14 

B. Preliminary Audit Report & Audit Division Recommendation 

The Audit staff presented this matter to OMFP representatives at the exit conference and 

provided schedules detailing the unreported debts for each audited reporting period. 

OMFP did not provide comments related to this matter. 

The Preliminary Audit Report recommended that OMFP provide documentation 

demonstrating that these expenditures did not require reporting on Schedule D-P. Absent 

such documentation, the Preliminaiy Audit Report recommended that OMFP amend its 

reports to disclose the unreported debts of $156,019. 

C. Committee Response to Preliminary Audit Report 

In response to the Preliminary Audit Report recommend 

disclosure reports to materially correct the disclosure of^ 

Schedule D-P. 

P amended its 

igations on 

I Finding 5. Stale-Dated Chec! 

Summuy 

The Audit staff identified 12 stale-d 

Legal Stsmdard 

Handling Stale-D^^(Uni 

payees (creditors dncqmcUiutO] 

Commission of its effi^^loj 

outstandin] 

Treasi 

In response to the Preliminary Audit 

U.S. Treasury. 

Y 

checks totalirikN$H,197 issued by OMFP. 

P made alniyht^nt of $ 15,197 to the 

^ a committee has issued checks that the 

I committee must notify the 

[ encourage them to cash the 

;.alsp^ubmit a check payable to the U. S. 

I outstmming checks. 11 CFR §9038.6. 

A. Facts 

The Audit staf 

identified 12 stale 

dated between June' 

December 31,2017.** 

ion of OMFP's bank accounts through December 31,2016, 

iecks totaling $15,197 issued by OMFP. The checks were 

and December 14,2016 and had not cleared the bank as of 

B. Preliminary Audit Report & Audit Division Recommendation 

The Audit staff provided OMFP a schedule of stale-dated checks at the exit conference. 

OMFP did not provide comments on this finding. 

The Audit stafT conducted a limited review of financial activity through December 31,2017 in order to 

determine whether the stale-dated checks had been cashed by the recipients and cleared the bank prior to 

the issuance of this report. 
15 

The Preliminary Audit Report recommended that OMFP demonstrate that: 

• The checks were not outstanding by providing copies of the front and back of the 

negotiated checks along with bank statements; or 

• The outstanding checks have been voided by providing either: 

o Copies of the voided check with evidence that no obligation exists, or 

o Copies of the front and back of negotiated replacement checks along with 

bank statements. 

• Absent such evidence, the Preliminary Audit Report recommended that $15,197 

be paid to the U.S. Treasury; or 

• If funds were not available to make the necessary refunds, OMFP should have 

disclosed the contributions requiring refunds on Schedul^^cP until funds become 

available to make such refunds. 

C. Committee Response to Preliminary Audit Repor 

In response to the Preliminary Audit Report recomme 

$15,197 to the U.S. Treasury. 

le a payment of 
FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM 

TO: 

FROM: 

SUBJECT: 

Patricia C. Orrock 

Chief Compliance Officer 

Thomas E. Hintermister 

Assistant Staff Director 

Audit Division 

Erin Chlopak (^^0^ 

Acting Associate 

General Counsel for Policy 

Lorenzo HoIIoway ^ 

Assistant General Counsel 

Compliance Advice 

Jennifer Waldman 

Attomey 

'J 

January 8,2018 

Preliminary Audit Report on O'Malley for President (LRA 1007) 

I. INTRODUCTION 

The Office of General Counsel ("OGC") has reviewed the Preliminary Audit Report 

("Proposed Report") on O'Malley for President ("Committeie"). The Proposed Report contains 

five findings: Net Outstanding Campaign Obligations (Finding 1), Amounts Owed to the U.S. 

Treasury (Finding 2), Failure to Itemize Offsets to Expenditures (Finding 3), Reporting of 

Debts and Obligations (Finding 4), and Stale-Dated Checks (Finding S). We concur with the 

findings and address questions raised by the Audit Division in its cover memorandum 

transmitted with the Proposed Report. If you have any questions, please contact Jennifer 

Waldman, the attomey assigned to this audit. 
LRA 1007 - O'Malley for President 

PAR Legal Comments 

Page 2 of3 

II. REFUNDED NONQUALIFIED CAMPAIGN EXPENSES DO NOT REQUIRE 

REPAYMENT. 

The Committee spent $39,834 on behalf of the O' Say Can You See Political Action 

Committee (the "PAC"), which the PAC refiinded. Since the Committee spent these funds on 

behalf of the PAC, these funds were not spent in connection with Martin O'Malley's campaign 

for nomination and therefore are nonqualified expenditures. 11 C.F.R. §§ 9032.9(a), (c); 

9034.4(a)(1). After a determination by the Commission that a committee used public funds on 

nonqualified campaign expenses, a committee, as a general matter, is required to make a 

repayment. 11 C.F.R. § 9038.2(b)(2). The auditors, however, are not recommending a 

repayment for these nonqualified campaign expenses. The auditors argue, in part, that a 

repayment is not required because the Committee paid the nonqualified campaign expenses 

before the candidate received public funds. 

We agree with the approach not to recommend a repayment but we disagree with the 

reasoning. All expenses, even those incurred before a committee has applied for matching 

public funds, must be examined until the last public dollar has been spent. See 11 C.F.R. § 

9038.2(b)(2)(iv). As the Court of Appeals for the D.C. Circuit has recognized, "federal funds 

and private contributions are commingled in the candidate's coffers," and "the regulations 

require repayment of unqualified expenditures regardless of whether the expenditures could 

properly be attributed to federal matching fund payments." Keimetfy for President Committee 

V. Federal Election Commission, 734 F.2d 1558,1562 (D.C. Cir. 1984). Therefore, it is 

irrelevant when the Committee the paid the nonqualified expenses if its account still maintains 

public funds. 11 C.F.R. § 9038.2(b)(2)(iv). 

We believe the Committee does not owe a repayment because the PAC refunded the 

funds spent on the Committee's behalf, replacing the money spent on the non-qualified 

expenses. The PAC's refund restored the public funds that the Committee used for the nonqualified expenses. Since the public funds were refunded to the Committee, these funds were 

available to pay other qualified campaign expenses or to repay the Treasury if the Committee 

had been in a position of carrying a surplus or it had received public funds in excess of its 

entitlement. See 11 C.F.R. §§ 9038.2(b)(1), (4). Therefore, any payment to the Treasury for 

these non-qualified campaign expenses would be a penalty. A repayment determination is not 

meant to be a penalty, rather it is a method of making the government whole. Kennedy for 

President, 734 F.2d at 1565 (explaining that a repayment is not a penalty but it "merely recoups 

[the] money expended by the candidate in violation of conditions he or she voluntarily assumed 

in order to receive the matching funds.'.'). 

III. AUDIT DIVISION SHOULD INCLUDE THE FINDING ON THE USE OF 

PUBLIC FUNDS TO DEFRAY NONQUALIFIED CAMPAIGN EXPENSES. 

Although the Audit Division is not recommending a repayment for the use of public 

funds to pay nonqualified campaign expenses, we believe that there should be a finding in the 

audit report to discuss the fact that the Committee used public funds for this purpose. One of 

the important purposes of the public financing statutes is to allow taxpayers to scrutinize 

publicly funded campaigns — to know where campaign finances come from and how they are 

spent. Reagan Bush Committee v. EEC, 525 F. Supp. 1330,1340 (D.D.C. 1981) ("Clearly, 

section 9009(a) evinces a purpose on the part of Congress to allow taxpayers who chose to 

direct a portion of their taxes to the Presidential Election Campaign Fund to know exactly how 

those tax monies are being spent... Yet the interests protected by PECFA do not stop at the 
LRA 1007 - O'Malley for President 

PAR Le^l Comments 

Page 3 of3 

public's right to know how tax monies are distributed, but also embrace a concem for openness 

and accountability to the public in the operation of Presidential campaigns") Reagan Bush 

Committee v. FEC, S2S F. Supp. 1330,1340 (D.D.C. 1981).' Therefore, we recommend that 

the Audit Division revise the audit report to include a finding that addresses these nonqualified 

campaign expenses. 

' The court in Reagan Bush Committee was interpreting the Presidential Election Campaign Fund Act 

(general election financing statute). The statute at issue in this Proposed Report's finding is the Presidential 

Primary Matching Payment Account Act. However, the different statutes share a common objective of ensuring 

transparency regarding candidates' use of public iiinds. 
FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM 

TO; 

FROM: 

SUBJECT: 

Patricia C. Orrock May 25,2018 

Chief Compliance Officer 

Thomas E. Hintermister 

Assistant Staff Director 

Audit Division 

Erin Chlopak 

Acting Associate General Counsel 

for Policy 

Lorenzo HoIIoway 

Assistant General Counsel 

Compliance Advice 

Jennifer Waldman C^UJ 

Attorney ^ 

Draft Final Audit Report on O'Malley for President (LRA 1007) 

The Office of General Counsel ("OGC") has reviewed the Draft Final Audit Report 

("DFAR") on O'Malley for President ("Committee"). The DFAR contains five findings: Net 

Outstanding Campai^ Obligations (Finding I), Amounts Owed to the U.S. Treasury (Finding 

2), Failure to Itemize Offsets to Expenditures (Finding 3), Reporting of Debts and Obligations 

(Finding 4), and Stale-Dated Checks (Finding 5). We concur with the findings but have 

additional comments regarding Finding 2. If you have any questions, please contact Jennifer 

Waldman, the attorney assigned to this audit. 

Finding 2 in the DFAR notes that the Committee does not owe a repayment to the United 

States Treasury. The Audit Division reached the same conclusion in the Preliminary Audit 

Report ("PAR"). To provide additional legal support for Finding 2 in the DFAR, we recommend 
LRA 1007 - O'Malley for President 

DFAR Legal Comments 

Page 2 of2 

that the Audit Division attach our comments on the PAR. In oiir comments on the PAR, we 

explain the legal basis supporting the conclusion that the Committee does not owe a repayment. 

Although the preliminary audit report may include calculations regarding future 

repayments, 11 C.F.R. § 9038.1(c)(l)(iii), the final audit report serves as the legal notification of 

any repayment determination made by the Commission. 11 C.F.R. § 9038.2(a)(2). Therefore, 

while the conclusion that the Committee does not owe a repayment remains the same between 

the PAR and the DFAR, the DFAR triggers the repayment process, and it must include the legal 

basis for the Commission's repayment determination. 11 C.F.R. § 9038.2(c)(1). We, therefore, 

incorporate our comments on the PAR by reference here and, we recommend that the Audit 

Division attach our comments on the PAR to the DFAR. 

The DFAR does not include an explicit recommendation that the Commission determine 

that no repayment is owed to the United States Treasury. Since a determination that no 

repayment is owed is still a determination, we recommend that the Audit Division revise the 

DFAR to include this recommendation.