Draft Final Audit Report of the 

Audit Division on the 

Georgia Federal Elections 

Committee 

January 1, 2005 - December 31, 2006 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

requured to file reports 

under the Federal 

Election Campaign Act 

(tiie Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have nici |; 

the threshold 

requirements for ^ 

substantid compliance 

with the Aci." Thc audit 

determm^" x^hcihjr ilfe^ 

coimni^e complied wuh 

the limiiciiions, 

prohibiti^Tnid 

disclosure reqi^ircinents 

of tiie 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. 

About the Committe^ 

The Georgia Federd Election^tllnmlittee is a state party 

committee of the Georgia^«*i:ifKTuiic Party headquartered in 

Atlanta, GA. For more iit^matioii. see the chart on the 

Committee Organiza^^p^. 

Financial ActivitKCp- 3) ^ 

• Receipts ^ ' ' J|| . 

o ContributionS^roin hidividuals ^ 

o Contributions 1 nmi Oi her Political Committees 

o ^ Ti.insfers from Affili.iiAl Party Committees 

o Ol I tejto Operating I .x^^idiu^es 

o Trani^^^ni Non-Fe^^^ccounts 

o 0%rFSSRotvipts 

%tal%ccvipts / 

Disbursill^nts ^ 

Operatmg Expenditures 

Contribufion&to Federal Candidates 

z CcHirilinaOTParty Expenditures 

r C'oMii ihd^n Refunds 

z Federal Election Activity 

z Transfers to Non-Federal Accounts 

c Other Disbursements 

Total Disbursements 

$831,598 

349,991 

776,863 

13,928 

1.193,210 

1,800 

$3,167,390 

$1,815,099 

12,322 

142.208 

5,800 

701,728 

460,783 

2,047 

$3,139,987 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Payment of Federal Activity with Non-Federal Funds 

(Finding 2) 

• Disclosure of Occupation/Name of Employer (Finding 3) 

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

Audit Division on the 

Georgia Federal Elections 

Committee 

January 1, 2005 - ro^rSl, 2006 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Changes to the Law 1 

Part II. Overview of Committee ^ 

Conunittee Organization 2 

Overview of Financial Activity * 3 

Part III. Summaries ^ ^ 

Findmgs and Recommendations v ^ 

Part IV. Findings and Recommendations 

Findmg 1. Misstatement of Finaii^d Activity 6 

Finding 2. Payment of Federal Aclix fix u ith Non-Fcilci al I 'lJ^s 9 

Finding 3. Disclosure of Occupati(i:i/N;iinJ m" T niployer W 13 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Georgia Federd Elections Committee (GFEC), 

undertaken by the Audit Division of the Federd Election Commission (the Commission) 

in accordance with the Federd Election Campaign Act of 1971, as amended (the Act). 

The Audit Division conducted the audit pursuant to 2 U.S.C. §438(b), which permits the 

Conunission to conduct audits and field mvestigations of any p()1it^l committee that is 

required to file a report under 2 U.S.C. §434. Prior to conduct ing ^ny^audit under this 

subsection, the Conunission must perform an intemd revicW ui reports filed by selected 

committees to determine if the reports filed by a particu^cmiiin^i^i^ meet the threshold 

requirements for substantial compliance with the Act. 2 u||.C. 

Scope of Audit 

Following Conunission approved procedures^i he .\udit staff evaluated varioiiN f actors 

and as a result, this audit examined: ^ 

1. The disclosure of mdividual contributors' occupiii ion and name of employer; 

2. The disclosure of disbursements,llcbis and obligadoii^: 

3. The disclosure of expenses allocated bcm^-en federal, nun-feJcral, and Levin 

accounts; % 

4. The consistency between reported figws ai:tl ^•cuicS; 

5. The completeness o f i eci n iK; and, ^ ^ 

6. Other conimittee ()p«.M A\ necessary to^tiie reviewf 

Changes to the Law 

On December 1.2005, tiie ( uiiiiiii^Nion wgal to amend its mles to require state, district 

and locaL^iiu oMiiiiiiiiees in pay us adimS&ative expenses the sdaries, wages and 

fringe.b^fits of eniplo\ees who s|D^nd25 percent or less of their compensated time in a 

montiF([^federal election^activity ^^k) or activity ui coimection with a federal election 

("covere^^pjloyees"). The previous regulation that allowed party committees to use 

non-federaf^^^for sdaries and wages for covered employees was stmck down by the 

Supreme Cou^^^ays v^^SC. The revised mle became effective on January 19,2006. 

(See Finding 2, Pavmciii^Federd Activitv witii Non-Federal Funds). 
Part II 

Overview of Coinmittee 

Conunittee Organization 

Important Dates Georgia Federal Elections Committee 

• Date of Registration June 14, 1976 

• Audit Coverage January 1,2005 - December 31,2006 

Headquarters Atlanta, 

Bank Infonnation 

• Bank Depositories 

• Bank Accounts ^j'^^deral,!!'!!!! l-ederal, 1 Levin 

Treasurer 

• Treasurer When Audit Was Conducted Relg:empleton _ 

• Treasurer During Period Covered by Audit Je^^^J. DiSantis ^ 

Management Information 

• Attended FEC Campaign Finance Seminar 

• Used Commonly Available Campaign l^iMIK'lIl 

w 

Software Package % A. 

• Who Handled Accoun:in jliiul Rccordkeepll |#asks ^aid Staff 

4 f 
Overview of Financial Activity 

(Audited Amounts) 

Federal Cash on hand @ January 1,2005 $17,342 

o Contributions from Individuals $831,598 

o Contributions from Other Political Comniittees 349,991 

o Transfers from Affiiiated Party Committees 776,863 

o Offsets to Operating Expenditures 13,928 

o Transfers from Non-Federal Accounts 1,193,210 

o Other Federal Receipts 1,800 

Total Federal Receipts X 1^ $3,167,390 

o Operating Expenditures "7 $1,815,099 

o Contributions to Federal Candidates 

o Coordinated Party Expenditures 

0 Contribution Refunds ^ 

d . 12.322 

142,208 

. X " 5,800 

o Federal Election Activity ^„ 701,728 

o Transfers to Non-Federal accounts V ^ 460,783 

o Other Federal Disbursements : . TM, 2,047 

Total Federal Disbursements ^ $3,139,987 

Federal Cash on hand @ December 31,2006 k $44,745 

Levin Cash on hand @ January 1,20(15 $6,886 

Total Levin Receipts % F 750 

Total Levin Disbursemigm^ %^ 7,210 

Levin Cash on hand December 31,200^ ^ $426 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

A comparison of GFEC's reported financial activity to bank records revealed a 

misstatement of receipts and disbursements in both 2005 and 2006; and an understatement 

of cash at December 31,2006. In 2005, GFEC under reported T<^ ^ and disbursements 

by $523,109 and $523,965 respectively, and in 2006 GFEC imiffrepbrted receipts by 

$126,313 and disbursements by $100,422. GFEC's reported e.^^^alance at December 31, 

2006 was understated by $26,261. The Audit staff reconAnd'^^^t GFEC file amended 

disclosure reports to correct the misstatements. In r^^^ ^ GFE^ol lowed the Audit 

staffs recommendation by amending its reports fg^Morthe discrepaneies with the 

exception of the activity related to its payroll account. GI^C did not ni.ike adjustments for 

its payroll account contendmg that it is not a fvtieial account,.but one which M.I« created to 

facilitate its payroll processing. GFEC contends thai the iton-f^eral funds paid through 

this account are not reportable to the Conunission. (I-or more detail, see p. 6) 

Finding 2. Pasrment of Fe^^dActivity with Non-Federal Funds 

Disclosure qf Salaries and Relat^^^^^^ ^ ^ 

GFEC failed to provide supporting docum^tat^^^ailing ihftime spent on federal 

activities for employees whose earnings anfl relfted payroll expenses were allocated on 

Schedules H4. GFEC^^-poiietl Nalaries and related exposes on Schedules H4 totaling 

$231,366. Absent lhe supportiii<! documentatim, GFEC should have disclosed tiiese 

payments on Sch^lulcs R. TheMidit staff rec%c^ended that GFEC either provide the 

supporting documentatioiMiieiiiioiieil aboie or^^end its reports to correctiy itemize its 

salaries a^^^teil expense^^100'r federal activity on Schedules B. In response, 

GFECji^med declarationsiis employees whose sdary payments were originally 

allocai^on Schedul^^N ihat show these payments were allocable and therefore 

corred I \ reported. 

Funding by theNon-Federal Account for Possible Federal Actiuity 

GFEC made 68l^^fers ^lin g $628,254 from its non-federal accounts into a federal 

account it used to make payroll disbursements. Without supporting documentation to 

show otherwise, the Audit staff considered all of the disbursements made from GFEC's 

payroll account to be 100% federd activity reportable on Schedules B. The Audit staff 

reconunended that GFEC demonstrate that its disbursements for salaries and related 

expenses are allocable to its non-federal account. Absent such a demonstration, the 

interim audit report noted tiiat GFEC would be required to transfer $478,715^ from its 

federd account to its non-federal account as payment for its share of federal expenses, hi 

response, GFEC provided declarations from several employees attestmg that they spent 

little or no time working on federal activities during the months m which all or a portion 

See Facts and Analysis section for calculation. 
of theu: payroll was paid with non-federd funds. As a result no transfer to the nonfederd accounts is needed. (For more detail, see p. 9) 

Finding 3. Disclosure of Occupation/Name of Employer 

A review of contributions from mdividuals revealed that 71 contributions totaling 

$170,474 lacked, or did not adequately disclose, the contributor's occupation and/or 

name of employer. Furthermore, no evidence was provided that "best efforts" was made 

to obtain, mamtam, and submit the information. The Audit staff recommended that 

GFEC provide evidence that it exercised best efforts or contact each contributor lacking 

this information, submit evidence of such contact, and disclose aiiC information received 

on Schedules A. In response, GFEC filed amended reports diNclosing'^e information it 

had acquired as a result of its contact with the contributors. 

(For more detail, see p. 13) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity J 

Summary 

A comparison of GFEC's reported fmancid activity to bank records revealed a 

misstatement of receipts and disbursements in both 2005 and 2006; and an 

understatement of cash at December 31,2006. In 2005, GFEC u^|||gr reported receipts 

and disbursements by $523,109 and $523,965 respectively, an^^ra©.6 GFEC under 

reported receipts by $126,313 and disbursements by $100,422. (iE^C's reported cash 

balance at December 31, 2006 was understated by $26,2611. I he Audit staff 

recommended that GFEC file amended disclosure reports^ corremlie misstatements. 

In response, GFEC followed the Audit staff's reconunendation by aiiieiidiiig its reports 

for all of the discrepancies with the exception of ihe activity related to pa\Toll account. 

GFEC did not make adjustments for its psLyro^ccoimt conieiiding that it i"^.^ ^ federal 

account, but one which was created to facilitate iis pa>roll proq^ssing. GF ^ contends 

that the non-federal fimds paid through this accouni are noi reportable to the 

Conimission. 

Legal Standard ' ^ 

Contents of Reports. Each report must'^selo^e: ^ 

• The amount of cash on hand at the be^miing ami eiul of^e reporting period; 

• The total amount ofj^^Si;ii^ lor the repo^^g period^anil for the cdendar year; and 

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

• Certain transadi ioi is that requ ire itemizatio^^tSchedules A (Itemized Receipts), 

Schedules B (Itemi/elli)j^bu^^el1le!1I^l, Sch^kiles H3 (Transfers from Nonfederal 

ACCOUIUN for .AlUicateolFederal/NonleieFd Activity), or Schedules H4 (Disbursements 

for M'ocaied Feclei ji/Nonleileid ActivUy). 2 U.S.C. §434(b)(l), (2), (3), (4), and (5) 

aiiilTl34(e)(2), (am i i4). 

4 

Facts and Analjrsis ^ 

The Audit sial I leconciled (il EC's reported financial activity to its bank records for 2005 

and 2006. Belou arc chartN ihat outline the discrepancies in both years followed by 

explanations of the iiii^^ia^ments, if known. 

2005 Activity r 

Reported Bank Records Discrepancy 

Opening Cash Balance 

@ January 1,2005 

$16,116 $17,342 $1,226 

Understated 

Receipts $414,202 $937,311 $523,109 

Understated 

Disbursements $418,781 $942,746 $523,965 

Understated 

Ending Cash Bdance 

@ December 31,2005 

$11,537 $11,907 $370 

Understated 
Beginning Cash on Hand as of January 1,2005: 

The $1,226 understatement of beginning cash on hand was due to prior period errors. 

The understatement of receipts resulted from the following: 

• Unreported transfers: non-federal accounts to payroll account^ + $505,984 

• Unreported contributions from politicd conmiittees + 17,000 

• Unexplained difference + 125 

Understatement of Receipts 

The net understatement of disbursements resulted from the following: 

• Unreported disbursements made from payroll accoimt ^ + 

• Unreported transfers: federal accounts to non-federd a^^miis + 

• Inter-account transfers from federd accoimts to payrjilr 

account erroneously reported - ^ 

• Unexplained difference - \ . 

NetUnderstatement of Disbursemenis ^ ^523,965 

$523,109 

$500,014 

34,018 

2,895 

7,172 

2006 Activity r 

Reported Binik Records Discrepancy 

Opening Cash Bdance 

@ January 1,2006 

T SI 1.537 .SI 1,907 $370 

Understated 

Receipts $2,1^66 $2,2^0,0/9 $126,313 

Understated 

Disbursements $2,096,1^^ ^2,197,242 $100,422 

Understated 

Ending Cash ^^laiice 

©December 31, 2006 

$18,483T\. $44,744 $26,261 

Understated 

The net i^lTNiaieiiieiii of rec4:ipi> resulud liom the following: 

• Unreported tranNrci'^: non-lederal acpounts to payroll account 

• ^ran^lfer from politieal ^.onmiillecPnot reported 

• Unej^^Md difference = ^ 

Net^lderstatemeidof Receipts 

+ 

+ 

$122,391 

5,000 

1,078 

$126,313 

The net understaterneiu ol^isbursements resulted from the following: 

• Unreported disbui ^cinents made from payroll account 

• Reported transfe^ from federal account to non-federal 

account not traced to bank 

• Unreported transfers: federal account to non-federal account 

• Unexplamed difference 

Net Understatement of Disbursements 

+ 

+ 

$122,391 

27,550 

258 

5,323 

$100,422 

^ GFEC paid both federal and non-federal staff from this account but did not report the majority of the 

account activity to the Commission. Since payments for federal payroll were made from this account, the 

Audit staff considered it a federal account. 
On December 31,2006, the cash balance was understated by $26,261 as a result of tiie 

errors described above. 

In both 2005 and 2006 the primary reason for the understatement of receipts and 

disbursements was GFEC's failure to properly report activity to and from its payroll 

account. GFEC, which did not consider this account to be a federal accoimt, made 

severd transfers into this account from both its non-federd and federal accounts and paid 

both its federd and non-federal employees from the account. It should be noted that only 

33% of the payroll account's activity was reported on GFEC's di-elosure reports to the 

Commission.* \ 

The Audit staff presented this matter at the exit conference. (i I - I X.^ representatives 

disagreed that the payroll account was a federal accoimt^md explain^ that the payroll 

accoimt was used like an "escrow account." They jj^^^^t this account was created to 

accommodate GFEC's payroll processing vendo^aychex, which woiiiil noi draw fiuids 

to process payroll from multiple accounts. GIV.C represeii^tives opined ihal account 

was not a federal account and its non-federal aciix ii\ ua.s nonportable to XM 

Commission. " ' ^ 

It is the opinion of the Audit staff tiiat since (rFEC made diNhiirsements from the payroll 

account for both federal and non-federal nav roll, the account t'uncdoned as an dlocation 

account and dl activity to and from this %:ouni w a*^^ ivportabjc to the Commission on 

Schedules A, B, H3, and/or H4. In Findii^^^lllie iiiie|^^udit report. Payment of 

Federal Activitv with Noii-rederal Funds, t^piudit staff^ated that since GFEC did not 

mdntam monthly log.s. liine sheets or affida\^ for its employees, it was not possible to 

determine whetherpa\ roll should have been paid wholly from the federd account, the 

non-federal account, or allocated between the two accounts as administrative expenses. 

Therefore, it \^ti^ stated thai Gl-'liC' ^hou^^^rt these disbursements on Schedules B 

until it d^ioii^ti.ited v^li.ii perceiiuiizc of its employees' time was spent working on 

federal elect ion acti^ iw. 

/ ' w 

Interim Audit Report Recc^tmiendation and Committee Response 

The Audit sial l'leeommended that, withm 30 days of service of this report, GFEC: 

• Amend its 2()()5 and ^Ofi reports to correct tiie misstatements noted above, including 

appropriate Scheduled, B, H3, and H4. 

• Report non-fede^l'^payroU disbursements on Schedules B as "Other Disbursements," 

line 29 of the detailed summary page and report the corresponding transfers from the 

non-federd account on Schedules A as "Other Federal Receipts," lme 17. 

• Include a memo text with each amended item stating that "the transactions are being 

disclosed as a result of tiie 2005-2006 cycle FEC audit." 

• Amend the cash balance on its most recently filed report with an explanation that it 

resulted from audit adjustments from a prior period. It was further recommended that 

^ In 2005 only 2% of GFEC's salaries or related expenses were for employees who spent more than 25% of 

their time on FEA activities or activities in connection with a federal election. In 2006,70% of GFEC's 

salaries or related expenses were for this type of activity. 
GFEC reconcile the cash bdance on its most recent report to identify any subsequent 

discrepancies that may impact adjustments recommended by the Audit staff. 

In response, GFEC filed amendments correctmg the errors detailed above not related to 

its payroll account. With regard to the unreported payroll account transactions, GFEC 

argues that this account is a "pass through escrow" account, not a federal account, and 

GFEC does not intend, at this time, to report the non-federd portion of the payroll 

account's activities to the Conmiission. 

GFEC reasons that the enactment of the Bipartisan Campaign Refoi in Act of 2002 

(BCRA) altered the process of paying payroll expenses by state|pai-i^9ommittees by 

creating two distinct challenges. Fu:st, the conunittee would^^e to estimate each 

employee's activities so that appropriate federal or non-f^^^^iiids were used to pay 

tiiem. Second, GFEC's payroll company encountered^pimems w 'w'w the arrangement of 

debiting two different bank accounts for payroll. 

Based upon the above, GFEC believes that the p<i>ioll acdbunt was a transmiit.il^account 

for both federd and non-federal fimds, ratiier th.iii a i^'^'ei^ a^unt. GFECj^helieves that 

the disclosure of the non-federal portion of this accoum^ould be incorrect and 

unnecessary. GFEC will, however, amend its reports fi^^ifommission concludes it is 

necessary. To avoid possible confusion li\ any readers oMiFliC's reports, the Audit staff 

further recommends tiiat GFEC should iiieUide memo text eiiig^l^ith any non-federal 

activity it may disclose, stating that the ^insactioiis au* I'or n^Pallocable non-federd 

activity. ^ 

A ^ Although tiie enactment of ihe IK'RA did change tiie way payroll is allocated, it did not 

create for the first<»^ime ilie need^i allocate pa^^ii> That requirement had been in place 

for a number of years. I he Audit staff belicv^^e payroll account served as an 

allocation accouni used to make boih-fedcr^jind non-federal disbursements using both 

federal anti-non-fcdcral fimds. ..Allocation accoimts are federal accounts from which 

conuiiiiiees must repoil ull federal ami non-federd activity. 

I Finding^ Pajrmeiit oiFederal Activity with Non-Federal Funds | 

Summary |. ^ 

Disclosure of SaX^ms and Related Expenses 

GFEC failed to provj^ supporting documentation detailing the time spent on federal 

activities for employees whose eamings and related payroll expenses were allocated on 

Schedules H4. GFEC reported sdaries and related expenses on Schedules H4 totaling 

$231,366. Absent the supporting documentation, GFEC should have disclosed tiiese 

payments on Schedules B. The Audit staff recommended that GFEC either provide tiie 

supportmg documentation mentioned above or amend its reports to correctiy itemize its 

salaries and related expenses as 100% federal activity on Schedules B. In response, 

GFEC provided declarations from its employees whose sdary payments were originally 

allocated on Schedules H4 that show these payments were diocable and therefore 

correctly reported. 
10 

Funding by the Non-Federal Account for Possible Federal Actiuity 

GFEC made 68 transfers totaling $628,254 from its non-federal accoimts into a federd 

account it used to make payroll disbursements. Without supporting documentation to 

show otherwise, the Audit staff considered dl of the disbursements made from GFEC's 

payroll accoimt to be 100% federd activity reportable on Schedules B. The Audit staff 

reconunended that GFEC demonstrate that its disbursements for sdaries and related 

expenses are diocable to its non-federal account. Absent such a demonstration, the 

interim audit report noted that GFEC would be required to transfer $478,715^ from its 

federal account to its non-federd accoimt as payment for its share of federal expenses. In 

response, GFEC provided declarations from several employees aiie^tmg that they spent 

little or no time working on federal activities during the months^] whkh all or a portion 

of theu payroll was paid with non-federd fimds. As a result nmhransfer to the nonfederal accounts is needed. ^ 

Legal Standard ^ ^ 

A. Accounts for Federal and Non-federal Actmty. A party commiuee ihat finances 

political activity in connection with both fedei.irfiiul non-^erd election^ ^^lal{Establish 

two accoimts (federd and non-federal) and allocate >hared ^^nses, those that 

simultaneously support federd and non-federd election activity between the two 

accounts. Altematively, the conunitte^may conduct hoihr federal and non-federd activity 

from one bank account, considered a rccleral accouni. 11 C^l l< H02.5(a)(l)(i). 

> •

B. Paying for Allocable Expenses. Cofl^issiom^^^ons^Mer party committees two 

ways to pay for diocable shared federal/non-f^erd e-?^^^i^. 

• They may pay t^^nure amount of t^^nared exgpnse from the federd accoimt 

and transfer films froir. ihe iion-feder^accoimt to the federal account to cover the 

non-federal««li.ue of that e.\pense; or 

• They may esiabliNh a ^enaraie. federd allocation accoimt into which the committee 

deposits funds from lioth IIN ledetcj^^^on-federal accounts solely for the 

pumose of'pux^ng lhe allocable expenses of shared federal/non-federd activities. 

11 CFR §106.'5(gKI)(i) and ii'm.K). 

C. ReportijiK .VUocable Expcnsei£^ A political conunittee that dlocates federal/nonfederal expen^e^ must repon each disbursement it makes from its federd accoimt (or 

separate allocuiii)|^ccou^fto pay for a shared federal/non-federal expense. Committees 

report these kind^nf di>bursements on Schedules H4. 11 CFR §104.10(b)(4). 

D. Costs allocable l^y State party committees between Federal and Non-federal 

accounts (Effective prior to January 19,2006). State party committees must pay salaries 

and wages from fimds that comply with State law for employees who spend 25% or less of 

their time in any given month on federal election activity. 11 CFR § 106.7(c)(1). 

See Facts and Analysis section for calculation. 
11 

E. Costs allocable by State party committees between Federal and Non-federal 

accounts (Effective on January 19,2006). State party conimittees must either pay 

salaries, wages, and fringe benefits for employees who spend 25% or less of their time m 

a given month on federal election activity with fimds from theu federd accoimt, or with a 

combination of fimds from their federal and non-federal accoimts. 11 CFR §106.7(c)(l), 

as amended January 19,2006. 

F. Recordkeeping: Salaries and Wages. Conunittees must keep a monthly log of the 

percentage of time each employee spends in coimection with a Federal election. Salaries 

and wages for employees who spend more than 25% of thek conineiisated time in a given 

montii on Federal election activity or activities in connection wjtii a Federal election must 

be paid only from a Federal accoimt. 11 CFR §106.7(d)(l)(ii). 

Facts and Analysis 

Disclosure of Salaries and Related Expenses ^ 

The Audit staffs review of payroll expenses indicia that GFEC did iioi^iiaintain 

monthly logs, time sheets or aftidavits for its employees td^tablish how niiieh^me was 

devoted by each employee to Federd and noh-tederal aciiv iih||. Therefore^ased on the 

regulatory change effective January 19,2006 (See page I. C'lianges to the Law), the 

Audit sia££ applied the following to assess sdary expendii^es: 

1. For salary and payroll tax paymeniN inadclvt'oie Januar\ 19. 2()()6: 

If there is monthly log, time shee^r al I ul.ti it uliich st^s that: 

• the time spent on federal activitms l|s« than or equal to 25%; the payment can 

be made froi^lhe non-federd ac^^t and it ;;cquires nothing fiirther of the 

federal committee:Or ^ 

• the time^spcni on I'ederd activity ex^eds 25%, or for which there is no 

documentation indicatiiiu a lesser percentage, tiie federal conunittee must 

diNcloNe^hese payments on SL^MI ^ B, Line 30b, as non-dlocable federd 

flection aeiivit) (|-L.\j. 

2. F ^ "<|^y payroll lax paym^ts made on or afrer January 19, 2006^: 

LrK^re is monthl}^^^, timesheet or affidavit which states that: 

• tiie I ime spent oi^deral activity each month is none, or 0%; this may be paid 

by the non-fed^l' account and requires notiiing furtiier of the federal 

commitlee: or ^ 

• the time spent on federal activity is less than or equal to 25%; tiiis payment 

must be nrade from the federal account and disclosed by the federal conunittee 

on Schedules H4 as diocable admmistrative activity, for which reimbursement 

may be sought from the non-federal accoimt at the administrative ratio; or 

• the time spent on federal activity exceeds 25%, or for which there is no 

documentation indicating a lesser percentage, the federd conunittee must 

disclose these payments on Schedules B, Line 30b, as non-allocable FEA. 

^ GFEC did not allocate any salary or wage payments on Schedules H4 before the regulations changed on 

January 19,2006. 
12 

The Audit staffs review reveded that GI^C failed to maintam supporting 

documentation detailmg the time spent on federal activities for employees whose salaries 

and related expenses, reported on Schedules H4, totaled $231,366. Absent the supporting 

documentation, GFEC should have disclosed these sdary and related expenses as nonallocable FEA on Schedules B, Line 30b of the detailed summary page. 

The Audit staff discussed this matter with GFEC's representatives during the audit and 

requested monthly logs, timesheets and affidavits. GFEC representatives were unable to 

locate any of the items requested. 

Funding by the Non-Federal Account fo r Possible Fe^^mi^tbiity 

GFEC made 68 transfers totding $628,254 from its non-fedi^^ccounts into a federal 

account it used to make payroll disbursements. Without Mi^^^^documentation, the 

Audit staff considered dl of the disbursements made from GFEC^^a^oU accoimt to be 

non-allocable FEA, reportable on Schedules B, Luie J^l^^^^the detailed nummary page. 

r 

The Audit staffs analysis indicated that during tile period'i^vered by the^af^^6xcluding 

payroll, GFEC transferred $149,539 less tiiaii ii co^iild hav^^i^ non-feder^o federal 

accoimts for diocable expenses. A similar analysis of (JIIBC'S payroll account for the 

same period showed tiiat GFEC trans^^red $628,254 mine than it should have from nonfederal accounts into its payroll accouni if all payroll wa^ considered 100% Federal. This 

resulted in GFEC's non-federal accoim^^ovj^iTiHiding its fedenig^vroU accounts by 

$478,715 ($628,254 - $149,539). 

During audit fieldworkihe Audit siaff mad^^erd reqii»'-is for GFEC to provide 

montiily logs, time^i^ts or noiai ized affidavits for its employees that would 

demonstrate its noi^dei al account was not f^^cing federd activity. GFEC did not 

provide any of the requested iieiii'^. \ i die exit^iference, GFEC representatives stated 

that they did not believe w\\\ of the iiiuepji^gi^ctivity from the payroll account was for 

federal ^^^li" " ''^^y l >"'ihci^ stal^tiiat tiie accoimt used to pay these 

employees was not atldcral aceoiini. The account was set up to acconunodate GFEC's 

payroll j^^ssing company who \^ould only process GFEC's payroll from a single bank 

accoimtT^neiefore, GFEd! bcliev^the non-federal activity related to this accoimt is not 

reportable to ihe Coinmission. 

Interim Audit I^^ft Recommendation and Committee Response 

The Audit staff recoi^Sended that, withm 30 calendar days of service of this report, 

GFEC: ^ 

• Provide monthly logs or time sheets attesting to the time spent by employees for 

tiie period employed by GFEC, or affidavits stating that these employees did not 

spend more that 25% of their time on Federd election activities or activities m 

coimection with a Federal election, and amend its disclosure reports accordmgly. 

• Report any disbursements that GFEC can show are solely non-federd on 

Schedules B, line 29 of the detailed summary page as "Other Disbursements." 

• Report any disbursements that GFEC caimot show are diocable or solely nonfederd on Schedules B, line 30b of tiie detailed summary page, as FEA. 
13 

• If no additional documentation was provided, GFEC was to reimburse the nonfederd account $478,715. 

• Include a memo text with each amended item stating that "the transactions are 

being disclosed as a result of the 2005-2006 cycle FEC audit." 

In response, GFEC provided declarations from several of its employees attesting that 

during relevant months in which the employees' payroll was fimded entuely, or partidly, 

by non-federal fimds; that they worked less than 25%, or no time at all, on activities in 

coimection with a federal election. GFEC dso noted tiiat the Commission's regulations 

regarding payment of payroll for those employees who did not in^tiie 25% threshold 

changed in January 2006 and that GFEC correctly amended its.p1^^11>procedures to 

comply with tiiese new requirements. 

Finding 3, Disclosure of Occupation/Name of Employer | 

Summary V ^ 

A review of contributions from individuds repealed ihat 7rccmtributions loialmg 

$170,474 lacked, or did not adequately disclose, the eonirihutoVs occupation and/or 

name of employer. Furthermore, no evidence was provided that "best efforts" was made 

to obtain, maintain, and submit the iifToiiii.ition. The Audit staff recommended that 

GFEC provide evidence that it exercised^hesi efforts or contaci ci^h contributor lacking 

this mformation, submit evidence of sueh coiilaci. uml disclose any information received 

on Schedules A. In response, GFEC file^nendcd reporis c|iiclosmg the information it 

had acquired as a result of its coin act with thj^btribulors.' 

Legal Standard! 

A. Itemization Required for Contributions ir ^ Individuals. A political coinmittee 

other than an autiiorized coiiiiniiiee intM iieini^any contribution from an mdividual if it 

exceeds ^pj^^calciulai- \e.ir. either b> ii^eli or when combined with other 

contribiiims from ihe ^ame coniribulor. 2 U.S.C. §434(b)(3)(A). 

B. ReqiSirvd Information fcir Contributions from Individuals. For each itemized 

contribution from an individual, the committee must provide the following information: 

• The cd^^^tor's f m name and address (including zip code); 

• The contn^gr^^^cupation and the name of his or her employer; 

• The date of ^^^ t (the date the conunittee received the contribution); 

• The amoimt of the contribution; and 

• The cdendar year-to-date total of all contributions from the same individud. 11 

CFR §§100.12 and 104.3(a)(4) and 2 U.S.C. §434(b)(3)(A). 

C. Best Efforts Ensures Compliance. When the treasurer of a political coinmittee 

shows that tiie coinmittee used best efforts (see below) to obtain, maintain, and submit 

the information required by the Act, the conunittee's reports and records will be 

considered in compliance with the Act. 2 U.S.C. §432(h)(2)(i). 
14 

D. Definition of Best Efforts. The treasurer and the conunittee will be considered to 

have used "best efforts" if the conunittee satisfied all of the following criteria: 

• All written solicitations for contributions included: 

o A clear request for the contributor's fiill name, mailing address, occupation, 

and name of employer; and 

o The statement that such reporting is required by federal law. 

• Withm 30 days after the receipt of the contribution, the treasurer made at least one 

effort to obtain the missing information, in either a written request or a 

documented oral request. 

• The treasurer reported any contributor information that, although not initially 

provided by the contributor, was obtained in a follow-u|^ominunication or was 

contained in the conimittee's records or in prior repi^^QLat the coinmittee filed 

during the same two-year election cycle. 11 CFI^ §lM9b>V 

Facts and Analjrsis ^ 0 ^ 

A review of contributions from individuals revedfH that 71 contributions totaling 

$170,474 lacked, or did not adequately disclq^e. the contribiiior's occupation uiid/or 

name of employer. This represents 23% of the dollar value otyndividud cq^tributions 

itemized by GFEC. Most of these contributions were disclosed with a notation of 

"mformation requested." ^ 

The Audit staff asked a GFEC representative to provide doeiiinl^tion in support of theu 

best efforts procedures. In response, the WHiC representativeCxplained that the original 

solicitations and follow-up letters to the co^^l^rs coi^ied a request for the 

occupation and name^employer informati^ and that ^ y information received would 

be provided to the auditors for rcv;iew. To ds^^no such information has been provided. 

The Audit staff discussed IFUN matter with Gl 'l-iS representatives at the exit conference 

and provided a list of. the iteiiu/ed coniribuiions that lacked, or did not adequately 

disclose, the required oceupulioii and/or a name of employer information. 

Interim Audit Report Recc^pmendation and Committee Response 

The Audit sialT recommended that, witiiin 30 days of receipt of this report, GFEC take 

the followmg ac iioii: 

• Provide documental ion that it exercised best efforts to obtam, mamtain and 

submit the reiiutred contributor mformation; or 

• Make an effori to contact those individuals for whom the required information 

was not in GFEC files and provide documentation of such efforts (such as copies 

of letters/email to the contributors and/or phone logs); and, 

• File amended reports to disclose any information in GFEC's possession as well 

as information obtained in response to this recommendation. 

In its response, GFEC filed amended reports disclosmg the occupations and names of 

employers it had obtained m accordance with the interim audit report reconunendation. 

A description of GFEC's attempts to gather mformation was submitted for the 
15 

contributors GFEC was unable to contact that documents GFEC's best efforts to acquire 

the information. 

GFEC fiirther stated that it has undertaken procedurd changes to its operations to ensure 

ongoing compliance with best efforts regulations.