Draft Final Audit Report of the 

Audit Division on the Washington 

State Republican Party 

January 1, 2009 - December 31, 2010 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee tiiat is 

required to file reports under 

the Federal Election 

Campaign Act (tiie Act). 

The Commission generally 

conducts such audits when a 

committee appears not to 

have met the threshold 

requirements for substantial 

compliance with the Act.' 

The audit determines 

whether the committee 

complied with the 

limitations, prohibiiions and 

disclosure requirements of 

tiie Act. / 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, witii 

respect to any of tiie mattes 

discussed in this report. 

About the Committee (p. 2) 

The Washington State Republic;niParty il a state party committee 

headquartered in Bellevue, Wa^iiiijiioii. For more information, 

see the chart on the Commit^^Orj; animal ion. p. 2. 

Financial Activity (p- 2) 

• Federal Rec<^pts V 

o Contributions from ^tei^als ^ 

Contributions iVoniii^itical Committees 

'^nsfers from Anliiiicd and Otiier 

Political Committees * 

TraiisliM s from Non-fcdcral \md Levin 

Fund\ ^ 

Otherl^ccipls 

'otal FedSal Receipts 

;deral Dis^rsements 

Operating Expenditures 

isfers to Affiliated and Other Political 

Contributions to Other Committees 

Jeral Election Activity 

o ]|^funds/Other Disbursements 

Total Federal Disbursements 

• Levin Receipts 

• Levin Disbursements 

$1,844,135 

900,961 

527.887 

462.069 

44.356 

$3,779,408 

$3,753,148 

32.334 

27,900 

103.626 

23,837 

$3,940,845 

$15,000 

$32,000 

Findings and Reconmiendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Misstatement of Financial Activity - Levin Fund (Finding 2) 

• Reporting of Debts and Obligations (Finding 3) 

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

Division on the 

Washington State RepubUcan Party 

January 1, 2009 - December 31, 2010 
Table of Contents 

Page 

Part I. Background 

Autiiority for Audit 1 

Scope of Audit 1 

Part II. Overview of Conunittee 

Committee Organization 2 

Overview of Financial Activity ^ 2 

Part III. Smnmaries 

Findings and Recommendations - \ 3 

Part IV. Findings and Recommendations ^ 

Finding 1. Misstatement of Financial Activity # 5 

Finding 2. Misstatement of Financial Activity - Levin Fund 8 

Finding 3. Reporting of Debts ai\d Obligations 10 
Parti 

Background 

Authority for Audit 

This report is based on an audit of tiie Washington State Republican Party (WSRP). 

undertaken by tiie Audit Division of the Federal Biection Commission (the Commission) 

in accordance with the Federal Election Campaign Act of 1971. as amended (tiie Act). 

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

Commission to conduct audits and field investigations of any pojM|al committee that is 

required to file a report under 2 U.S.C. §434. Prior to condu^igany^audit under this 

subsection, the Commission must perform an intemal revii^^f iv|)Orts filed by selected 

committees to determine whether the reports filed by a pabular committee meet the 

tiireshold requirements for substantial compliance witii il^^ct. IJ.S.C. §438(b). 

Scope of Audit ^ 

Following Commission-approved proceduresf^llic Audii .siaff^valuated varioSrisk 

factors and as a result, this audit examined: ^ ^ 

1. the disclosure of individual contributors' occupalion and name of employer; 

2. the disclosure of disbursements, debts and obligatioii.s; 

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

4. the consistency between reported fi^e^ and hank lecord.s; 

5. the completeness of records; and 

6. other committee operai inns necessary tM^review. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration October 14.1975 

• Audit Coverage January 1. 2009 - December 31, 2010 

Headquarters Bellevue. Washin^iion 

Bank Information 

• Bank Depositories Two 

• Bank Accounts Eleven Fei^al. Nine Non-federal, and One 

Levin ^ 

Treasurer 

• Treasurer When Audit Was Conducted CsPen Morse ^ 

• Treasurer During Period Covered by Audit ^iil Miichell!febmary 19. 2^^^yuly 18. 

2009 ColleeiM^rse: July 19,0)09 -

Present 

Management Information 1^ 

• Attended FEC Campaign Finance Seminar ^ 

• Who Handled Accounting and 

Recordkeeping Tasks % 

Haiti Stall " 
Overview of Financial Activity 

(Audited Amounts) 

Federal Cash-on-hand @ January 1,2009 $ 155,272 

o Contributions from Individuals 1,844,135 

o Contributions from Political Committees 900,961 

o Transfers from Affiliated and Otiier 

Political Committees 

527,887 

o Transfers from Non-federal and Levin 

Funds 

•162.069 

o Other Receipts A k 44.356 

Total Federal Receipts 

o Operating Expenditures 

o Transfers to Affiliated and Otiier Political 

Committees 

o Contributions to Other Committees 

^ ^. 3 jm4 8 

' 3233-1 

# " ^ 27.900 

o Federal Election Activity % 103,626 r 

o Refunds/Other Disbursements 23,837 

Total Federal Disbursements $3,940,845 

Federal Cash-on-hand @ December 31. 

2010 ^ 

($6,165)^ 

r 

Levin Cash-on-hand @ Janu:ir\ 1,2009 $17,001 

Total Levin Receipts ^ 1 $15,000 

Total Levin Disbursgifftnl.s T $32,000 

Levin Cash-on-hand @ December 31, 2010 

4 

$1 

Ending cash-on-hand was negative due to outstanding checks as of December 31,2010. 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

A comparison of WSRP's reported activity with bank records revealed a misstatement of 

its beginning cash-on-hand and receipts for 2009 and a misstate^pll^f receipts, 

disbursements and ending cash-on-hand for 2010. For 2009. WSRP understated 

beginning cash-on-hand by $30,321 and overstated receipt'i by .S15.641. In 2010, receipts 

were understated by $697,155. disbursements were unde^lateil by S1.062.382 and ending 

cash-on-hand was overstated by $362,753. ^ 

In response to the Interim Audit Report. WSRP filed amended reports that materially 

corrected the misstatements. (For more detailf NCC p. 5.) ^ 

Finding 2. Misstatemenjt of Financial Activity - Levin 

Fund 

A comparison of WSRP's reported Le\ in aeliv iiy with bank rtg|F^s revealed a 

misstatement of its beginning cash-on-h^ and di.^^burNcment^r 2009 and a 

misstatement of disbursements and endin^^sli-oii hand fof^OlO. For 2009. WSRP 

overstated beginning c|ph-on-liand by $32,^p^and overstated disbursements by $32,499. 

In 2010. WSRP uniler.'itated disbursements b^ 15.000 and overstated ending cash-onhand by $12,500. ^ f 

In response to the Interim^udit Kepon.^^lP filed amended reports that corrected tiie 

misstatcir^nts. (For more delail. see |i. 8.) 

Filfding 3. Reporting of Debts and Obligations 

During audit fieldwork, the Audit staff identified debts to five vendors that WSRP failed 

to report in calendar years 2(R)9 and 2010. WSRP did not report debts totaling $361,838. 

In response to the Interim Audit Report, WSRP amended its reports to disclose these 

debts. (For more detail, see p. 10.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

A comparison of WSRP's reported activity with bank records revealed a misstatement of 

its beginning cash-on-hand and receipts for 2009 and a misstatem^t of receipts, 

disbursements and ending cash-on-hand for 2010. For 2009. W^^smiderstated 

beginning cash-on-hand by $30,321 and overstated receipts by .S45.641. In 2010. receipts 

were understated by $697,155, disbursements were understated b\ $1,062,382 and ending 

cash-on-hand was overstated by $362,753. ^ 

In response to the Interim Audit Report. WSRP filed amended reports that materially 

corrected tiie misstatements. ^ ^ / 

Legal Standard ^ ^ 

Contents of Reports. Each report nmst disclose: 

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

• the total amount of receipts for the reiioitinj! period and for ^#calendar year; 

• the total amount of disbursements fo^e leporpng period^ahd for the calendar year; 

and % 

• certain transaction.s iliai re(]iiire itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itenii/eil Disbursements). 2 U.S.C. §434(b)(l). (2). (3). (4) and (5). 

Facts and Analysis ^ 

i 

A. Facts 1 ^ 

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

200^ and 20 LO. It determined that WSRP misstated the beginning cash balance and 

receipts itn 2009 and reeeiplN, dis^rsements and ending cash balance for 2010. The 

following charts outiine the (!iscrepancies for the cash balances, receipts and 

disbursements for euch yepp. The succeeding paragraphs address the reasons for the 

misstatements. 
2009 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1. 2009 

$124,951 $155,272 $30,321 

Understated 

Receipts $852,256 $806,615 $45,641 

Overstated 

Disbursements $970,577 $952,783 $17,794 

Overstated 

Ending Cash Balance 

@ December 31.2009 

$6,630 $9,104 $2,474 

A 1 Understated 

WSRP understated the beginning cash-on-hand by $30,3^ and dKl nol explain the 

discrepancy, but it likely resulted from prior period di^rep^cies. 

The overstatement of receipts resulted from the fol lowing:-:^ 

• Reported transfers from Levin ($32,499) and iioii-f^ral accounts 

($30,691) that were not supported by bank deposits^3fecks/debits 

by tiie transferring accounts 

• Transfers from affiliated commiitee and non-federal account 

not reported ' 

• Unexplained differences 

Net Overstatement of Receipts 

$ (63.190) 

15.097 

2.452 

$(4S.64n 

2010 Committee >^llvit> ^ ^ 

Bank Records Discrepancy 

Begiru^iiig (!ash Baianee 

©January 1.2010 

"$Wo $9,104 $2,474 

Understated 

j^4-eipts -^^5,638 $2,972,793 $697,155 

Understated 

Disburseinents $1,925,680 $2,988,062 $1,062,382 

Understated 

Ending Cash Baianee F 

©December 31.2010 

$356,588 -$6,165 $362,753 

Overstated 
The understatement of receipts resulted from tiie following: 

• Transfer from Levin account not reported $ 3,000 

• Transfers from non-federal accounts not reported 109,078 

• Transfers from political committees not reported 487,215 

• Contributions from individuals not reported 93,337 

• In-kind contributions not reported as receipts 10,976 

• Reported transfer not supported by bank deposits (11,675) 

• Reported contribution not supported by bank deposit (5,000) 

• Unexplained differences 10.224 

Net Understatement of Receipts $697.155 

The understatement of disbursements resulted from the follow ing: 

• Payroll expenditures not reported ^ $ 33.457 

• Operating Expenditures not reported . 1.023.213 

• Transfers to political committees not repo^tr ^ 25.000 

• Contributions to other committees not reported <^ 10,000 

• Reported disbursements not supportedCj cheeks or debits ^ (24,185) 

• Unexplained differences * ^ (5.103) 

Net Understatement of Disbursements $1.062.382 

The majority of tiie $1,023,213 in expenditures not reported included costs associated 

with mail pieces provided by nine vend^, totaling S882.966. 

The $362,753 overstatenieiii of the endingx:asli-on-hand resulted from the misstatements 

described above. 

B. Interim Audit4<c|i(irl & .Audit Division Sccummendation 

Audit staff discussed tin^ matter \\ itii WSRP re|iresentatives at the exit conference. 

WSRP representatives made no eoniineiU on this matter. 

The buerim Audit Report lecoitiiineiKled that WSRP amend its disclosure reports to 

corbel the misstatemens Ibr both 2(K)^and 2010. and amend its most recently filed 

report to correct the cash-on-hand balance with an explanation that the change resulted 

from a prior period audit adjitstment. 

Further, the Auilii sialf recommended that WSRP reconcile the cash balance of its most 

recent report to ident!i\ aiiv subsequent discrepancies that may affect the adjustment 

recommended by the .-Xiidit staff. 

C. Committee Response to Interim Audit Report 

In response to tiie Interim Audit Report. WSRP filed amended reports that materially 

corrected the misstatements. 

In addition, a WSRP representative explamed that Audit staff should have treated a 

$43,921 disbursement from a federal account and a transfer of an identical amount from 

the nonfederal account to the federal account- both of which were included as 

unreported in the Interim Audit Report - as reversing transactions. These transactions 

involved a payment mistakenly made from a federal account for nonfederal activity and 
tiie subsequent reimbursement from the nonfederal account. WSRP included both 

transactions in the amended reports. 

Finding 2. Misstatement of Financial Activity - Levin Fimd 

Summary 

A comparison of WSRP's reported Levin activity with bank records revealed a 

misstatement of its beginning cash-on-hand and disbursements for 2009 and a 

misstatement of disbursements and ending cash-on-hand for 2010. For 2009. WSRP 

overstated beginning cash-on-hand by $32,499 and overstated disbursements by $32,499. 

In 2010, WSRP understated disbursements by $15,000 and o\ ei statcS^nding cash-onhand by $12,500. 

In response to the Interim Audit Report. WSRP filed amended repoi t N that corrected the 

misstatements. ^ ' ^ 

Legal Standard 

Contents of Levin Reports. Each report mu$l disclo.se: 

• the amount of cash-on-hand for Levin funds at the bcginnrhg and end of 

period; 

• the total amount of Levin fund reSeipts and disbursement^ (including allocation 

transfers) for the reporting period ami lor tiic calendar year: and 

• certain transactions tiiat require iten^ation on Schedule I .-.-\ Mtemized Receipts of 

Levin Funds) or Schedule L-B (Itemi^ D|sbii! seiiieiit'» irf^Levin Funds). 11 CFR 

§300.36 (b)(2)(B). 

Facts and An^^is 

A. Facts 

During audi^l'ieldwork, the }\udii staff reconciled reported Levin activity with bank 

records for 2009 ami 2010. It deierinined that WSRP misstated beginning cash-on-hand 

and^dlsbursements for 2009 and disbiiCements and ending cash-on-hand for 2010. The 

following cliarts outline the discre^ncies for the cash balances, receipts, and 

disbursements lor each year. The succeeding paragraphs address the reasons for the 

misstatements. 

e reporting 

2009 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1. 2009 

$49,500 $17,001 $32,499 

Overstated 

Receipts $0 $0 $0 

Disbursements $49,499 $17,000 $32,499 

Overstated 

Ending Cash Balance 

@ December 31.2009 

$1 $1 $0 
WSRP overstated tiie beginning cash balance by $32,499 and did not explain the 

discrepancy, but it likely resulted from prior period discrepancies. 

The overstatement of disbursements resulted when WSRP erroneously reported transfers 

of $32,499 to the federal account. WSRP also identified these transactions as an 

adjustment to the federal bank reconciliation (see Finding 1. page 5). These transfers 

appear to have been reported to correct the overstatement of cash-on-hand as of January 

1, 2009. 

2010 Committee Activity ^ 

Reported BaiipRecord.s Discrepancy 

Beginning Cash Balance 

@ January 1,2010 

$1 

A- K. 

$0 

Receipts 5)12.500 ii5.oo6"" 5>2.i5"oo"" 

#d^rstated 

Disbursements $0 Sls^.OOO f $15,000 

Understated 

Ending Cash Balance 

@ December 31, 2010 

t $12,501 $1 $12,500 

Overstated 

WSRP did not report a $15,000 transfer i%adc to «Ke federal account. The $12,500 

overstatement of the ending cash balance resulted from the misstated receipts and 

disbursements noted alcove. ^ ^ 

B. Interim Audi^ei]^j& .Audit Division l^^mmendation 

Audit staff discussed thi^uitter wilh WSRP re^esentatives at the exit conference. 

WSRP rcp^^iatives made no eoinineiit on this matter. 

The^teiiin Audit Reporl recomiiii^j^ that WSRP amend its disclosure reports to 

correct the misstatements ibr both^^^9 and 2010.^ 

C. Committee Response to Interim Audit Report 

In response to tiic interim Audit Report. WSRP filed amended reports that corrected the 

misstatements. 

WSRP has not reported any Levin activity for calendar year 2011. 
10 

Finding 3. Reporting of Debts and Obligations 

Summary 

During audit fieldwork. the Audit staff identified debts to five vendors that WSRP failed 

to report in calendar years 2009 and 2010. Debts totaling $361,838 were not reported. 

In response to the Interim Audit Report. WSRP amended its reports to disclose tiiese 

debts. 

Legal Standard ^ 

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

and nature of outstanding debts and obligations until tiio.^ debts are extinguished. 

2 U.S.C. §434(b)(8) and 11 CFR §§104.3(d) and 104.11®^ 

B. Separate Schedules. A political committee nmst file separate schedules for debts 

owed by and to the committee with a statement explaining^^ circumstances anil 

conditions under which it incurred or extinguished each del^^d obligatioi^ 

11 CFR §104.11(a). ^ 

C. Itemizing Debts and Obligations. ^ 

• Once it has been outstanding 60%iys from the date incuiTcd. a debt of $500 or 

less must be reported on the next^^ularly sdiediiledrfport. 

• A debt exceeding S500 must be dis^^t^in the repOTt that covers the date on 

which tiie debt \\as incurred. 11 CI ^ 104.11(1^ 

Facts and Analysis 

A. Fads 

The Audit staff reviewed vcndtir invoices and computer files containing WSRP 

disl^'semeiits made in 2009 and 20^/Although WSRP paid the majority of invoices in 

a timely mamier. it carried outstan^^ balances with five vendors that were not disclosed 

as debts on^cliedule D (Debts and'^Obligations). The debts totaled $361,838.^ 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff inl'ori^l WSRP representatives of this matter at the exit conference and 

provided schedules 4^iling the undisclosed debts for each reporting period. WSRP 

representatives made no conunent on tiiis matter. 

The Interim Audit Report recommended that WSRP amend its reports to disclose the 

debts and obligations addressed above. 

^ Each debt in this amount was counted once. In order for WSRP to correctiy file amended reports, a 

schedule was provided that includes the amount of each debt required to be reported for each reporting 

period. 
11 

C. Committee Response to Interim Audit Report 

In response to tiie Interim Audit Report, WSRP filed amended reports disclosing tiie 

debts and obligations.