AOI-19

FEDERAL ELECTION COMMISSION

WASHINGTON. DC 20404

REPORT OF THE AUDIT DIVISION
ON
CITIZENS TO ELECT RICK LARSEN

1. BACKGROUND
A. AUDIT AUTHORITY

This report is based on an audit of Citizens to Elect Rick Larsen (CERL),
undertaken by the Audit Division of the Federal Election Commission (the Commission)
in accordance with the provisions of the Federal Election Campaign Act of 1971, as
amended (the Act). The audit was conducted pursuant to Section 438(b) of Title 2 of the
United States Code, which states, in part, that the Commission may conduct audits and
field investigations of any political committee required to file a report under Section 434
of this title. Prior to conducting any audit under this subsection, the Commission shall
perform an internal review of reports filed by selected committees to determine if the
reports filed by a particular committee meet the threshold requirements for substantial
compliance with the Act.

B. AUDIT COVERAGE

The audit covered the period from May 17, 1999, the date of CERL’s first
financial transaction, through December 31, 2000. CERL’s reports covering this period
reflect a beginning cash balance of $0, total receipts for the audit period of $1,583,397,
total disbursements for the audit period of $1,579,105, and an ending cash balance of
$4,292.

Cc. CAMPAIGN ORGANIZATION

CERL registered with the Commission on May 24, 1999 as the principal
campaign committee for Mr. Richard Ray Larsen (the Candidate), Democratic candidate
for the U.S. House of Representatives from the State of Washington, Second District. At
its inception, Mr. Todd E. Morrow served as Treasurer. On April 3, 2000. Mr. Robert
Anderson became Treasurer and continues to serve in that capacity. CERL maintains its
headquarters in Everett, WA.

To manage its financial activity, CERL maintained one checking, two
savings and one money market account. From these accounts, approximately 690
disbursements were made. CERL received approximately 4,430 contributions from
individuals, totaling approximately $848,500, and 445 contributions from political action


FEDERAL ELECTION COMMISSION

WASHINGTON DC 20403

June 11, 2002

Mr. Robert Anderson, Treasurer
Citizens to Elect Rick Larsen
c/o Robert W. Ferguson, Esq.
Preston Gates Ellis, LLP

701 Fifth Avenue, Suite 5000
Seattle, WA 98104-7078

Dear Mr. Anderson:

Attached, please find the Report of the Audit Division on Citizens to Elect Rick
Larsen. The Commission approved this report on June 6, 2002.

The Commission approved Final Audit Report will be placed on the public record
on June 17, 2002. Should you have any questions regarding the public release of this
report, please contact the Commission's Press Office at (202) 694-1220.

Any questions you may have related to matters covered during the audit or in the
report should be directed to Kendrick D. Smith or Thomas J. Nurthen of the Audit
Division at (202) 694-1200 or toll free at (800) 424-9530.

Hncerell
woph J S. as
fad Stoltz —
accion Staff Director
Audit Division

Attachment as stated

cc: Ryan Pennington, Finance Director


CITIZENS TO ELECT RICK LARSEN

EXECUTIVE SUMMARY

Citizens to Elect Rick Larsen (CERL) registered with the Federal] Election Commission
on May 24, 1999, as the principal campaign committee for Richard Ray Larsen. Democratic
candidate for the U.S. House of Representatives from the State of Washington, 2” District

The audit was conducted pursuant to 2 U.S.C. §438(b), which states that the Commission
may conduct audits of any political committee whose reports fail to meet the threshold level of
compliance set by the Commission.

The audit findings summarized below were presented to CERL at the completion of
fieldwork on December 19, 2001 and later in the interim audit report. CERL’s responses to the
findings are contained in the audit report.

APPARENT EXCESSIVE CONTRIBUTIONS - 2 U.S.C. §§441a(a)(1)(A) and (2)(A); 11 CFR
§§110.1(b), 103.3(b)(3) and (4), 110.1(b)(5), 110.1(k) and 110.1(1)(5). The Audit staff identified
62 contributions from 56 individuals that exceeded the contribution limitations by $43,812.
CERL refunded 22 contributions totaling $14,200 and obtained redesignation documentation for
a $700 contribution. However, these actions were not timely. In addition, only 14 of the 22
refund checks issued by CERL have been negotiated.

In response to the interim audit report, CERL representatives did not dispute the receipt
of the above excessive contributions. CERL refunded all of the excessive contributions and
provided copies of the refund checks and letters sent to the contributors.

DISCLOSURE OF CONTRIBUTIONS - 2 U.S.C. §434(b)(3) and 11CFR §104.13(a). The Audit staff
identified 34 contributions from political party committees, totaling $21,903, that were not
itemized on Schedule A (Itemized Receipts). Of these, twenty-four were in-kind contributions,
totaling $10,353, which also required disclosure on the Detailed Summary Page, Schedule A and
Schedule B.

In response to the interim audit report, CERL filed amended reports by reporting period
disclosing the contributions on Schedules A and, where appropriate, on Schedules B.


IL AUDIT FINDINGS AND RECOMMENDATIONS

A. APPARENT EXCESSIVE CONTRIBUTIONS

Sections 441a(a)(1)(A) and (2)(A) of Title 2 of the United States Code
state, that no person shall make contributions to any candidate and his authorized political
committees with respect to any election for Federal office which, in the aggregate. exceed
$1,000 and that no multi-candidate political committee shall make contributions to any
candidate and his authorized political committees with respect to any election for Federal
office which, in the aggregate, exceed $5,000.

Section 110.1(b) of Title 11 of the Code of Federal Regulations explains
that with respect to any election means that if the contribution is not designated in writing
by the contributor for a particular election then the contribution applies to the next
election for that Federal office after the contribution is made. A contribution is
considered made when the contributor relinquishes control over the contribution by
delivering the contribution to the Candidate. the political committee, or an agent of the
committee. A contribution mailed is considered made on the date of the postmark.

Section 103.3(b)(3) of Title 11 of the Code of Federal Regulations states,
in part, that the treasurer shall be responsible for examining all contributions received for
evidence of illegality and for ascertaining whether contributions received, when
aggregated with other contributions from the same contributor, exceed the contribution
limitations of 11 CFR 110.1 or 110.2. If any such contribution is deposited. the treasurer
may request redesignation or reattribution of the contribution by the contributor in
accordance with 11 CFR 110.1(b), 110.1(k) or 110.2(b). as appropniate. Ifa
redesignation or reattribution is not obtained, the treasurer shall, within sixty days of the
treasurer's receipt of the contribution, refund the contribution to the contributor.

Section 103.3(b)(4) of Title 11 of the Code of Federal Regulations states
that any contribution which appears to be illegal under 1] CFR 103.3(b)(1) or (3), and
which is deposited into a campaign depository shal] not be used for any disbursements by
the political committee until the contribution has been determined to be legal. The
political committee must either establish a separate account in a campaign depository for
such contributions or maintain sufficient funds to make all such refunds.

Section 110.1(b)(5) of Title 11 of the Code of Federal Regulations states,
in part. that the treasurer of an authorized political committee may request a written
redesignation of a contribution by the contributor for a different election if the
contribution exceeds the limitation on contributions set forth in 11 CFR 110.1(b)(1). A
contribution shall be considered to be redesignated for another election if the treasurer of
the recipient authorized political committee requests that the contributor provide a written
redesignation of the contribution and informs the contributor that the contributor may
request the refund of the contribution as an alternative to providing a written
redesignation; and within sixty days from the date of the treasurer's receipt of the


CITIZENS TO ELECT RICK LARSEN

CHRONOLOGY
Audit Fieldwork 09/10/01 - 12/19/01
Interim Audit Report to Committee 02/22/02
Response Received to the Interim Audit Report 04/10/02
Final Audit Report Approved 06/06/02

Final Audit Report to Committee 06/11/02


(theta

FEDERAL ELECTION COMMISSION

WASHINGTON DC 20ahs
June 14, 2002
MEMORANDUM
TO: Ron M. Harris
Press Officer
Press Office

FROM: Joseph F. Stoltz ,
Assistant Staff Dé
Audit Division

SUBJECT: Public Issuance of the Final Audit Report on Citizens to Elect Rick Larsen

Attached please find a copy of the final audit report and related documents on
Citizens to Elect Rick Larsen that was approved by the Commission on June 6, 2002.

Informational copies of the report have been received by all parties involved and
the report may be released to the public on June 17, 2002.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library


the period October through December 2000, CERL did not consistently maintain
sufficient funds to make the necessary refunds. The bank balances were approximately
$37,000 on October 30, 2000 and approximately $9.700 on December 28. 2000'.

In the interim audit report, the Audit staff recommended that CERL
provide evidence that demonstrated the contributions noted above ($43.812) were not
excessive; that it obtained timely reattributions or redesignations; or, that the
contributions were timely refunded. Absent submission of the requested evidence, CERL
was to refund the remaining unresolved excessive contributions totaling $34.562
($43,812 - (14,200 - 4,950)) and provide evidence of all refunds (copies of the front and
back of the negotiated refund checks). If funds were not available to make the necessary
refunds, those contributions that required refund should have been disclosed as debts on
Schedule D (Debts and Obligations) until such time that funds were available to make the
refunds. With respect to the refund checks that had not been negotiated, the Audit staff
recommended that if CERL was not successful in its efforts to accomplish the refunds,
the funds should have been paid to the U.S. Treasury or to a charitable organization.

In response to the interim audit report. CERL representatives did not
dispute the receipt of the above excessive contributions. CERL refunded all of the
excessive contributions (totaling $34,562) and provided copies of the refund checks and
letters sent to the contributors. Although the refund checks had not been negotiated by
the payees, CERL representatives stated they would make the negotiated check copies
available as soon as they clear the bank’.

B. DISCLOSURE OF CONTRIBUTIONS

Section 434(b)(3) of Title 2 of the United States Code states, in part, that
each report under this section shall disclose the identification of each political committee
which makes a contribution to the reporting committee during the reporting period,
together with the date and amount of any such contribution.

Section 104.13(a) of Title 11 of the Code of Federal Regulations states, in
part, that the amount of an in-kind contribution shall be equal to the usual and normal
value on the date received. Each in-kind contribution shall be reported as a contnbution
and an expenditure in accordance with 11 CFR §104.3(a) and (b).

As aresult of our review of contributions from political party committees,
the Audit staff identified 34 contributions, totaling $21,903, that were not itemized on
Schedule A (Itemized Receipts). Twenty-four were in-kind contributions, totaling
$10,353, which also required disclosure on the Detailed Summary Page, Schedule A and

‘ Based on an analysis of the contributions and disbursements databases provided by CERL. the

2000 Primary activity was not funded by contribuuons designated for the 2000 General or future elections.
including any excessive contributions identified by the Audit staff. Because election designations were not
provided in the databases, they were determined by the Audit staff based on contribution receipt dates and
disbursement dates provided in the databases.

CERL has provided copies of the front and back of 27 negotiated refund checks, totaling $17,502


REPORT OF THE AUDIT DIVISION
ON

CITIZENS TO ELECT RICK LARSEN

Approved June 6, 2002

FEDERAL ELECTION COMMISSION
999 E STREET, N.W.
WASHINGTON, D.C.



CITIZENS TO ELECT RICK LARSEN

TABLE OF CONTENTS
Page
Executive Summary 1
Final Audit Report 3
Background 3
Findings 5
Transmittal to Committee 9

Chronology 11