.'.

BJ005889

July 6, 1994

MEMORANDUM

RONALD M. HARRIS

CHIEF, PRESS OFFICE

TO:

FROM: ROBERT J. COSTA

ASS I STfu~T STAFF

AUDIT DIVISION

DIRECTOR !

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

COMMITTEE ON ARRANGEMENTS FOR THE 1992

REPUBLICAN NATIONAL COMMITTEE

Attached please find a copy of the final audit repo-rt on

Committee on Arrangements for the 1992 Republican National

Convention which was approved by the Commission on June 23, 1994.

Informational copies of the report have been received by all

parties involved and the report may be released to the public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Report Analysis Division

FEC Library
REPORT OF THE AUDIT DIVISION

O~

Committee on Arrangements for the

1992 Republican National Committee

FEDERAL ELECTIOS CO~\e~1.ISSIOS

999 E STREET. S.W.

WASHC'lGTO~. D.C.
.,..,

L~ ,

REPORT OF mE AUDIT DIVISION

O~

Committee on Arrangements for the

1992 Republican National Committee

FEDERAL ELECTIO~ CO\f,nSSIO~

999 E STREET. ~.W.

WASH~GTO~. D.C.
'"

. ,
TABLE OF CONTENTS - COMMITTEE ON AR~~GEMENTS FeR THE

1992 REPUBLICAN NATIONAL CONVENTION

Page

'. -

Executive summary

Final Audit Report

Background

Findings

Legal Analysis

Transmittal to Treasurer

Chronology

1

3

3

5

17

21

23
-.
C F:) ER .\ L f l E( -:-' ( -"'", -- '. ". ' .:, . I~' '-

~I~A~ A~~:7 RE?0RT

0:\ -:~::

COMMITTEE ON AR~~NGEMENTS FJR T~E 1992

REPUBL!CA~ ~A::~NA: :~SVE~T!ON

EXECUTIVE SUMMARY

The Committee on Arrange~ent5 for the 1992 Republican

National Convention (the Co~~ittee\ registered with the Federal

Election Commiss~on on Fecr~ary ::. 1990. The Committee was

created fer the purpose of ~~~d~c::~g the 1992 Presidential

nominating convention of the Republican Party. The Committee

received $11,048,000 in federal f~nds for this purpose.

The Audit was conducted pursuant to 26 U.S.C. 59008(g).

The findings of the audi t -we-re- -presented-t.o-t.he-Committee------ ----

at an exit conference at the conclusion of the Audit fieldwork

and in the interim audit report approved by the Commission on

December 14, 1993. The Committee responded to the findings

contained in the interim report on March 1, 1994. The comments

and other information received from the Committee have been

included in the findings in th~s report.

The final audit report requires the Committee to repay

$47,411 to the U.S. Treasury. Of this amount 526,273 has been

repaid to date.

The following is an overvie~ of the findings contained in

the final audit report.

Fail~e to Itemize Debts and Obligations - 2 U.S.C.

S434(b)(8} and 11 CFR 104.11'a', Committees are required to

list selected debts on each :~5=:o5~re renart. The audit

identified 13 obligations to:a:~ng S394.3ie which were not

disclosed. In response to a :e::n~enda:ion in the interim audit

report, the Committee file: 3:~e:~:es :is:lcsing the debts.

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Excessive Contribut:=~s :r=~ ~:a:: - :: eFR ll6.5. Funds

for travel and other ex?enses adva~~ed by l~dividuals and

subsequently re:mbursed by a ~~mrn:tteeare ~~ntributions by the

.' eo.., "x~e"'-"- """o<:s s-e r • f • r person payJ.ng .. - -.~ .. ~-'" ~"--- ::' -~~"--~-" :>·,,, exemp~ed ,. - b y ~h e

Commission's regulations. ~he ln~erlm report questioned, as

contributions. expenses to~aling $10,202 incurred by one staff

member. This amount was reimbursed by the Committee, though not

within the required time period. As a result. the amount

constltuted an impermissib:e contribution. In response to the

interim report the Committee argued that a significant portion

of the advances in question were reimbursed by the Committee

before the individual disbursed funds in payment. The audit

rejected this argument because the date the expenses were

incurred is the operative date.

Improoer Use of Funds - Payments for Lost Equipment - 11

CFR 9008.6(a)(4) and 9008.10(d). The audit identified net

payments totaling $2i,285 made to vendors to replace leased

equipment that was lest. The audit staff concluded that the

losses were not reasonable and should be viewed as improper use

of funds. On December 7, 1993, the Commission determined that

no repayment was required.

----__Unspent portion of Fund payment - 11 CFR 9008.10(e). If

any portion of the federal grant remains--linspent--after-al-l---------

expenses are paid, the unspent portion must be returned to the

U.S. Treasury. The Committee had $45,375 in unspent funds. To

date $25,237 has been repaid to the u.s. Treasury.

Stale-dated Committee Checks - 26 U.S.C. 9008{h} and 11 CFR

9007.6. Finally, the Committee is required to pay to the U.S.

Treasury $1,036, the total amount of checks outstanding which

had not been cashed. The Committee has repaid this amount.

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AK004835

,\ ... ~.. ...... ".

REPORT OF THE AUDIT DIVISION

ON THE

COMMITTEE O~ ARRANGEMENTS FOR THE 1992

REPUBLICAN NATIONAL CONVENTION

I. Background

A. Audit Authority

This report is based on an audit of the Committee on

Arrangements for the 1992 Republican National Convention (the

Committee), to determine whether there has been compliance with

the provisions of the Federal Election Campaign Act of 1971, as

amended (the Act). The audit was conducted pursuant to Section

9008(g) of Title 26 of the United States Code which directs the

C9mmJsS_!911 __to conduct an examination and audit of the payments

for presidentiill--noainatlficrcon',,-e-n-tion-s-no l:aterthan--aecembe-r

31 of the calendar year in which the presidential nominating

convention involved is held.

In addition to examining the receipt and use of

Federal funds, the audit seeks to determine if the committee has

materially complied with the limitations, prohibitions and

disclosure requirements of the Federal Election Campaign Act of

1971, as amended.

,~

w, B. Audit Coverage

The audit covered the period March 26, 1990, the date

the Republican National Committee executed a loan agreement on

behalf of the Committee, through December 31, 1992. In

addition, certain financial activity was reviewed through

February 28, 1994 to determine any amounts due to the United

States Treasury. During the audit period the Committee reported

an opening cash balance of $-0-, total receipts of 511,688,647,

total disbursements of $::,396.346. and a closing cash balance

on December 31, 1992 of 5292,381.1/

!I All fIgures in thIS report have been rounded to the nearest

dollar.

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C. Campaign Orga~izati~~

The C~mmittee :eqls~ered Nl:n ~te federal Election r,-cmmlSSlon " en '""e""..... -.uary .

_"-, - -,.~~"', a r ....

~. a "a.'1 ~,'- __~n11 a'... Com' ml t te e 0 f thI.e

Reoublican Party. The 7:eas~:ers :0: the ?erl0d audited were •• ~~"" M U \ • • "'f"' t:' .... _ •• r o

...·~_~ ... am Cna:1~S .. ~rn ,e~.~a'i ·-:__ .•~ac(\~ _-" -~..... 'a"'ua .. ry 3 _.

1 10_J.°1 , and

Alec Poitevint :::-~m Ja~uary 3:, 199: to the present. During

various porticns of the period audited the Co~mittee maintained

offices 1n washington, ~.: .. Alexandria, VA. and Houston, TX.

The Committee records are currently maintained in Alexandria,

'I t"'\ •

To manage its financial activity. the Committee used

five bank aooc~nts whic~ included two operating accounts from

which most disbursements were made, a pay:oll account, and two

accounts which maintained credit balances. Federal funds were

deposited into an operating account. The Committee made

approximately 4600 disburseQents.

The Ccmmittee received $:1.048,000 in federal funds.

This amount represents the full entitlement established at 26

U.S.C. S9008(b).

D. Audit Scope and Procedures

_The__audit includecL a reView of thefoll()wing_general

categories:

1.

r

2 . '00

3

t...:"}

.. 4

Compliance with statutory limitations with respect to

the receipt of contributions and loans (see Finding

II-B.);

compliance with the statutory requirements regarding

the receipt of contributions from prohibited sources;

the itemization and proper disclosure of receipts, as

well as the completeness and accuracy of the

information disclosed;

the itemization and proper disclosure of disbursements

when required. as well as the completeness and

accuracy of the information disclosed;

S. proper disclosure of debts and obligations (see

Finding II .A. );

6. the accuracy ~: t~tal ~e9~r~~~ =e=eipts,

disbursements, and cash balances as compared to

Com~:ttee ba~k records;

..,

I. adequate

Paqe 4

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Comm:::ee transactions;
-,)-

8. the financial positi~n with respect :0 any unexpended

funds (see Find:~g I::.C.;;

9. compliance wit~ req~:re~en:s concerr.:ng expenditures

for convention expe~5es (see Findir.g 1::.3.\;

10. compliance with spend:~g ::~ita~:8nsi and

11. other audit procedures that were deemed necessary in

the situation.

Unless specifica~ly

non-compliance was detected.

Commission may pursue further

this report in an enforcement

d:scussed be:o~, ~o ma~erial

:t should be noted that the

any of the matters discussed in

action.

C',

II. Findings and Recommendations - Non-repayment Matters

A. ReDorting Requirements - Itemization of Debts

and Obliaations

Section 434(b)(8) of 7itle 2 of the United States Code

requires that the amount and nature of outstanding debts and

obligations owed by or to a political committee be disclosed.

Sections 104.1l(a} and (b) of Title 11 of the Code of Federal

---Regulations_state,-J_n~~J.!'!_vall~_~li~_r~,_that debts and obligations

owed by or to a political committee wnich--iemiii-n-outsl:anar-Ilg---------

shall be continuously reported until extinguished. These debts

and obligations shall be r~ported on separate schedules together

with a statement explaining the circumstances and conditions

under which each debt and obligation was incurred or

extinguished. A debt or obligation, the amount of which is over

$500 shall be reported as of the date on which the debt or

obligation is incurred, except that any obligation incurred for

rent, salary or other regularly recurring administrative expense

shall not be reported as a debt before the payment due date.

The Audit staff reviewed selected debts and

obligations and determined that the Committee did not disclose

13 obligations to nine vendors totaling $394,318 for the

following periods: January 10 1991 Quarterly (one for

$10,510); April 10 1992 Quarterly (one for $13,475); July 10

1992 Quarterly (nine for $331,248); and October 10 1992

Quarterly (two for $39,085\.

At the Exit Conference the Ccmmlttee was provided wlth

a schedule of the undisclosed Gebts. :he Committee

representative stated that the Commlttee was as diligent as

possible regarding debts.

The Committee our::~e~ :~e :~~lo~lng pr~cedures and

problems involved with debt report:~g: 1\ All invoices in-house

on the last day of a repcr:ii.g per:cd ~ere paid on that day, and

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unpaid bills in-hand o~ ~~e day before the report ~as prepared ~ere reported as debts; 21 many invoioes dated close to the end

of a repoct:~g peri~d ~e:e received a::e~ - af:en many months

a:ter - ~he recort due dat.e; 31 estlmat::;g deb:s ·.... ou:d be

misleading to t~e Fublic; and 41 c~e 10-day cutoff for debt

repcrtlng for conventi~~ cQ~m:ttees does not provide enough time

to cbtai~ the ~e~essary l~voices to pre~are t~e debt sc~edules.

Further the Committee reFresentative suggested that in the

alternative "sach committee could be required to report all

procedures used for reportlng debts and obligations and explain

to the public that unknc~n debts do exist, but the amounts are unknc~n ., The Committee aqreed to file amended Schedules D.

The Audit staff notes that the undisclosed debts were

extinguished during each subsequent reportlng period.

In the interim audit report the Audit staff

recommended that within 30 calendar days of service of that

report the Committee file amended Schedules D to disclose the

obligations noted above.

In its response to the interim report the Committee

expressed appreciation and support for the concept of compliance

with the debt and obligations reporting regulations, and

objected to being " found to have failed to comply ..• " with

these regulations, " when prompt payment of all invoices - ---weekly-,-and-fulL_payment__o_C_alJ._~_n .... o_i:::_e_~_~t the end _of each

reporting period, left remaining only misleadi-ng and Tnaccuril-t-e---------

estimates... to report."

On June 9, 1993 the Committee filed amended schedules

which corrected the public record.

B. Excessive Contributions from Staff or Other

Individuals

( Section 116.5(b) of Title 11 of the Code of Federal

Regulations states that the payment by an individual from his or

her personal funds, including a personal credit card, for the

costs incurred in providing goods or services to, or obtaining

goods or services that are used by or on behalf of, a candidate

or a political committee is a contribution unless the payment is

exempted from the definition of contribution under 11 C.F.R.

SlOO.7(b)(8). If the payment is not exempted under this

section, it shall be considered a ~ontribution by the individual

unless the payment is for the individual's transportation

expenses incurred while traveling an behalf of a candidate or

political committee of a ?0~:t1cal ?arty or for usual and normal

subsistence expenses incurred by an individual, other than a

volunteer, ~hile traveling on be~a~f of a candidate or political

committee of a political party; and, ~~e individual is

relmbursed within sixty days a:~er t~e oloslng date of the

billing statement on WhlCh the charges first appear if the

payment was made uSlng a personal credit card, or ~ithin thirty

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-5-

days after the date on whi~h the ex?e~ses were incurred if a

personal credit card was ~~t ~sed. For purposes of this

section, the clcsi~g date shall be the date indicated on the

billing statement which se=ves as the ~utoff date fo:

determining which charges are i~c:~ded cn that billing

statement. In addition, "s-..:::s:stence expenses" include only

expenditures for Fersona~ :iv:~g expenses related to a

particular individual traveling on committee business, such as

food or lodging.

Section 100.7(a)(1)(iii) of Title 11 of the Code of

federal Regulat:cns states that the term "contribution" includes

a gift, subscription, loan, advance, or deposit of money or

anything of value. The term "anything of value" includes all

in-kind contributions. Unless specifically exempted under 11

C.F.R. SlOO.7(b), the provision of any goods or services without

charge or at a charge which is less than the usual and normal

charge for such goods or services is a contribution.

During our review of the Committee's expense

reimbursements to campaign staff, we noted that one individual

advanced funds or credit cn behalf of the Committee for amounts

totaling $10,202. The expenses were incurred for his own

travel and subsistence ($5,151) and for the subsistence of

others (mostly meals to volunteers, $5,051) between July 30,

1992 and August 22, 1992. The individual was reimbursed on

--- --No-vember--lS~-l-992~~/

'J)

c,

At the Exit Conference the Committee was provided a

schedule of the items in question. With respect to the meals

provided to volunteers, the Committee had explained at interim

conferences that the Committee procedure was to pay vendors

directly for meals catered {box lunches) to volunteers. The

individual noted above was a non-paid staff member in an

honorary position who supervised several staff members and many

volunteers. He handled the bills directly instead of using the

Committee procedure, and provided the Committee with the

catering costs after the close of the convention.

Subsequent to the Exit Conference the Committee

provided a letter from the individual (dated 9/15/92) which

stated, in reference to the volunteers, that n ••• feeding them

fell between the cracks of planning. I was approached in a

moment of panic by the coordinator to solve this problem or in

his opinion we would lose ma~y of these people. In response, I

arranged for them to be fed ... " on three occasions.

~/ A reimbursement check dated November 18, 1992 was returned

to the Committee because :: represented an overpayment by

$162. The replacement check for the amount $10,196 was

dated December 1, ::'992. The 55 apparent

under-reimbursement represents the net of two arithmetic

errors.

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In the interim audit report the Audit staff

recommended that withl~ 3: calenda, days of service ~f that

reoort, the Committee eit~er demc~s:rate that no ccn:,lbutlon

oc~urred with respect tc t~ese ex~ense reimbursements, or offer

any other information 0, ~itigatir.g circumstances that are

beiieved to be relevant to the iss~e.

In ~espcnse to the interim report the Ccmmlttee

outlined the sequence of lncurrences and reimbursements, and

advanced the follOWing reasoning to support their contention

that the Commission ta~e ~~ :~rthe= actio~ ~ith :espec: ~o this

matter.

1. The Committee found no ,elevance between staff

reimbursements and Section 441a(a) cited in the

interim report.

2. Regarding one portion of the reimbursement

($5,151) the Committee: Stated that it

" ... had no knowledge of the billing date of the

credit ca,d statement in order to comply with the

60 day rule ... n; noted that the overage period

was 11 days for $5,151 in reimbursements for

personal travel and subsistence; and stated that

this reimbursement was only one of many issued to

__ lodividual s~ __

3. The Committee submits that " ... there is no

contribution for the volunteers' meals

[$5,051] ... [s}ince the individual was

tendered payment on 11/18/92, prior to any

disbursement for these meals by the

individual ... n.

With regard to Section 441a(a) the Audit staff

acknowledges that this citation as it appeared in the interim

report is not relevant to a Convention committee.

The Audit staff does not consider the 11-day overage

period cited by the Committee or the lack of knowledge

concerning the billing date of the credit card statement to be

materially relevant to the issue. In any event, the Audit staff

determined that the personal travel and subsistence expenses for

this individual ($5,151) ~ere outstanding between 71 and 111

days, not 71 as calculated by t~e Committee. The portion paid

by credit card was outstandlng bet~een 71 and 105 days. The

expenses for volunteers' ~ea:s 'S3.~Sl) were outstanding for 90

and 92 days.

The Committee's contentlon, that the re:mbursement for

volunteers' meals is net a cont,:~~:ion because the individual

was reimbursed by the Committee before he disbursed funds for

these meals, is wi~hout ~er:t. ?~:s~a~t to 11 :.:.R. SlOO.7 a

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"contribution" is defined ~o include a loan. advance. or

anything of value. The cor.~:ibution ~as made when the

obligation was incur:ed ~~r the prov:s~Q~ of food on 8/18,92 and

8/20/92. The operative =ate :5 :~e =a:e of incurrence net the

date of payment.

Furthermore, :~ :5 ~at clea: ~he~ the in~oices rer

food ~ere actually pald by t~e individual. Within the letter

dated 9/15"92 discussed above. the individual stated with

reference to providing ~:od fer the ~olunteers: ~The paid

invoices for expenses are included". The Committee provided

copies of two ~on-neg0tiated checks. j~aw~ on t~e individual's

account and dated weli after the 9'15.-92 :etter:

1. Check 12659 dated 11 -25./92 1n payment fer two

"Charge Sale" invoices totaling $3,441 and dated

8/18/92 and 8/20/92.

2. Check .2671 dated 12/4/92 in payment for one "Net

10 Days" invoice dated 9/9/92 for services

provided on 8':3/92.

The Committee has provided no additional information

relative to this finding and the analysis as presented in the

interim audit report is unchanged.

--II-I_E-indingsandF.ecommendations - Reoayment Matters

A. Stale-dated Committee Checks

cSection 9008(h) of Title 26 of the United States Code

states that the Commission shall have the same authority to

require repayments from the national committee of a political

party as it has with respect ~o repayments from any eligible

candidate under section 9007(b).

Section 9007.6 of Title 11 of the Code of federal

Regulations states that if the committee has checks outstanding

to creditors or contributors that have not been cashed, the

committee shall notify the Commission of its efforts to locate

the payees, if such efforts have been necessary, and its efforts

to encourage the payees to cash the outstanding checks. The

committee shall also submit a check for the total amount of such

outstanding checks, payable to the United States Treasury.

The Audit staff reconciled t~e bank activity through

March 31. 1993 and identified 13 stale-dated checks totallng

$3,719.

At the Exit Confe:ence t~e Audit staff provided the

Committee representatives wlth a sc~edu:e of the stale-dated

checks. The Committee representat:':e s~ated that the Cor:l!l\lttee

would reissue checks and repay the U.S. Treasury the amount of

those checks for WhlCh payees could no: ~e located. On May 10.

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c

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1993 the Committee provided a list of the stale-dated checks

(which ~as separated into S2,7~3 of reissued checks and $945 of

repayable checks' and copies c: ~~e relssued checks (front only;

along ~ith stop payme~t do~~~e~:a:::~ :cr :~e original checks

(both reissued and repayab:e'. 7~e Committee presented a check

paya bl e to the. lJ, ............ <; "'reasu"'y.. _'...J <~,.._ _

~~.; .. "t_ ........~~,.. __"'''-a'''''en~ =- J'" • L o'J.. ~h" '__

checks not reissued. Finally the ::~mi~tee stated that copies

of the canceled checks would be provided ~hen the reissued

checks cleared the bank.

In the inte:lm audlt cepe:: the Audit staff

recommended that with:n 30 calendar days of service of that

report the Commlttee provlde c~pies both s:des) of the :eissued

checks totaling $2,773 to demonstrate that they were negotiated.

Absent this evidence the A~dit staff ~ould recommend

that the Commission make an initial determination that $2,773 in

outstanding checks are payable to the U.S. Treasury.

In response to the interim report the Committee

provided copies of negotiated chec~s totaling 52,682, and

presented a check payable to the U.S. Treasury for 591.

Recommendation .1

The Audit staff recommends that the Commission make an

initial determination that 51,036 is repayable to the U.S.

- Treasury-pur-sua-ntt:6--26--U~S;-C .S9008(h)-and-H-€.F'.R.§900-1.6.-

Repayments totaling $1,036 were made on May 10, 1993 and

March 1, 1994.

B. Improper Use of Funds - Payments for Lost Eauipment

Section 9008.6{a){4) of Title 11 of the Code of

Federal Regulations states, in part, that permissible uses of

federal funds for convention expenses include, but are not

limited to, expenses for preparing, maintaining, and dismantling

the physical site of the convention, including rental of the

hall, platforms and seating, decorations, telephones, security,

and utilities. Section 9008.8(b)(4)(v) states that the

convention committee has the burden of proving that expenditures

by the convention committee were for purposes of defraying such

convention expenses.

Section 9008.l0(d) states, HI relevant part. if the

Commission determines that any a~c~~t of a~y payment to t~e

convention committee under :: CFR ?JC8.3'b\ ~as used for anv

purposes other than the purposes authorized at 11 CFR 9006.6, it

shall notify the national committee of the amount improperly

used and such national committee s~a:: pay :0 :he Secretary an

amount equal to the amount s?ec:::e~.

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-3-

During the revie~ of disbursements for equipment

leases and purchases the Au~:t staff ~oted two payments to

vendors for 18st equi~~e~: =~y :u~s tota~l~g S33,3;~. A payme~:

to GE Rental/~ease inc:~~ed :~e re?lace~ent cost ~S4,404) of th~

laser printers which we:e ~~: retur~e= as part of nlne printers

leased during the conver:::c:,.. The se::ond payment, to ~otorola

for $28,990, ~as for electro~ic equi~~ent (2-way radios and

accessories) ~hich was leased during the convention and not

returned. Both lease agree~ents stated that the customer would

be responsible for the replacement cost of equipment not

returned.

At the Exit Conference the Commlttee was provided with

the payment information on the lost equipment.

With regard to the Motorola equipment the Committee

representatives had stated at an interim conference that they

had tried to locate the missing equipment and that initially

a lot more equipment had been misplaced before it was located

and returned to the lessor. The Committee representatives

stated that they had been unable to file a police report or

recover insurance settlements on the missing items because the

Committee could not state with certainty that the equipment was

stolen.

At the Exit Conference the Committee further stated - -tria t -attnou.gn-the -equiplileficwas·-insured;--itwasnot covered

because the $1,000 deductible was applied per incident. The

Committee also stated that another vendor was responsible for

tracking the equipment and that the Committee had reduced the

consulting payment to this vendor by about $6,100, in part

because the vendor failed to adequately monitor the equipment.

Finally, the Committee representative opined that the loss of

equipment (laser printers and radios) was normal for a

convention of this size and that some allowance should be made

for it.

The Audit staff verified that a $6,108 reduction was

made to the consultant who the Committee stated was responsible

for tracking the radie equipment, and has reduced the loss

accordingly. The Committee provided no additional documentation

to substantiate its assertions with regard to either insurance

coverage or other efforts made to :ecover the losses.

The Audit sta:f acknowledges that leased equipment may

be damaged or lost and =ec~gnizes :~e qualified nature of an

expenditure for normal ~ea: and tear. Accordingly, the Audit

staff did not include as :~proper use of federal funds six

payments totaling $3,275 ~ade to f:~e ~endors for the repair or

replacement of furniture. := $-,:95 ~a:d to a vendor for the

repair of leased golf ::a::s.

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However, the Audit staff is of the opinion that

neither t~e loss of the :ase~ pr:~~e=s ~or the loss of rad:o

equipment (as adjusted, lS =easona=:= :ass cr ~armal spcl:a;e.

Nine printers ~ere leased at a ~ost of 51,954; t~o of these were

lost at an additional =eplacement cost of 54,~J~. Radio

equipment lease costs totaled 5S1,9S9; :~e replacement cost for

missing equipment increased the expense of this activity by

$22,882 (528,990 less 56,108). The Audlt staff concludes that

losses totalinq 527,236 ,54,404 + 522,882) should be viewed as

improper use of funds.

On December ~, ~993 the C8~mlSSlon deter~:ned tha:

no repayment is required.

C. unspent Portlon of Fund Payment

Section 9008(h) of Title 26 of the United States Code

states, in part, that the Commission shall have the same

authority to require repayments from the national committee of a

major party as it has with respect to repayments from any

eligible candidate under section 9J07(b).

In addition, 11 C.F.R. S9008.10(e)(1) and (2) states

that if any portion of the payment under 11 CFR 9008.3 remains

unspent after all convention expenses have been paid, that -- -----------__portion_shC!cJ.Lb~_~eturned to the Secretary of the Treasury: and

the national co_it tee -0i-conventi-on-colllll1ittee-s-ha-l-lmakean----

interim repayment of unspent funds based on the financial

position of the committee as of the end of the sixth month

following the last day of the convention, allowing for a

reasonable amount as deteroined by the Commission to be withheld

for unanticipated contingencies. If, after written request by

the national committee or convention committee, the Commission

determines, upon review of evidence presented by either

committee, that amounts previously refunded are needed to defray

convention expenses, the Commission shall certify such amount

for payment.

Section 9008.7(d)(3) of Title 11 of the Code of

Federal Regulations provides, in Fart, that local retail

businesses, excluding banks, as ~ell as local municipal

corporations and government agencies may donate funds to a host

committee for use by that committee in defraying convention

expenses. Such funds are to be ma"~tained in a separate

account.

Section 9008.~\c" ~, s:a:es t~at funds used bv t~e

host committee in accordance ~lth section 9008./(d}(2l and (3)

shall not be considered eXFenditu=es and shall not count against

the expenditure llmitation under :: :~~ 9008.7 I a).

page 12

6/23/94
-11-

Section 9008.4'::' states. in part. that the

entitlements established by 11 CFR 9008.3 shall be adjusted so

as not to exceed the difference between the expenditure

limitations of 11 C:? ?S:-.-a~ a~d t~e a~cJ~t of private

contributions rece:ved by the nat:onal committee of a political

party. In calculating these adjustments ex?enditures by host

committees in accordance .:t~ 11 eFR 3008.7'd) will not be

considered private contr:=Jtlcns or expenditures counting

against the limitation.

Finally, 11 C.:.? §9008.10(gJll, and (2) states that

if the Commlssion determi~es that repayment is required, it

shall give writ~en notiflca:lon tc the committee of the amounts

required to be paid and the reasons therefor; and the national

committee shall repay to the Secretary. within 90 days of the

notice, the amount of the repayment. Upon application submitted

by the national committee or convention committee, the

Commission may grant a 90-day extension of the repayment period.

The Audit staff reviewed the Committee's financial

position at the close of business March 31, 1993 for the interim

report and determined that the unspent portion of the fund

payment totaled $94,520.

The Audit staff reviewed the response to the interim

report and additional documentation provided through February

_2-8,_19_9_4__anctdeterlUined the current financial position of the

Commi t tee as shown-be fow-. --

Page 13

6/23/94
-12-

Calculation of financial ?~sition and Spending Subject

to the Expe~~itur~ Limitation

Committee on A~~angemen~5 fOe the 1992

Republican ~ational Convention

as of ~~a:ch 31. 1993

Detecmined at Feb:uacy 28, 1994

ASSETS

Cash on Har.d

Cash in Banks

Add:

Caoi tal ~.ssets

Deposits Receivable

total Assets

LIABILITIES

Accounts Payable

Stale-dated Checks Reissued

Repayment to U.S. Treasury

Stale-dated Checks

_Offic ial_l'_r_oceedi ngsL _

Winding Down Costs

Total Liabilities

Remaining Federal Funds

Spending Limitation Remaining

S -Q1.53,782

S 20,713

7,671

$ 7,600

2,682

1,036

48,800

7-5,673

$182,166

$135,791

$ 46,375 Y

S46,375y

~/ Includes $20,713 in unsold capital assets; amount may be

adjusted as assets are disposed of at greater or less than

this valuation.

Page 14

6/23/94
-13-

The Committee made no interim repayment pu~suant to 1:

C.F.R. §9008.l0(e}(2).

In the interi~ report the A~dlt staff discussed the

possibility that 5656,368 1n i~-klnd disbursements identified

during the audit of the P.c~ston Hest :2~mittee, :oc. may be

attributable to the Committee's spendlog limitation. 7hese

disbursements represent 13 in-kind contributions for which the

business entities failed to demonstrate a orooortional

commercial return. The Audit staff also n~ted that should it be

determined that these Host Committee disbursements are

attributable to the spendlng limitatlon, the Committee's

entitlement would be reduced by the 5656,368 in private funds

and a repayment in an equal amount would be required. At the

Exit Conference the Committee exoressed concern about these

disbursements being charged to the limit. The Treasurer

questioned how the Committee could be held responsible for

activities of the Host Committee.

The response by the Houston Host Committee to its

interim report indicated that the in-kind disbursements noted

above defrayed expenses for the Host Committee and were not

convention-related expenses chargeable to the Committee's

spending limit.

-- In_j:he__~flt:erimauditt:epot:t the Audit staff

recommended that, absent ashowing-to-tne--contra-ry;-withilT--30

days of service of that report, the Commission make an initial

determination that $94,520 in unspent funds is repayable to the

united States Treasury pursuant to 26 U.S.C. S9008(hl and 11

C.F.R. S9008.l0(e).

The Audit staff also recommended that the Committee

demonstrate why no interim repayment pursuant to 11 C.F.R.

S9008.10(e}(2) was required.

In response to the interim report the Committee

stated: "No interim repayment was required due to anticipated

additional invoices which were unknown on 3/31/93, as well as

wind down costs. Transactions subsequent to 3/31/93 includinq

but not limited to, the printing of the Official Proceedings,-

have proven this to be a reasonable decision."

Recommendation 12

The Audit staff recommends that the Commission ~ake an

initial determination that 545,3-5 :~ unspent funds is repayable

to the United States Treasury pursuant to 26 U.S.C. §9008(h) and

11 C.F,R. §9008.l0(e}.

A repayment of 5:5,23~ ~as ~ade C~ March 1, 1994,

page 15

6/23/94
IV. Summary of Amounts Repayable ~~ t~e U.S. Treasury

A.

B. Unspent Por:io~ of ~und ?ayne~~ i r:!.c.)

Subtotal

Amount Repaid to Da~e

Amoun~ Due to U.S. Treasury

s

S 47,411

(26,273)

S 21 .1J..e. a/

:.n

c: -,

a/ Includes $20,713 in capl~al assets ~hich may be liquida:ed

at more or less than thlS value.

Page 16

6/23/94
{/ TJtry;:t~vt., (,<U.....

U/~/1"-/,

FEDERAL ELECT10:--.: CO,\V,,1!SSION

JU:le 6, 1994

KEKORANDlIl'I

THROUGH:

,"

etor

Robert J. Costa

Assistant Staf

Audit Divisio

John C. surCn

Staff Diree~ )

Lawrence M. N b1e

General Coun e1 . J'(}.{,

Kim Bright- oleman ~'r Associate neral Counsel

---Lorenzo-Hola~way- 4...{ff-.-------------------------- ------ ----- Assistant General Counsel

Rhonda J. vosdingh

Attorney

FROK:

TO:

c:

SUBJECT: Proposed Final Audit Report on the Committee on

Arrangements for the 1992 Republican National Conventien

(LRA 1425/AR 194-10)

The Office of General Counsel has reviewed the proposed Final

Audit Report on the Committee on Arrangements for the 1992

Republican National Convention ("the Committee") submitted to this

Office on April 7, 1994. The following memorandum summarizes our

comments on the proposed Report. If you have any questions

concerning our comments, please contact Rhonda J. Vosdingh, the

attorney assigned to this audit.

We concur with the findings in the proposed Final Audit

Report which are not discussed separately in the following

memorandum ..!/

11 Since the proposed Final Audi t Report does ,not include any

matters exempt from public disclosure under 11 C.F.R. S 2.4, we

recommend that the Commission'S discussion of this document be

conducted in open session.

Page 17

6/23/94
.. 'r-inn.i<'A\id-i t '-l\eport ------

Committee on Arrangements for the 1992 Republican Nat'l Convention

(LRA .425/AR 194-10)

Page 2

I. STAFF ADVANCES (II.B.)

We agree with the Audit Division's finding that a

contribution was made to the Ccm~ittee when Jack Laughery, a

National Committeeman, advanced $10,202 to the Committee for his

own travel and subsistence and the subsistence of others.

11 C.F.R. S 116.5. These expenses were incurred between JUly 30,

1992 and August 22, 1992, and the Committee reimbursed Mr.

Laughery for these expenses on November 18, 1992.~/ The proposed

Report notes that Mr. Laughery's personal travel and subsistence

expenses were outstanding between 71 and 111 days, the portion

paid by credit card was outstanding between 71 and 83 days, and

the expenses for others' subsistence were outstanding for 90 and

92 days .i/

The expenses for others' subsistence primarily included

provision of meals to Committee volunteers. Apparently, these

meals were obtained on Mr. Laughery's personal credit at the

restaurants. These meals were provided between July 30 and August

22, 1992. On November 18, 1992 the Committee issued a check to

Mr. Laughery to cover these expenses. The Committee argued that

because it had issued a check to Mr. Laughery to cover these

expenses before he actually disbursed funds for these meals, no

contribution resulted. We disagree with the Coamittee'. po.ition.

In the case of an individual who incur.s expenses for others'

subsistence, a contribution occurs at the time the financial ·;--------------obli9ationTsincurred~-regar(ness-o-f-when-th.- pa-yment is-due-or------

when the individual pays the debt. 11 C.F.R. S 116.5.

Furthermore, in determining whether a contribution results, it is

immaterial whether or when the committee reimburses an individual

who advanced funds on behalf of others. 11 C.F.R. S 116.5(b).i/

~/ A reimbursement check dated November 18, 1992

the Committee because it included an overpayment.

issued a replacement check on December 1, 1992.

was returned to

The COllllllittee

3/ Although the proposed Report states that the portion of Mr.

Laughery's personal travel and subsistence paid by credit card was

outstanding between 71 and 83 days, you informed us that the

actual number of days these expenses were outstanding is between

71 and 105 days and the Report will be revised accordingly.

4/ Mr. Laughery received three invoices from the restaurants.

All the invoices were addressed to his business address. The

payments, however, appear to have been drawn on his personal

checking account, which negates any implication that a corporate

contribution was made. We also note that one of the invoices was

addressed to the "Republican Convention Security Detail, c/o Jack

Laughery" at his business address. The fact that this invoice was

addressed to the Committee may suggest that Mr ..Laughery was

acting as an agent of the Committee when he incurred the expenses

for the meals. If Mr. Laughery is considered an agent, then the

transactions are governed by 11 C.F.R. S 116.3 <extensions of

Page 18

6/23/94
,. "FinaYKuditRet:or:;:

Committee on Arrangements for the 1992 Republican Nat'l Convention

(LRA t425/AR t94-10)

Page 3

The fact that the staff advances resulted in contributions to

the Committee raises the issue of the contribution limitation for

convention committees that receive their maximum entitlement of

federal funds under 26 U.S.C. 5 9008(b)., Although the regUlations

governing the 1992 presidential election cycle do not address this

issue, we believe that the contribution limit for publicly

financed convention committees should be $20,000 if they provide

reimbursements for the advances. A convention committee is

affiliated with the national committee as it is established,

financed, maintained, and controlled by the national committee and

therefore shares the national committee's $20,000 contribution

limitation. See 11 C.F.R. 55 9008.8(b)(1) and (2),

llO.3(a)(I)(i~ If the convention committee reimburses the

individual, the advance no longer constitutes a contribution, and

there is no basis for reducing the committee's entitlement of

federal funds. 11 C.F.R. S 9008.4{c). Therefore, since the

advances at issue in the present case were under the $20,000

limitation and the Committee reimbursed the individual for these

expenses, there is no repayment implication for the Committee.

See 11 C.F.R. S 9008.10{c).~/

II. UNSPENT PORTION OF FUND PAYKENT (III.C.)

The Audit Division recommends the Commission determine the .. Committ.ee_repay _to__the_Un i_ted__States__Treasu ry_$46,315__i n _unspent---

federal funds. See 26 U.S.C. S 9008{h) and 11 C.F.R.

S 9008.10{e). The Commission's regulations provide that all

unspent funds shall be repaid to the United States Treasury within

24 months of the convention. 11 C.F.R. S 9008.10{e){3). They

also provide that an interim repayment be made 6 months after the

convention. 11 C.F.R. 59008.10(e)(2). In the instant case,

remaining unspent funds must be repaid by August 20, 1994.

However, the interim repayment was due January 20, 1993. Although

the Committee repaid a portion of its unspent funds on March 1,

1994 and promised to repay to the Treasury any amount that remains

by June 1, 1994, the Committee did not make any interim repayment

within 6 months of the convention as required by the regulations.

(Footnote 4 continued from previous page)

credit to a committee for goods and services). However, since

there is no additional evidence that Mr. Laughery was an agent of

the Committee for the purpose of providing meals, we believe that

the transactions fall within the purview of 11 C.F.R. S 116.5.

~/ The proposed 1996 regulations would codify the policy of

allowing a convention committee that accepts the maximum

entitlement of federal funds under 26 U.S.C. S 9008(b) to accept

staff advances up to $20,000 if it provides reimbursement. See

Agenda Document #94-35, Memorandum to the Commission from th-e--

Office of General Counsel, Re: Convention Regulations: Final

Rules and Explanation and Justification, pp. 11-12 (Explanation

and Justification for 11 C.F.R. S 9008.6).

Page 19

6/23/94
Eh;i~AJdlt-~Repo r t

Committee on Arrangements for the 1992 Republican Nat'l Convention

(LRA 142S/AR 194-10)

Page 4

The Committee argued that no interim repayment was re~uired due to

anticipated additional invoices which were unknown at :he tirn~ and

wind down costs.

This Office disagrees with the Committee's contention. The

Commission's regulations require convention committees to make an

interim repayment of unspent funds 6 months after the convention,

allowing for a reasonable portion as determined by the Commission

to be withheld for unanticipated contingencies. 11 C.F.R.

S 9008.10(e)(2) .6/ In the instant case, the Commission did not

make a determination that a reasonable portion for the Committee

to withhold would be the entire amount of its remaining unspent

funds. Because the Commission did not make such a determination,

this Office believes the Committee withheld federal funds that

properly should have been repaid to the United States Treasury by

January 20, 1994 as an interim repayment. Bowever, the time for

the interim repayment has passed and the interim repayment will be

subsumed within the repayment the Committee makes in response to

the Final Audit Report. 11 C.F.R. S 900B.10{e)(3). Therefore,

this Office believes the Committee's failure to make an interim

repayment does not warrant additional action.I/

6/ The regulations further provide that if amounts previously

refunded are needed to defray convention expenses, the Commission

shall certify such amount for payment. 11 C.F.R. S 9008.10(e)(2).

7/ The proposed 1996 convention financing regulations would also

require the committees to make an interim repayment of unspent

funds based on the committee's financial position six months after

the convention and explicitly require the committee to make the

interim repayment within 30 days of that date. Agenda Document

~94-3S, Memorandum to the Commission from the Office of General

Counsel, Re: Convention Regulations: Final Rules and Explanation

and Justification (proposed section 9008.12(b)(S)(ii). It is

anticipated that the proposed revisions to the regulations clearly

setting the date by which the interim repayment is due would

prevent the instant scenario from recurring in the future.

Page 20

6/23/94
AKOOS149

" ",'

c

L0

C'.,

June 28, 1994

Mr. Alec poitevint, Treasurer

Committee on Arrangements for the

1992 Republican National Convention

228 S. Washington Street

Suite 200

Alexandria, VA 22314

Dear Mr. Poitevint:

Attached please find the Final Audit Report on the

Committee on Arrangements for the 1992 Republican National

Convention. The Commission approved this report on June 23,

1994. As noted on page 3 of the report, the Commission may

pursue any of the matters discussed in an enforcement action.

In accordance with 11 CFR 59008.10(g)(1) the Commission has

made_~I!_!n1UaLcie~e~miIl~tiOI'LtMttheCQmmUteILis-torepay-t<)

-----tlle Secretary of the Treasury $47,411. Of this amount the

Committee has repaid $26,273; the balance due the U.S. Treasury

is $21,138. Pursuant to 11 CFR S9008.10(e)(3) the balance due

shall be repaid to the U.S. Treasury on or before August 20,

1994. The Commission may grant an extension of time upon

request of the national committee.

Should the Committee or the national committee dispute the

Commission's determination that a repayment is required,

Commission regulations at 11 CFR 59008.11(a) provide either

committee with an opportunity to submit in writing, within 30

calendar days after service of the Commission's notice (August

1, 1994) legal and factual materials to demonstrate that no

repayment or a lesser repayment, is required. The Commission

will consider any written legal and factual materials submitted

by either coaaittee within the 30 day period in making the final

repayment determination. Such materials may be submitted by

counsel if the Committee or the national committee so elects.

If either committee decides to file a response to the initial

repayment determination, please contact Kim L. Bright-Coleman of

the Office of General Counsel at (202) 219-3690. If the

committees do not dispute this initial determination within the

30 day period provided, it will be considered final.

page 21

6/23/94
Mr. Alec Poitevint, Treasurer

Page 2

The Commission approved Final Audit Report will be placed

on the public record on July 6, 1994. Should you have any

questions regarding the public release c: this report, please

contact Mr. Ron Harris of the Commission's Press Office at (202)

219-4155.

Any questions you may have related to matters covered

during the audit or in the report should =e directed to Cornelia

Riley or Marty Favin of the Audit Divislon at (202i 219-3720.

Sincerely,

il.y '- )..., ,-:J""T' . ,l<. ~ll. J' ~1~Robert J. Costa , Assistant Staff Director

Audit Division

Attachments:

Final Audit Report

Legal Analysis

ee: Mr. Keith A. Davis

Page 22

6/23/94
CHRONOLOGY - COMMITTEE ON ARRANGEMENTS FOR THE

1992 REPUBLICAN NATIONAL CONVENTION

Pre-audit Inventory Commenced

Audit Fieldwork

Interim Audit Report to

the Committee

Response Received to Interim

Audit Report

final Audit Report Approved

Page 23

6/23/94

12/07/92

12/28/92 - 04/26/93

12/15/93

03/01/94

06/23/94
·'"' 'J ,

C>.
Pub Iie. D/SCJOSU;'0

C6#f&) •• "'-. -.+'.

"'7-'---

.... _v. ,:- '. \... , AK004734 r' ... -. "'" __ ! , '" ',...... t .....

- '.",' I J

March 8, 1994

MEMORANDUM

TO:

THROUGH:

FROM:

THE COMMISSI~~~

JOHN C. SU~~~d~ '\ STArr DIRE~ A7~

ROBERT J. COS4A -7'1'--

ASSISTANT STA~F DIRECTOR

AUDIT DIVISION

SUBJECT: REPAYMENT OF $25,328.25 RECEIVED FROM THE COMMITTEE ON

ARRANGEMENTS FOR THE 1992 REPUBLICAN NATIONAL

CONVENTION

-- - - -- ------

This inforaational aeaorandua is to advise you of a

$25,328.25 repayment received from The Comaittee on Arrangements

for the 1992 Republican National Convention. The repayment was

received in response to the interim audit report and represents

stale-dated checks and unspent public funds.

Attached are copies of the checks, the letter which

accompanied the repayment, and the receipt showing delivery to

the Department of Treasury.

Should you have any questions regarding the repayment

please contact Ray Lisi at 219-3720.

Attachments as stated
· .,

PAY

_ ::_£'.:~ '~0 (~E:K ,\~"~:'..-.~.7

3/1/94 2720 *25237.00*

Twenty Five Thousand Two Hundred Thirty Seve~ and 00/100-------------------

u. S. TK.EASL:RY

,-:::

**Ninety One and

U.S. TREASURY

3Y1! 94 ~~JIVo c;lJi ~2c5*'

25/100------------------------------ ~~

________________ ~A

u' 0 0 0 0 2 7 l. gIi' I: 0 5 bOO l, 0 a qI: b 5 2'" 0 l. 5 5 L, 7 l. II'
1992 Republican National Convention

Houstoo/ TOO5

Office 01 Finance

March 1, 1994

Mr. Robert J. Costa

Assistant staff Director for

the Audit Division

Federal Election Commission

999 E Street NW

Washington, DC 20463

Dear Mr. Costa:

Enclosed please find the Response of the Committee on

Arrangements for the Republican National Convention to the

Interim Report of the Audit Division issued December 15, 1993.

Separate checks to the United states Treasury in the amount of

the Committee's preliminary repayment and the total of the stale- ------- dated--cheoks-a£a--~t-aehed.-------- --- --- -- - -- -----

c

Sincerely: ~7

£//~: Keith A. Davis

Assistant Treasurer

Committee on Arrangements for the

Republican National Convention

encls.

an

PIt

228 South Washington Street • S~~e 200 • Alexandr:a. VA 22314

(7C3) 548-9061 • Fax (703) 684-0683
FEDERAL ELECT!O' CO\\\\ISSIO'

.,

'. "

March 7, 1993

RECEIPT FROM THE

UNITED STATES DEPARTMENT OF TREASURY

FOR A

PAYMENT TO THE GENERAL FUND OF THE U. S. TREASURY

Received on March 7, 1993, from the Federal Election Commission

(by hand delivery', two checks drawn on the account of The

Committee On Arrangements For The 1992 Republican National

Convention. Check #2719 in the amount of $91.25 represents a

repayment for a stale dated check which was not reissued. Check

12710 in the amount of $25,237 represents a repayment of unspent

public funds.

------------- - --Pur-suant-~Q--l1-C.--F .--R.--§900S. l-O{g-H3h -theche-cits should - - -- -

be deposited into the general fund of the Treasury.

The Committee on Arrangements For The

1992 Republican National Convention

Amount of Repayment: $25,328.25

Presented by:

~.

\.\. 'G:.-L-z \ '.. L-(__~-=> fa r the

Federal Election Commission

Received by:

for the

United States Treasury