11

candidate” and therefore the Commission set a floor, that is, a minimum, of 50 percent
that must be attributed to the clearly identified candidate, “no matter how much of the
space in the mailing is devoted to that candidate.” AO 2006-11 did not, however, involve
a presidential candidate; additionally, AO 2006-11 was issued after the 2004 election.

Fourth, the Commission considered the application of 11 CFR §109.21 and AO 2004-01,
issued to Bush-Cheney ‘04, Inc. and Alice Forgy-Kerr for Congress, which provided
guidance on attribution of coordinated communications between two authorized
committees.

There were not the minimum four affirmative votes among the Commissioners required
to make a finding as to whether or not the 50% allocation complied with the Act and
Commission regulations. Some Commissioners considered the 50% allocation to be in
accord with past precedent and relevant Commission regulations, so there was no
adjustment required to expenditures applied to the expenditure limits applicable to the
General Committee. Some Commissioners were of the opinion that the Act and
Commission regulations regarding hybrid ads require the General Committee to pay more
than 50%, in which event any adjustment above 50% would apply against the expenditure
limits applicable to the General Committee and would have resulted in an Audit staff
finding of expenditures over allowable limits.

| Issue 2. Interest Income

Summary
Interest accrued on funds transferred from the General Committee to two media accounts
totaling $19,745.

Legal Standard

Investment of Public Funds: other uses resulting in income. Investment of public
funds or any use of public funds that results in income is permissible, provided that an
amount equal to all net income derived from such use, less Federal, State and local taxes
paid on such income, shall be paid to the Secretary. 11 CFR §9004.5.

Income on Investment or other use of payments from the Fund. If the Commission
determines that a candidate received any income as a result of an investment or other use
of payments from the fund pursuant to 11 CFR §9004.5, it shall so notify the candidate,
and such candidate shall pay to the United States Treasury an amount equal to the amount
determined to be income, less any Federal, State or local taxes on such income. 11 CFR
§9007.2(b)(4).

Facts and Analysis

Interest of $19,745 was earned on two accounts maintained by media vendors engaged by
the General Committee and retained by the vendors. The Commission discussed whether
the $19,745 in interest would be subject to repayment pursuant to 11 CFR §9007.2(b)(4).
See 11 CFR §9004.5. After the discussion, there were not the required four affirmative
votes among the Commissioners necessary to make a finding. Some Commissioners held


Part II
Overview of Campaign

Campaign Organization

General Committee Compliance Fund

Important Dates

¢ Date of Registration 08/04/2004 07/17/2003

¢ Audit Coverage Dates 09/1/2004 thru 12/3 1/2004 | 07/02/2003 thru 12/31/04

Headquarters Arlington, VA Arlington, VA

Bank Information

¢ Bank Depositories 1 1

¢ Bank Accounts 6 Checking Accounts 7 Checking Accounts and

1 Investment Account

Treasurer David Herndon David Herndon
08/04/2004 — 01/17/06 07/17/2003 — 01/17/06
Salvatore Purpura Salvatore Purpura
01/18/06 - present 01/18/06 - present

Overview of Financial Activity (Audited Amounts)

General Committee | Compliance Fund

Opening Cash on Hand $0 $0
Receipts
¢ From Individuals $ 11,146,198
e Federal Funds Received $ 74,620,000
¢ From Political Committees 50,995
¢ From Authorized Committees 7,171,380
¢ Offsets 275,751 308,346
e Loan Received 6,500,000
¢ Other Receipts 15 123,977
e Total Receipts $ 81,395,766 $ 18,800,896
Disbursements
e Operating Expenses $ 72,192,685 $ 2,643,597
¢ Transfers to Other Authorized 100

Committees
¢ Loan Repayments Made 6,500,015
e Refunds to Contributors 246,107
e¢ Other Disbursements 63,038
e Total Disbursements 78,692,700 2,952,842
Closing Cash Balance @12/31/2004 $ 2,703,066 $ 15,848,054


* For two trips, NetJets® provided Flight Itinerary Statements which included
the flight rule or code, indicating these flights operated under 14 CFR Part 91,
the date of the flight, passenger lists and departure and arrival information.

¢ For one trip, CitationShares provided a Flight Log which included the flight
tule or code, indicating the flight operated under 14 CFR Part 91, the date of
the flight, the number of passengers and the departure and arrival information.

¢ For one trip, a letter was provided from Flight Options that stated that the
flights were flown under 14 CFR Part 91.

e For one flight, a letter from the Vice President of Operations for Bombadier
stated that the flight was flown under 14 CFR Part 91.

¢ Stargazer Aviation, whose business was chartering flights, requested that its
135 certificate be suspended during the time that it provided two flights and,
as such, would then be operating under 14 CFR Part 91. A letter was
provided from the FAA’s Flight Standards District Office in San Antonio,
Texas noting that the suspension was accepted.

« Two flights were offered by an LLC which was formed by an incorporated
entity to limit potential liability and is treated as a “disregarded entity” and
does not file its own tax return. The LLC’s income and expenses flow into the
tax statements for the corporation. A signed letter noting this information was
provided by the Assistant Treasurer for the LLC.

e For the remaining flight, a letter was provided from the Executive Assistant to
the owner of the plane that attests that the flight was flown under 14 CFR Part
91. A “Trip Report” was also provided which stated “Own” under “Type
Flight.” The letter states that this is short for owner, which is how their flight
department identifies a Part 91 flight.

|Finding 2. Expenditure Limitation

Summary

The expenditure limitation for the 2004 general election for the office of President of the
United States was $74,620,000. Based on the positions of the Commission regarding the
Findings contained in this Report, the Audit staff's review of financial activity through
December 31, 2006, and estimated winding down costs, indicates that the General
Committee has not exceeded the limitation.

5 Netjets, CitationShares, Flight Options and Bombadier offer fractional ownership of jets, and, in effect,
operate as management companies for the provision of jet services.


Part IV
Findings and Recommendations -
General Committee

Finding 1. Potential In-kind Contributions from Air
Charter Providers

Summary

It appeared that the General Committee may have reimbursed for the use of private
aircraft at an amount less than that required potentially resulting in the receipt of in-kind
contributions of $69,678. In response to the Preliminary Audit Report recommendation,
the General Committee provided documentation demonstrating that the amount it paid for
each aircraft was the correct reimbursement as a matter of law or fact.

Legal Standard

Contributions Not Permitted. In order to be eligible to receive any payments from the
Presidential Election Campaign Fund, the candidate of a major party in a presidential
election shall certify to the Commission that no contributions to defray qualified
campaign expenses have been or will be accepted by such candidates or any of their
authorized committees except to the extent necessary to make up any deficiency in
payments received out of the fund. 26 U.S.C. §9003(b)(2).

Contribution defined. A gift, subscription, loan (except when made in accordance with
11 CFR §§100.72 and 100.73), advance, or deposit of money or anything of value made
by any person for the purpose of influencing any election for Federal office is a
contribution. The term anything of value includes all in-kind contributions.

The usual and normal charge for a service is the commercially reasonable rate that one
would expect to pay at the time the services were rendered.

The provision of services at a charge less than the usual and normal charge results in an
in-kind contribution. The value of such a contribution would be the difference between
the usual and normal charge for the services and the amount the political committee was
billed and paid. 11 CFR §100.52 (a) and (d).

Repayment for Contributions Accepted. If the Commission determines that an
eligible candidate of a major party, the candidate’s authorized committee(s) or agent(s)
accepted contributions to defray qualified campaign expenses (other than contributions to
make up deficiencies in payments from the fund, or to defray expenses incurred for legal
and accounting services in accordance with 11 CFR §9003.3(a)), it shall notify the
candidate of the amount of contributions so accepted, and the candidate shall pay to the
United States Treasury an amount equal to such amount. 11 CFR §9007.2(b)(5).


Part III
Summaries

Findings and Recommendations - General Committee

Finding 1. Potential In-kind Contributions from Air
Charter Providers

It appeared that the General Committee may have reimbursed for the use of private
aircraft at an amount less than that required potentially resulting in the receipt of in-kind
contributions of $69,678. In response to the Preliminary Audit Report recommendation,
the General Committee provided documentation demonstrating that the amount it paid for
each aircraft was the correct reimbursement as a matter of law or fact. (For more detail,
see p. 4)

Finding 2. Expenditure Limitation

The expenditure limitation for the 2004 general election for the office of President of the
United States was $74,620,000. Based on the Commission’s actions regarding the
Findings and issues contained in this Report, the Audit staff's review of financial activity
through December 31, 2006 and estimated winding down costs indicates that the General
Committee has not exceeded the limitation. (For more detail, see p. 7) 2

Additional Issues —- General Committee

Issue 1. In-kind Contributions - Republican National
Committee Hybrid Ads

See discussion at page 10.

Issue 2. Interest Income
Interest accrued on funds transferred from the General Committee to two media accounts
totaled $19,745. (For more detail, see p. 11)

Findings and Recommendations - Compliance Fund
Based upon our examination of the reports and statements filed by the Compliance Fund,
and the records presented, no material non-compliance was discovered. (For more detail,
see p. 12)

? As discussed in Part V, below, some Commissioners are of the opinion that the 50% allocation of the cost
of hybrid ads between the RNC and the General Committee was not in compliance with the Act and
Commission regulations and that, therefore, the General Committee should have paid more than 50% of
these costs. Approval of this audit report does not reflect approval by those Commissioners of a 50%
allocation. The Audit staff notes that, had the Commission taken action on the issues raised in Part V,
such action would have resulted in an adjustment of the expenditure limit calculations, and therefore, an
Audit staff finding of expenditures over the allowable limits. Some Commissioners considered the 50%
allocation to be in accord with past precedent and relevant Commission regulations, so there was no
adjustment required against the expenditure limits applicable to the General Committee.



November 2004. The providers of these flights included individuals, LLCs? and
commercial charter companies.

All of these trips were flown on planes which were certified for commercial service by
the FAA under 14 CFR parts 121, 129, or 135; and in addition, the service providers did
not appear to be corporations or labor organizations. It was unclear if these planes were
also certified by the FAA to fly under 14 CFR parts 91 or 125. More information was
requested on the nature of the planes, the contracting arrangement, and what FAA
certificate or operating authority the planes were flown under for these specific trips.
However, given the information the Audit staff had, reimbursement for these flights
should have been made at a charter rate.

The Audit staff used the 2004 Spring Charter Guide’ to determine rates for each flight.
Based on the original information provided by the General Committee and other
information provided by the FAA, the Audit staff calculated the charter rate cost of each
trip using the hourly charter rate for each flight leg and the length of each flight. Thus,
for the service provided, at the charter rate the General Committee should have paid
$99,170. By failing to pay a charter rate, the General Committee potentially received in-
kind contributions of $69,678 ($99,170 - $29,492).

At the exit conference and in subsequent emails, the Audit staff provided a work paper
detailing these flights and discussed the matter with General Committee representatives.

Preliminary Audit Report Recommendation and Committee
Response

The Preliminary Audit Report recommended that the General Committee provide
documentation that:

e@ demonstrated that the amount it paid for each aircraft was the correct
reimbursement as a matter of law or fact; or,
e demonstrated a lower charter rate is applicable.

Absent such a demonstration, the Audit staff would recommend that the Commission
make a determination that $69,678 is repayable to the United States Treasury.

The General Committee submitted documentation that demonstrated that all questioned
flights were flown under 14 CFR Part 91 or the provider was a corporation; and, as such,
the first class rate reimbursed by the General Committee is acceptable. The
documentation provided is described below:

3 Documentation detailing some of the LLC’s filing status election for federal tax purposes was not
provided during audit fieldwork.

* Audit staff used the 2004 Spring Charter Guide because the 2004 Fall Charter Guide was not available
until December 2004.


FEDERAL ELECTION COMMISSION
Washington, DC 20463

April 2, 2007

MEMORANDUM
To: Robert W. Biersack

Press Officer
From: Joseph F. Stoltz

Assistant Staff Director

Audit Division
Subject: Public Issuance of the Report of the Audit Division on Bush-Cheney ‘04,

Inc. and the Bush-Cheney ’04 Compliance Committee, Inc.

Attached please find a copy of the audit report which was approved by the
Commission on March 22, 2007.

The report may be released to the public on April 2, 2007.

Attachment as stated

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


Reported Operating Expenditures at December 31, 2006 $ 76,359,412
Add: Accounts Payable 6,944
Estimated Winding Down Costs (January 1, 2006 to May
31, 2007) 210,185
Less: Due from Bush-Cheney ’04 (Primary), Inc. (131,972)
Due from the Compliance Fund (611,872)
Other Offsets to Operating Expenditures (833,386)
Accounts Receivable (379,311)
Net Expenditures Subject to the Limitation $ 74,620,000
Expenditure Limitation 74,620,000
Amount In Excess of the Limitation $ -0-

As the chart demonstrates, based on the positions of the Commission regarding the
Findings contained in this Report, the Audit staffs review of financial activity through
December 31, 2006, and estimated winding down costs, indicates that the General
Committee has not exceeded the limitation. °

Further, the General Committee filed a Statement of Net Outstanding Qualified
Campaign Expenses. The Statement of Net Outstanding Qualified Campaign Expenses,
prepared by the Audit staff, can be found at page 13. It presents the General Committee’s
financial position as of December 2, 2004, the end of the expenditure report period; and
is adjusted for the General Committee’s financial activity through December 31, 2006.
The NOQCE supports the result of the expenditures subject to the limitation analysis.

® As discussed in Part V, below, some Commissioners are of the opinion that the 50% allocation of the cost
of hybrid ads between the RNC and the General Committee was not in compliance with the Act and
Commission regulations and that, therefore, the General Committee should have paid more than 50% of
these costs. Approval of this audit report does not reflect approval by those Commissioners of a 50%
allocation. The Audit staff notes that, had the Commission taken action on the issues raised in Part V,
such action would have resulted in an adjustment of the above expenditure limit calculations, and
therefore, an Audit staff finding of expenditures over the allowable limits. Some Commissioners
considered the 50% allocation to be in accord with past precedent and relevant Commission regulations,
so there was no adjustment required against the expenditure limits applicable to the General Committee.


Legal Standard

Expenditure Limitation. No candidate for the office of President of the United States
eligible under 2 U.S.C. §9003 to receive payments from the Secretary of the Treasury
may make expenditures in excess of $20,000,000 as adjusted for the increases in the
Consumer Price Index. The expenditure limitation for the 2004 general election for the
office of President of the United States was determined to be $74,620,000. 2 U.S.C.
§441a(b)(1)(B) and (c).

Repayments. If the Commission determines that the eligible candidate of a political
party and their authorized committees incurred qualified campaign expenses in excess of
the aggregate payments to which the eligible candidates of a major party were entitled
under section 9004, it shall notify such candidates of the amount of such excess and such
candidates shall pay to the Secretary of the Treasury an amount equal to such an amount.
2 U.S.C. §9007(b)(2).

Net Outstanding Qualified Campaign Expenses (NOQCE). Within 30 days after the
end of the expenditure reporting period, the candidate must submit a statement of net
outstanding qualified campaign expenses. The statement must contain:
¢ = The total of all committee assets including cash on hand, amounts owed to the
committee and capital assets listed at their fair market value;
¢ The total of all outstanding obligations for qualified campaign expenses; and
e Anestimate of necessary winding-down costs. 11 CFR §9004.9(a)(1) and (b).

Expenditure Report Period. In the case of a major party, the expenditure report period
begins on the earlier of September 1 before the election or the date on which the major
party’s nominee is chosen. The period ends 30 days after the Presidential election. For
President Bush, the expenditure report period ran from September 1, 2004 to December
2, 2004. 26 U.S.C. §9002(12).

Facts and Analysis

As noted above, the expenditure limitation for the 2004 general election for the office of
President of the United States was $74,620,000. Shown on the next page is the Audit
staff's analysis of expenditures subject to the limitation.


Travel by Airplane — Prior to January 14, 2004. A candidate or person traveling on
behalf of the candidate who uses an airplane owned or leased by a corporation not
licensed to provide commercial service must reimburse the corporation the first class air
fare for travel between cities with regular commercial service or the usual charter rate
where no regular commercial service exists. 11 CFR §114.9(e).

Travel by Airplane — On or After January 14, 2004. Campaign travelers who use an
airplane that is licensed by the Federal Aviation Administration to operate for hire under
11 CFR part 121, 129 or 135 are governed by the definition of a contribution at 11 CFR
§100.52(a) and (d). 11 CFR §100.93(a)(2).

Contributions by a Limited Liability Company (LLC): An LLC not electing
treatment as a corporation under federal tax law or not having publicly-traded shares will

be considered as having been made from a partnership and governed by the rules
pertaining to partnerships. 11 CFR §§110.1(b)(1) and (g)(2) and (4).

Facts and Analysis
Effective January 14, 2004, the Commission revised its air travel regulations. Prior to the
rule change, air travel was governed by:

e 11 CFR §114.9 — for travel on airplanes owned or leased by a corporation or labor
organization and not licensed to offer commercial services between locations
served by regularly scheduled commercial service, the service providers would be
paid first class airfare.

¢ 11 CFR §100.52 — for travel on airplanes not owned or leased by a corporation or
labor organization, the service providers would be paid the usual and normal
charge (the charter rate).

After the rule change, the regulations included a provision that dictated which reimbursed
rate is applicable based on how the aircraft is licensed to operate, not on the ownership
status:
e 11 CFR §100.93 — for travel on airplanes not licensed by the Federal Aviation
Administration (FAA) to operate for compensation or hire under 14 CFR Part
121, 129 or 135, the service providers would be paid first class airfare.
e 11 CFR §100.52 — for travel on airplanes licensed by the FAA to offer
commercial service, the service providers would be paid the usual and normal
charge (the charter rate).

However, in promulgating these new aircraft regulations an inadvertent delay in the
publication of the effective notice may have caused confusion as to which regulation was
applicable to publicly funded candidates in the 2004 general election. As a result, if the
General Committee complied with either the old or the new rules it was considered to be
in compliance.

The General Committee reimbursed eight providers of ten flights at the first class rate, for
a total of $29,492. All flights occurred on separate days between September 2004 and


Part I
Background

Authority for Audits

This report is based on audits of Bush Cheney °04, Inc. (General Committee) and Bush-
Cheney ’04 Compliance Committee, Inc. (Compliance Fund). The audit is mandated by
Section 9007(a) of Title 26 of the United States Code. That section states that, “after
each presidential election, the Commission shall conduct a thorough examination and
audit of the qualified campaign expenses of the candidates of each political party for
President and Vice President.” Also, Section 9009(b) of Title 26 of the United States
Code states, in part, that the Commission may conduct other examinations and audits as it
deems necessary.

Scope of Audits

These audits examined:

1. The receipt of excessive contributions and loans.

2. The receipt of contributions from prohibited sources.

3. The receipt of transfers from other authorized committees.
4. The disclosure of contributions and transfers received.

5. The disclosure of disbursements, debts and obligations.

6. The recordkeeping process and completeness of records.

7. The consistency between reported figures and bank records.
8. The accuracy of the Statement of Net Outstanding Qualified Campaign Expenses.
9. The campaign’s compliance with spending limitations.

10. Other campaign operations necessary to the review.

Inventory of Campaign Records

The Audit staff routinely conducts an inventory of campaign records before it begins the
audit fieldwork. The General Committee’s and the Compliance Fund’s records were
materially complete and the fieldwork began immediately.


12

the view that the standard for repayment should be whether the General Committee
actually received or benefited from the interest earned by having the interest used to
make media buys or to offset commissions. They concluded that because the General
Committee did not receive or benefit from the interest earned, no finding or repayment
determination would be appropriate. Other Commissioners considered that the purpose
for payment of interest or income was to ensure that any income received through the use
of public funds benefits the public financing system. They concluded that repayment
under these circumstances may be appropriate.

Part VI.
Findings and Recommendations -—
Compliance Fund

Based upon our examination of the reports and statements filed by the Compliance Fund,
and the records presented, no material non-compliance was discovered.


Table of Contents

Page

Part I. Background

Authority for Audits 1

Scope of Audits 1

Inventory of Campaign Records 1
Part II. Overview of Campaign

Campaign Organization 2

Overview of Financial Activity 2
Part III. Summaries

Findings and Recommendations — General Committee 3

Additional Issues — General Committee 3

Findings and Recommendations — Compliance Fund 3

Part IV. Findings and Recommendations - General

Committee
Finding 1. Potential In-kind Contributions from Air Charter Providers
Finding 2. Expenditure Limitation 7

Part V. Additional Issues - General Committee
Issue 1. In-kind Contributions — Republican National Committee Hybrid Ads 10
Issue 2. Interest Income ll

Part VI. Findings and Recommendations - Compliance
Fund

Based upon our examination of the reports and statements filed by the
Compliance Fund, and the records presented, no material non-compliance
was discovered. 12

Part VII. Attachment
Statement of Net Outstanding Qualified Campaign Expenses 13


Report of the Audit Division on Bush-
Cheney ’04, Inc. and the Bush-Cheney ’04

Compliance Committee, Inc.
July 2, 2003 - December 31, 2004

Why the Audits
Were Done

Federal law requires the
Commission to audit
every political
committee established
by a Presidential
candidate who receives
general funds for the
general campaign.' The
audits determine
whether the candidate
was entitled to all of the
general funds received,
whether the campaign
used the general funds in
accordance with the law
and whether the
campaign otherwise
complied with the
limitations, prohibitions,
and disclosure
requirements of the
election law.

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 Campaign

Bush-Cheney ’04, Inc. (General Committee) is the principal campaign committee for
President George W. Bush, the Republican Party’s nominee for the office of President
of the United States. The Bush-Cheney 04 Compliance Committee, Inc.
(Compliance Fund) was established to accept contributions to be used solely for legal
and accounting services to ensure compliance with Federal election laws. Both are
headquartered in Arlington, VA. For more information, see chart on the Campaign
Organization, p 2.

Financial Activity (p. 2) General Compliance
Receipts . Committee Fund
e Federal Funds Received $ 74,620,000
* From Individuals —_ $11,146,198
¢ From Political Committees , 50.995
¢ From Authorized Committees 7 171.380
© Offsets 275,751 308,346
e Loan Received 6,500,000
© Other Receipts — 15 123,977
Total Receipts $81,395,766 $18,800,896
Disbursements
¢ Operating Expenditures $ 72,192,685 $ 2,643,597
¢ All Other Disbursements 6,500.01 5 , 309. 245
Total Disbursements 597. ‘
$ 78,692,700 $ 2,952,842

Findings and Recommendations - General Committee
(p. 3)

e Potential In-kind Contributions from Air Charter Providers (Finding 1)

¢ Expenditure Limitation (Finding 2)

Additional Issues - General Committee (p. 3)
¢ In-kind Contributions - Republican National Committee Hybrid Ads (Issue 1)
e Interest Income (Issue 2)

Findings and Recommendations - Compliance Fund (p. 3)
Based upon our examination of the reports and statements filed by the Compliance
Fund, and the records presented, no material non-compliance was discovered.

' 26 U.S.C. §9007(a).


10
Part V
Additional Issues — General Committee

Issue 1. In-kind Contributions - Republican National
Committee Hybrid Ads

Facts and Analysis

The cost of media ads that identified President Bush and/or Senator Kerry by name and
image and referred to other political figures in Congress as allied with President Bush or
Senator Kerry without identifying specific candidates was allocated 50% to the General
Committee and 50% to the RNC. Senator Kerry and President Bush were the only
candidates clearly identified in the ads. Since these ads contained references such as “our
leaders in Congress,” “Congressional leaders,” “liberals in Congress” and “liberal allies,”
these ads are termed “hybrid ads.”

The Commission addressed whether a 50% allocation of the cost of these hybrid ads is
consistent with Commission precedent and existing regulations.

First, the Commission considered the extent to which, if any, 11 CFR §106.1(a) provides
guidance regarding the proper allocation for these hybrid ads. Section 106.1(a) of the
Commission’s regulations provides that expenditures made on behalf of more than one
clearly identified candidate should be attributed to each candidate according to the benefit
reasonably expected to be derived (determined by the proportion of space or time devoted
to each candidate as compared to the total space or time devoted to all candidates).

Second, the Commission considered the extent to which, if any, 11 CFR §106.8 provides
guidance regarding the proper allocation for these hybrid ads. Section 106.8 of the
Commission’s regulations provides that a flat 50% allocation is appropriate for the costs
of a phone bank conducted by a political committee that refers to one clearly identified
federal candidate and “generically refers to other candidates of the Federal candidate’s
party without clearly identifying them,” regardless of the space or time devoted to the
clearly identified Federal candidate.

Third, the Commission considered the extent to which, if any, the Commission’s advisory
opinion issued to Washington State Democratic Central Committee (AO 2006-11)
regarding mass mailings provides guidance regarding the proper allocation for these
hybrid ads. In AO 2006-11, the Commission noted that although there are no
Commission regulations specifically addressing cost allocation for “hybrid ads” (other
than for phone banks), “nonetheless an appropriate method for allocating the costs of”
such ads (involving mass mailing costs) is to “apply analogous ‘space or time’
principles” as set out in the Commission’s rules that address ads featuring more than one
clearly identified candidate. In advising the Washington State Democratic Central
Committee that a “space or time” analysis is relevant, the Commission explained that for
mass mailing “hybrid ads” where only one candidate is clearly identified, the ad “serves
in large measure the purpose of influencing the election of [that] clearly identified


Part VII.
Attachment
Bush-Cheney ’04, Inc.
Statement of Net Outstanding Qualified Campaign Expenses
At December 2, 2004
As Determined on December 31, 2006
Assets
Cash in Bank $4,028,400
Accounts Receivable:
Due from the Compliance Fund $611,872 (a)
Due from the Bush-Cheney ’04 (Primary), Inc. 131,972 (b)
Due from other Vendors 1,124,717 1,868,561
TOTAL ASSETS $5,896,961

Obligations:

Accounts Payable:

For Qualified Campaign Expenses $4,747,421
Due to the Compliance Fund 140,281 (c)
Due to the Bush-Cheney °04 (Primary), Inc. 196,972 (d) 5,084,674

Winding Down Costs:

Actual: December 3, 2004 to December 31, 2006 $602,102 (e)

Estimated: January 1, 2007 to May 31, 2007 210,185 (f) 812,287
TOTAL OBLIGATIONS $5,896,961
NET OUTSTANDING QUALIFIED CAMPAIGN EXPENSES (DEFICIT) ($ -0-)

FOOTNOTES TO NOQCE

(a) This amount represents Compliance Fund reimbursements for compliance related costs paid by the General Committee.
(b) This amount represents Primary Committee reimbursements for primary expenses paid before December 2, 2004.

(c) The General Committee owes the Compliance Fund for its portion of allocable expenses.

(4) The General Committee owes the Primary Committee for its portion of the allocable expenses paid during the campaign.

(e) The Compliance Fund has also directly paid $4,186,243 of winding down costs.

(f) The Audit staff will review the General Committee’s disclosure reports and records to compare actual figures with estimates
and prepare adjustments accordingly. Further, the General Committee has not exceeded the winding down cost limitation
imposed by 11 CFR §9004.11(b).