FEDERAL ELECTION COMMISSION

WASHINGTON, D.C 20463

November 29,1999

MEMORANDUM

;,

TO:

FROM:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERTJ.COSTA ~~~ ASSISTANT STAFF DIRECT;R...../ "-'

AUDIT DIVISION

51

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

FRIENDS OF RONNIE SHOWS

Attached please find a copy ofthe final audit report and related documents on

Friends ofRonnie Shows which was approved by the Commission on November 18,

1999.

Informational copies ofthe report have been received by all parties involved and

the report may be released to the public on November 29, 1999.

Attachment as stated

cc: Office ofGeneral Counsel

VOffice of Public Disclosure

Reports Analysis Division

FEC Library
•

TABLE OF CONTENTS

FRIENDS OF RONNIE SHOWS

PAGE

Executive Summary

Final Audit Report 3

Background 3

Findings 5

Transmittal to Committee 17

Chronolot,'Y 19
FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

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FJmffiNDSOFRO~SHOWS

EXECUTIVE SUMMARY

The Friends ofRonnie Shows (the CO\OIllittee) registered with the Federal

Election Commission on March 23,1999 as ~e principal campaign committee ofRonnie

Shows, Democratic candidate for the U.S. House ofRepresentatives from the state of

Mississippi, 4th District. The audit was conducted pursuant to 2 U.S.C. §438(b), which

states that the Commission may conduct audits ofany political committee whose reports

fail to meet the threshold level of compliance set by the Commission. The findings of

the audit were presented to the Committee at the completion offieldwork on July 1, 1999

and later in the interim audit report. The Committee's response to those findings is

contained in the audit report. The foHowing is an overview of the findings contained in

the audit report.

APPARENT PROHIBITED CONTRIBUTIONS - 2 U.S.c. §441b(a). The audit

revealed that the Comlnittee received 23 contributions totaling $8,600 from incorporated

entities. Ofthis amount, $2,400 was refunded, albeit not timely. In response to the

interim audit report, the Committee provided evidence of additional refunds totaling

$4,550. It was also determined that 5 contributions totaling $1,650 were not from

corporations.

RECEIPT ofCONTRIBUTIONS IN EXCESS OF TIlE LIMITATION -2 U.S.C.

§44 la(a)(I )(A) and (2)(A). Contributions from 23 individuals and three political

committees were identified as exceeding the contribution limitation by $53,750 and

$5,500, respectively. The Committee issued refunds to individuals totaling $37,250 and

to poLitical committees totaling $2,500, albeit untimely. In response to the interim audit

report, the Committee provided evidence of additional refunds totaling $7,000 and

evidence to demonstrate that one contribution in the amount $750 was not in excessive.

The Committee also presented signed redesignations and/or reattribtutions in an effort to

demonstrate that $3,500 in contributions were not excessive. The remaining $5,250 in

excessive contributions from individuals were not addressed. Regarding the remaining

$3,000 in excessive contributions from political committees, a $1,000 refund was

reportedly made in September, 1999; however, no documentation was provided.

RECEIPT OF CURRENCY £N EXCESS OF LIMITATION - 2 U.S.C. §441g. The

Audit staffs review ofreceipts identified 21 deposits involving $23,881 in currency.

There were no records to document the source ofthe funds deposited. In response to the

interim audit report, the Committee provided documentation to demonstrate that $14,091

Page 1 of 19 Approved I III 8/99
2

in deposits involving currency were generated from fundraising activities involving

contributions of $50 or less. The Committee identified the contributor of a $500

contribution and refunded the entire amount. For the balance ofthe undocumented

currency, the Committee provided copies of official bank checks as evidence of

donations to charities. .

ITEMIZATION OF CONTRIBUTIONS -2 U.S.C. §§434(b)(3)(A) and 43 I(l3)(A).

Our review of contributions from individuals revealed that a material number of

contributions were not itemized as required. The Audit staff also reviewed contributions

from political committees and determined that the Committee failed to itemize 45

contributions totaling $62,850. In response to the interim report, the Committee filed

amended reports which disclosed the aforementioned contributions.

RECORDKEEPING FOR AND ITEMIZATION OF DISBURSEMENTS - 2 U.S.c.

§432(c)(5) and (d). The audit revealed that tpe Committee did not maintain adequate

documentation for disbursements totaling $211,990. In addition, the Committee did not

itemize 59 disbursements totaling $164,655. In response to the interim audit report, the

Committee provided copies of canceled checks and other bank documentation for the

$211,990 in disbursements. The Committee also filed amended reports to itemize those

disbursements that were not previously disclosed.

MISSTATEMENT OF FINANCIAL ACTIVITY - 2 U.S.c. §434(b)(I), (2) and (4).

The Committee's reported receipts were understated by a net amount of $20,076 and

disbursements understated by a net amount,of$30,555. As a result, cash on hand at the

end of the audit period was overstated by $10,479. The misstatement was due primarily

to the Committee's failure to report receipts and disbursements between October 15th and

18th ,1998. In response to the interim audit report, the Committee filed amended reports

which corrected the public record.

DISCLOSVREOFLoANINFORMATION-Il C.P.R. §104.3(d)(l). The

Committee received 4 loans totaling $32,562, but did not disclose the loans on Schedules

A and C-I. In response to the interim audit report, the Committee amended its reports to

disclose Schedules A and C-l as recommended.

Page 2 of 19 Approved 11/18/99
FEDERAL ELECTION COMMISSION

WASHINGTON, 0.( 20463

REPORT OF THE A UDIT DIVISION

ON

A99-06

I.

FRIENDS OF RONNIE SHOWS

lJACKGRO!JND

A. AUDIT AUTHORITY

This report is based on an audit ofthe Friends ofRonnie Shows

Committee (the Committee), undertaken by the Audit Division ofthe Federal Election

Commission (the Commission) in accordance with the provisions ofthe Federal Election

Campaign Act of 1971, as amended (the Act), The audit was conducted pursuant to

Section 438(b) ofTitle 2 ofthe 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 ofthis title. Prior to conducting any audit

under this subsection, the Commission shall perfonn an internal review ofreports filed

by selected committees to detennine ifthe 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 February 18, 1998, through December

31, 1998. The Committee reported a beginning cash balance of $0; total receipts for the

period 0[$701,928; total disbursements [or the period of $681,309; and an ending cash

balance of $20,618 on December 31, 1998J

The figures cited in this report are rounded to the nearest doliae. The amounts reported do not foot

(see Finding lI.F., Misstatement of Financial Activity),

Page 3 of 19 Approved 11/18/99
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C. CAMPAIGN ORGANIZATION

The Committee registered with the Commission on March 23,19994as

the principal campaign committee for Ronnie Shows, Democratic candidate for the U.s.

House of Representatives from the state ofMississippi for the Fourth District.

The treasurer ofthe Committee during the audit period and currently, is

Thomas G. Bass. The Committee maintains its headquarters in Bassfield, Mississippi.

To manage its financial activity, the Committee maintained one bank

account. From this account, the Committee made approximately 247 disbursements.

Into this account the Committee deposited approximately 1,200 contributions totaling

$722,004.

• D. AUDIT SCOPE AND PROCEDURES

The audit covered the following general categories:

1. The receipt of contributions or loans in excess ofthe statutory

limitations [see Findings II.B. and H.C.];

2. the receipt of contributions from prohibited sources, such as those

from corporations or labor organizations [see Finding II.A.];

3. proper disclosure ofreceipts from individuals, political

committees and other entities, to include the itemization of

contributions or other receipts when required, as well as, the

completeness and accuracy ofthe information disclosed [see

Finding ILD);

4. proper disclosure of disbursements including the itemization of

disbursements when required, as well as, the completeness and

accuracy ofthe information disclosed [see Finding II.E.];

5. proper disclosure of campaign debts and obligations [see Finding

II.G.];

Neither the Statemem ofOrgamzation nor a Statement ofCandidacy were timely filed.

Page 4 of 19 Approved 11/18/99
3

6. the accuracy oftotal reported receipts. disbursements and cash

balances as compared to campaign bank records [see Finding

II.F.]:

7. adequate recordkeeping for campaign transactions [see Finding

II.E.l; and

8. other audit procedures that were deemed necessary in the situation.

Although the Committee's contribution records meet the minimum

recordkeeping requirements ofthe Act, the scope of our testing of contributions received

from individuals was limited because the Committee's contribution records did not

include response devices or other documentation generated by the contributor which

contained the contributor's occupation and name of employer. Therefore, no verification

ofthe reported information was possible.

Our testing of disbursements was also limited because the Committee did

not maintain adequate documentation for disbursements. Further, since invoices or other

documentation generated by the payee was not available for a material number of

disbursements, we were not able to verity the purpose or determine the date ofincurrence

for expenses, and in tum were not able to identify debts or obligations required to be

disclosed.

Unless specifically discussed below, no material non-compliance was

detected. It should be noted that the Commission may pursue further any ofthe matters

discussed in this report in an enforcement action.

II. AUDIT FINDINGS AND RECOMMENDAnONS

A. ApPARENT PROHIBITED CONTRIBUTIONS

Section 44Ib(a) ofTitle 2 ofthe United States Code states, in part, that it

is unlawful for any corporation to make a contribution or expenditure in connection with

any election at which a Representative in Congress is to be voted for, or in connection

with any primary election or political convention or caucus held to select candidates for

',uch office, or for any candidate, political committee, or other person knowingly to

accept or receive any contribution prohibited by this section, or any officer or any

director of any corporation to consent to any contribution or expenditure by the

corporation prohibited by this section.

Section 103.3(b)(I) of Title II ofthe Code of Federal Regulations states,

in part, that contributions that present genuine questions as to whether they were made by

corporations, labor organizations, foreign nationals, or Federal contractors may be, within

len days ofthe treasurer's receipt, either deposited into a campaign depository under 11

CFR I03.3(a) or returned to the contributor. The treasurer shall make at least one written

Page 5 of 19 Approved 11118/99
4

or oral request for evidence ofthe legality ofthe contribution. Ifthe contribution cannot

be determined to be legal, the treasurer shall, within thirty days ofthe treasurer's receipt

ofthe contribution, refund the contribution to the contributor.

Sections 103.3(b)(4) and (5) ofTitie II ofthe Code of Federal

Regulations state that any contribution which appears to be illegal under II CFR

103.3(b)(I) or (3), and which is deposited into a campaign depository shall 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.

If a contribution which appears to be illegal under 11 CFR 103.3(b)(I) or

(3) is deposited in a campaign depository, the treasurer shall make and retain a written

record noting the basis for the appearance ofillegality. A statement noting that the

legality ofthe contribution is in question shall be included in the report noting the receipt

ofthe contribution. If a contribution is refunded to the contributor because it cannot be

determined to be legal, the treasurer shall note the refund on the report covering the

reporting period in which the refund is made.

Our review of contributor records revealed that the Committee received

23 contributions totaling $8,600 from incorporated entities. The corporate status ofthe

entities was verified with the Mississippi Secretary of State. Ofthis amount, $2,400 was

refunded, albeit not timely. These refunds were made on June 18, 1999, after the date on

which the Committee was notified ofthe audit. Based on a review ofthe Committee's

bank balances at the end of each statement period, the Committee did not, in each period,

maintain sufficient funds to refund the $8,600 in prohibited contributionsS

This issue was discussed with Committee representatives at the exit

conference. Committee representatives stated that they were in the process ofidentifying

and resolving questionable contributions.

The interim audit report recommended that the Committee provide

evidence demonstrating that the contributions in question were not from corporations,

absent such evidence, refund $6,200. The report also recommended that the Committee

provide evidence for such refunds, including refunds made on June 18, 1999. Iffunds

were not available to make refunds, disclosure ofthe prohibited contributions as refunds

owed to the contributors until such time that funds become available was also

recommended.

In response to the interim audit report, the Committee provided evidence

of additional refunds totaling $4,550. It was determined that 5 contributions totaling

5 When reviewing the bank balances to determine ifsufficient funds were available, the amounts

identified as impermissible contributions discussed in Findings lIB and 1\.C. were taken into

consideration.

Page 6 of 19 Approved 11/18/99
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$1.650 were not from corporations. Official bank checks were used to effect refunds:

copies ofthe checks were included in the response

6

B. RECEIPT OF CONTRIBUTIONS IN EXCESS OFTHE LIMITATION

Section 44Ia(a)(l )(A) of Title 2 of the United States Code states 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.

Section 441a(a)(2)(A) ofTitle 2 ofthe United States Code states that no

multicandidate 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 102.9(1) ofTitle 11 ofthe Code of Federal Regulations states that

the treasurer shall maintain the documentation required by 11 CFR 110.1(1) concerning

designations, redesignations, reattributions and the dates of contributions. Ifthe treasurer

does not maintain this documentation, 11 CFR 110.1(1)(5) shall apply.

Section 103.3(b)(3) of Title 11 ofthe Code of Federal Regulations states,

in relevant part, that the treasurer shall be responsible for examining all contributions

received for ascertaining whether contributions received. when aggregated with other

contributions from the same contributor, exceed the contribution limitation set forth in 11

CFR 110.1. Contributions which on their face exceed the contribution limitations set

forth in 11 CFR 110.1 and contributions which do not appear to be excessive on their

face, but which exceed the contribution limits set forth in II CFR 110.1 when

aggregated, may be either deposited into a campaign depository under 11 CFR 103.3(a)

or returned to the contributor. If any such contribution is deposited, the treasurer may

request redesignation or reattribution of the contribution by the contributor in accordance

with II CFR 110. I(b) or 110.1(k). If a 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 I03.3(b)(4) ofTitle II ofthe Code of Federal Regulations states,

in part, that a contribution which appears to be illegal under 11 CFR I03.3(b)(3) and is

deposited into a campaign depository, shall 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 campaib'11 depository or maintain

sufficient funds to make all such refunds.

Section llO.l(b)(2)(ii) ofTitle 11 ofthe Code of Federal Regulations

states, in part, that "with respect to any election" means in the case of a contribution

Also included in its response were copies of the refund checks. dated June 18, 1999.

Page 7 of 19 Approved I 1/18/99
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designated in writing by the contributor for a particular election, the election so

designated, and in the case of a contribution not designated in writing by the contributor

for a particular election, the next election for that Federal office after the contribution is

made.

Section 11O.1(b)(5)(i)(C) ofTitle II ofthe 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 ifthe

contribution was not designated in writing for a particular election, and the contribution

exceeds the limitation on contributions.

Section 110.I(b)(5)(ii) ofTitle II ofthe Code ofFederal Regulations

states, in part, that a contribution shall be considered to be redesignated for another

election ifthe treasurer ofthe recipient authorized political committee requests that the

contributor provide a written redesignation ofthe contribution and informs the

contributor that the contributor may request the refund ofthe contribution as an

alternative to providing a written redesignation, and that within sixty days from the date

ofthe treasurer's receipt ofthe contribution, the contributor provides the treasurer with a

written redesignation ofthe contribution for another election, which is signed by the

contributor.

Section 110. 1(k)(3)(i) ofTitle 11 ofthe Code of Federal Regulations

states, in part, that if a contribution to a candidate, either on its face or when aggregated

with other contributions from the same contributor, exceeds the limitations on

contributions, the treasurer ofthe recipient committee may ask the contributor whether

the contribution was intended to be ajoint contribution by more than one person.

Sections llO.1(k)(3)(ii)(A) and (8) ofTitie 11 of the Code of Federal

Regulations state, in part, that a contribution shall be considered to be reattributed to

another contributor ifthe treasurer ofthe recipient committee asks the contributor

whether the contribution is intended to be a joint contribution by more than one person,

and informs the contributor that he or she may request the return ofthe excessive portion

ofthe contribution ifit is not intended to be ajoint contribution, and if within sixty days

from the date ofthe treasurer's receipt ofthe contribution, the contributors provide the

treasurer with a written reattribution ofthe contribution, which is signed by each

contributor, and which indicates the amount to be attributed to each contributor if equal

attribution is not intended.

Section 110.1(\)(1) ofTitle 11 ofthe Code of Federal Regulations states,

in part, that if a political committee receives a contribution designated in writing for a

particular election, the treasurer shall retain a copy ofthe written designation.

Section 110.1 (1)(3) ofTitle 11 of the Code of Federal Regulations states,

in part, that if a political committee receives a written reattribution of a contribution to a

Page 8 of 19 Approved 11/I8/99
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different contributor, the treasurer shall retain the written reattribution signed by each

contributor.

Section 110.1(1)(5) of Title II ofthe Code of Federal Regulations states,

in part, that if a political committee does not retain the written records concerning

designation, the contribution shall not be considered to be designated in writing for a

particular election, and the provisions of 11 CFR 110. 1(b)(2)(ii) shall apply.

During the review ofcontributions from individuals, the Audit staff

identified $53,750 in contributions from 23 individuals that were in excess ofthose

individuals' $1,000 per election contribution limitation. Documentation to support that

the contributions were timely designated to more than one election or attributed to more

than one individual was not presented for Audit staffreview7 To identify the apparent

excessive contributions, the Audit staff considered the signatory on the check as the

contributor and the election to which the contribution was applied was based on the date

of the contribution check. Excessive contributions identified related to both the primary

and general elections. The primary election was held on June 2,1998.

Likewise, the review of contributions from political committees identified

$5,500 in contributions in excess ofthe limitation.

Based on a review of the Committee's bank balances at the end of each

statement period, the Committee did not, in each period, maintain sufficient funds to

refund the excessive contributions.s

Subsequent to being notified ofthe audit, Committee representatives

began the process of identifying and resolving questionable contributions. On June 18,

1999, the Committee issued refunds for excessive contributions to individuals totaling

$37,250 and to political committees totaling $2,500.

The interim audit report recommended that the Committee provide

evidence demonstrating that the contributions in question were either not excessive, or

were reattributed, redesignated or refunded in a timely manner; absent such evidence,

refund $19,500. The report also recommended that the Committee provide evidence for

such refunds, including those refunds made on June 18, 1999. Iffunds were not available

to make refunds, disclosure of the excessive contributions as refunds owed to the

contributors until such time that funds become available was also recommended.

Undated documents obtained for one reattribution and two redesignations were not considered

acceptable.

When reviewing the bank balances to determine ifsufficient funds were available, the amounts

identified as impermissible contributions, discussed in Findings ILA. and II.C., were taken into

consideration.

Page 9 of 19 Approved 11/18/99
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In response to the interim audit report, the Committee provided evidence

ofrefunds totaling $7,000 and evidence to demonstrate that $750 was not in excess of the

2 U.S.c. §441 a(a) limit. Official bank checks and negotiated Committee checks were

used to effect the refunds; copies ofthe checks were i~duded in the response.

9 The

Committee also presented signed redesignations and/or reattribtutions in an effort to

demonstrate that $3,500 in contributions were not excessive. The regulations stipulate

that redesignations and/or reattributions must be made within sixty days of receipt of a

contribution. Moreover, the redesignations and reattributions must be dated by the

contributor. These devices were not dated. Accordingly, the related contributions are

still viewed as excessive. The remaining $5,250 in excessive contributions from

individuals were not addressed.

The Committee took no action on the remaining $3,000 in excessive

contributions from political committees. However, on its amended reports for 1998, a

refund of $1,000 was reportedly made on September 23, 1999 to one ofthe political

committees identified as having made an excessive contribution. Evidence of the refund

was not included in the response.

The chart below depicts the actions taken relative to the excessive

contributions.

POLITICAL

INDlVroUALS COMMITTEES

Excessive Contributions $53,750 $5,500

LESS:

Untimely Refunds dated 6/18/99 37,250 2,500

Untimely Refunds in Response to I

Interim Audit Report 7,000

Contribution not Excessive 750 ,..--_.. --_.-------

Apparent Untimely Redesignations

and Reattributions 3,500

Reported Refund not Verified 1,000

Excessive Contributions Not

Addressed $ 5,250 $ 2,000

C. RECEIPT OF CURRENCY IN EXCESS OF LIMITATION

Section 441g ofTitle 2 ofthe United States Code states that no person

shall make contributions of currency ofthe United States or currency of any foreign

country to or for the benefit of any candidate which, in the aggregate, exceed $100, with

Also included in its response were copies of the refund checks, dated June 18, 1999.

Page 10 of 19 Approved 11/18/99
9

respect to any campaign ofsuch candidate for nomination for election. or for election. to

Federal office.

Sections 110.4(c)(2) and (3) ofthe Code of Federal Regulations state that

a candidate or committee receiving a cash contribution in excess of $1 00 shall promptly

return the amount over $100 to the contributor. A candidate or committee receiving an

anonymous cash contribution in excess of$50 shall promptly dispose ofthe amount over

$50. The amount over $50 may be used for any lawful purpose unrelated to any Federal

election, campaign, or candidate.

The Audit staff's review ofreceipts identified 21 deposits involving

$23,881 in currency. There were no records to document the source ofthe funds

deposited. Consequently, the amount ofcurrency included in each ofthe 21 deposits was

viewed as an anonymous contribution and the amount in excess of $50 was viewed as an

excessive contribution. Accordingly, the Committee received excessive currency totaling

$22,831 [$23,881 - $1 ,050 (21 X $50)]. Based on a review ofthe Committee's bank

balances at the end of each statement period, the Committee did not, in each period,

maintain sufficient funds to dispose ofthe excessive currency.

A schedule ofthe deposits and the excessive amounts was provided to

Committee representatives at the exit conference.

According to Committee representatives, the currency was the result of

fundraising activities at which currency was accepted as gate receipts. The Audit staff

informed the Committee representatives that in cases where contributions are collected at

events, records should be kept documenting the name of the event, the date, and the total

amount of contributions received on each day ofthe eventW However, individual

contributions exceeding $50 must be recorded as prescribed at 11 C.F.R §§ 102.9(a)( I)

and (2).

The Committee representatives stated that they would attempt to provide

information relating to the fundraising events to account for the currency.

The interim audit report recommended that the Committee either provide

records for fundraising events to include records ofthe name and address of individuals

who contributed over $50 or provide the identities ofthe contributors ofthe currency and

refund any amounts received in excess of$100 per individual. Ifthe Committee was

unable to identitY the source ofthe funds, the report recommended that these funds be

disposed offor any lawful purpose not related to any Federal election, campaign, or

candidate. Finally, iffunds were not available to dispose of or refund the excessive

currency, the report recommended that the Committee disclose the excessive amount as a

debt, until such time that funds become available.

10 Campaign Guide for Congressional Candidates and Committees, p. 24.

Page 11 of 19 Approved 11/18/99
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In response to the interim audit report, the Committee provided

documentation to demonstrate that $ 14,091 in deposits involving currency were

generated from fundraising activities involving contributions of $50 or less. One

individual was identified as contributing $500 in currency; the entire amount was

refunded. Finally, the Committee wrote in the response, "[e]vents which we were unable

to provide documentation for have been forwarded to various charities." Copies ofthe

official bank checks, which covered the remaining balance, were provided as evidence of

the donations.

D. ITEMIZATION OF CONTRIBUTIONS

Section 434(b)(3)(A) ofTitle 2 ofthe United States Code requires a

political committee to report the identification of each person who makes a contribution

to the committee in an aggregate amount or value in excess of $200 per calendar year,

together with the date and amount of any such contribution.

Section 431(13)(A) ofTitle 2 ofthe United States Code defines the term

"identification" to be, in the case of any individual, the name, the mailing address, and

the occupation ofsuch individual, as well as the name ofhis or her employer.

Section 104.3(a)(4)(ii) ofTitle II ofthe Code of Federal Regulations

requires that each report shall include the identification and the aggregate year-to -date

total for all committees (including political committees and committees which do not

qualify as political committees under the Act) which make contributions to the reporting

committee during the reporting period, together with the date ofreceipt and amount of

any such contribution.

Contributions from individuals were examined on a sample basis. Our

review revealed that a material number of contributions were not itemized as required.

For example, between October 15, 1998 and October 19, 1998 contributions in an

aggregate amount or value in excess of$200 were received, however none during that

period were itemized on the report filed for the Post-General period.

In addition, the Audit staffreviewed 160 contributions totaling $250,100

from political committees and determined that the Committee did not itemize 45

contributions totaling $62,850, approximately 25% ofthe amount of contributions

received from political committees.

At the exit conference the Audit staff provided the Committee with a

schedule ofthe contributions from political committees that were not itemized as

required. Committee representatives acknowledged the reporting problems and stated

their intention to amend the reports.

The interim audit report recommended that the Committee file amended

Page 12 of 19 Approved 11118/99
II

Schedules A (Itemized Receipts) to itemize contributions from individuals and political

committees.

In response, the Committee filed amended reports which disclosed the

aforementioned contributions to complete the public record.

. E. RECORDKEEPING FOR AND ITEMIZATION OF DISBURSEMENTS

Sections 432(c)(5) and (d) ofTitie 2 ofthe United States Code state that

the treasurer of a political committee shall keep an account ofthe name and address of

every person to whom any disbursement is made, the date, amount, and purpose ofthe

disbursement, and the name ofthe candidate and the office sought by the candidate, if

any, for whom the disbursement was made, including a receipt, invoice, or canceled

check for each disbursement in excess of $200. The treasurer shall preserve all records

required to be kept by this section and copies of all reports required to be filed by this

subchapter for 3 years after the report is filed.

Section 434(b)(5)(A) of Title 2 ofthe United States Code states that each

report shall disclose the name and address of each person to whom an expenditure in an

aggregate amount of value in excess of $200 within the calendar year is made by the

reporting committee to meet a candidate or committee operating expense, together with

the date, amount, and purpose ofsuch operating expenditure.

Sections 104.3(b)(4)(i)(A) and (B) ofTitle 11 ofthe Code of Federal

Regulations define "purpose" as a briefstatement or description of why the disbursement

was made, and gives examples of acceptable descriptions.

The Audit staffreviewed all ofthe Committee's disbursements to

determine if records were maintained as required and ifthe disbursements were

adequately disclosed. The review revealed that the Committee did not maintain adequate

documentation for disbursements totaling $211,990 (30% ofthe total dollar value of

disbursements). For seven disbursements made by wire transfer totaling $147,593, no

debit memos or other record ofthe disbursements (other than the wire transfer debit on

the bank statement) were maintained. In addition, no canceled checks were maintained

for 14 disbursements totaling $39,815. And, for 12 other disbursements totaling $24,582,

the documentation either lacked a purpose, contained an inadequate purpose, or lacked

an address.

The review also revealed that the Committee did not itemize 59

disbursements totaling $164,655 or 23% ofthe total amount required to be itemized.

At the exit conference, Committee representatives were provided with

schedules detailing these irregularities.

Page 13 of 19 Approved Ilf18/99
12

Again, Committee representatives acknowledged the reporting problems

and stated their intention to amend the reports and provide the missing canceled checks

and debit memos to document the wire transfers.

The interim audit report recommended that the Committee obtain and

submit the missing disbursement documentation noted above to include originals or

copies ofthe debit memos for the wire transfers, related invoices, and the canceled

checks. It further recommended that the Committee file amended Schedules B to

disclose the disbursements that were not itemized.

In response to the interim audit report, the Committee provided copies of

the canceled checks, amended its reports to disclose an acceptable purpose for the

disbursements in question and itemized on Schedule B those disbursements that

previously were not disclosed. The Committee also provided bank documentation in the

form of wire transmittals and a debit memo to document the $147,593 in wire transfers.

F. MISSTATEMENT OF FINANCIAL ACTIVITY

Sections 434(b)(1), (2) and (4) ofTitle 2 ofthe United States Code state,

in part, that a political committee shall disclose the amount of cash on hand at the

beginning ofthe reporting period and the total amount of all receipts and disbursements

for the reporting period and calendar year.

The Audit staff reconciled the Committee's reported financial activity to

its bank activity for the period February 18, 1998 through December 31, 1998 and

determined that both receipts and disbursements were understated. Receipts were

understated by a net amount of $20,076 and disbursements by a net amount of$30,555.

These understatements were primarily due to the Committee's failure to report receipts

and disbursements between October 15, 1998 and October 19, 1998. Between these

dates, the Committee deposited $36,265 in contributions and expended $36,741 in

disbursements. Miscellaneous reporting errors accounted for the remainder ofthe

misstatement.

As a result ofthe misstatements ofreceipts and disbursements noted

above, the Committee's reported ending cash on hand at December 31, 1998 of$20,618

was overstated by $10,479.

At the exit conference, Committee representatives were provided

schedules ofthe above reporting errors.

The interim audit report recommended that the Committee file amended

reports for each reporting period from its inception through 12/31/98 to correct the

misstatements noted above.

Page 140f 19 Approved IJ/18/99
13

In response to the interim audit report, the Committee filed amended

reports which corrected the public record.

G. DISCLOSURE OF LOAN lNFORMATION

Section 104.3(d)(l) ofTitle I I ofthe Code ofFederal Regulations states,

in part, that when a candidate or political committee obtains a loan from, or establishes a

line of credit at, a lending institution as described in II CFR 100.7(b)(lI) and

100.8(b)(l2), it shall disclose in the next due report the following information on

schedule C-l: the date; amount ofloan; interest rate and repayment schedule; types and

value of collateral used to secure the loan; an explanation ofbasis upon which the loan

was established; and a certification from the lending institution ofthe accuracy ofthe

borrower's statements.

Section 104.3(a)(4)(iv) ofTitle II ofthe Code of Federal Regulations

states, in relevant part that each report shall disclose each person who makes a loan to the

reporting committee or to the candidate acting as an agent ofthe committee, during the

reporting period, together with the identification of any endorser or guarantor ofsuch

loan, the date such loan was made and the amount or value ofsuch loan.

The Committee obtained one loan from Walthall Citizens Bank in the

amount of$IO,OOO. In addition, the Candidate obtained three personal loans from

MDOT Federal Credit Union and, in tum, loaned the campaign $22,5621l On its

disclosure reports, the Committee included the loans received in total receipts on the

Detailed Summary Pages and disclosed the loans on Schedule C (Loans). However, the

loans were not disclosed on Schedule A (Itemized Receipts) or Schedule C-l (Loans and

Lines ofCredit from Lending Institutions) as required.

At the exit conference, Committee representatives were provided a

workpaper detailing the loan activity and a recommendation that the Committee file the

appropriate Schedules C-l. Committee representatives acknowledged the reporting

problems and stated their intention to amend the reports.

The interim audit report recommended that the Committee amend its

reports to include the required Schedules A and C-l.

In response to the interim audit report, the Committee filed amended

reports which included Schedules A and C-l as recommended.

It As ofDecember 31, 1998, one loan in the amount of$II,OIS was outstanding.

Page 15 of 19 Approved 11118/99
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Page 16 of 19 Approved I III 8/99
FEDERAL ELECTION COMMISSION

WASHINGTO,N. DC. 204&3

November 23.1999

Mr. Thomas G. Bass. Treasurer

Friends ofRonnie Shows

Rt. 2, Box 228A-l

Bassfield, MS 39421

Dear Mr. Bass:

Attached please find the Report ofthe Audit Division on the Friends ofRonnie

Shows Committee. The Commission approved the report on November 18. 1999.

The Commission approved Final Audit Report will be placed on the public record

on November 29, 1999. Should you have any questions regarding the public release of the

report, please contact the Commission's Press Office at (202) 694-1220. Any questions

you have related to matters covered during the audit or in the report should be directed to

Brenda Wheeler or Wanda Thomas ofthe Audit Division at (202) 694-1200 or toll free at

(800) 424-9530.

~Zif~ Robert 1. Costa

Assistant StaffDirector

Audit Division

Attachment as stated

cc: Cindy Parrish, CPA

Craig Adams. CPA

Page 17 of 19 Approved 11/18/99
•

Page 18 of 19 Approved 11/18/99
CHRONOLOGY

FRIENDS OF RONNIE SHOWS

•

•

•

Audit Fieldwork

Interim Audit Report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

06/21/99 - 07/01/99

09/03/99

10/06/99

11/18/99

Page 19 of 19 Approved IIII8/99