Interim Audit Report of the 

Audit Division on 

Ted Lieu for Congress 

(February 18, 2014 - December 31, 2014) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial compliance 

with the Act.' The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions, and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to the matter 

discussed in this report. 

About the Campaign (p. 2) 

Ted Lieu for Congress is the principal campaign committee for 

Ted Lieu, Democratic candidate for the U.S. House of 

Representatives from the state of California, 33"* District, and is 

he^quartered in Encino, California. For more information, see 

the Campaign Organization chart, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals $ 1,686,988 

o Contributions from Political 

Committees 543,129 

o Contributions from the 

Candidate 5,200 

o Transfers from Other Authorized 

Committees 46,300 

o Loans from the Candidate 76,000 

o Offsets to Operating 

Expenditures 11,357 

o Other Receipts 87,810 

Total Receipts $ 2,456,784 

Disbursements 

o Operating Expenditures $2,115,224 

o Loan Repayments to the 

Candidate 76,000 

o Contribution Refunds 17,600 

o Other Disbursements 133,500 

Total Disbursements $ 2342,324 

Finding and Recommendation (p. 3) 

• Misstatement of Financial Activity 

' 52 U.S.C. §30111(b). 
Interim Audit Report of the 

Audit Division on 

Ted Lieu for Congress 

(February 18, 2014 - December 31, 2014) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Part II. Overview of Campaign 

Campaign Organization 2 

Overview of Financial Activity 2 

Part III. Summary 

Finding and Recommendation 3 • 

Part IV. Finding and Recommendation 

Misstatement of Financial Activity 4 
Part I 

Background 

Authority for Audit 

This report is based on an audit of Ted Lieu for Congress (TLFC), undertaken by the 

Audit Division of the Federal Election Conunission (the Commission) in accordance with 

the Federal Election Campaign Act of 1971, as amended (the Act). The Audit Division 

conducted the audit pursuant to 52 U.S.C. §30111(b), which permits the Conunission to 

conduct audits and field investigations of any political committee that is required to file a 

report under 52 U.S.C. §30104. Prior to conducting any audit under this subsection, the 

Conunission must perform an internal review of reports filed by selected committees to 

determine if the reports filed by a particular committee meet the threshold requirements 

for substantial compliance with the Act. 52 U.S.C. §30i 11(b). 

Scope of Audit 

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and, as a result, this audit examined: 

1. the receipt of excessive contributions and loans; 

2. the receipt of contributions from prohibited sources; 

3. the disclosure of contributions received; 

4. the disclosure of individual contributors' occupation and name of employer; 

5. the consistency between reported figures and bank records; 

6. the completeness of records; and 

7. other committee operations necessary to the review. 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration February 6,2014 

• Audit Coverage February 18,2014 - December 31,2014 

Headquarters Encino, Califomia 

Bank Information 

• Bank Depositories Two 

• Bank Accounts One Checking, One Savings 

Treasurer 

• Treasurer When Audit Was Conducted Jane Leiderman 

• Treasurer During Period Covered by Audit Jane Leiderman 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

No 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand ® Fehruary 18,2014 SO 

Receipts 

o Contributions from Individuals 1,686,988 

o Contributions from Political Conunittees 543,129 

o Contributions from the Candidate 5,200 

o Transfers fix)m Other Authorized 

Committees 46,300 

o Loans from the Candidate 76,000 

o Offsets to Operating Expenditures 11,357 

o Other Receipts 87,810 

Total Receipts $ 2,456,784 

Disbursements 

o Operating Expenditures 2,115,224 

o Loan Repayments to the Candidate 76,000 

o Contribution Refunds 17,600 

o Other Disbursements 133,500 

Total Disbursements $ 2342,324 

Cash-on-hand @ December 31,2014 $ 114,460 
Part III 

Summary 

Finding and Recommendation 

Misstatement of Financial Activity 

During audit fieldwork, a comparison of TLFC's reported financial activity with its bank 

records revealed a misstatement of receipts and disbursements for calendar year 2014. 

TLFC understated its receipts by $87,748 and understated its disbursements by $92,802. 

The Audit staff recommends that TLFC amend its disclosure reports to correct the 

misstatements. (For more detail, see p. 4.) 
Part IV 

Finding and Recommendation 

Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of TLFC's reported financial activity with its bank 

records revealed a misstatement of receipts and disbursements for calendar year 2014. 

TLFC understated its receipts by $87,748 and understated its disbursements by $92,802. 

The Audit staff recommends that TLFC amend its disclosure reports to correct the 

misstatements. 

Legal Standards 

A. Contents of Reports. Each report must disclose: 

• the amount of casb-on-band at the beginning and end of the reporting period; 

• the total amount of receipts for the reporting period and for the election cycle, 

including other forms of receipts; 

• the total amount of disbursements for the reporting period and for the election cycle; 

• transfers to other committees authorized by the same candidate; 

• any other disbursements; and 

• certain transactions that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 52 U.S.C. §30104(b)(l), (2), (3), (4) and (5). 

B. Categories of Receipts for Authorized Committees. 

An authorized committee of a candidate for Federal office shall report the total amount of 

other receipts received during the reporting period and during the election cycle. 

11 C.F.R. §104.3(a)(3)(x). 

C. Categories of Disbursements for Authorized Committees. 

An authorized committee of a candidate for Federal office shall report the total amount of 

transfers to other committees authorized by the same candidate m^e during the reporting 

period. 11 C.F.R. §I04.3(b)(2)(ii). 

D. Joint Fundraising by Committees. 

The participants in a joint fundraising effort under this section shall either establish a 

separate committee or select a participating committee, to act as fundraising 

representative for all participants. The fundraising representative shall be a reporting 

political committee and an authorized committee of each candidate for federal office 

participating in the joint fundraising activity. 11 C.F.R. § 102.17(a)(l)(i). 

Facts and Anal3rsis 

A. Facts 

As part of audit fieldwork, the Audit staff reconciled TLFC's reported activity with its 

bank records for calendar year 2014. The reconciliation revealed that TLFC misstated its 
receipts and disbursements. The following chart outlines the discrepancies between 

TLFC's 2014 disclosure reports and its bank records, and the succeeding paragraphs 

explain why the discrepancies occurred. 

2014 Campaign Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance @ 

Febraary 18,2014 

$0 $0 $0 

Receipts $2,369,036 $2,456,784 $87,748 

Understated 

Disbursements $2,249,522 $2,342,324 $92,802 

Understated 

Ending Cash Balance @ 

December 31,2014 

$121,864-' $114,460 $7,404 

Overstated 

The understatement of receipts resulted from the following: 

• Contributions intended for Lieu Victory Fund,^ not reported 

• Other receipts, not reported 

• Unexplained difference 

Understatement of Receipts 

The understatement of disbursements resulted from the following: 

• Transfers of Lieu Victory Fund contributions, not reported 

• Other disbursements, not reported 

• Under-reported disbursements 

• Over-reported disbursements 

Net Understatement of Disbursements 

$ 86,750 

700 

298 

S 87,748 

$ 86,750 

7,540 

2 

f1.4901 

S 92.802 

The $7,404 overstatement of the ending cash balance resulted from the misstatements 

described above, as well as from a $2,350 mathematical discrepancy in calculating the 

ending cash balance. 

Regarding the $86,750 in receipts and disbursements that were not reported by TLFC, the 

Audit staff determined that TLFC processed credit card contributions designated for the 

Lieu Victory Fund. Per the TLFC treasurer, these credit card contributions were received 

on donation forms designating the Lieu Victory Fund as the recipient committee. The 

treasurer further informed the Audit staff that Ae Lieu Victory Fund had no way to 

TLFC miscalculated its ending cash balance. It should be SI I9,SI4 (a difference of S2,3S0). Using the 

correct ending cash balance (SI I9,SI4), the discrepancy is SS,0S4. 

On April 17,2014, TLFC entered into a joint iundraising agreement with the Democratic State Central 

Committee of CA - Federal. The agreement established both committees as participants and a new 

committee. Lieu Victory Fund, was formed to serve as the iundraising representative. TLFC did not 

disclose Lieu Victory Fund as a Joint iundraising representative or the depository established to receive 

and distribute proceeds on its Statement of Organization, received on February 7,2014. TLFC and Lieu 

Victory Fund share the same treasurer, Jane Leiderman. 
accept/deposit credit card contributions because it had not established a credit card 

merchant account. Alternatively, the Lieu Victory Fund used TLFC's credit card 

merchant account to process its credit card contributions and then periodically transferred 

these contributions in bulk to the Lieu Victory Fund. TLFC did not report the receipt of 

these credit card contributions or the transfer (disbursement) to the Lieu Victory Fund. 

However, TLFC did report the subsequent transfers of net proceeds from Lieu Victory 

Fund (including memo entries of the gross amounts), and the Lieu Victory Fund itemized 

each of the credit card contributions on its disclosure reports. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the misstatement during the exit conference and provided the 

treasurer with supporting documentation. The treasurer stated that the credit card 

contributions deposited into the TLFC account were accurately reported by the Lieu 

Victory Fund and that $46,300 in contributions transferred to the Lieu Victory Fund 

actually wound up.coming back to TLFC as its share of proceeds from the joint 

fundraiser. The treasurer added that the proceeds had also been reported one way or 

another by TLFC. 

In response to the exit conference, the treasurer stated that the decision to utilize the 

TLFC merchant account to process Lieu Victory Fund contributions was made when "the 

campaign was in full mode and all the money needed to be processed immediately." She 

further added that, as the TLFC treasurer, it was acceptable to use the TLFC merchant 

account for the following reasons: 

• Contributors would see the name "Lieu" on their credit card statements and this 

would allow them to better identify the contribution to Lieu Victory Fund; 

• Most of the contributions were eventually transferred back to TLFC when Lieu 

Victory Fund disbursed its proceeds to the fundraiser participants; and 

• TLFC transferred funds to reimburse Lieu Victory Fund the same day that the 

credit card contributions were processed by the TLFC merchant account. The 

treasurer further stated that TLFC did not misuse the funds nor did it use any of 

the funds intended for Lieu Victory Fund. 

Altematively, the treasurer stated that she could have processed the credit card 

contributions through her company's merchant account and made a disbursement to Lieu 

Victory Fund. But, she thought this method may cause complications with contributors 

not being able to easily identify a charge to their credit cards. 

In accordance with 52 U.S.C. §30104(b)(2), an authorized committee must report all of 

its receipts and disbursements, including transfers of funds to and from a candidate's 

other authorized coimnittees. Although the funds received may or may not ultimately be 

characterized as contributions to TLFC, they were, nevertheless, reportable as receipts. 

As a registered and reporting committee, TLFC was required to report, at a minimum, the 

receipt of these contributions as "other receipts." 52 U.S.C. §30104(b)(2)(J); 11 C.F.R. 

§104.3(a)(3)(x). Regarding the disbursements (transfers) to Ae Lieu Victory Fund, a 

joint fundraising representative is considered an authorized committee of each candidate 

who participates in thejointfundraising arrangement. 11 C.F.R. §102.17(a)(I)(i). An 
authorized committee of a candidate is required to report transfers of funds made to other 

authorized committees of the same candidate. 11 C.F.R. §104.3(b)(2)(ii). Thus, TLFC 

was required to report disbursing funds to Lieu Victory Fund. 

The Audit staff recommends that, within 30 calendar days of service of this report, TLFC 

amend its disclosure reports to correct the misstatements noted above and reconcile the 

cash balance on its most recent report to identify any subsequent discrepancies that could 

affect the recommended adjustments. In addition, the Audit staff recommends that TLFC 

adjust the cash balance as necessary on its most recent report, noting that the adjustment 

is the result of prior-period audit adjustments. Further, TLFC should amend its Statement 

of Organization to include the Lieu Victory Fund as its Joint Fundraising Representative.