FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C 20463 

April 13,2016 

MEMORANDUM 

To-^' The Commission 

Through: Alec Palmer 

Staff Director 

Frqmi Patricia C. Orrock 

Chief Compliance Officeicer 

Thomas E. Hintermistei>H^^ 

Assistant Staff Director 

Audit Division 

Douglas A. Kodis 

Audit Manage! 

B)^ Pamela Wilkerson 

Lead Auditor 

Subject; Audit Division Recommendation Memorandum on the Majority 

Committee PAC (MCP) (A 13-16) 

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit Reports), 

the Audit staff presents its recommendation below and discusses the finding in the 

attached Draft Final Audit Report (DFAR). The Office of General Counsel has reviewed 

this memorandum and concurs with the recommendation. 

Excessive Contributions to Candidates 

The Audit staff determined that the MCP, a Leadership PAC for Congressman 

Kevin McCarthy (Sponsor), made direct money contributions to nine federal 

candidate committees that, when aggregated with in-kind contributions exceeded 

the multicandidate contribution limit by $20,110. The excessive contributions are 

not eligible for redesignation. The in-kind contributions consisted of airfare paid 

by MCP for the Leadership PAC's Sponsor to speak or make appearances at 

fiindraising events that directly benefitted these committees. 

In response to the Interim Audit Report recommendation, MCP stated that it had 

contacted the nine federal candidate committees that received excessive 

contributions to request refunds, and has since provided documentation supporting. 
refunds.totaling $13,276. The Audit staff considers the $13,276 to be untimely 

resolved. In response to the DFAR, MCP noted its continued efforts to obtain the 

remaining excessive amounts. 

The Audit staff recommends that the Commission find that the MCP made 

excessive contributions to federal candidate committees in the amount of $20,110. 

The Committee did not request an audit hearing. 

If this memorandum is approved, a Proposed Final Audit Report will be prepared within 

30 days of the Commission's vote. 

In case of an objection. Directive No. 70 states that the Audit Division Recommendation 

Memorandum will be placed on the next regularly scheduled open session agenda. 

Documents related to this aiidit report can be viewed in the Voting Ballot Matters folder. 

Should you have any questions, please contact Pamela Wilkerson or Doug Kodish at 694-

1200. 

Attachment: 

- Draft Final Audit Report of the Audit Division on the Majority Committee PAC 

cc: Office of General Counsel 
Braft Final An.dit Haport of tho 

Audit Division on the Majority 

Committee FAG 

(January 1, 2011 - December 31, 2012) 

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! JMaudit 

determin6s"whethOT:.^e.. 

committf^ complied wiffi. 

the lirnitations, 

prohibitibris'arid 

disclosure i^uirements 

of the Act. "i 

•>rAbout the Committee (p. ^2) 

The Majority Committee PAC is a nonconnected, multi-candidate, 

House leadership, political action committee, headquartered in 

Bakersfield, California. The'Leadership PAC Sponsor is 

Congressman Kevin McCarthy. For more information, see the 

Committee Organization, p. 2. 

Financial Activity (p. 2) 

ji. Receipts 

o Contribution froin Individuals 

o Contributions from Political 

Committees 

o Transfers from Affiliated. 

Committees^* 

o Offsets to Operating 

Expenditures 

Total Receipts 

A 

Disbursements 

o Operating Expenditures 

o Contributions to Federal 

Candidates 

o Other Disbursements 

Total Disbursements 

$304,150 

1,412,986 

220,572 

9,850 

S 1,947,558 

$ 792,934 

1,291,922 

10,833 

S 2,095,689 

Future Action 

The Commission mdy 

initiate an enforcement 

action, at a later time, 

with respect to any 

matter discussed in this 

report. 

Finding and Recommendation (p. 3) 

Excessive Contributions to Candidates 

S2 U.S.C. §30111(b). 
Desalt' Au^tt of the 

Audit IXiVisiou on the 

Bii^otity Committee PAC 

(January 1, 2011 - December 31, 2012) 

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1^al>|e of Contents 

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Page 

Part I. Background 

Authority for Audit I 

Scope of Audit 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summary 

Finding and Recommendation - • 3 

Part IV. Finding and Recommexidation 

Excessive Contributions to Candidates 4 
Part E 

Backgroiund 

Authority for Audit 

This report is based on an audit of the Majority Committee PAC (MCP), undertaken by 

the Audit Division of the Federal Election Commission (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 

Commission 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 Commission must perform an internal review of reports filed by selected 

committees to determine if the reports filed by a particulu committee meet the threshold 

requirements for substantial compliance with the Act. 52 U.S.C. §30111(b). 

Scope of Audit 

Following Commission-approved procedures', the %udir.st^j&vifldated V^rio^ 

factors and as a result, this audit examined: 

1. the consistency between reported figures and bank records; 

2. the disclosures of individual contributor's occupation and name of employer; 

3. the disclosure of contributions to other political committees; 

4. travel related expenses; and . 

5. other committee operations necessary to the review. 

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Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration August 24,2006 

• Audit CovoraRe January 1,2011 - December 31,2012 

Headquarters Bakersfield, CA 

Bank Information 

• Bank Depositjories Two 

• Bank Accounts Two Federal 

Treasurer 

• Treasurer When Audit Was Conducted Jill Thomson 

• Treasurer During Period Covered by Audit Conni Brunni; 8/24/06 - 10/18/12 

Jill Thomson; 10/19/12-Present 

Management Information • 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

' (Audited Amounts) 

r 

0 . 

0 

f 

Cash-on-hand ^ January 1,2011 $ 205.040 

Receipts 

o Contributions from Individuals 304,150 

o Contributions.from Politie'Sl Committees 1,412,986 

o Transfers from Affiliated Committees 220,572 

o Offsets to OperatinR' Expenditures: 9,850 

Total Receipts S 1,947,558 

Disbursements 

o OperatinR Expenditures 792,934 

o Contributions to Federal Candidates 1,291,922 

o Other Disbursements 10,833 

Total Disbursements $ 2,095,689 

Cash-on-hand @ December 31,2012 S 56,909 
Finding and Recommendation 

Excessive Contributions to Candidates 

MCP made direct money contributions to nine federal candidate committees that, when 

aggregated with in-kind contributions, appeared to exceed the multicandidate 

contribution limit by $20,110. The in-kind contributions consisted of airfare paid by 

MCP for the leadership PAC's Sponsor to speak or make appearances at iundraising 

events that directly benefitted these committees. The excessive contributions are not 

eligible for redesignation. In response to the Interim Audit Report recommendation, 

MCP stated that it had contacted the nine federal candidate committees that received 

excessive contributions to request refunds. Subsequently, MCP provided copies of 

refund request letters sent to the nine candidate committees and provide^copies of refund 

checks and supporting bank documentation for, ipfunds totaling $13,276. The. Audit staff 

considers the $13,276 to be untimely resolved and recommends that MCP provide copies 

of the additional refund checks and outstanding bank documentation to support when 

refunds for the remaining $6,834 are deposited. (For more detail, see p. 4.) 

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• V 
Part 

F^i^pig l^coipLmeiidatiorjL 

I Finding 1. Excessive Contributions to Candidates 

Summary 

MCP made direct money contributions to nine federal candidate committees that, when 

aggregated with in-kind contributions, appeared to exceed the multicandidate 

contribution limit by $20,110. The in-kind contributions consisted of airfare paid by 

MCP for the leadership PAC's Sponsor to speak or make appeaiwces at fiindraising 

events that directly benefitted these committees. The excessive eontributions are not 

eligible for redesignation. In response to the Interim Audit. Report reQpmmendation, 

MCP stated that it had contacted the nine federal candidiate committees that received 

excessive contributions to request refunds. SubsequentIy,.MCP provided copies of 

refund request letters sent to the nine candidate committees wd provided copies of refund 

checks and supporting bank documentation for refunds totalihgi 13,276. The Audit staff 

considers the $ 13,276 to be untimely resolved and recommends that MCP provide copies 

of the additional refund checks and outstanding bank dobumentation to support when 

refunds for the remaining $6,834 are deposited. 

Legal Standard 

A. Contribution Defined. A gift, subscription, loan (except when made in accordance 

with 11 CFR §§I00.:82 and 100.83), advance, or deposit of money or anything of value 

made by any person foflhe purpose of influencing any election for Federal office is a 

contribution. I I. CFR § I b'G.32(i). r; - ; - • 

B. In-Kind Contribudon. The term, anything of value, includes in-kind contributions. 

The^ptovision of servicias ita charge less than the usual and normal charge results in an 

in-kind contribution. The usual and normal charge for a service is the commercially 

reasonable ra&.^^at one wduld expect to pay at the time the services were rendered. The 

value of such a .bontribution^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(d). 

C. Contribution Limits. 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. 52 U.S.C. §30116 (a)(2)(A). 

D. Definition of Multicandidate Committee. 

•' A multicandidate committee is a political committee (other than an authorized 

candidate committee) that has satisfied the following 3 requirements; 

It has been registered under the federal election campaign law for at least 6 

months. 

• It has received contributions from more than 50 contributors. 
5 

• It has made contributions to at least S federal candidates. (This last 

requirement does not apply to state party committees.) 52 U.S.C. 

§30116(a)(4). 

• A political committee affiliated with another political committee that has already 

qualified as a multicandidate committee automatically becomes a multicandidate 

committee by virtue of that affiliation. But it shares the contributions limits with its 

affiliated committee. 52 U.S.C. §30116(a)(5). 

E. Allocation of Expenses Between Candidates. Expenditures made on behalf of more 

than one clearly identified federal candidate shall be attributed to each such candidate 

according to the benefit expected to be derived. In the case of a publication or broadcast 

communication, the attribution shall be determined by the proportion of space or time 

devoted to all candidates. This method shall be used to allocate payments involving both 

clearly identified federal candidates and one or more clearly identiHed non-federal 

candidates. 11 CFR§ 106.1(a). 

Facts and Analysis 

A. Facts 

The Audit staff reviewed MCP's reported contributions to political committees, totaling 

$1,292,000, and airfare, totaling $178,000. From the review of airfare, the Audit staff 

found in-kind contributions to political committees totaled $94,000. Of this amount, 

contributions to :hin6 federal eandidate dbinmitteies, totaling $20,110^ appear to b& 

ex^i^iye contriba&qns, whenicbiribined'withidirecj money cop^tributions.^ Tbe'in-kind 

contributions consisted of airfare paid by MCP for the leaderahip PAC's Sponsor to 

speak or make appearances, at fundraising evenfs' that directly benefitted these federal 

candidate committees. . Ibe excessive contributions are hot eligible for redesignation. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff-presented a finding for the potentially excessive 

contributions and explained diat they resulted from the aggregation of direct money 

contributions and in-kind contributions related to airfare. A schedule of the potentially 

excessive contributions was provided. The Audit staff asked Counsel to provide an 

explanatioii and documentation for any item on the schedule for which they believed was 

incorrect. Counsel agreed arid stated that they may need additional clarification for some 

of the items on the schedule.' 

In response to the exit coriference. Counsel provided a narrative and documentation for 

three contributions that did not result in excessive contributions. The Audit staff 

removed these items from the schedule and they were not presented as part of the finding 

amount. 

The Interim Audit Report recommended that MCP provide evidence showing that the 

contributions were not excessive or seek a refund of the excessive contributions and 

provide copies of the refund checks and the related depository bank statements. 

' The amount of airfare/in-kind contributions was allocated equally among different committees based 

upon the number of events attended by the Sponsor. 

' The amount of direct money contributions was S6S,000. 
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C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MCP stated that it had 

contacted the nine federal candidate committees that received excessive contributions to 

request reiunds. Subsequently, MCP provided copies of refund request letters sent to the 

nine candidate committees and provided copies of refund checks and supporting bank 

documentation for refunds totaling $13,276. The Audit staff considers the $13,276 to be 

untimely resolved and recommends that MCP provide copies of the additional refund 

checks and outstanding bank documentation to support when refunds for the remaining 

$6,834 are deposited. 

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