FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM 

May 2, 2012 

TO: 

FROM: 

Patricia Carmona 

Chief Compliance Officer 

Thomas Hintennister 

Assistant Staff Director 

Audit Division 

Christopher Hughey -^^'C 

Deputy General Counsel / 

Lawrence L. Calvert, Jr. 

Associate General Cougar i 

Lorenzo Holloway 

Assistant General Counsel 

For Public Finance and Audit Advice 

Delanie DeWitt Painter 

Attomey 

SUBJECT: Draft Final Audit Report on the Maine Republican Party (LRA 817) 

I. INTRODUCTION AND BACKGROUND 

The Office of the General Counsel has reviewed the proposed Draft Final Audit 

Report ("DFAR") on the Maine Republican Party ("the Committee"). We generally 

concur with the findings in the DFAR and have three specific comments on Finding 3 -

Disclosure of Disbursements. First, we concur that the Committee has taken the 

appropriate conective action by amending its reports to disclose some of the expenses 

identified by the auditors. Second, however, we do not agree that the Audit Division has 

sufRcient information to be able to conclude that the undocumented payroll expenses 

paid with non-federal funds were properly paid or withheld from the Committee's 

reports. Third, althougih the Committee took conective action to disclose a number of 

expenses, the available documentation remains inadequate to determine the nature of 

those expenses and there is no basis for the Audit Division to conclude that the amended 

reports are more conect than the Committee's original reports. If you have any 

questions, please contact Delanie DeWitt Painter, the attomey assigned to this audit. 
Memorandum to Thomas Hintemiister 

DFAR Maine Republican Party (LRA 817) 

Page 2 

Finding 3 ofthe DFAR concludes that the Committee inconectiy disclosed 

different categories of disbursements totaling $625,824. First, it concludes that tiie 

Committee failed to disclose $94,019 in disbursements paid from non-federal accounts 

but which the auditors conclude should have been paid fi-om the federal account.^ 

Second, it concludes that tiie Committee may have failed to properly disclose $519,305 in 

disbursements from the federal account that the Committee reported as federal operating 

expenses but which may have been Federal Election Activity ("FEA") paid entirely with 

federal fimds that potentially should have been reported on a different line of the 

Committee's reports. Third, it concludes that the Committee failed to properly disclose a 

coordinated party expenditure of $12,500 for a television advertisement, which it 

incorrectly reported as a federal operating expense.^ 

The Committee amended its reports in response to the Interim Audit Report 

("lAR"). The Committee disclosed the payments identified by the auditors fi'om its nonfederal accounts as allocable administrative expenses or federal expenses (voter 

identification and printed materials), but did not amend its reports to disclose $14,999 for 

payroll and associated expenses paid fix>m the non-federal accounts that the Committee 

asserts was non-federal. The Committee amended its reports to disclose as FEA the 

$519,305 originally reported as federal operating expenses and to disclose tiie $12,500 

coordinated party expenditure. The DFAR states that for payments from the federal 

account, the Conunittee filed amended reports **to materially conect the disclosure as 

FEA or coordinated party expenditures." 

II. APPROPRIATE CORRECTIVE ACTION 

We concur that the Committee has taken the appropriate corrective action by 

amending its reports to disclose payments from its non-federal accounts for 

administrative costs, printed materials and possible voter identification expenses and 

payments from its federal account that appear to be FEA for GOTV/public 

communications, payroll, consulting, travel and per diem, equipment and miscellaneous 

expenses. We agree that, in the absence of documentation indicating that these expenses 

were directiy attributable to a clearly identified federal candidate or were for entirely 

non-federal purposes, the $48,520 in costs for postage, consulting, travel reimbursements, 

printing and accounting fees appear to be the type of ordinary overhead expenses that can 

* The auditors calculated that at the end of the two year audit period, the Committee did not as an 

overall matter fund federal activity with non-federal funds. 

^ We concur that the Committee's payment of $ 12,500 for a television advertisement appears to be a 

coordinated party expenditure because it appears to be a public communication diat refers to a clearly 

identified House candidate and tfiat was publicly disseminated in the candidate's jurisdiction within 90 

days of the election. We note as well that the candidate appears in the advertisement and the 

advertisement's disclaimer says it was authorized by the candidate. See 11 CF.R. § 109.37. Our analysis 

below does not address this issue further. 
Memorandum to Thomas Hintermister 

DFAR Maine Republican Party (LRA 817) 

Page 3 

be considered administrative expenses.^ 11 C.F.R. § 106.7(c)(2). The Committee stated 

that it did not have documentation indicating that tiie administrative costs paid fix>m the 

non-federal account were solely non-federal expenses. Response at 1. 

We note, however, that a similar issue arose in the audit of the Kansas Republican 

Party ("KRP"). In KRP, the Commission considered the issue of disbursements paid 

fi-om non-federal accounts for, among other things, postage, consulting, travel and 

printing where records were not adequate to establish whether the expenses were federal, 

non-federal or allocable. See Final Audit Report of the Commission on the Kansas 

Republican Party, (June 8,2011) ("KRP FAR"). KRP did not have records to 

demonstrate the expenses were solely non-federal and amended its reports to disclose the 

disbursements as allocable. Our views were the same as we have expressed here. But the 

Commission was unable to reach agreement on the Audit Division's recommendation by 

four votes and moved the issue to the Additional Issues section of the report.^ See KRP 

FAR; Statement of Reasons of Chair Bauerly and Commissioner Weintraub, (May 26, 

2011). Some Commissioners "agreed that KRP was required to report the disbursements 

in question" but other Commissioners "concluded that absent evidence that the expenses 

were in fact federal, the recommendation improperly shifts the burden to audited 

committees to disprove a negative." KRP FAR at 17. In a Statement of Reasons, Chair 

Bauerly and Commissioner Weintraub expanded on their view that reporting was 

required, writing that to determine otherwise would "create perverse incentives for 

committees to avoid keeping appropriate records." See Statement of Reasons of Chair 

Bauerly and Commissioner Weintraub at 3. 

We also agree that the $183,747 in printed materials paid fix)m tiie federal account 

were FEA.^ Our review of the printed materials indicated that tiiey were GOTV (Type II 

FEA) or public communications on behalf of a clearly identified candidate (Type III 

FEA), and some of the expenses were coded on the Committee's database as FEA. The 

Committee stated it could not determine why some expenses for GOTV/public 

' Administrative costs include rent, utilities, office equipment and supplies, postage for other than 

mass mailings, and routine building maintenance, unless those costs are directly attributable to a clearly 

identified candidate. 11 C.F.R. § 106.7(c)(2). 

* The Commission was, however, able to reach agreement on $20,123 in payments finom non-federal 

accounts for allocable administrative expenses such as rent, telephone and office supplies that appeared to 

be related to federal expenses and that the committee amended its reports to disclose as federal or allocated 

expenses. KRP FAR, Finding 3. 

^ FEA means four types of federal expenses that meet certain requirements: 1) voter registration 

activity within 120 days ofthe federal election ('Type I FEA"); 2) voter identification, generic campaign 

activity or get-out-the-vote ("GOTV") activity in connection with an election where a federal candidate is 

on the ballot ('Type II FEA"); 3) a public conmiunication that refers to a clearly identified federal 

candidate and promotes or supports or attacks or opposes ("PASO") a federal candidate ('Type III FEA"); 

or 4) services of a state or local party committee employee who spends more than 25% of compensated 

time during a month on activities in connection with a federal election ("Type IV FEA"). See 2 U.S.C. § 

431(20); 11 C.F.R. § 100.24. 
Memorandum to Thomas Hintemiister 

DFAR Maine Republican Party (LRA 817) 

Page 4 

communications were classified as operating expenditures rather than FEA and it may 

have been a data entry enor or some other cause. Response at 2. Moreover, we concur 

that tiie Committee properly amended its reports to disclose $142,941 in payroll paid 

firom its federal accounts as FEA (Type IV FEA). In response to the lAR, the Committee 

stated that it cannot confirm that the individuals did not perform work related to federal 

elections because there is no documentation showing what amount of time, if any, the 

individuals spent on federal elections, and none of the individuals still work for the 

Committee. Response at 2. However, the DFAR states fhat the Committee previously 

submitted affidavits indicating that the individuals worked solely in connection with 

federal elections during 2008, and the individuals received at least one payment that tiie 

Committee coded on its database as FEA. We believe the affidavits are sufficient 

documentation that the payroll expenses were FEA. 

Furtiier, we agree that there is sufficient information to conclude that costs of 

consulting, travel and per diem, equipment and miscellaneous expenses that were paid for 

with federal fimds but reported as operating expenses should be reported as FEA. The 

Committee stated that the consulting expenses were FEA because they were for a 

consultant to the Committee's **Victory 2008" campaign, which was *'primarily 

concemed with federal elections." Response at 3. The Committee explained that travel 

and per diem expenses were also related to tiie **Victory 2008" campaign and were FEA. 

Id. The Conimittee states that there is no documentation describing the use of equipment 

and miscellaneous costs, but discussion with party employees and officers from that time 

period indicates the equipment costs were "almost certainly" for outfitting satellite 

"Victory" offices. Id. Additional information could clarify the nature of tiiese expenses 

since activity that is **primarily concemed with federal elections" is not necessarily FEA. 

However, unlike with some of the other expenses discussed in part FV below, the 

Committee's database coded all of these expenses as FEA. Thus, the Committee's 

amendments conceming these expenses are consistent with the small amount of available 

documentation. 

We also concur with the Audit Division's decision to accept, as materially 

conecting the Committee's reports, amendments disclosing payments fi^om the 

Committee's non-federal accounts of $11,500 for printed materials that are not available 

for review and $19,000 for possible voter identification expenses where the invoice stated 

"volunteer connect" and the Committee's database coded tiie payment as "Voter ID." 

The Committee stated tiiat it was unable to locate documents to clarify tiiat the printed 

materials were solely non-federal, and, while the vendor "has historically provided 

services to state campaigns, there have been occasions where the vendor has provided 

services that were not solely non-federal." Response at 2. It provided no additional 

infonnation conceming the possible voter identification expenses but stated that it 

amended its reports to disclose them. Id. The Conunittee has not provided sufficient 

documentation for the Audit Division to conclude that these expenses were properly paid 

with non-federal funds or property withheld fi-om the Committee's reports. We believe 

tiie DFAR should make that point explicitiy. However, we note with respect to tiie 

printed materials not available for review that similar undocumented printed materials 
Memorandum to Thomas Hintermister 

DFAR Maine Republican Party (LRA 817) 

Pages 

were also the subject of the Commission's split vote in the Kansas Republican Party 

audit, discussed above. 

III. NON-FEDERAL ACCOUNTS - PAYROLL EXPENSES 

We do not agree, however, that the Committee has demonstrated that $14,999 in 

payroll and associated expenses paid &om its non-federal accounts were solely nonfederal. The Committee has taken no corrective action to disclose these expenses and 

provided no further documentation. It asserted in response to the lAR that these expenses 

were non-federal because they were incuned in 2007 when there were no identified 

federal candidates on the ballot in Maine and Committee employees "did not spend any 

time on FEA activity" in 2007. Response at 2. There are two problems with the 

Conmiittee's assertions. First, while the Committee states that employees spent no time 

on FEA during 2007, it does not address whether any employees spent time on the 

broader category of "activity in connection with a Federsd election." Employee 

compensation is FEA if the employee spends more than 25% of their time in a given 

month on FEA "or activity in connection with a Federal election. "11 CF.R. 

§§ 106.7(d)(l)(ii), 300.33(d)(1) (emphasis added). FEA means only tiie four specific 

types of activities described at 2 U.S.C. § 431(20), but "activity in connection witii a 

Federal election" is a broader term encompassing all federal activity, not only FEA. It 

could include, for instance, planning for the next year's federal elections, or deciding 

about off-year contributions to specific federal candidates. Second, we note that neither 

logs, affidavits nor any other documentation has been provided in support ofthe 

Committee's assertion. But see Commission Agenda Document No. 11 -10-B (Motion on 

Audit Division Recommendation Memorandum on the Georgia Federal Elections 

Committee, considered in Open Session Mar. 3,2011). (Commission split on issue of 

whether committee should keep records of staff time for staff who spent no time on 

federal activity, with three Commissioners asserting (in a motion that failed on a 3-3 

split) that "the Commission does not have jurisdiction to impose recordkeeping and 

documentation requirements on employee activity that a State party committee claims is 

solely non-Federal."). Therefore, it does not appear to us that the Audit Division has 

sufficient information to be able to conclude that the undocumented payroll expenses 

paid with entirely non-federal funds were properly paid in that fashion or properly 

withheld from the Committee's reports. We recommend that you raise this issue for the 

Commission's consideration when tiie Audit Division Recommendation Memorandum 

and DFAR are submitted to the Commission. 

IV. DOCUMENTATION INADEQUATE TO DETERMINE NATURE OF 

EXPENSES 

For a number of the disbursements Originally reported as federal operating 

expenses, the available documentation remains inadequate to determine conclusively the 

nature of a number of expenses. There is no basis for the Audit Division to conclude that 

the amended reports are more correct than the Committee's original reports. 
Memorandum to Thomas Hintermister 

DFAR Maine Republican Party (LRA 817) 

Page 6 

The Committee conceded that expenses of $67,711 for printed materials that are 

not available for review and $23,029 for telemarketing expenses where scripts are not 

available for review appear to be FEA and amended its reports accordingly, but it did not 

provide copies of the printed materials or telemarketing scripts and did not state why it 

diought the expenses are FEA. See Response at 3. The Committee stated that it could 

not locate the telemarketing scripts but tiiat its database descriptions of four of the 

telemarketing transactions indicates they should have been reported as FEA, the 

descriptions of five others "provide no guidance as to the nature of the expenditure," and 

one description appears to be a state expense. Response at 3. 

We do not think there is sufficient information to categorize these expenses as 

FEA. FEA is only one of several types of expenses, even within the broad category of 

federal expenses, which these materials could have been. With respect to 

communications that are paid for with federal funds, it is particularly difficult to 

determine without knowing the content of the communications the precise line on the 

Detailed Summary Page on which the expenses should have been reported, because ofthe 

many different types of activity they could have been.^ If the printed materials were 

public communications that refened to a clearly identified candidate for federal office, 

and promoted, supported, attacked, or opposed a candidate for that office, they would be 

Type III FEA. See 2 U.S.C. § 431(20); 11 C.F.R. § 100.24. But since tiie printed 

materials are not available for review, it is not possible to examine their form or content 

to determine whether they were public communications, or if so, whether they PASO-ed 

a clearly identified federal candidate. Without reviewing the printed materials it would 

also be difficult to determine whetiier they constituted Type II FEA for voter 

identification, generic campaign activity or GOTV, or whetiier any exemptions apply to 

them. Similarly, the Committee's database descriptions of some of the telemarketing 

transactions cannot adequately substitute for a review of the telemarketing scripts to 

determine the nature of these expenses. If one transaction was indeed a state expense, as 

the Conimittee contends, it could not be FEA. Therefore, we conclude tiiat witiiout 

reviewing copies of the printed materials and the telemarketing scripts, the Audit 

Division cannot determine that either the original or amended reporting of these expenses 

is accurate. 

Therefore, we recommend that the DFAR state that although the Committee has 

amended its reports, the nature of some expenses remains unknown because of lack of 

documentation. The DFAR should further state that because of the lack of 

documentation, the Audit Division does not have a basis for determining whether either 

the Committee's original or amended reports are correct. 

' Depending on the content of the communications and other &ctors, these materials might have 

been operating expenses, as originally disclosed; or FEA, as disclosed on the amended reports; or 

independent expenditures; or coordinated party expenditures; or exempt activity. Indeed, our review of 

certain other printed materials in response to your query after our lAR comments concluded that they were 

FEA, but two of the mailers were also independent expenditures, and we also addressed the slate card 

exemption with respect to those two mailers.