FEDERAL ELECTION COMMISSION

""SHINGlO,," DC 2046'

AK007455

January 29, 1996

MEMORANDUM

SUBJECT: PUBLIC ISSUANCE OF TIlE PIIIAL AUDIT REPORT ON

THE COMKI'l'TBE '1'0 ELBC'l' IIICBABL PATRICK PLAIIAGAN

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TO:

PROM:

RON M. HARRIS

PRESS OPFICER

PRESS OPFICE

ROBERT J. COSTA .-tQ<::

ASSISTANT STAFF DIREC'1'OR

AUDIT DIVISION

o Attached please find a copy of the final audit report

and related documents on The eo-i-tt.ee to- Elect llichael

Patrick Flanagan which was approved by the Ca.ai88ion on

January 5, 1996.

Inforaational copies of the report have been received by

all parties involved and the report aay be released to the

public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Reports Analysis Division

FEC Library
REPORT OF THE AUDIT DIVISION

ON

The Committee to Elect

Michael Patrick Flanagan

Approved January 5, 1996

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FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

\\'.-\SHINGTON, D.C.
TABLE OP CON'l'EtrrS

THE COMMITTEE TO BLse'!' MICHAEL PATRICK FLANAGAH

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Executive Summary

Final Audit Report

Background

Findings

Transmittal to Cam.ittee

Chronology

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FEDERAL ELECTION COMMISSION

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PINAL AUDIT REPORT

ON

THE COMMITTEE TO ELECT MICHAEL PATRICK FLANAGAN

EXECUTIVE SUMMARY

The Committee registered with the Office of the Clerk of

the U.S. House of Representatives on March 24, 1994 as the

principal campaign committee for Mr. Michael Patrick Flanagan,

Republican candidate for the u.s. House of Representatives for

the fifth District in the state of Illinois.

The audit was conducted pursuant to 2 U.S.C. S438(b),

which states, that the Commission may conduct audits of any

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 an exit conference held after the audit fieldwork (6/16/95)

and later in an interim audit report. The COllDllittee'8

responses have been included in the findings set forth in this

swmnary.

The following is an overview of the findings contained in

the final audit report.

Misstatement of Financial Activity

Sections 434(b)(1),(2) and (4) of Title 2 of the United

States Code. The CODDittee did not file a Year End Report

covering the period between November 29 and December 31, 1991.

The Audit staff dete~ined that the Committee should have

reported total receipts of $1,755, disbursements of $76 and

ending cash on hand of $1,679.

For 1992, the Committee's receipts and disbursements were

overstated by $2,898 and $4,662, respectively, and ending cash

on hand was understated by $3,444. These differences were

primarily due to including in reported totals an amount

totaling $3,081 for both receipts and disbursements Which

represented debts owed to individuals.

Tile Conunittee responded by filing a Year End report for

1991 and filing amended Summary and Detailed Summary Pages tor

1992 that materially corrected the misstatements.

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Apparent Excessive Contributions - Individuals

Section 4414(8)(1) of Title 2. The audit identified 4

contributors who exceeded their contribution limitations by a

total of $3,680.

In response to the inter~ audit report, the Committee

provided photocopies of the fronts of three refund checks,

totaling $3,080. The Committee's treasurer stated that he will

forward copies of the negotiated refund checks upon receipt.

In addition, the Committee stated that it had already

reimbursed $500 to one individual in March of 1995. Por the

remaining $100, an analysis of the Committee'. response

indicated that this amount does not appear to be excessive.

Disclosure of Occupation and Name of Employer

Section 434(b)(3)(A) of Title 2. The Committee itemized

22 contributions, totaling $12,535, for which the contributors'

occupation and name of employer was not disclosed. In response

to the interim audit report, the COJIDittee filed amended

Schedules A that materially disclosed the required information.

Itemization of Contributions from Individuals

Section 434(b)(3)(A) of Title 2. The audit identified

lS contributions, totaling $6,962, that were not itemized by

the Committee. In response to the interia audit report, the

C01IDIlittee filed amended Schedules A that contained a llat.erial

number of these iteaizations.

Debts and Obligations

Section 434(b)(8) of Title 2. The audit identified

ohligations totaling $30,493 which the Comaittee did not

disclose when incurred. In addition, beginning with the July

15 Quarterly Report through the January 31 Year Bnd Report,

itemized report entries related to debts and obligations did

not contain the nature or purpose, as required, nor were

cert.ain entries itemized on the correct reporting form.

In response to the interim audit report, the C~ittee

filed amended Schedules C and D which materially corrected

these discrepancies.

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FEDERAL ELECTION COMMISSION

AK007377

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REPORT OF THE AUDIT DIVISION

ON

THE COMMlftEE TO ELECT MICHAEL PATRICK FLANAGAN

I. Background

A. Overview

This report is based on an audit of The Committee to

Elect Michael Patrick Flanagan (the Committee) undertaken by the

Audit Division of the Federal Election Commission in accordance

with the provi~ions of the Federal Blection Campaign Act of 1971,

8S amended (the Act). The audit was conducted pursuant to Section

438(b) of Title 2 of the United States Code which states, in part,

that the Commission may conduct audits and field investigations of

any political comadttee required to file a report under section

434 of this title. Prior to conducting any audit under this

subsection, the Commission shall perform an internal review of

reports filed by selected cOIBittees to detexmine if the reports

filed by a particular committee meet the threshold requirements for substantial compliance with the Act.

The audit covered the period November 29, 1993, the date

of the Committee'S initial bank transactions, through December 31,

1994. The Committee reported a beginning cash balance of $1,679;

total receipts for the period of $117,275; total disbursements for

the period of $112,888 and an ending c8sh balance of $4,386.11 The

Committee maintained one bank account for its activity during the

audit period.

B. Campaign Organization

The Ca..ittee registered with the Office of the Clerk of

the United States House of Representatives on March 24, 1994 8S

the principal campaign committee for Mr. Michael Patrick Flanagan,

Republican candidate for the U.s. House of Representatives for the

fifth District in the state of Illinois. The Committee maintained

its headquarters Chicago, Illinois.

!/ Does not foot due to various reporting errors (see Finding

II .A.). All amounts presented in this report have been

rounded to the nearest dollar.

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This report is based on documents and workpapers which

support each of its factual statements. They form part of the

record upon which the Commission based its decisions on the

matters in the report and were available to the Commissioners and

appropriate staff for review.

c. Key Personnel

The current Treasurer is Mr. Donald J. Griffin. He also

was the Treasurer during the audit period.

D. Scope

The audit included such tests as verification of total

reported receipts and expenditures; review of required supporting

documentation, and analysis of Committee debts and obligations and

such other audit procedures as deemed necessary under the

circumstances. However, although the disbursement records

provided by the Committee met the min~um recordkeeping

requirements of 2 U.S.C. 432(c)(S) and 11 CFR l02.9(b), records

related to $29,642 or 27. of disbursements did not contain any

documentation prepared outside of the Committee. Therefore,

substantive testing of disbursements was limited.

The Audit covered the following general categories:

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1.

2.

The receipt of contributions or loans in excess of

the statutory limitations (see Finding II.B.);

the receipt of contributions from prohibited sources,

such as those from corporations or labor

organizations;

3. proper disclosure of contributions from individuals,

political committees and other entities, to include

the itemization of contributions when required, as

well as, the completeness and accuracy of the

information disclosed (see Findings II.C. and D.)~

4. proper disclosure of disbursements including the

itemization of disbursements when required, as well

as, the completeness and accuracy of the information

disclosed;

5. proper disclosure of campaign debts and obligations

(see Finding II.E.);

6. the accuracy of total reported receipts,

disbursements and cash balances as compared to

campaign bank records (see Finding II.A.);

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7. adequate recordkeeping for campaign transactions;
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8. other audit procedures that were deemed necessary 1n

the situation.

Unless specifically discussed below, no material

non-compliance with statutory or regulatory requirements wae

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

of the matters discussed in this report in an enforcement action.

II. Findings and Recommendations

A. Misstatement of Financial Activity

Sections 434(b)(1), (2), and (4) of Title 2 of the

United States Code state, in part, that each report shall disclose

the amount of cash on hand at the beginning of the reporting

period and the total amount of all receipts and disbursements

received or made during the reporting period and the calendar

year.

The Audit staff's reconciliation of the Committee's

reported activity to its bank activity for the audit period

revealed the following misstatements:

1. November 29, 1993 through Deceaber 31, 1993

The Committee did not file a Year End Report due on

3anuary 31, 1994. Based on our analysis of Commdttee bank

records, the Audit staff determined that the Ca.mittee should have

reported total receipts of $1,755, disbursements of $76 and eDding

cash on hand of $1,679 including Schedules A, iteaizing those

contributions greater than $200.

2. January 1, 1994 through Dece.ber 31, 1994

co.,

The Committee's reported receipts and disbursements

were overstated by $2,898 and $4,662 respectively, and ending cash

on hand was understated by $3,444 !/. These differences are

primarily due to including in reported totals an amount totaling $3,081 for both receipts and disbursements which represented debts

owed to individuals.

At the exit conference, the Committee agreed to

file amended disclosure reports for 1993 and 1994. The Committee

filed ;'t ·~anuary 31 Year End Report for 1993 on June 30, 1995 which

disclosed the required information.

2/ The interLm audit reported forwarded to the Committee cited a

receipts understatement of $3,214, disbursements

overstatement of $1,581 and ending cash on hand

understatement of $6,475.

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In the interia a\1,4it report, the Audit staff

recommended that the C01IIIIlittee file amended SUDIlIary and Detailed

Summary Pages for calendar year 1994 to correct the aisstatements

discussed above.

In response to the interim audit report, the

CODmlittee filed amended SUIIIlIIary and Detailed SUlIIIIlary Pages for

1994 that materially corrected the misstatements discussed above.

B. Apparent ExceS8ive Contributions

Section 441a(4)(I) of Title 2 of the Unites States Code

states that no person shall make contributions to any candidate

and his authorized political c~ttees with respect to any

election for Federal office which, in the aggregate, exceed

$1,000.

Section 100.7(a)(I)(iii) of Title 11 of the Code of

Federal Regulations states, in part, that the te~ ·contribution"

includes a qift, subscription, loan, advance, or deposit of IIlOney

or anything of value .ade by any person for the purpose of

influencing any election for Pederal office. '!'he tera -anything of value- includes all in-kind contributions.

Section 110.1(k) of ~itle 11 of the Code of Federal

Regulations states, in part, that any contribution -.de by ~re

than one person, shall include the signature of each contributor

on the check, aoney order, or other negotiable instruaent or in a

separate writing. A contribution 1Ia<le by .c)r8 than one penon

that does not indicate the aaount to be attributed to each

contributor shall be attributed equally to each contributor. If a

contribution to a candidate on its face or when aggregated with

other contributions f~ the Sa.8 contrLbutor exceeds the

lLmitations on contributions, the treasurer ..y ask the

contributor whether the contribution was intended to be a joint

contribution by acre than one person. A contribution shall be

considered to be reattributed to another contribu~or if the

treasurer of the recipient political co.-ittee 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 aay request the return of the excessive portion of

the contribution if it is not intended to be a joint contribution;

and within sixty days froa the date of the treasurer's receipt of

the contribution, the contributors provide the treasurer with a

written reattribution of the contribution, which is signed by each

contributor, and which indicates the amount to be attributed to

each contributor if equal attribution is not intended.

Our review of contributions from individuals identified

4 apparent excessive contributions totaling $3,680. Two involved

checks ($2,000 and $4,000) where only one signature was present, a~-though the Committee, in its records and on its reports,

assigned the respective contributions between both spouses and

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elections. We did not find any evidence that the Committee

attempted to reattributed or redesignate any of the contributions

pursuant to 11 CPR 110.1(k)(3) or 110.1(b)(5). Of the remaining 2

contributions, one exceeded the contribution limit by $580 and the

second by $100.

At the exit confere~~a, the Committee was provided with

a schedule detailing the issues discussed above. The Committee

did not comment.

In the interim audit report, the Audit staff recommended

that the Committee provide evidence that the contributions in

question were not excessive; or absent such evidence, refund the

excessive amounts to each individual and provide copies of the

front and back of the negotiated checks.

In response to the interim audit report, the Committee

stated that w ••• the contributions referred to ... were made by

the contributors and received by the Committee with verbal

direction that each spouse was contributing to both the prima1y and general election.•.. However, because of the absence of a

clear and unequivocal designation and the passage of ttme for the

contributor to make a redesignation the Cam.1ttee has agreed to

refund••• • contributions totaling $3,580 3/. The Comaittee

provided copies of the front of three checks totaling $3,080 dated

OCtober 19, 1995. In addition, the Committee stated that it had

already reimbursed an individual for $500 in March of 1995;

however, no documentation supporting this transaction was

provided. We have reviewed the July 31 Mid-Year Report for 1995

which disclosed a disbursement for $500 as a loan repa~nt.

The treasurer stated that when refund checks clear the

bank, copies of the front and back will be provided to the Audit

staff for our review.

c. Disclosure of OCcupation and Name of Employer

c. Section 434(b)(3)(A) of Title 2 of the United States

Code states that each report shall disclose the identification of

each person (other than a political cODmlittee) who makes a

contribution to the reporting committee during the reporting

period, whose contribution or contributions have an aggregate

amount or value in excess of $200 within the calendar year,

together with the date and amount of any such contribution.

Section 431(13)(A) of Title 2 of the United States Code

defines the term "identification" as, in the case of any

individual, the name, the mailing address, and the occupation of

such individual, as well as the name of his or her employer.

3/ With regard to the remaining $100 apparent excessive

contribution, an analysis of the Committee's response indicated that this amount does not appear to be excessive.

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Section 432(i) of Title 2 of the United States Code

states, in part, that when the treasurer of a political ca.Blttee

shows that best efforts have been used to obtain, maintain, and

submit the information required by this Act for the political conunittee, any report OI' any records of such committee shall be

considered in compliance with this Act.

Section 104.7(b)(I) and (2) of Title 11 of the Code of

Federal Regulations state, in part, that with regard to reporting the identification of each person whose contribution(s) to the

political committee and its affiliated committees aggregate in

excess of $200 in a calendar year (pursuant to 11 CPR 104~3(a)(4», the treasurer and the committee will only be deemed

to have exercised best efforts to obtain, maintain and report the

required information if all written solicitations for

contributions include a clear request for the contributor's full

name, mailing address, occupation and name of employer, and

include the following statement: wPederal law requires political committees to report the name, mailing address, occupation and

name of employer for each individual whose contributions aggregate

in excess of $200 in a calendar year. w The request and 8tate.ent

shall appear in a clear and conspicuous manner on any response

material included in a solicitation. For each contribution

received aggregating in excess of $200 per calendar year which

lacks the required information the treasurer makes at least one

effort after the receipt of the contribution to obtain the .lasing information. Such effort shall consist of either a written

request sent to the contributor or an oral request to the

contributor documented in writing. The written or oral request

must be made no later than thirty (30) days after receipt of the

contribution. The written or oral request shall not include

material on any other subject or any additional solicitation,

except that it may include language solely thanking the

contributor for the contribution. The request must clearly ask

for the missing information, and must include the statement set

forth in (b) (1) of this section. (The effective date of this

regulation was March 3, 1994).

The Audit staff conducted a review of contributions from

individuals which identified 22 contributions totaling $12,535 for

which the contributor's occupation and name of employer was not

disclosed. We also identified 17 letters related to the above

contributions, dated January 13, 1995, which the Committee sent to

contributors requesting their occupation and name of employer.

Fourteen responses were received containing the required

information, however, the information was not disclosed. It also

appears that the written request for this information was made

outside the 30 day period. Although the requests did ask for the

reqUired information the exact language set forth at 11 CFR

S104.7(b){1) was not present.

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Finally, the Audit staff reviewed four solicitation

devices. Two devices, one used in a connection with an election

night event and a second for a debt reduction mailing, did not

contain either a request for occupation and name of employer or

language stating the reporting of such information is required by

law. The remaining two devices met the requirements of 11 CPR

104.7; however, information was not present with which to

associate contributions received to specific solicitation devices.

At the exit ~onference, the Committee was presented with

a schedule detailing the issue discussed above. The Committee

agreed to file amended Schedules A dipclosing th~ contributors'

occupation and name of employer as required.

In the interim audit report the Audit staff recommended

that, the Committee (a) file on amended Schedules A the required

information obtained; (b) absent a showing of best efforts,

contact the remaining 8 contributors and provide copies of their

responses to these requests; and (C) file amended Schedules A to

disclose this information. Such request, if necessary, is to

comply with 11 CFR SI04.7(b).

In response to the interim audit report, the Committee

filed Schedules A which materially disclosed the required

information.

o D. Itemization of Contributions from Individuals

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c.

Section 434(b)(3)(A) of Title 2 of the United States

Code states that each report under this section shall disclose the

identification of each person who makes a contribution to the

reporting committee during the reporting period, whose

contribution or contributions have an aggregate amount or value in

excess of $200 within the calendar year, together with the date

and amount of any such contribution.

Section 431(13)(A) of Title 2 of the United States Code

states, in part, the term identification means the name, the

mailing address, and the occupation of such individual, as well as

the name of his or her employer.

Our review identified 15 contributions froa individuals

totaling $6,962 (17.31% of contributions requiring ite.ization)

which were not itemized by the Committee. Although we could not

discern the reasons why these were not itemized 6 contributions

were received by the Committee between OCtober 6 and December 27,

1994.

At the exit conference, the Committee was provided with

a schedule detailing this issue. Committee officials stated that

amendments would be filed.

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In the interim audit report, the Audit staff recommended

that the Committee file Schedules A for line 11(a)(i) itemiZing

the contributions from individuals discussed above (a negative

adjustment to line 11(4)(ii) in a like amount is also necessary).

In response to the interim audit report, the Committee

filed Schedules A for line 11(a)(i) which materially itemized the

contributions from individuals discup~ed above.

E. Debts and Obligations

Section 434(b)(8) of Title 2 of the United States Code,

states, in part, that each report filed under this section shall

disclose the amount and nature of outstanding debts and

obligations owed by to a political committee.

Sections 104.11(a) and (b) of Title 11 of the Code of

Federal Regulations state, in part, that debts and obligations

owed by or to a political committee which remain outstanding

shall be continuously reported until extinguished. These debts

and obligations shall be reported on separate schedules together

with a statement explaining the circumstances and conditions under

which each debt and obligation was incurred or extinguished. A

debt or obligation, the amount of which is over $500 shall be

reported as of the date on which the debt or obligation is

incurred, except that any obligation incurred for rent, salary or

other reoccurring administrative expense shall not be reported as

a debt before the payment due date.

The Audit staff reviewed disburse.ents to dete~e if

the Committee correctly reported debts and obligations owed to

vendors. The review identified obligations totaling $30,493 which

the Committee did not disclose when incurred. These obligations,

owed to a direct marketing consulting firm, were incurred between

July 29, 1994 and December 31, 1994. At December 31, 1994 $lS,J59

remained unpaid.

Furthermore, beginning with the July 15 Quarterly Report

through the January 31 Yea~ End Report it appears that the

Committee combined entries for Schedule D (Debts and Obligations

Excluding Loans) and Schedule C (Loans) on a single Schedule C and

did not disclose the nature or purpose for any of these entries.

At the exit conference, the Committee was provided with

schedules detailing the issues discussed above. The Committee

agreed to file amended reports to disclose the information.

In the interim audit report, the Audit staff recommended

that the Committee:

o File amended Schedules 0 beginning with the October IS

Quarterly Report through January 31 Year End Report to

correctly disclose the amounts owed to the direct

marketing consulting firm;

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o file separate SChedules D (Debts and Obligations Bxcluding

Loan.) beginning with the July 15 Quarterly Report through

January 31 Year Bnd Report to disclo8e only debts 0W8Cl,

and to disclose each debt'. nature or purpose, and

o file separate Schedule C (Loans) report pages beginning

with the July 15 Quarterly Report through January 31 Year

Bnd Report to disclose all loans ente~ into by the

Committee.

In response to the int.ria audit report, the Committee

filed amended Schedules D a-d C which .aterially corrected the

discrepancies noted above.

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FEDERAL ELECTION COMMISSION

W ~SH'NC TO..... 0 ( It).W)'

AK006730

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January 19, 1996

Mr. Donald J. Griffin, Trea8urer Commit~~ to-Elect

Michael Patrick Planagan

350 North LaSalle Street, Suite 800

Chicaqo, IL 60610

Dear Mr. Griffin:

Attached please find the Pinal Audit Report OD ~e

Committee to Elect Michael Patrick Flanagan. 'lhe Ce-i.sion

approved the report on January 5, 1996.

The C~••ion approved Pinal Aucllt Report vi11 be placed

on the public record on January 26, 1996. Should you have any

questions regarding ~he public relea.e -of--~-he J:epOrt~--p1eeJle

contact the C~88ion'. Press Office at (202) 219-4155. Any

questions you have related to aattera coverecl during the audit

or in the report should be direct.ed to !'ca Bunter or Rick Balter

of the Audit Division at (202) 219-3120 or toll free at (800)

424-9530.

Director

Attachment as stated

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CHRONOLOGY

THE COMMITTEE TO ELECT MICHAEL PATRICK FLANAGAN

c--

Audit Fieldwork

Interim Audit Report to

the Conunittee

Response Received to the

Interim Audit Report

Final Audit Report Approved

6/1/95 - 6/16/95

9/21/95

10/24/95

1/5/96

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