lelease Date 8/18/81

11 til''?

FEDERAL ELECTION COMMISSION

WASHINCTO.-.. D C ~63

REPORT OF THE AUDIT DIVISION ON

THE CARTER-MONDALE REELECTION COMMITTEE, INC.

I. Background

A. Overview

This report is based on an audit of the ~arter-Monda1e

Re-election Committee, Inc. ("the Committee") to determine whether

there has been compliance with the provisions of the Federal

Election Campaign Act of 1971, as amended ("the Act"). The

audit was conducted pursuant to Section 9007(a) of Title 26 of

the United States Code, which states that "after each presidential

election, the Commission shall conduct a thorouah examination

and audit of the qualified campaign expenses of-the candidates

of each political party for President and Vice President."

In addition, Section 9009(b) of Title 26 of the United

States Code states, in part, that the Commission may conduct

other examinations and audits from time to time as it deems

necessary to carry out the provisions of this subchapter.

The Committee registered with the Federal Election

Commission on June 5, 1980, as the principal campaign committee

-of President James E. Carter. The Committee maintained its

headquarters in Washington, D.C. The Committee consists of two

(2) reporting entities, the "General fund" operating with funds

received under Section 9006(b) of Title 26 of the United States

Code, and the "Compliance fund" established under Section 9003.3 0: Title 11 of the Code of Federal Reaulations. SeDarate reoorts

were filed for each fund as required by Section 9006.1 of Title

11 of the Code of Federal Regulations.

The audit coverec the period from June 5, 1980 through

December 31, 1980, 1/ the final coverage date of the latest

reports fi~ed at the time of the aUdit.

1/ In accordance with standard Audit Division practice,

a detailed review of expenditures after December 4, 1980 was

made to de~ennine the accuracy of the Committee's reported

Net Outstand~ng Qualified Campaiqn Expenditures as of Dece~~er 4, 1980. Testing of expenditures was conducted

throuch March 2, 1961 for the General fund and March lS

for the Compliance fund. Compliance fund receipts were

tested through January 1981.
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During the period, the Committee reported an opening

cash balance of $-0-, total receipts of $29,773,960.28, total

expenditures of $29,208,250.96 and a closing cash balance of

S565,709.32 for the General fund. For the Compliance fund, the

Committee reported an opening cash balance of $-0-, total receipts of $1,457,741.64, total expenditures of $939,701.60 and a closing cash balance of $518,040.04. ~/

This report is based on documents and working papers

supporting each of the factual statements contained herein.

They form part of the record upon which the Commission based its

decisions on the matters addressed in the report and were

available to the Commissioners and appropriate staff for review.

B. Rey Personnel

The principal officers of the Committee during the

period audited were Robert S. Strauss, Chairman, from June 5,

1980 to present, and S. Lee Kling, Treasurer, from June 5, 1980

to present.

C. Scope

The audit included suchJtests as verification of total

reported receipts, expenditures and individual transactions:

review of required supporting documentation: analysis of debts

and obligations: review of contribution and expenditure limitations;

and such other audit procedures as deemed necessary under the

circumstances.

II. Audit Findinas and Recommendations Relatina t~ Title 2 of the United States Code

A. Missing Records and Documentation - Compliance

Fund Receiots t

Section 432tc) (1) - (4) of Title 2 of the United States

Code states, in part, that the treasurer of a political committee

shall keep an account of all contributions received by or on

behalf of such political committee, including the name and address

~/ These figures are those stated in the committee's amended

reports, filed February 26, 1981, and subject to the current

audit. Originally reported figures for the Compliance fund

had overstated receipts by $11,756.13 and understated

expenditures by $76,294.85 for an overstatement in ending

cash of $88,050.98. For the General fund, originally reported

figures understated receipts by $188,792.23, disbursements by

SSSl,747.04 and overstated ending cash by $362,954.81. In the

course of the audit, the Audit staff determined that the

differences between the amended figures and those originally filed resulted from ce~tain data entry duplications and omission

of payroll tax deposits.
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of any person who makes a contribution in excess of S50, together

with the date and amount of such contribution, and the identification

of any person who makes a contribution or contributions aggregating

more than $200 during a calendar year, together with the date

and amount of any such contribution.

In reviewing Compliance fund operating account deposits,

the Audit staff identified six (6) deposits totaling S204,203.90

representing individual contributions for which the Committee was

unable to provide a detailed accounting, or evidence that the

amounts deposited represented collections from individuals of less

than SSO per person and therefore did not require a detailed

accounting.

The deposits in question were from promotors of fundraising concerts who were engaged by Committee fundraising personnel

to sell tickets to the events and collect and forward the funds.

The Audit staff had requested from the Committee, fundraising

materials such as tickets or advertisements stating the ticket

price, and a contract or a written statement establishing that the

promotors sold the tickets to individuals in amounts aggregating

to less than 550 per individual contributor.

At the close of audit fieldwork, the Committee had contacted

the principal fundraising organizer, requesting that he obtain the

requirec documentation from the conce=t promotors. At the last date

of fieldwork, the information had not been received.

In order for a determination to be made as to whether

or not the Committee fundraising eve~ts involved contributions from

individuals in excess of $50 for which detailed accounting ~ould be

required pursuant to 2 U.S.C. Section 432(0) (1), the Audit staff recorr~ended that within 30 days of receipt of the interim audit

report the Committee provide for Audit staff review contracts with

the promoters of the fundraising concerts, solicitation materials,

samples of tickets in all price ranges, anc contributor lists related

to the listed events. In addition, it was recommended that the

Committee document all efforts to obtain such records, and submit

this information along with those records obtained.

On Ju~e 29, 1981, the Co~~ittee provided the Audit staff

with additional documentation for the six (6) deposits. For

three (3) of the deposits totaling 595,775.15, the documentation

consisted of letters from concert promotors stating that ticket

sales had been restricted to amounts of less than S50 per person.

For one deposit totaling $8,383.55, the Committee provided two (2)

letters to the concert promotor, requesting documentation on ticket

sales. The promotor subsequently respondec with a copy of a letter

==om the Co~~ittee, dated September 25, 1980, in which the Committee inst=~cte= the promotor to limit ticket sales to 549.99 per person

anc to refe~ pu==~ase~s of larger blocks of ~ickets to the theatre

bex o::ice.
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In addition, the Committee provided documentation for one (1)

deposit totaling $97,598.45, consisting of a letter to a promotor with a reference to a previous telephone request for additional

information. For the remaining deposit of $2,446.75, the Committee

provided evidence that payment on the check was stopped by the

issuer.

Recommendation

On the basis of our review of the additional documentation

submitted by the Committee, it is the opinion of the Audit staff

that no further action be taken on this matter.

B. Documentation For Exoenditures - General Fund •

Section 432(c) (5) of Title 2 of the United States Code

requires that the treasurer of a political committee shall keep

an account of each disbursement made by the committee, and for

each disbursement in excess of $200, the account shall include a

receipt, invoice, or cancelled check.

Accordinc to Committee officials, to ensure the

availability of rental cars during the campaign, the Committee

established a bank account and deposited 5100,000 from which

a national car rental company was authorizec to withdraw funds

for the non-payment of car rental invoices. The company made

two (2) withdrawals from the account for 595,070.80 and

$4,929.20, but documentation was available :or on1v $50,067.46.

The agreement between the Committee and the company was not

available for review.

The Committee aareed to obtain the documentation for

the remaining $49,932.54 in undocumented withdrawals, but at the

completion 0: audit fieldwork had not receivec the documentation

from the bank.

The Audit staf: recommended that within 30 days of

receipt of the interim report, the Committee obtain from the rental

company, and then provide for the Audit staf: to review, documentation including the agreement between the Committee and the car

rental company to support the $49,932.54 in payments noted above.

In addition, it was recommended that the Committee document all

attempts to obtain the expenditure documentation, and provide

this information along with the documentation received.
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On June 29, 1981, the Committee provided for the Audit

staff's review a copy of the agreement witn the car rental company,

and a log listing each rental agreement number, the check-in date,

location, renter's name and invoice amount.

Recommendation

On the basis of our review of the additional documentation

submitted by the Committee, the Audit staff recommends no further

action on this matter.

C. Failure to Itemize Debts and Obliaations

Section 434 (b) (2) (H); (3) (E) and (5) CD) of Title 2 of

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

disclose all loans, and the identification of each person who

makes a loan to the reporting committee, and the name and address

of each person who receives a loan repayment during the reporting

period, together with the date and amount of such loan repayment.

Section 104.11 of Title 11 of the Code of Federal

Regulations further requires that any debt, obligation or other

promise to make an expenditure of $500 or less shall be reported

if outstanding for 60 days. Any debt, loan or obligatio~ of

more than $500 shall be reoorted when incurred. Such debts and

obligations owed by or to a political corrmittee which re~ain

outstanding shall be continuously reported, until extinguished,

on a separate schedule with a statement explaining the

circumstances under which each debt or obligation was extinguished and the amount paid.

1) General Fund

rThe Audit sta=:, in revie~ing all General fund

operating accou~t expenditures made subsequent to the 1980 year

end report, identified 19 ve~dors to ~hich, on December 3l, 1980,

the Con~ittee owed individually ~ounts greater than S500, totaling

$55,648.19. T~e Committee did not, however, disclose the debts on

a schedule CP ~ith the December 31, 1980 report.

2) Compliance Fund

The Audit staff, in revie~ing all C=re;liance fund opera~ing account expenoitures made subsequent to the 1980 yearend report, identified 10 vendors to which, on Decem~er 31, 1980,

the Cc~ittee owed individually amounts greater than SSOC, totaling

S36,596.32. The Co~~ittee did not, however, disclose the debts on

a schedule CP with the December 31, 1980 report.
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Recommendation

The Audit staff recommends that since the Committee has made

final payments on the noted debts, and since the payments have

been disclosed in the first quarter 1981 reports, no further

action be taken.

D. Review of Compliance Fund Solicitations

Section 44ld(a) (1) of Title 2 of the United States

Code states, in part, that whenever any person makes an expenditure for the purpose of financing communications expressly advocating

the election or defeat of a clearly identified candidate, or

solicits any contribution through any broadcasting station, newspaper, magazine, outdoor advertising facility, direct mailing, or

any other type of general pUblic political advertising, such

communication, if paid for and authorized by a candidate, an

authorized political committee, or its agents, shall clearly state

that the communication has been paid for by such authorized

political committee.

Section 9003.3(a) (i) (i) CA) of Title 11 of the Code

of Federal Regulations further states, in part, that Candidates

accepting contributions to a legal and accounting Compliance fund shall clearly state on all solicitations to this fund that

such contributions are being solicited for this fund.

In examining Compliance fund contributions, the Audit

sta== determined that the Committee had conducted fundraisina

_events_and deposited the proceeds into the Compliance func . operating account. To establish wnether the Committee had

conducted solicitation to these events in accorda~ce with the

regulations, the Audit staff requested that the Committee

provide copies of all solicitation materials.

The Committee has stated that they could not provide such materials because they considered it unnecessa~y to keep

them and disposed of all superfluous campaign materials after

the election. The Committee noted that there was a possibility that some fundraising material may have been retained by former

fundraising field personnel.

The Audit staff recommended that within 30 days of

receipt of the interim report the Committee obtain and provide

for Audit staff review all communications and solicitation

material for Committee fundraising events. If the records could

not be obtained, the Committee was requested to document their

attempts to obtain the funcraising material, and submit this

information for Audit staf! review.
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On June 29, 1981, the Committee submitted to the Audit

staff a memorandum dated June 26, 1981, stating that their Director

of Finance had contacted two (2) former Committee fundraisinq persons

by telephone, and had not received any of the requested fundraisinq

materials.

Recommendation

Since the Committee has attempted to obtain the solicitation

material, and absent any indication that irregularities involving solicitation material have occurred, the Audit staff recommends

no further action.

E. Apparent Corporate Contributions - Com~liance Fund

Section 44lb(a) of Title 2 of the United States Code

states, in part, that it is unlawful for any national bank, or

any corporation organized by authority of any law of Congress,

to make a contribution or expenditure in connection with any

election to any political office, or for any political committee

to accept or receive any contribution prohibited by this section.

In the course of examining all contributions received

through the Committee's authorized joint fundraising committee,

the Tennessee '80 Campaign, the Audit staff identified two (2)

contributions totalinc $770.00 made with checks that aODearec to

be drawn on corporate-accounts. 3/ The Audit staff verified that

the business entities named on the instruments were in fact

incorporated. The Committee provided records showing they had

contacted the contributors and sent a letter requesting ~~itten

verification that the accounts were personal accounts. ~~en the

Audit ~taff indicated that additional verification other than the

letter would be needed to establish that the instruments were

not drawn on corporate accounts, the Co~~ittee decided to forego

any f'urther documentation e:forts, and refunded the contributions.

Recommendation

Since the contributions have been refunded, the Audit staff

recommends that no further action be taken on this matter.

F. Reoortinc Errors and Omissions - General Fund

Section -434 (b) (4) and (5) of Title 2 of the United States

Code, states, in part, that a committee shall disclose disbursements

made to meet candidate or committee operating expenses, including

the name and address of each person to whom expenditures have been

The Carter/Mondale Re-election Committee, Inc. authorized

two fundraising cow~it~ees jointly with the Tennessee State

Democratic Party: The Carter/Mondale Tennessee Victory Fund,

registered October 20, 1980, and the Tennessee '80 Campaiqn

registered November 10, 1980. The receipts collected by

these co~~ittees under the auspices of the Carter/Mondale

Re-election Comrni~tee Compliance fund were included in the

scope of this audit. Both fundraisinq co~ittees were

audited in July, 1981.

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made by such committee in an aggregate amount or value in excess

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

and purpose of such expenditure.

The Audit staff's review of the Committee's General

fund operating account expenditures, consisting of a 100\ examination of certain disbursements and a random sample of the remaining items, revealed the following reporting errors and omissions:

1) In reviewing sample items, the Audit staff identified

manually prepared payroll checks that were not entered into the

computerized reporting system, and were therefore omitted from the

reports. A subsequent 100\ review of manual payroll checks revealed

that there were 39 unreported items, each with an aggregate amount

in excess of $200, totaling $24,975.41. The Audit staff determined

that these omissions were the result of a failure in the data entry

system for checks issued between scheduled payroll processing dates.

The Committee has agreed to make the necessary data entries, and

file amended reports.

2) The Audit staff's examination of selected expenditures on a 100% basis identified 15 expenditures totaling

$1,496,425.00 that were reported with an inadequately stated

purpose. These disbursements, made to two (2) vendors, were

reported with only "contracted services" as the stated purpose.

3) A random sample of expenditures indicated that

58 expencitures in the sample were reported with disclosu=e errors.

With few exceptions, these errors consist of salary payments for

the P~esidential travel and Non-presidential travel cost centers

that were reported by data entry error as "travel reimbursements."

The Audit staff concluded that once the payroll disbursements for

these cost centers were amended, expenditure disclosure would be

materially correct.

In the interim audit report, the Audit staff recommended

that the Committee file a comprehensive amendment disclosing all

unreportec expenditures noted in 1 above and properly classify

those items notec in 2 and 3 above on Committee disclosu~e reports.

On June 29, 1981, the Committee filed amended reports

correcting the noted disclosure errors.

Recorr..~endation

On the basis of amended reports submitted by the Committee,

the Audit sta:f recommends ~~at no further action be taken.
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III. Findinas and Recommendations Related to Title 26

of the united States COde

A. Repayment of Primary Committee Loan

Section 9003.4(4) (i) of Title 11 of the Code of Federal

Regulations states, in part, that a general election candidate

who has received federal funding under 11 CFR Part 9031, et seg.,

may borrow from his or her primary election campaign an amount not

to exceed the residual balance projected to remain in the

candidate's primary account(s), for purposes of funding qualified

campaign expenses prior to the receipt of Federal funds under 11

CFR 9005, provided reimbursement is made to the primary campaign

within 15 days of receipt of such funds.

In the post-primary audit report of the Carter/Mondale

Presidential Committee, Inc. (primary committee), the Audit

staff identified 48 expenditures totaling $27,131.55 which were

general election related, and paid for by the primary committee. i/

Since the primary committee was, at that time, in a deficit

position, it appears that the general election committee could

not have reasonably expected a surplus from which to borrow.

The Audit staff recommended that absent a showina to the c~ntrary, within 30 days of receipt of the interim report,-the

general election c~~paign restore to the primary campaign the amount

of $27,131.55 • .- On June 29, 1981, the Co~~~ttee submitted to the Audit

staff a copy of check #4078 dated June 17, 1981 from the General ,.... - fJ,lnd to the primary campaign.

Recommendation

The Audit staff recommends that no further action be taken.

B. Matters Referred to the O:£ice of Gene~al Counsel

Certain other matters noted during the audit were referred

to the Commission's Office of General Counsel for consideration

on July 7, 1981.

i/ This matter was addressed in the final audit reDort on

the Carte~/Mondale Presidential Committee, Inc.- In that

report, the Commission required the primary committee

to repay the $5,947.82 in expenditures made prior to the

candidates date of ineligibility to the u.s. Treasury.

The remaining expenditures made afte~ the candidate's date

of ineligibility totaling 521,183.73, were deducted from t~e cancidate's matching fund entitlement.
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IV. Determination of Oualified Campai9n Expenses in ~xcess

of Ent1tlement and Repayments to the United States TreaSury

Section 9007.2(a) of Title 11 of the Code of Federal

Regulations provides that the Commission shall notify the candidate

that an equal repayment of money to the Fund will be required for:

(1) any payments made to the candidate from the fund which

are in excess of entitlement; or

(2) any expenses incurred which are in excess of the aggregate

payments to which a candidate is entitled; or

(3) any contributions accepted to defray qualified campaign

expenses, other than contributions accepted to make up deficiencies

in payments from the Fund, to defray qualified campaign expenses

incurred for legal and accounting services, or to defray those

excessive qualified campaiqn expenses for which repayment is already

required; or

(4} any amount of any payment which was used for any purpose

other than to defray qualified campaign expenses, to repay loans

used to defray qualified campaign expenses, or to restore funds which

were used to defray qualified campaign expenses: or

(51 any amounts expended from monies received from the fund

or from private contributions received under 9003.3(b) which are

not documented: or

("6) any income received as a result of investment or other use

of public funds, less any Federal, State, or local taxes paid on

such income.

Section 9007.2tbl of Title 11 of the Code of Federal

Regulations provides that the Commission shall notify the candidate

of its repayment determination, set forth within the notice the leqal and factual reasons upon which the determination is based, and advise

the candidate of the evidence upon which the determination is based.

Within 30 days after receiving the notice, the candidate shall repay

to the Secretary an amount equal to the amount determined. The

candidate may request, in writing, a 90 day extension of the

repayment pe~iod.

Section 9007.2<'c} of Title 11 of the Code of Federal

Regulations provides that if the candidate disputes the Commission's

determination that a repayment is required, the candidate in writing,

mav submit within 30 davs of the Commission notice, leaal or factual ~aterials to demonstrate that a repayment is not required. Upon

application, the Commission may grant a 30 day extension for submission 0: t~ese mate~ials by the candidate.
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A. Determination of Oualified Campaign Expenses In Excess of Entitlement

Section 9007(b) (2) of Title 26 of the United States

Code states, that if the Commission determines that the eligible candidates of a political party and their authorized committees

incurred qualified campaign expenses in excess of the 899regate

payments to which the eligible candidates of a major party were

entitled under Section 9004, it shall notify such candidates

of the amount of such excess and such candidates shall pay to

the Secretary of the Treasury an amount equal to such amount.

The expenditure report period for the 1980 presidential

elections ended on December 4, 1980. A determination of the

Committee's financial position as of this date indicated total

assets of $1,410,454.62, liabilities of $1,386,925.25, and

estimated winding down costs of $23,529.37 (See Attachment 1).

Therefore, the Committee has no federal fund surplus, anc no

repayment is required.

In addition, the Audit staff identified contincent

liabilities consisting of a disputed invoice from a polling firm,

a group of debts referred to the Democratic National Committe~,

and possible payments for unemployment compensation, all totaling $1,210,000.00. (See Attachment I). When weighed against the

Committee's remaining allowable allocation of $329,440.42 in

overhead expenses to the Compliance fund, the Committee could

possibly exceed the expenditure limitation by 5880,559.58. However,

at this point, the co~~ittee has not incurred qualified campaign

expenses in excess of their entitlement and no repayment is

reauirec. 51 . -

To summarize the above in terms of expenditures subject

to the limitation at December 31, 1980, the Committee expended

as follows:

~I Additional fieldwork will be conducted to uodate the Committee's

compliance with the expenditure limitations·wh~n the July 15,

1981 Quarterly report has been filed. At that time, an adce~dum to the audit report will be prepared if necessary.
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Federal Fund Entitlement

Reported Expenditures SUbject

to Limitation

Miscellaneous Adjustments Resulting from Reconciliation of Bank

Records to Reports

payroll Allocation - Compliance

to General (III.A.4.)

Computer Allocation - Compliance

to General (III.A.4.)

Compliance Fund Exp. Subject

to Limitation

Capital Assets at Market Value

Repayment to Primary Committee

Payables 1/1 - 3/3/81

Receivables 1/1 - 2/23/81

OVerhead Allocation

Estimated Winding Down

Total Expenditures

Surp1us/De:icit

$29,440,000.00

$29,068,125.46

21,437.71

61,568.05

23,264.43

25,484.90

(64,145.21)

27,131.55

358,836.87

(68,153.53)

(32,711.95)

19,161.72

$29,440,000.00

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B. Re~avments to the United States Treasury

1. Repayment of Interest Received on Federal Funds

Section 9004.5 of Title 11 of the Code of Federal

Regulations states that investment of public funds or any other

use 0: pUblic funds to generate income is permissible, p=ovided

that an amount eaual to all net income derived from such investments, less Federal, State and local taxes· paid on such income,

shall be re?aid to the Secretary.

Upon receipt of payment from the fund, the Committee

opened an investment account, and transfered a substantial portion

of the payment into that account. Through 2/26/81, the Ccmmittee

earned interest income on the account totaling S17S,809.2~.

In addition, the Committee purchased four (4)

ce:tificates of deposit, on which inte~est income was earned

totaling $14,975.78.
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On this income, the Committee paid $85,542.22 in

taxes through 12/31/80, and will pay an estimated $2,072.87 in

taxes for the period 1/1/81 to 2/28/81. Therefore, the net

interest income of $103,169.90 is repayable to the u.s. Treasury.

In the interim audit report, the Audit staff

recommended that absent a showing to the contrary, the Commission

determine that $103,169.90 in income, net of taxes, derived through the investment of Federal funds, be repayable in full to the

United States Treasury.

In its response of June 29, 1981, the Committee did

not provide any adjustments to the calculation of income, or any

additional information on the estimated taxes.

Recommendation

The Audit staff recommends that the Commission determine the

$103,169.90 in estimated net interest income to be repayable in

full within 30 days of receipt of this report, to the United

States Treasury. During the 30 days, the Committee may submit

legal and factual materials to demonstrate that repayment is no~ required.

2. Re~avment of Contrib~tions to the General Fund

Section 9007(b) (3) 0: Title 26 of the Unitec States

Code states, in part, that if the Co~~ission determines that the

eligible candidates of a major party or any authorized co~~ittee

of such candidates accep~ed co~tributions (other than contributions

to make up de:iciencies in payments out of the fund on account of

r' the application of section 9006(c) to defray qualified campaign

ex?enses, it shall notify such cancidates of the amount and such

candidates shall pay to the Secretary of the Treasury an amount r~ equal to such amount.

Though testing of campaign contributions disclosed

no material problems; in the course of examining documentation,

( , the Audit staff identified two cont=ibutions to the General fund

totaling $923.60. One contribution was made in-kind when a vendor

reduced a labor bill by the amount of S800, noted on the face of the

invoice as an intended contribution by the vendor. The other

contribution consists of a personal check from an individual

described in a memo fro~ the contributor as a reimbursement

paid from the individual's personal funds, to provide funds for

the Co~~ittee payment 0: a bill from his business.
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In the interim audit report the Audit staff

recommended that absent a showing to the contTary, the Commission

determine that these two (2) contributions totaling $923.60 be

determined as non-qualified campaign contributions, and be repaid in full to the United States Treasury.

In its June 29, 1981 response, the Committee did

not provide any information to show that the contributions are

qualified campaiqn contributions.

Recommendation

The Audit staff recommends that the Commission determine these

two (2) contributions totaling $923.60 to be non-qualified campaign contributions and repayable in full within 30 days of receipt of

this report, to the United States Treasury. During the 30 days,

the Committee may submit legal and factual materials to demonstrate

that repayment is not required.

3. Apparent Non-Qualified Camoaign Expenditures

Section 900i(b) (4) of Title 26 of the United States

Coce states, in part, that if the Co~~ission determines that any ~~ount of any payment made to the eligible candidates of a

political party under Section 9006 was used for any purpose other

than to defray the qualified campaign expenses with respect to

which such payment was made, or to repay loans the proceeds of

which were used, or otherwise to restore funds (other than

contributions to defray qualified campaign expenses which were

received and expended) which were used to defray such qualifiec ··ca.~paign expenses, it shall notify such candic.ate of the amount

so usee, anc such candidates shall pay to the Secretary of the

Treasury an amount equal to such amount.

Section 9002.11 of Title 11·0£ the Code of Federal

Regulations outlines the conditions for an expenditure to be a

qualified campaign expense, which include the following:

1) It must be incurred to further a candidate's

campaign for the election to the office of President or

Vice President of the United States, and incurred by or on behalf

of such candidate or his authorized co~~ittee, or any other agent

or person authorized or requested to make an expenditure by the

candidate or his agents.

2) It must be incurred within the expenditure

report period as defined by 11 C.F.R. 9002.12 or incurred before the

beginning 0: such period in accordance with 11 C.F.R. 9003.4 to the ex~ent such expense is for property, services or facili~ies to be

used during such period.

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Though a sample review of the Committee's

General fund operating account expenditures disclosed no material

problems concerning qualified campaign expenditures the Audit staff

noted two (2) disbursements for goods and services totaling . $2,074.70 which were incurred by and benefitted the Carter/Monda1e

Presidential Committee for the primary campaign.

a) One disbursement in the amount of $457.20

on September 11, 1980, was for computer reprogramming services

performed, according to the dates on the invoice, on April 7-8-9.

(No year is given). The date of the invoice and the nature of the

service indicate that the expenditure was related to the aggregation of contributions, and therefore attributable to the primary campaign.

In their response of June 29, 1981, the Committee

did not provide any additional information to show that this

disbursement was not attributable to the prima~y campaign.

b) On September 15, 1980, a disbursement of

$1,897.50 was made from the General fund for printing and reproduction costs related to the purchase of business cards and labels.

All but $280.00 was billed to the primary co~ittee by the vendor.

Therefore, it appeared that $1,617.50 in primary related bills was

paid by the General election committee.

In the June 29, 1981 response the Committee provide= information demonstrating that of the $1,617.50 in apparent primary expenditures paid by the General fund, $804.00 was for Re-election

Committee mailing labels and business cards. The adjusted amount

attributable to the primary campaign is there:ore $813.50.

After reviewing additional documentation submitted

by the Committee on June 29, 1981, the Audit staff adjusted the

total amount of primary campaign expenditures paid by the General

func to $1,270.70.

Recommendation

The Audit staff recommends that the Commission determine these

two (2) expenditures totaling $1,270.70 to be non-qualified campaign

expenditures and repayable in full to the United States Treasury. The Committee will have 30 days a:te: receipt of this report to

submit legal and factual materials to demonstrate that repayment is not required.
-16-

4. Matters Referred to the Office of General Counsel

A certain other matter noted during the audit

was referred to the Commission's Office of General Counsel for

consideration on May 20, 1981.

Summary of Repavments to the u.s. Treasury

" t

Interest received on Federal Funds

(net of taxes)

Contributions to the General Fund

Apparent Non-Qualified Campaign Expenditures

Reprogramming Costs

Printing Costs

Total Repayment if

$' 457.20

813.50

$103,169.90

923.60

1,270.70

$105,364.20

As previously noted, a certain other matter has been

re:erred to the Office of General Counsel. Upon resolution of this matter, a further repayment may be required.
Statement o! ~et Outstan~in, Oual1fiec C.cp.1~~ txpense5 at 1~/"80

Cash:

~.ttachment I

General Fu~~ Accounts

D.C. Court Attachment

total Adjusted Cash:

Capital Assets _t Fair Market Value

Receivables:

Payroll Due Fro: Compliance Fun~

Refunds Due to Coc:1ttee

Interest Receivable

Receivable From Pr1ma~' Coc:1ttee

Total Receivables

Overhead to be Allocate~

Total Assets

Liabilities:

$ 63t..92~.60

46,'80.23 1/

2.'31.6' 2/

623,914.75 -

',723.64 3/

l, 121. 60 :!I

681,405.83

",145.21

632,191. 63

32,711. 95 }/

Debts avec by the Co::ittee

Tax on Interest Inco=e ~epa~~ent of Interest tc t.S. Treas~ry

Due te Com~lian:e rune aefunc to Prica~: Co==ittee fer General

Election Pa)~e~ts

Total Outstandins Debt

1.05~t459 .. 21 S7.61~.O;

103,169.90 6/

116,549.50 1./

, "'.

( ..

tstiaation of ~indini Do~~ Costs:

Rent - '/1/80 - 4/1/£~

Payrell - 12/4/80 - 8/1/S;

Storage Cost - 1 year

Supp11es - 1 yea~

Tele~hone - 1 year

Total Liabilities

Net Surplus/Deficit

Contingent Liabilities:

Vne=plo)~ent Co~?ensatio~

Disputed Invoice For=

Cambridge Survey Research

Debts Ref erree to D~;C

Total Contingencies:

523.20

21,9J7.77

499.8:

235.'1.

3~:;.1~

8e,OOO.oc 1/

400,000.00 10' 73C.O~C.O: -

1.~10,OOO.OO

23,529.37

£st1~atlon of ~axicu: Ex:ess Due to Realization of Continrencies

Re~air.ing Overhea~ Allo~.~le

To:al ContingenciesPossible Excess

See footnotes or. the nex: pa~e

329."0.42

1, 210, O~=. oe·

(68C,559.58)
'ootnotes

Attachment of fuads conceminl I Street lea.e, fund. vithdr.wn from lefteral .l.ction

account, but di.pute va, with CarterfHo~d.le Pr••ide~c1al eo.a1tte., IDc~

The.e checks vere paid fram aeneral fund ca.h, but vere compliance fund p.yroll

expenses.

11

,~

11

~/

•

,~

I~terest earned after 12/31/80 o~ 1~vestment of f.deral fUDds.

See Fiad1nl III.A.'.

The Audit .taff calculated an allowable overhead adjuse.ent a.DVDt of '362,152.37.

The Com=ittee vill allocate whatever portion of thi••.aunt 1. e.c••••ry to brins

them to the limit aDd preveDt a .urplus or deficit r.payment.

lepayment of iDterest earned Oft federal funds a. r.quired by 11 C.F.l. 9004.5.

See Finding IV.B.l.

See Finding III.A. - Includes reimbur.ements re~uired ia ItI.A.2. (6,232.12),

III.A.3. (25,484.80), and a portion of III.A.'. (23,264.43 + 61,568.05). rart of

III.A.4. payroll amount is also included in estimated ¥indias down payroll

(16,247.7;).

General election related payments aoted .nd reported 1a the pOlt primary Carter!

Mondale Presidential Coc:1ttee, Inc. .udit report al paid by the primary committee.

The Co==ittee did ~ot pay state une=plo)~ent co~ensat1oD, aDd vill pay as necessary.

Invoice received by the Co=cjttee il in excess of service level authorized by the Co~ttee•
.. .

.. . ",;;1

1

·1

I

FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 2CM6J

July 27, 1981

- .'

MEMORANDUM

The Office of General Counsel has reviewed the final

audit ~eport regarding the Carter/Mondale Re-Election Committee,

Inc. (-the COmQittee-). Based on the-information in this

report, we make the following comments. As to findings

not mentioned herein, we agree with the auditor,' conclusions. .

Finding II. D. Compliance Fund Solicitation Notice,.

The auditors were unable to review copie~ of fundraising materials which were used to solicit contributions to the

Committee's legal and accounting compliance fund. The

Committee has apparently disposed of the exce., literature

and has attempted to obtain examples. As the Committee cannot

produce evidence that its solicitations contained notices in

accordance with the statutory and regulatory requirements found at 2 U.S.C. 5 441d(a)(1) and 11 C.P.R. S 9003.3(a) (1)

(i) (A), the auditors have referred this matter as a MUR. It

is the opinion of this Office, however, that without evidence

to support a positive assertion that a violation occurred in

this matter, such finding should not be pursued further in

the compliance track. We would recommend no further action

in this matter•.

,1.- . !

II

I I •

I~~ If"'

I

,

TO:

THROUGH:

PROM:

SOBJECT:

Robert J. Costa

B. Allen Clutter

Staff Director:

Charles N. Steel~~~ General Counsel

Pinal Audit Report - Carter/Mondale Re-elec~ion Committee, Inc. - A-946

-.~'"
O· " "" ....

i

,,....

.. r"

#' " a ..

:':' (...;I

Memorandum to Robert J. Costa

Page Two

Final Audit Report - Carter/Mondale Re-election

Committee, Inc. - A-946

Finding III-A. U.e of Compliance Funds

The Regulations at 11 C.F.R. 5 9003.3(a)(2)(i)(E) allow

the Committee to use private contributions in the Committee's

legal and accounting compliance fund to make loans to its general election fund. Such loans may only be used to defray .qua~~fied

campaign expenses incurred prior to the expenditure report per10d

or prior to the receipt of federal funds. Such loans from the

Compliance Fund are allowed provided that the funds are repaid - -to the ComPliance Pund within 15 days after receipt of federal

funds. (See 11 C.P.R. S9003.4(b)(2).) The Regulations narrOWly restrict the use of these private funds in order to maintain the

integrity of the separate accounts.

The audit report gives details of several instances in

which the Committee used its Compliance Fund to defray expenses incurred by the General Fund long after the receipt of federal

funds. On November 13, 1980, the Compliance Fund paid a General

Fund telephone bill of $227,030.99. The Committee explained to

the auditors that its General Fund monies were available but were

in a savings account and less accessible. The Committee obtained

the funds from savings to repay the Compliance Fund a month

later•

The auditors also found that other General Fund expenses totaling $57,824.19 for telephone bills and travel were paid by the Compliance Fund. The bulk of these payments were offset

by General Fund payments for compliance activity. The balance

of $6,233.12 was repaid to the Compliance Fund in response to

the Interim Audit Report recommendations.

In addition to the above expenditures, the auditors found

that through apparent accounting errors, the Compliance Fund

paid four General Fund expenditures totaling $25,484.90 for the

First Lady's travel, a dinner, a telephone deposit, and a reimbursement for -tactical pre99 relations.- Finally, the Compliance Fund assumed payment of all payroll and computer costs. Through the Committee's failure to allocate these costCJ, the Audit

Division has found that the Compliance Fund paid $77,8l5.~2 of

the General Fund's finance, budget and legal payroll and .$23,264.-4~

in computer rental costs which are allocable to the General Fund.

None of these payments falls within the categories of allowable

uses for Compliance Fund contributions as set forth in the

regulations at 11 C.F.R. S 9003.3(a)(2)(i).

In none of these instances has the Committee presented proof that the expenditures made from the Compliance Fund were

in fact compliance-related. Use of the Compliance Fund for

general election payments during the expenditure report period

·1

1

- .....
-:.1/1

Memorandum to Robert J. Costa

Page Three . Final Audit Report - Carter/Mondale Re-election

Committee, Inc. - A-946

·1I

for the Committee's convenience disregards the regulation which

.trictly limits loans from the Compliance Fund and undermines

the intent of public financing. As it appears that the committ~ may have utilized Compliance Fund contribu~ions in violation ~-------

of the Act and Regulations, we do not believe that the Commission

should take no further action as the auditors' recommend. Thus,· \

we recommend that this matter be made part of the Matter Under

Review. £ . Finding III. B. Reimbursement for Use of Government Conveyance

11 C.F.R. 5 9004.7(b)iS) states that for an individual

using government conveyance for campaign travel, -the candidate's

authorized committee shall pay the appropriate government entity

an amount equal to that portion of the actual cost of the conveyance

or accommodations which is allocable to all passengers••••- 11 C.F.R. S 9004.7(b)(S)(i) specifies the method of calculating

payment based on operating costs divided by the number of passengers using the conveyance.

According to the auditors, the Committee calculat.d the cost

of five tours made by the First Lady on government air transporta- tion by means of a aethod not allowed by these general election

regulations. Auditors estimate that the Committee's calculations

based on first class comcercial air fare plus a dollar could

result in underpayments or overpayments to the government of

more than $5000 per tour. The Committee apparently does not :

dispute the requirement to reiaburse the government for any <:~ --- underpayaent resulting from the miscalculations. Bowever, the

Committee has been unable to obtain from the candidate's transition team the necessary records for these tours. Based on the

amount of discrepancy apparently involved in this matter, we

would concur that it be made part of the MOR.

Finding III. C. Documentation for Expenditure - General Fund

In its interim audit report, the Audit Division requested specific docucentation froQ the Committee, beyond the canceled

check, debit memos and contract already provided, which would

support in detail expenditures by its media consultant, Rafshoon

Communications, Inc. The Cocmittee had contracted with Rafshoon

wfor the placement of all media advertising for the general election as well as for printing and production of collateral

materials. w In the contract, the Rafshoon agency further agreed

to maintain and provide supporting documents from the media and

vendor invoices for production and back-up for out-of-pocket

expenses. The contract specified that such information would

be available for auditing 60 days after the election.
Memorandum to RObe~tt;p. Costa

Page Four I

Final Audit Report"- Carter/Mondale Re~election

Committee, Inc. - A-946

Because the Rafshoon agency expenses total $19,501,SOO,

a ,um which represents at least 67 percent of the campaign's total expenditures for the general election, this Qffice, in

our earlier analysis, argued in support of ~he recommendation

that additional documents be required from ~he Committee to

establish that expenditures made by the media consultant are

indeed qualified campaign expenses.

The Committee contends that the requirecents of the

regulations are satisfied by a showing that the Committee

"actually made the disbursement followed by a brief statement

of the purpose of the expenditure, such as the word -aedi.-.

The regulation at 11 C.F.R. S l04.3(b)(4)(i)(A) does include

the term -media- as an acceptable description of purpose and

this term is mentioned in the Committee's contract with . -~,

Rafshoon. However, despite the Committee's technical observance of the regulation, it is our concern that more than half

of the Committee's expenses are supported by a few debit memos,

a single canceled check and a contract.

11 C.F.R. 5 9007.1 requires that -the Commission shall

conduct a thoro~gh examination and audit of the receipts, disbursecents, debts and obligations of each candidate, his

or her authorized comcittee and agent9 of such candidates or

committees." [Emphasis added.] 11 C.F.R. S 9003.5(a) requires candidates and their authorized committees to furnish the

Commission with any evidence requested regarding qualified campaign expenses -made by a candidate, all authorized

committees and all agents thereof.- Rafshoon Communications,

authorized to act on behalf of the Committee, can be considered

an agent of the Cocmittee and it9 activity for the candidate

is thus subject to audit review.

The same regulation (5 9003.S(a» states that -the candidate

shall include, as part of this evidence" [ecphasis added) several

forms of acceptable documentation specified therein. The

regulation clearly authorizes the Commission to use its discretion in requesting additional documentation to demonstrate

that particular disbursements constituted qualifed campaign expenS~5. In this case, it is rea~onable to require additional

documents to 9upport such a substantial percentage of the

campaign's general election expenditures. Obtaining the

documents would not prove burdensoce as the Con~ittee has

only to enforce its contract with the Rafshoon agency which

agreed to maintain the records and provide them for audit. ( The Co~ittee's affidavit froe its finance director concerning _

his opinion of the Rafshoon docucents cannot be viewed as

independent evaluation and thus does not constitute conclusive proof of the qualified nature of the campaign expenses

at issue. Therefore, based on the foregoing analysis, we agree that this matter should beco~e the subject of a MUR. .
• @. . III. Findinqs and Recommenda~ion8 ~elated ~o Ti~le 26

of the United States cOde . · . ..,~, •."'::'" (?···"1'··':':· -," .t·' "!t'. :.t· ...··.·· ..~.~~, I:. 'i··.··'·.;· to" .j;.'.... :

A. : APi;aren~1:~· p·rohib·i'fed·'useHtfif 'cO!Piianci' '~Uii(!s~~:-;~~~~~~~~~

Section 9003.3(a) (2) (i) (A-E) of Title 11 of the Code

of Federal Requlations est~lishes the permissible uses of

contributions to the C01llPliance fund. They are as follows:

1) to defray the cost of legal and accountinq . services provided solely ~o ensure compliancel

2). to defray any civil or criminal penalties imposed

pursuant to 2 U.S.C. 437g or 26 U.S.C. 9012;

·3} to make repayments under 11 C.P.R. 9007.21

4) to defray the cost of soliciting contributions to

the' Compliance fundI and

'-.

.""\

5) to be used as a loan to an account established

pursuant to 11 C.F.R. 9003.4' to defray qualified campaign expenses prior to the receipt of federal

funds•

The Committee has stated that early in ~eir planning

of the general election accounting system, two (2) general ledger inter-fund transaction accounts (a General fund and Compliance .~ fund account) were established for the followinq reasons:

(-..

1)

2)

To reflect inter-fund loans permitted under 11 C.P.R.

9003.4(b) (2)1

As a vehicle for disclosing anticipated accounting

errorsI

3) In the absence of final FEC-requla~ions, the

committee believed that loans from the Compliance fund to the General fund would be allowed, provided they were fully disclosed and reimbursed.

Throughout the campaign, a -Due-to-Compliance fundledger account was maintained to reflect disbursements which were

paid from the Compliance fund, but were disclosed as General fund

expenses. In addition, through expenditure testing, the Audit

staff identified other General fund expenditures that were paid by the Compliance fund which were not reflected in the inter-fund

account and appeared to be the result of accounting errors. Analysis of the general ledger account and a review of expenditure test

items revealed the following:

....... .. -- -;,..... - .. -...-......=r.. ..... ___.•. -....-r-__. ...
.:--

.. t S..

r"'"

" l~ , '... •• _, ~~O-""k:' .'., 0 ••~_ r.' ~ . •...," • I ., ,,;< or, ~. :1

1) ·~:~"On November ·13,··1980,·~~e "Comm1t:tee·'Compliance.·~~~:,~,/·,,~~42''-~~

fund paid a telephone expenditure totaling 0 $227 , 030.099 for the ,. '.' . . General· tund. This expenditure was recorded in ~e Due-toCompliance fund account, reported in the appropriate General fund

report, and the Compliance ~und was reimbursed in approximately one' (1) month." .

2) The Compliance fund made nine (9) expenditures totaling $57,824.19 for telephone and general travel expenses related to General fund activity, which were disclosed in General

fund" reports. These expenditures, recorded in the Due-to-Compliance fund account, were offset against the Due-to-General fund account _ which reflected a total of $51,592.07 in General fund disbursements

made for Compliance fund expenses. The net remaining portion due

to the Compliance fund totals $6,232.12.

3) The Committee made from the Compliance fund four

(4) disbu~s~ents totalinq $25,484.90 for items which appear from

review of expenditure documentation to be Genera~ fund expenses. The expenditures were for a campaiqn trip by the First Lady to

Michigan, a December telephone deposit, a dinner at the Vice

President's mansion, and a reimbursement of expenses described as

for Wtactical press relations.- At the time of the interim audit

report the expenditures had not been reimbursed.

4) During the review of Committee compliance payroll and computer costs, the Audit staff noted that 100% of the payroll for the finance, budget, and legal cost centers, and all computer

costs were being paid by the Compliance fund. The Audit staff

reviewed the duties and responsibilities of each individual in

the finance, budget and legal departments, and through discussions

with Committee officials, determined the percentage of time each

individual worked. on compliance related matters. When averaqed and applied to the total payroll for the selected departments, the Audit staff determined that $77,815.82--($61,568.05 pre December 4, 1980, and $16,247.77 in wind down) in payroll should

have been paid by the General fund.

The Audit staff also reviewed the uses of the

computer system, and through discussions with committee personnel

on the uses of reports produced by the system, and the frequency each was run, derived a percentage of compliance versus qeneral operating use of the computer system. This percentage was then

applied to the processing and development costs associated with

the system. The Audit staff allocated the costs of processing computerized payroll by determining the portion of total payroll represented by compliance payroll, and then applying that percentage to the payroll processing costs. In this manner, the Audit

staff determined that $23,264.43 in computer rental and operation

costs should have been paid by the general fund.
o

r

,..

I - • I

. . •••.. . -:\....... '! ,.,." .::.,.: ". 1-' "'. :<"', "l·.·t".~: " .:' .• J

'. 5) ·~~The·Comp1iance"'fUnd" mad'e"slx~~(6) :expend:i~ures '~~~~~.~/~

~ota1in9 $1,121.60 related ~o payroll processing for ~e Carter-' . Mondale·Presidential Commi~tee, Inc. (primary campaign). These

expenditures resul~ed when "they were deducted by the vendor from

an advance payment made by the Compliance fund for the general .l.c~ion campaign. . .

. In the interim audit report, the Audi~ staff recommended

that the Commit~ee submit documentation to demons~rate ~at the expe~ditures were made solely for the purpose of ensuring compliance

with ~e Act, or:

. 1., Reimburse the Compliance fund from the General

fund for ~e unreimbursed portion of telephone and travel expenses to~alin9 .$6,232.12.

2) Reimburse ~e Compliance fund from the General

fund for the $25,484.90 in General fund expenses paid by the

Compliance fund because of accounting errors, and itemize the

expenditures with an amendment to the 1980 General fund yearend report:

3) Reimburse the Compliance fund and itemize with an

amendment to the year end General fund report an allocation of

$101,080.25 from the Compliance fund to the General fund for the

General fund's .share of computer costs and salaries for legal, finance and bUdqet personnel: and

4) Seek rei~bursement from the primary committee for

carter/Mondale Presidential Committee, Inc., expenditures totaling $1,121.60 which were paid by the Compliance fund.

On June 29, 1981, the Committee submitted documentation

showing that the following recommended actions had been taken: .......

1) The Compliance fund was reimbursed by the General

fund for the unreimbursed portion of telephone and travel expenses

totaling $6,232.12.

2) The Compliance fund was reimbursed from the General

fund for $25,484.90 in General fund expenses, and the expenditures

were itemized in an amendment to the April 10, 1981 Report.

3) The Compliance fund was reimbursed for the General

fund's share of computer costs and salaries for legal, finance and

budget personnel totaling $101,080.25. The reimbursement was

itemized with an amendment to the April 10, 1981 Report.
, ....

-12-

. . •• e......... .. •. ..... :... ...... ... •. !-:•.•• ........ .., • .•• 1 .. .-. .. ...... :'" ~.; .•. , '.' .:..•• j

. :-- '-_......'.... ~.~ ....~.. . -::-' ......::' ._f!'~~~;t~.: ~'.~·":~·~.~"!·~:..··J."\~.,,,,",,·'-:-~~~t~:·~~,:,~-~.·::'~.~ ,1I~. ~tr~~.:e:·~~.~'

4) The Compliance fund was rei~urs~d by 'the 'primary' . . commi~~ee for Car~er/Mondale Presiden~ial Commi~~ee, Inc. expen- ditures ~o~aling $l,121.60'which were paid by the Compliance fund.

RecOmmendation

The Audi~ staff recommends that no further action be taken.

B. Reimbursement For Use of Government Conveyance

Section 9004.7(b) (5) of Ti~le 11 of ~he Code of

Federal ~e9Ulations states, if any individual, including a candida~e, uses government conveyance or accommodations paid for

by a government entity for campaign related travel, the candidates'

authorized committee shall pay the appropriate government entity

an amount equal to that portion of the actual cost of the

conveyance Dr accommodations which is allocable to all passengers,

includinq the candidate, travelling for campaign purposes.

Section 9004.7(b) (5) (i) provides that the calculation

of the reimbursement shall be determined by dividing the total

operatinq cost for the conveyance by the number of passenqers.

During the campaign, the First Lady frequently used

government air transportation for campaiqn related activity.

Though required to use the actual cost of the trip in the

determination of the amount to be reimbursed to the government,

the campaign was billed by the White House Military Office for

transportation costs calculated using first class airfare plus

one dollar (the president's travel was calculated correctly).

The billings represent five (5) tours involving 43 stops.

Though actual cost figures were not available to allow for a

determination of the adequacy of the reimbursement for the

First Lady's travel at the time of the audit fieldwork, the

Audit staff is of the opinion that first class airfare plus

one dollar does not approximate actual cost. i/

4/ In billings prepared by the White House Military Office for

tours undertaken by the President, both actual cost and first

class airfare plUS one dollar was provided. A comparison

of these two methods for the president's travel indicates that

the difference in method could result in committee overpayments,

or underpayments of up to $5,267.09 per tour.
(' ..

-13-

, . The ~udit, sta~f...recQn#nended .irii:"t.he·..lnte~im_.aqdi,t ·.~epC?j:~" ..,.; .~" 1:hat f:he Committee obta1n' from t:he White House ·Military Office '..\'. .. .:'"

an invoice for the five tours based on actual cost, and if

necessary reimburse the go!ernment for any difference.

The committee aqreed to request a reimbursement

recalculation of the First Lady's tours by the White House Military Office, but at ehe time of the interim'audit report had not

received a new billinq.

On June' 29, 1981, the committee submitted to the AUdi~

staff a memorandum dated May 7, 1981 stating that their inquiries

to the White Bouse had revealed that the required records were . archived ·in Atlanta and could be retrieved through the Transition

Office. The Committee has provided a copy of a letter dated

June 28, 1981, to the Washington counsel for President Carter's

Transition Office ~equesting the records of the First Lady's tours.

The Transition Office had not replied at the time of the Committee's

response.

Recommendation

The Audit staff recommends that this matter be referred to

the Office of General Counsel.

c. Documentation for Expenditures - General Fund

Section 9003.5 of Title 11 of the Code of Federal

Regulations states in part: that the candidate has the burden of

proving that disbursemen~s made by the candidate or any authorized

committees are qualified campaign expenses, and that the candidate

and his or her authorized committees shall obtain and furnish to

the Commission at its request any evidence regarding qualified campaign expenses made by the candidate, all authorized committees

and all agents thereof. ~_

In the course of the audit, it was determined that the

committee made 11 disbursements totaling $19,501,500.00 to a media

vendor. The documentation for those disbursements consists of one

(1) cancelled check for $1,500.00, and ten (10) bank debit memo's

representing $19,500,000.00, in wire transfers to the vendor's

bank account. Contemporaneous memoranda, consistinq of 5 letters

requesting wire transfers totaling $14,600,000.00, were available

but do not give a statement of purpose, nor do the debit memo's or

the check. (Attachment I) The Committee has provided a statement

of purpose in the form of a copy of the contract with the vendor,

(Attachment II) in which the primary description of media services

to be provided is a statement that the vendor ·wi1l contract for

placement of all media advertising for the qeneral election

as well as for printing and production of collateral materials."
-15-

.- ..- : '-'1'" -- ~9";- • .,e- ~. "';''''~.''' '.,Ir.·~·AW 1-'!fI& i., '.t' '0' .V':'. '.1 ~r' , ., •• •• :

..... ·R.commendatiQDr~t~~~~~:;:'~~.=~.~~::~~~~",.!.-A~J'"J!rf!;t~.!\~ ~.~ .. • , .:. • • • .. • •. ". .' • • If":. • • • ' • ,,'. •

The Audi~ 8~aff recommends ~at this matter be referred to

the Office of General Coun.el.

. D. Repaymen~ of ·Prtmary Commi~tee Loan

Section 9003.4(4) (i)'of Title 11 of ~e Code of Pederal Requla~ions 8~a~es, in part, that a general election candidate

who has received federal funding under 11 CPR Par~ 9031, et seq.,

may borrow from his or her primary election campaign an amount not

to exceed the residual balance projected to remain in the . candidat~'s primary account(s), for purposes of funding qualified campaign expenses prior to ~e receipt of Pederal funds under 11

CPR 9005, provided reimbursement is made to ~e primary campaign within 15 days of .receipt of such funds.

In ~he post-primary audit report of the Carter/Monda1e

Presidentia1 Committee, Inc. (primary committee), the Audit

staff identified 48 expendi~ures totaling $27,131.55 which were

general election related, and paid for by the primary committee. ,~ Since the primary committee was, at that time, in a deficit

position, it appears that the qeneral election committee could

not have reasonably expected a surplus from which to borrow• . . The Audit s~aff recommended that 'absent a showinq to the .. ," contrary, within 30 days of receipt of the interim report:, t;he

general election campaign restore to the primary campaiqn ~he amount

of $27,131.55.

On June 29, 1981, the Commdttee submitted to the Audit

staff a copy of check .4078 dated June 17, 1981 from the General

fund to the primary campaign.

Recommendation _..-

The Audit staff recommends that no further action be ~aken.

This matter was addressed in ~e final audit report on

the Carter/Mondale Presidential Committee, Inc. 'In that

report, the commission required the pr~ary committee

to repay the $5,947.82 in expenditures made prior to the

candidates date of ineligibility to the u.s. Treasury. The remaining expenditures made after the candidate's date

of ineligibility totaling $21,183.73, were deducted from

the candidate's matching fund entitlement.

·1

FEDERAL ELECTION COMMISSIOI':

\\'AStH"'lG fa...... D r 20~".l

February 10, 1982

MEMORANDUM

TO:

FROM:

SUBJECT:

FRED EILAND

PRESS OFFICE4 ;?i'1

BOB COSTA •/'/' L,..../

PUBLIC ISSUANCE OF AN ADDENDUM TO

THE FINAL AUDIT REPORT OF THE

CARTER/MONDALE RE-ELECTION CO~~ITTEE, 'INC.

AND SUBSEQUENT REPAYMENT

Attached please find a copy of an addendum to the audit

report of the Carter/Mondale Re-Election Committee, Inc. ("the

Committee"), and a receipt for the additional repayment requested . ~herein. The addendum was approved on January 19, 1982, and the ~heck was received on February 9, 1982.

The Committee was informed by letter of the January 19, 1982

decision, and the addendum may be released to the public as of

today, February 10, 1982.

Attachments as stated
&= 0 DUGU ., .w,

FEDERAL ELECTION CO,\1MISSIO~

January 5, 1982

MEMORANDUM

1

I

I

I

TO:

THROUGH:

FROM:

SUBJECT:

COMMISSIONERS

B. ALLEN CLUTTER

STAFF DIRECTOR

BOB COSTA

ADDENDUM TO THE FINAL AUDIT REPORT

OF THE CARTER/MONDALE RE-ELECTION

COMMITTEE, INC.

I. Summary of Issue and Recommendations

" ..

. t~

On September 25, 1981, the Audit staff received a check from

the Carter/Monda1e Re-election Committee, Inc. (Rthe Committee")

for $82,876.31. The check, representing the repayment of Federal

funds pursuant to 2 U.S.C.··9007 is $4,355.71 short of the amount

calculated as repayable by the Audit staff. The Audit staff

recommends that the attached letter be sent to the Committee

requesting repayment of the remaining $4,355.71. 'This matter is

being circulated on a tally vote basis. Should an objection be

received, it is reco~~ended that this matter be placed on the

next Executive Session Agenda •

II. Background

t: On August 14, 1981, the Committee received the final audit

report requiring the repayment of $105,364.20 within 30 days of

receipt of the report. The repayment consisted of:

1) $103,169.90 in interest (net of income taxes) received

on the investment of federal funds (pursuant to 11 C.F.R.

9007.2(a) (6) J

2) $923.60 in contributions to the General Fund (pursuant

to 11 C.F.R. 9007.2(a) (3» 1 and

3) $1,270.70 in apparent non-qualified campaign expenses (pursuant to 11 C.F.R. 9007.2 (a) (4».
·-

, ..

I~MORANDUM TO THE COMMISSIONERS

Page 2 ,

T~e Committee's 30 day period in whic~ to repay, request an

extenslon, or submit legal and factual ~a:erials to dispute the

repayment, enoed on September 14, 1981. On Se?te~ber 18, 1981,

the Audit staff received a check from the Ccrr~ittee, which was

subsequently returned to the Committee at t~eir reauest, due to

errors in their tax calculation. •

.' In September, the Audit staff conducted further fieldwork

ahd revised the inter~st repayment calculation for the receipt of

additional interest, and federal and state income taxes paid on

the interest, thereby reducing the repayment to $87,458.63.

On September 25, 1981, a check for $62,876.31 ($4,582.32

short of the required repayment) was received from the Committee.

No additional documentation was submitted to explain the

difference in payment, or dispute the orisinal repayment amounts.,

The Audit staff contacted the Committee and through discussions

with the Committee's former Director of F;nance it was determined

that the difference represents the value 0: certain interest and

penalties assessed by the Internal Revenue Service for late

payment of taxes, the value of which was ceducted from the

repayment. Since both payments were ~ade to ~he General Fund of

the U.S. Treasury, the Committee was of tbe opinion that the

value of the interest and penalties shoulc be deducted from the

interest repayment calculated by the Audit staff to avoid a

duplication of payment.

Suo~ort For The Recommendation

In its review of the situation, the Cffice 0: General

Counsel has determined that the value of the :nte:est paid on the

tax can be deducted, thereby reducing the Audit staff's repayment calculation by $226.61. However, penalties paie by the Committee

should not be considered as Federal, State or local income taxes

for purposes of 11 C.F.R. 9004.5 or 11 C.!.R. 90C7.2(a) (6), and

therefore should not be offset against t~e in~est~ent income in

arriving at a repayment. Therefore, the :epa~mg~t was reduced fro~ $87,458.63, to $87,232.72.

In partial payreent of that amount, O~ Se?t~~~er 25, 1981,

the Audit staff received a check from tte :c~~ittee for

$82,876.31. The Audit staff recommends t:'at :h~ attached letter

be sent to the Co~~ittee acknowledgins rec~i?: 0: the payment and rec~esti~c the bala~ce ($4,355.71) wit~i~ 15 :ays. . .-
FEDERAL ELECTION COMMISSION

WASHINCTON, D.C. 20463

Jant:ary 20, 1982

. .

Mr. S. Lee Kling

Carter/Mondale Re-election Committee, Inc.

4710 Bethesda Avenue, Suite 1302

Bethesda, Maryland 20814

Dear Mr. Kling:

On August 14, 1981, the Carter/Mondale Re-election

Committee, Inc ("the Committee") received t:'e final audit .~ report which provided the Committee 30 days in vhich to

respond to the repayment determination. During that 30

day period, additional fieldwork was conducted by the Audit

staff, wherein additional federal and state income tax

payments made by the Committee were revie~e:. Since payment

'~f income taxes are deductib~~ from gross i~come (investment) _.. for purposes of determin1rlg the amount repayable pursuant to

11 C.F.R. 9007.2(a)(6), the total repayment a~ount <as noted

in the Final Audit Report) was reduced frcm $105,364.20 to

$87,458.63.

,.

.-- On September 25, 1981, the Audit staff received a check,

in the amount of $82,876.31, which was dra~ on a Committee

depository and made payable to the U.S. Treasury. It is my

understanding, based on discussions between Mr. La:ry Hayes

and Mr. Glen Buco of the Commission's Audit s:aff, that the

$4,582.32 difference represents certain pe~al:ies ?lus interest

assessed by the Internal Revenue Service =c~ late ~ayment of

taxes. Although the Co=mission's Regulatic~s recognize the

appropriate~ess of subtracting any inco=e taxes paid in arriving

at the amount repayable from the invest~e~t of public funds, there

is no provision ~hich permits .the subtrac:i:n of a~y penalties

assessed by the Internal Revenue Service :c: late rayment of taxes •

•
Mr. S. Lee Kling

Carter/Mondale Re-Election Committee, Inc •

.' .age 2

Therefore, the Commission has determined th~t the penalties

assessed for late payment of taxes are not appropriate offsets

·to.interest income. However, the Commissio: ~ill allow the

Committee to deduct interest paid from the repaycent to the

u.s. Treasury. Accordingly, the repayment has been reduced to

$87,232.02, and you are advised to submit a check in the amount

of $4,355.71 made payable to the Bureau of Government Financial

Operations to the Audit staff within 20 days of receipt of this

'notice in order to fully comply with the re~ay~ent determination

of the final audit report, as adjusted.

Should you have any questions, please contact Glen Buco

of my staff at 523-4155 or toll free at (800) 424-9530.

Sincerely,

Robert

Assista~:

J~~ Sta:£ Director

for the Audit Division

CERTIFIED MAIL RETUR~ RECEIPT REQUESTED

•
• .'

FEDERAL ELECTION COMMISSIOt'

r

February 10 , 1982

Received from the Federal Election Commission, a check 11820

dated February 5, 1982, drawn on the account of the Carter/

Mondale Re-Election Committee Inc. Compliance Account in the

amount of $4,355.71 for deposit into the General Fund of the

U.S. Treasury pursuant to 26 U.S.C. 9007(c). This a~ount

represents a repayment made pursuant to 11 C.P.R. 9007.2(a) (4)

and (6).

/ 1',..",.- _./ . ;.__ ... L.., .... / -:-:~-.'

......,.- /r;

I . ./'.:..~~.--=-

For Federal Election Commission For U.S. Treasury, Bureau

of Goverw~ent Financial

Operatior..s
... ,

FEDERAL ELECTION COM/\1ISSION

'~.!)~~'Rt(1'\\

\\'-\SHI'C 10'.0L 2040 i

A1Drn~ RF~ING '!HIS O~

Mt\Y BE I.DCA1ED IN A CXM'LETED CXH'LIANCE

Fn.E RELEASED BY '!lIE <nMISSI~ AND MADE PUBLIC IN

1HE PUBLIC REOORDS OFFICE. FOR '!HIS PARI'IQlLAR

ORGANIZATION'S CXM'LE'lED CXM'LIANCE ACI'ION Fn.E

SlMPLY JSK FUR '!HE PRESS stI+1ARY OF MJR /1 1.11'9 . ,

1HE PRESS StM1ARY WII.L PROVIDE A BRIEF HIS'IORY OF

'!HE CASE AND A SlM1ARY OF 'DiE ACrICNS ~, n" J.N{.

Audit ~!2'
FEDERAL ELECTION COM"1ISSIO~

H2~ HH E1 '" \\

\\'.-\SHI\'C 10'"'.0 L 20463

AlDlTI<K4L INFORMA.TI<E REGARDlNG '!HIS ORGANIZATICN

M\Y BE IJJQ\lED IN A CXH'IE:C:D CXH'LIANCE AC'I'Im

FILE RELEASED BY '!HE CIM{[SSIOO AND MADE PUBLIC m

'DIE PUBLIC RF.(X)ROO OFFICE. :roR nns PARl'IC11LAR

ORGANI2ATION'S CXM'lEIED cx:M'LIA.~ ACI'ION FILE

Sn1PLY JSK FUR '!HE PRESS Sl»fARY OF MUR /1 11..':,~ •

tHE PRESS StI+W{Y Wll1. PROVIDE A BRIEF HIS'roRY OF

'mE CASE AND A SlMi\RY OF '!HE AC'l'ICm 'IJ\I<m, IF J.NY.

Audit ~~.............