11

Repayments. The Commission may determine that amount(s) of any payments made to
a candidate from the matching payment account were used for purposes other than
defrayal of qualified campaign expenses, repayment of loans which were used to defray
qualified campaign expenses, and the restoration of funds (other than contributions which
were received and expended to defray qualified campaign expenses) which were used to
defray qualified campaign expenses. The Regulations state, in part, that the Commission
may make a repayment determination for funds which were expended for costs associated
with continuing to campaign after the candidate's date of ineligibility.

11 CFR §9038.2(b)(2)(i) and (ii)(D).

Facts and Analysis

The Commission determined that Congressman Kucinich’s date of ineligibility was
March 4, 2004. However, Congressman Kucinich continued to campaign until July 29,
2004, the date on which the Democratic Party nominated its candidate for President of
the United States. In the preliminary audit report, the Audit staff calculated that during
the period that the Congressman continued to campaign, KFP paid expenses of
$1,985,314, including expenses incurred to attend the Democratic National Convention.
To partially offset these expenses, KFP deposited contributions totaling $1,447,294. The
balance, $488,020 ($1,985,314 — $1,447,294 — a $50,000 exemption for convention
expenses) was paid with funds containing matching funds; and, as such, was subject to a
pro rata repayment to the U.S. Treasury.

At the exit conference, the Audit staff provided KFP’s treasurer with a worksheet
showing the calculation of the continuing to campaign expenses. The treasurer
acknowledged that Congressman Kucinich had continued to campaign until the
Democratic National Convention. The treasurer stated that he would review the auditors’
calculations to confirm whether or not the expenses included were for continuing to
campaign or for expenses incurred prior to DOI.

Preliminary Audit Report Recommendation

The Audit staff recommended that KFP submit documentation to demonstrate that
matching funds were not used to fund the continuing to campaign effort between March 5
and July 29, 2004. Absent such documentation, the Audit staff would recommend that
the Commission determine that $145,668 ($488,020 multiplied by the repayment ratio,
29.8488%") is repayable to the U.S. Treasury.

Committee Response to Recommendation

In response to the PAR recommendation, KFP disagreed with the Audit staff’s
calculation that while continuing to campaign KFP’s expenses exceeded private
contributions by $488,020. In summation, KFP responded that:

1. Contributions raised from August 1, 2004 to December 31, 2004, should
be applied to debts associated with continuing to campaign, not
exclusively to wind down.

7 This figure (29.8488%) represents KFP’s repayment ratio as calculated pursuant to 11 CFR
§9038.2(b)(2)(iii).


Part II
Overview of Campaign

Campaign Organization

Important Dates

Kucinich for President, Inc.

e Date of Registration

February 21, 2003

¢ Eligibility Period”

December 23, 2003 — March 4, 2004

e Audit Coverage

February 13, 2003 — September 30, 20047

Headquarters

Columbus, OH

Bank Information

e Bank Depositories

Five

e Bank Accounts

Nine — Checking Accounts

Two — Savings Accounts

One — Certificate of Deposit

Treasurer

e Treasurer When Audit Was Conducted

Donald J. McTigue

e Treasurer During Period Covered by Audit

Donald J. McTigue

Management Information

¢ Attended FEC Campaign Finance Seminar _| Yes

¢ Used Commonly Available Campaign Yes
Management Software Package

e Who Handled Accounting and Paid Staff

Recordkeeping Tasks

2 This period began with the date the candidate satisfied matching fund eligibility requirements and ended when the

candidate received insufficient votes as determined by the Commission. See 11 CFR §9033.5(b)

3 Limited reviews of receipts and expenditures were performed after September 30, 2004 to determine whether the
candidate was entitled to receive additional matching funds.


15

entered as John Smith, J.D. Smith, John Donald Smith, or John Smith, Jr., with each
name variation assigned a unique contributor identification number.

At the exit conference, the KFP treasurer stated that he had spent time merging
contributor IDs in the database in order to file amended reports but was notified of the
audit before the amendments were filed.

Preliminary Audit Report Recommendation and Committee
Response

The Audit staff recommended that KFP file amended reports to itemize the contributions
as required. The response to the recommendation stated that KFP reviewed its
contributor data base and changes were made where necessary to allow proper
aggregation. KFP filed amended reports that itemized correctly the contributions
required to be itemized.

| Finding 5. Receipt of Currency in Excess of Limitations

Summary

A review of 698 deposits of currency determined that 117 of them could not be
associated with individual contributors or fundraising events. The Audit staff treated
these as anonymous cash contributions subject to a $50 limit per deposit. After allowing
a $50 contribution from each deposit, there remained $41,410 in anonymous
contributions that exceeded the limit. The Audit staff recommended that KFP submit
information that showed that no single anonymous cash contribution exceeded $50 or,
dispose of the amount in excess of the limit in a manner that is not related to Federal
elections. In response to the PAR recommendation, KFP calculated that the anonymous
cash contributions exceeded the limit by $39,570. KFP provided copies of negotiated
checks paid to organizations not related to Federal elections. The response did not
address a $1,840 ($41,410 minus $39,570) reduction in the amount in excess of the limit.
The Audit staff recommends that $1,840 be paid to the U.S. Treasury.

Legal Standard

Anonymous Cash Contribution Limit. A candidate or committee receiving an
anonymous cash contribution in excess of $50 shall promptly dispose of the amount over
$50. The amount over $50 may be used for any lawful purpose unrelated to any Federal
election, campaign, or candidate. 11 CFR §110.4(c)(3)

Recordkeeping Requirements for Receipts. Political committees must keep records of:
e All contributions received by or on behalf of the committee;
e The name and address of any person who makes a contribution in excess of $50,
together with the date and amount of the contribution; 2 U.S.C. §432(c).

Preserving Documents. Committees must preserve these records for 3 years after a
report is filed. 2 U.S.C. §432(d).


e Anexpense associated with winding down the campaign and terminating political
activity. 11 CFR §9034.4(a)(3).

Value of Capital Assets. The fair market value of capital assets is 60% of the total
original cost of the assets when acquired, except that assets that are received after the date
of ineligibility must be valued at their fair market value on the date received. A
candidate may claim a lower fair market value for a capital asset by listing the asset on
the NOCO statement separately and demonstrating, through documentation, the lower
fair market value. 11 CFR §9034.5(c)(1).

Entitlement to Matching Payments after Date of Ineligibility. If, on the date of
ineligibility (see above), a candidate has net outstanding campaign obligations as defined
under 11 CFR §9034.5, that candidate may continue to receive matching payments
provided that on the day when the matching payments are made the sum of contributions
plus matching funds received on or after the date of ineligibility is less than the
candidate’s net outstanding campaign obligations. 11 CFR §9034.1(b).

Facts and Analysis

The Audit staff prepared a Statement of Net Outstanding Campaign Obligations as of the
candidate’s date of ineligibility (DOI), March 4, 2004. The audited statement was
presented in the preliminary audit report (PAR) and showed KFP to be in a deficit
position in the amount of $1,222,331. After accounting for funds received after March 4,
2004, the Audit staff calculated that KFP had received $182,162 in matching fund
payments in excess of the Candidate’s entitlement.

After considering documentation provided in response to the PAR and adjusting actual
winding down costs through December 31, 2006 and estimated winding down costs
through June 30, 2007, the Audit staff prepared an updated NOCO that appears on the
next page. The changes between the NOCO statement in the preliminary audit report and
the statement that follows are discussed below the statement.


Part III
Summaries

Findings and Recommendations

Finding 1. Net Outstanding Campaign Obligations

A review of KFP’s financial activity through December 31, 2006, and estimated winding
down costs through June 30, 2007 indicates that KFP did not receive matching fund
payments in excess of the Candidate’s entitlement.

(For more detail, see p. 6)

Finding 2. Costs Associated With Continuing to Campaign
Congressman Kucinich continued to campaign after his date of ineligibility, March 4,
2004, until July 29, 2004, the date on which the Democratic Party nominated its
candidate for President of the United States. KFP was permitted to use only private funds
received during this period, not matching funds, to fund campaign activity. The Audit
staff determined that while continuing to campaign, KFP paid expenses that exceeded
private contributions received by $454,015. These expenses were paid with funds that
contained matching funds. Such funds are subject to a pro rata repayment to the U.S.
Treasury. The Audit staff recommends that the Commission determine that $135,518 is
repayable to the U.S. Treasury.

(For more detail, see p. 10)

Finding 3. Misstatement of Financial Activity

A comparison of KFP’s reported financial activity to bank records revealed
misstatements of receipts and disbursements in calendar year 2003. The PAR
recommended that KFP amend its disclosure reports. In response, KFP filed the
requested amended reports.

(For more detail, see p. 12)

Finding 4. Itemization of Contributions from Individuals
A sample review of contributions from individuals indicated that KFP failed to itemize a
significant number of contributions that required itemization. The sample results
projected that contributions totaling $520,530 were not itemized as required. The Audit
staff recommended that KFP amend its reports to itemize the contributions. In response
to the recommendation, KFP filed amended reports which substantially correct its filings.
(For more detail, see p. 14)

Finding 5. Receipt of Currency in Excess of Limitations

A review of 698 deposits of currency determined that 117 of them could not be
associated with individual contributors or fundraising events. The Audit staff treated
these as anonymous cash contributions subject to a $50 limit per deposit. After allowing
a $50 contribution from each deposit, there remained $41,410 in anonymous
contributions that exceeded the limit. The Audit staff recommended that KFP submit


Overview of Financial Activity
(Audited Amounts)

Cash on hand @ February 13, 2003 $0
o Contributions from Individuals $ 8,015,122"
o Matching Funds Received 2,955,963>
o Contributions from Political Committees 16,015
o Loans Received 1,507,000
o Offsets to Expenditures 223,198
o Interest Received 2,878
Total Receipts $ 12,720,176
o Operating Expenditures $ 10,953,171
o Exempt Legal and Accounting 56,393
o Loan Repayments 1,507,000
o Contribution Refunds 38,764
o Other 11,938
Total Disbursements $ 12,567,266
Cash on hand @ September 30, 2004 $ 152,910

* Approximately 138,000 contributions received from about 74,600 individuals.
5 KFP received an additional $336,000 in matching funds after 9/30/04 for a total of $3,291,963. This represents
18% of the maximum entitlement ($18,655,000).


16

Facts and Analysis

The Audit staff identified 698 deposits of currency totaling $179,030. Some of the
currency deposits were itemized on the disclosure reports using the contributor name
“Unnamed Cash” or “Gate Receipts.” Other currency deposits, generally those in
amounts less than $200 were reported as unitemized contributions.

During the audit fieldwork, the treasurer stated that the currency was received at KFP
events where donations were accepted, campaign paraphernalia was sold, or volunteers
conducted fundraising activities. He stated that the currency receipts were sent to the
KFP Cleveland, OH office and then periodically forwarded to him in Columbus for
deposit into a KFP bank account. To avoid sending cash through the mail, money orders
were purchased by KFP in Cleveland and sent along with any contributions made by
personal checks. A transmittal memoranda that provided information related to the
money orders and checks was also forwarded.

The Audit staff reviewed the transmittal memoranda and other documents related to the
currency deposits and determined that 117 of the currency deposits could not be
associated with individual contributors or fundraising events. The Audit staff treated
these as anonymous cash contributions subject to a $50 limit per deposit. After allowing
a $50 contribution from each deposit, there remained $41,410 in anonymous cash
contributions that exceeded the limit.

Preliminary Audit Report Recommendation

The Audit staff recommended that KFP submit information that demonstrates that no
single anonymous cash contribution in excess of $50 was received. Absent such a
demonstration, the Audit staff recommended that KFP dispose of the amount in excess of
the limit in a manner that is not related to Federal elections.

Committee Response to Recommendation and Audit Staff's
Assessment

In response to the recommendation, KFP acknowledged that anonymous contributions
exceeded the limit and reported charitable contributions totaling $39,570 on Schedule B-
P of the 2005 Year End Report to organizations not related to Federal elections. KFP
provided copies of the negotiated checks to verify that the charitable contributions were
made. However, KFP’s response does not address a $1,840 ($41,410 minus $39,570)
reduction in the amount in excess of the limit and the Audit staff recommends that the
$1,840 be paid to the United States Treasury.


Part IV
Findings and Recommendations

| Finding 1. Net Outstanding Campaign Obligations

Summary

A review of KFP’s financial activity through December 31, 2006, and estimated winding
down costs through June 30, 2007 indicates that KFP did not receive matching fund
payments in excess of the Candidate’s entitlement.

Legal Standard
Net Outstanding Campaign Obligations (NOCO). Within 15 days after the
candidate’s date of ineligibility (see definition below), the candidate must submit a
statement of “net outstanding campaign obligations”. This statement must contain,
among other things:
«The total of all committee assets including cash on hand, amounts owed to the
committee and capital assets listed at their fair market value;
¢ The total of all outstanding obligations for qualified campaign expenses; and
e Anestimate of necessary winding down costs. 11 CFR §9034.5(a).

Date of Ineligibility. The date of ineligibility is whichever of the following dates occurs
first:
e The day on which the candidate ceases to be active in more than one state;
¢ The 30th day following the second consecutive primary in which the candidate
receives less than 10 percent of the popular vote;
e The end of the matching payment period, which is generally the day when the
party nominates its candidate for the general election; or
«In the case of a candidate whose party does not make its selection at a national
convention, the last day of the last national convention held by a major party in
the calendar year. 11 CFR §§9032.6 and 9033.5.

Qualified Campaign Expense. Each of the following expenses is a qualified campaign
expense.
e  Anexpense that is:

o Incurred by or on behalf of the candidate (or his or her campaign) during the
period beginning on the day the individual becomes a candidate and
continuing through the last day of the candidate’s eligibility under 11 CFR
§9033.5;

o Made in connection with the candidate’s campaign for nomination; and

o Not incurred or paid in violation of any federal law or the law of the state
where the expense was incurred or paid. 11 CFR §9032.9.

e  Anexpense incurred for the purpose of determining whether an individual should
become a candidate, if that individual subsequently becomes a candidate,

regardless of when that expense is paid. 11 CFR §9034.4.


FEDERAL ELECTION COMMISSION
WASHINGTON, D.C. 20463

March 19, 2007

MEMORANDUM

TO: ROBERT W. BIERSACK
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ
ASSISTANT STAFF ;CTOR
AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE REPORT OF THE AUDIT DIVISION ON
KUCINICH FOR PRESIDENT, INC.

Attached please find a copy of the final audit report and related documents on
Kucinich for President, Inc. that was approved by the Commission on March 8, 2007.

All parties involved have received informational copies of the report and the report
may be released to the public.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library
Web Manager


Candidate’s Remaining Entitlement to Matching Funds

Shown below are adjustments to the deficit for funds received after March 4, 2004
through January 3, 2005, the date of receipt of the last matching fund payment. KFP has
not received matching fund payments in excess of the amount to which it was entitled, as
presented below:

Net Outstanding Campaign Obligations (Deficit) as of 3/4/04 ($ 1,487,484)

Less: Private Contributions® 7/30/04 — 1/2/05 269,682
Matching Funds Received 3/5/04 — 1/3/05 1,128,578
Remaining Entitlement to Matching funds ($ 89,224)

Committee Response to Preliminary Audit Report and Audit Staff's
Assessment

KFP’s response to the PAR noted that the Capital Assets presented in the PAR were
overstated. The Audit staff agreed and the correct amount is reflected in the NOCO
presented above.

KFP also disagreed with the Audit staff’s calculation of Accounts Payable for Qualified
Campaign Expenses. KFP identified a number of expenses billed after the DOI which
included goods and services provided both before and after the DOI that should have
been prorated accordingly. The total amount proposed by KFP to be added to Accounts
Payable when the post-DOI bills were pro rated was $64,490.

The Audit staff reviewed the supporting documentation submitted by KFP and increased
Accounts Payable by $34,005 for goods and services provided before DOI. As a result,
the Audit staff increased Accounts Payable for Qualified Campaign Expenses from
$645,072 to $679,077.

Estimated Winding Down Costs included in the statement presented above is based on a
revised estimate provided by KFP that includes additional legal and storage fees.

Finally, KFP disagreed with the amount of private contributions used in the Audit staff’s
calculation of the Net Outstanding Campaign Obligations. The response stated that the
calculation included $6,234 which was the proceeds from the sale of a capital asset.

The Audit staff verified the sale and adjusted the amount of private contributions
received from 7/30/04 to 11/1/04 by $6,234. The correct amount appears above in the
calculation for remaining entitlement.

Therefore, after making the adjustments to capital assets and accounts payable as noted
above and adjusting for changes in the actual and estimated winding down costs, the
Audit staff calculated that KFP has not received matching fund payments in excess of the
Candidate’s entitlement.

© Contributions received from 3/5/04 — 7/29/04 were allowed to be used for continuing to campaign and are
not included in this amount. See Finding 2.


Kucinich for President, Inc.

Statement of Net Outstanding Campaign Obligations

As of March 4, 2004
Prepared on February 16, 2007

Assets
Cash on Hand
Accounts Receivable
Capital Assets

Total Assets

Liabilities

Accounts Payable for Qualified Campaign Expenses
Qualified Convention Expenses (11 CFR §9034.4(a)(6)
Winding Down Costs:
Paid Winding Down Costs (7/30/04 — 12/31/06)
Estimated Winding Down Costs (1/1/07 - 6/30/07)
Amounts Payable for Excessive Anonymous Cash Contributions

Total Liabilities

Net Outstanding Campaign Obligations (Deficit) as of March 4, 2004

Footnotes to NOCO Statement:

{a] Amount includes contributions dated before DOI but deposited after DOI.

$ 365,397
40,593
15,258

$ 679,077
50,000

976,245

162,000
41,410

[b] Includes $46,778 in contribution refunds made after DOI for contributions received before DOI.
[c] This amount does not include expenses incurred between March 5, 2004 and July 29, 2004, the period during which

the candidate continued to campaign. See Finding 2.

a]

[b]

[c]
{d]
le]

$ 421,248

_$ 1,908,7320_

($ 1,487,484)

[d] Estimated winding down costs are based on KFP’s NOCO estimates. Actual winding Down costs will be compared

to the estimate and adjustments made as necessary.

(e]_ KFP donated $39,570 to charity and the remaining $1,840 is payable to the U.S. Treasury. See Finding 5.


information that showed that no single anonymous cash contribution exceeded $50 or,
dispose of the amount in excess of the limit in a manner that is not related to Federal
elections. In response to the PAR recommendation, KFP calculated that the anonymous
cash contributions exceeded the limit by $39,570. KFP provided copies of negotiated
checks paid to organizations not related to Federal elections. The response did not
address a $1,840 ($41,410 minus $39,570) reduction in the amount in excess of the limit.
The Audit staff recommends that $1,840 be paid to the U.S. Treasury.

(For more detail, see p. 15)

Summary of Amounts Owed to the U.S.
Treasury

e Finding 2 Costs Associated with Continuing to Campaign 135,518
¢ Finding 5 Receipt of Currency in Excess of Limitations 1,840

Total Due U.S. Treasury $137,358


Part I
Background

Authority for Audit

This report is based on an audit of Kucinich for President, Inc. (KFP), undertaken by the
Audit Division of the Federal Election Commission (the Commission) as mandated by
Section 9038(a) of Title 26 of the United States Code. That section states “After each
matching payment period, the Commission shall conduct a thorough examination and
audit of the qualified campaign expenses of every candidate and his authorized
committees who received [matching] payments under section 9037.” Also, Section
9039(b) of the United States Code and Section 9038.1(a)(2) of the Commission’s
Regulations state that the Commission may conduct other examinations and audits from
time to time as it deems necessary.

Scope of Audit

This audit examined:

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

The disclosure of contributions and transfers received.

The disclosure of disbursements, debts and obligations.
The recordkeeping process and completeness of records.
The consistency between reported figures and bank records.
The accuracy of the Statement of Net Outstanding Campaign Obligations.
The campaign’s compliance with spending limitations.
Other campaign operations necessary to the review.

CPENAMNARWNHE

Inventory of Campaign Records
The Audit staff routinely conducts an inventory of campaign records before it begins the
audit fieldwork. KFP’s records were substantially complete and the fieldwork began

immediately.


12

2. The only question about whether any repayment is due involves the cutoff
date chosen for calculating private funds raised as offset against
continuing to campaign expenses.

3. The Audit staff did not account for the pro rata portion of pre-DOI
expenses represented in the post-DOI billings.

For these reasons the Committee contends that it did not exceed its entitlement to
public funds and, therefore, does not owe a repayment to the U.S. Treasury.

Audit Staff's Assessment

Contributions raised from August 1, 2004 to December 31, 2004, were not available to
pay for continuing to campaign expenses. Although the Candidate is allowed to use
private contributions to continue to campaign, this is an exception that is limited to
contributions raised while the candidate is actively continuing to campaign. The
candidate ceased campaigning on July 29, 2004, the date on which the Democratic Party
nominated its candidate for President of the United States. Contributions received after
July 29, 2004 must be applied to outstanding campaign debts incurred through DOI and
winding down expenses. If these contributions were allowed to be used to pay
continuing to campaign debt, for every dollar used, a dollar of additional entitlement to
matching funds would be created. This results in public funds being used to finance the
continuing to campaign effort, clearly not the intent of 11 CFR §9034.4(a)(3)(ii).

Regarding accounts payable for goods and services provided before DOI but billed after,
the Audit staff reviewed the supporting documentation submitted by KFP. As a result the
Audit staff reduced the amount of expenses considered to be for continuing to campaign
by $34,005 to $1,901,309° and recalculated the amount of funds containing matching
funds used to pay for continuing to campaign expenses as $454,015 ($1,901,309 -
$1,447,294°). A pro rata repayment of $135,518 ($454,015 multiplied by the repayment
ratio, 29.8488%) is due the U.S. Treasury.

The Audit staff recommends that the Commission determine that $135,518 is repayable
to the U.S. Treasury.

| Finding 3. Misstatement of Financial Activity

Summary

A comparison of KFP’s reported financial activity to bank records revealed
misstatements of receipts and disbursements in calendar year 2003. The PAR
recommended that KFP amend its disclosure reports. In response, KFP filed the
requested amended reports.

5 See Finding 1, Net Outstanding Campaign Obligations.
° Contributions deposited by KFP from March 4, 2004 through July 29, 2004, the period after DOI during
which Congressman Kucinich continued to campaign.


14

Preliminary Audit Report Recommendation and Committee
Response

The Audit staff recommended that KFP file amended reports to correct the misstatements
noted above. In response, KFP filed such amended reports.

| Finding 4. Itemization of Contributions From Individuals |

Summary

A sample review of contributions from individuals indicated that KFP failed to itemize a
significant number of contributions that required itemization. The sample results
projected that contributions totaling $520,530 were not itemized as required. The Audit
staff recommended that KFP amend its reports to itemize the contributions. In response
to the recommendation, KFP filed amended reports which substantially correct its
fillings..

Legal Standard

Itemization Required for Contributions from Individuals. An authorized candidate
committee must itemize any contribution from an individual if it exceeds $200 per
election cycle, either by itself or when combined with other contributions from the same
contributor. 2 U.S.C. §434(b)(3)(A).

Required Information for Contributions from Individuals. For each itemized
contribution from an individual, the committee must provide the following information:
¢ The contributor’s full name and address (including zip code);
e The contributor’s occupation and the name of his or her employer;
¢ The date of receipt (the date the committee received the contribution);
e The amount of the contribution; and
e The calendar year-to-date election cycle-to-date total of all contributions from the
same individual. 2 U.S.C. §434(b)(3)(A) and 11 CFR §§100.12 and 104.3(a)(4)

Sampling. In conducting an audit of contributions, the Commission uses generally
accepted statistical sampling techniques to quantify the dollar value of related audit
findings. Apparent violations (sample errors) identified in a sample are used to project
the total amount of violations. A committee must take any action required by the
Commission with respect to a sample-based finding. 11 CFR §9038.1(f) Such action will
include obtaining, submitting and reporting contributor information on amended reports.

Facts and Analysis

The Audit staff reviewed contributions from individuals on a sample basis. The sample
results projected that a material number of contributions from individuals whose
aggregate total contributions exceeded $200 per election cycle, were not itemized as
required. The projected amount of such contributions was $520,530. The itemization
errors occurred because contributor information from various sources was not
consistently entered into KFP’s contributions database. As a consequence, multiple ID
numbers were assigned to the same contributor, preventing proper aggregation and
itemization of the contributions. For example, contributor John D. Smith may have been


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Inventory of Campaign Records

Part II. Overview of Campaign
Campaign Organization
Overview of Financial Activity

Part III. Summaries
Findings and Recommendations
Summary of Amounts Owed to the U.S. Treasury

Part IV. Findings and Recommendations
Finding 1. Net Outstanding Campaign Obligations
Finding 2. Costs Associated With Continuing to Campaign
Finding 3. Misstatement of Financial Activity
Finding 4. Itemization of Contributions from Individuals
Finding 5. Receipt of Currency in Excess of Limitations

Page


Report of the Audit Division on

Kucinich for President, Inc.
February 13, 2003 - September 30, 2004

Why the Audit

Was Done

Federal law requires the
Commission to audit
every political committee
established by a candidate
who receives public funds
for the primary
campaign.' The audit
determines whether the
candidate was entitled to
all of the matching funds
received, whether the
campaign used the
matching funds in
accordance with the law,
whether the candidate is
entitled to additional
matching funds, and
whether the campaign
otherwise complied with
the limitations,
prohibitions, and
disclosure requirements
of the election law.

Future Action
The Commission may
initiate an enforcement
action, at a later time,
with respect to any of the
matters discussed in this
report.

' 26 U.S.C. §9038(a).

About the Committee (p. 2)

Kucinich for President, Inc. (KFP) is the principal campaign
committee for Congressman Dennis J. Kucinich, a candidate for
the Democratic Party’s nomination for the office of President of
the United States. KFP is headquartered in Columbus, OH. For
more information, see the chart on Campaign Organization, p.2.

Financial Activity (p. 3)
« Receipts

o Contributions from Individuals $ 8,015,122
o Matching Funds Received 2,955,963
o Contributions from Political

Committees 16,015
o Loans Received 1,507,000
o All Other Receipts 226,076
o Total Receipts $ 12,720,176

« Disbursements

o Operating Expenditures $ 10,953,171
o Exempt Legal and Accounting 56,393
o Loan Repayments 1,507,000
o All Other Disbursements 50,702
o Total Disbursements $ 12,567,266

Findings and Recommendations (p. 4)

Net Outstanding Campaign Obligations (Finding 1)

Costs Associated with Continuing to Campaign (Finding 2)
Misstatement of Financial Activity (Finding 3)

Itemization of Contributions from Individuals (Finding 4)
Receipt of Currency in Excess of Limitations (Finding 5)

e


10

| Finding 2. Costs Associated With Continuing To Campaign |

Summary

Congressman Kucinich continued to campaign after his date of ineligibility, March 4,
2004, until July 29, 2004, the date on which the Democratic Party nominated its
candidate for President of the United States. KFP was permitted to use only private funds
received during this period, not matching funds, to fund campaign activity. The Audit
staff determined that while continuing to campaign, KFP paid expenses that exceeded
private contributions by $454,015. As a result, these expenses were paid with funds that
contained matching funds. Such funds are subject to a pro rata repayment to the U.S.
Treasury. The Audit staff recommends that the Commission determine that $135,518 is
repayable to the U.S. Treasury.

Legal Standard

Continuing To Campaign After Date of Ineligibility. If the candidate continues to
campaign after becoming ineligible, the candidate may only receive matching funds
based on net outstanding campaign obligations as of the candidate's date of ineligibility.
The statement of net outstanding campaign obligations shall only include costs incurred
before the candidate's date of ineligibility for goods and services to be received before the
date of ineligibility and for which written arrangement or commitment was made on or
before the candidate's date of ineligibility, and shall not include winding down costs until
the date on which the candidate qualifies to receive winding down costs. Contributions
dated after the candidate's date of ineligibility may be used to continue to campaign, and
may be submitted for matching fund payments. Payments from the matching payment
account that are received after the candidate's date of ineligibility may be used to defray
the candidate's net outstanding campaign obligations, but shall not be used to defray any
costs associated with continuing to campaign unless the candidate reestablishes
eligibility. 11 CFR §9034.4(a)(3)(ii)

Entitlement to Matching Payments after Date of Ineligibility. If, on the date of
ineligibility (see above), a candidate has net outstanding campaign obligations as defined
under 11 CFR §9034.5, that candidate may continue to receive matching payments
provided that on the day when the matching payments are made the sum of contributions
plus matching funds received on or after the date of ineligibility is less than the
candidate’s net outstanding campaign obligations. 11 CFR §9034.1(b).

Post-ineligibility Expenditures. Any expenses incurred after a candidate's date of
ineligibility are not qualified campaign expenses except for winding down expenses
permitted under 11 CFR §9034.4(a)(3)(i). 11 CFR §9034.4(b)(3)

Convention Expenses. Expenses incurred by an ineligible candidate to attend,
participate in, or conduct activities at a national nominating convention may be treated as
qualified campaign expenses, but such convention-related expenses shall not exceed a
total of $50,000. 11 CFR §9034.4(a)(6)


13

Legal Standard

Contents of Reports. Each report must disclose:

e The amount of cash on hand at the beginning and end of the reporting period;
The total amount of receipts for the reporting period and for the election cycle ; and
The total amount of disbursements for the reporting period and for the election cycle.

¢ Certain transactions that require itemization on Schedule A (Itemized Receipts) or
Schedule B (Itemized Disbursements). 2 U.S.C. §434(b)(1), (2), (3), (4), and (5).

Facts and Analysis

The Audit staff reconciled the reported activity to the bank records and determined there
was a misstatement of receipts and disbursements in calendar year 2003. The following
chart details the discrepancies between the totals on KFP’s disclosure reports and bank
records.

2003 Activity

Reported Bank Records Discrepancy
Opening Cash Balance $0 $0 $0
Receipts $ 6,603,802 $ 6,710,525 $ (106,723)
Disbursements $ 5,354,942 $ 5,462,562 $ (107,620)
Ending Cash Balance $ 1,248,860 $ 1,247,963 $ 897

The understatement of receipts was the result of the following:

e Contributions not reported $185,753
e Vendor refunds and bank interest not reported 19,396
e Miscellaneous reporting errors (36,224)
¢ Debit card returns reported in error (9,766)
e¢ Unexplained difference 52,436)
e Net Understatement of Receipts $106,723

The understatement of disbursements was the result of the following:

e Disbursements not reported $77,162
e In-kind transaction not reported 7710
e Bank fees not reported 18,941
e Payroll reporting errors (30,917)
e Debit card returns reported in error (9,766)
e Unexplained difference 51,430
e Net Understatement of Disbursements $107,620