FEDERAL ELECTION COMMISSION

WASHINGTON. DC 20463

October 6, 2000

MEMORANDUM

TO:

FROM:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERT J. COSTA

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

• SUBJECT: PUBLIC ISSUANCE OF THE REPORT OF THE AUDIT DIVISION

ON THE MAINE DEMOCRATIC STATE COMMITTEE

Attached please find a copy ofthe final audit report and related documents on the

Maine Democratic State Committee which was approved by the Commission on

September 27,2000.

Informational copies ofthe report have been received by all parties involved and

the report may be released to the public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Reports Analysis Division

FEC Library
•

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REPORT OF T~ AtrolTIHVISION

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FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

WASHINGTON, D.C.
•

TABLE OF CONTENTS

MAINE DEMOCRATIC 8TATE COMMITTEE

PAGE

Executive Summary

Final Audit Report 3

Background 3

Findings 5

Transmittal to Committee 9

Chronology 11
A99-58

FEDERAL ELECTION COMMISSION

Washington, DC 20463

MAINE DEMOCRATIC STATE COMMITTEE

EXECUTIVE SUMMARY

The Maine Democratic State Committee (the Committee) registered with the

Commission on March 19, 1984. The audit was conducted pursuant to 2 U.S.c. §438(b),

which states that the Commission may conduct audits of any political committee whose

reports fail to meet the threshold level of compliance set by the Commission.

The findings ofthe audit were presented to the Committee at an exit conference

held at the completion offieldwork on June 22, 2000 and later in the interim audit report.

The relevant parts of the Committee's response to those findings were included in this

audit report.

The following is an overview ofthe findings contained in the audit report.

Itemization ofTransfers from Affiliated Committees -2 U.S.C. §§431(13)(B),

434(b)(3)(D) and 11 CFR §102.17(c)(8)(B). The audit identified three transfers received

during the 1998 Year End reporting period from the Association ofState Democratic

Chairs (ASDC), totaling $9,000, and one transfer from the Democratic National

Committee (DNC), in the amount of$I,910, which were not itemized on Schedules A

(Itemized Receipts) as required. According to the disclosure reports filed by the ASDC

and DNC, these were transfers ofjoint fundraising proceeds, however, no memo

Schedules A's were filed for the three ASDC transfers. The Committee filed an

amended Schedule A itemizing the four transfers not previously itemized, a corrected

Detailed Summary Page ofReceipts and Disbursements, and a memo Schedule A which

noted $2,320 in total unitemized receipts from the ASDC, relative to its 1998 Year End

Report.

Debts and Obligations-2 U.S.C. §434(b)(8), 11 CFR §§ 104.3(d) and 104.11.

The audit identified nine debts owed by the Committee, totaling $16,290, which were not

reported on Schedules D (Debts and Obligations) as required. Also, the Committee did

not file a Schedule C (Loans) relative to a $17,562 bank loan balance at December 31,

1997. The Committee filed amended Schedules D which materially corrected the debt

and obligation errors and an amended Schedule C relative to the Year End 1997 report

which correctly disclosed the outstanding bank loan balance for that reporting period.

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Page 2 of 11 Approved 9/27/00
A99-58

FEDERAL ELECTION COMMISSION

WASHINGTON. DC. 20463

REPORT OF THE AUDIT DIVISION

ON THE

MAINE DEMOCRATICSTATE COMMITTEE

I. BACKGROUND

A. AUDIT AUTHORITY

This report is based on an audit ofthe Maine Democratic State Committee

(the Committee), undertaken by the Audit Division ofthe Federal Election Commission

(the Commission) in accordance with the provisions ofthe Federal Election Campaign

Act of 1971, as amended (the Act). The audit was conducted pursuant to Section 438(b)

ofTitle 2 ofthe United States Code which states, in part, that the Commission may

conduct audits and field investigations of any political committee required to file a report

under section 434 ofthis title..Prior to conducting any audit under this subsection, the

Commission shall perform an internal review ofreports filed by selected committees to

determine ifthe reports filed by a particular committee meet the threshold requirements

for substantial compliance with the Act.

B. AUDIT COVERAGE

The audit covered the period from January I, 1997 through December 31,

1998. To manage its federal financial activity, the Committee used three bank accounts.

During this period, the Committee reported a beginning cash balance of($2,419); total

receipts of $440,453; total disbursements of $437,075; and a closing cash balance of

$959 1

• Also, the Committee used three bank accounts to manage its non-federal financial

activity.

C. COMMITTEE ORGANIZATION

The Committee registered with the Commission on March 19, 1984. The

Committee maintains its headquarters in Augusta, Maine. The Treasurer during the audit

period was James S. Bowers, who continues in the position.

All figures in this report have been rounded to the nearest dollar.

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2

D. AUDIT SCOPE AND PROCEDURES

The scope of our testing of contributions received from individuals during

calendar year 1997 was limited due to the absence ofthird-party documentation, such as

check copies, donor cards, etc. This activity comprised approximately 15% oftotal

reportcd receipts.

Also, the Audit staff was unable to test the timing oftransfers from the

non-federal account to the federal account to determine if they were made no more than

10 days before or 60 days after the payments were made to the vendor, as required by 11

CFR 106.5(g)(2)(ii)(B), because ofa lack ofsufficient documentation. However, a test

of the overall transfer activity during the audit period indicated that the Committee did

not transfer funds in excess ofits non-federal share into its federal account.

The audit included testing of the following general categories:

1. The receipt of contributions or loans in excess ofthe statutory limitations;

2. the receipt of contributions from prohibited sources, such as those from

corporations or labor organizations;

3. proper disclosure of contributions from individuals, political committees

and other entities, to include the itemization of contributions when

required, as well as, the completeness and accuracy ofthe information

disclosed (see Finding ITA);

4. proper disclosure of disbursements including the itemization of

disbursements when required, as well as, the completeness and accuracy

of the information disclosed;

5. proper disclosure ofdebts and obligations (see Finding n.B.);

6. the accuracy oftotal reported receipts, disbursements and cash balances as

compared to bank records;

7. adequate recordkeeping for transactions;

8. proper disclosure ofthe allocation of costs associated with administrative

expenses and activities conducted jointly on behalf offederal and nonfederal elections and candidates; and

9. other audit procedures that were deemed necessary in the situation.

Unless specifically discussed below, no material non-compliance with

statutory or regulatory requirements was detected. It should be noted that the

Page 4 of 11 Approved 9/27/00
3

Commission may pursue further any of the matters discussed in this report in an

enforcement action.

11. AUDIT FINDINGS AND RECOMMENDATIONS

A. ITEMIZATION OF TRANSFERS FHOM AFFILIATED COMMITTEES

Section 434(b)(3)(D) ofTitie 2 ofthe United States Code states, in part,

that each report under this section shall disclose the identification of each affiliated

committee which makes a transfer to the reporting committee during the reporting period

and, where the reporting committee is a political party committee, each transfer offunds

to the reporting committee from another political committee, together with the date and

amount ofsuch transfer.

Section 431(13)(B) ofTitle 2 of the United States Code defines

"identification" to be, in the case of a person (which includes committees), the full name

and address ofsuch person.

Section 102.17 (c)(8)(B) ofTitle 11 of the Code of Federal Regulations

states, in part, that each committee participating in a joint fundraising activity shall report

its share of net proceeds received as a transfer-in from the fundraising representative and

shall also file a memo Schedule A itemizing its share ofgross receipts as contributions

from original contributors to the extent required under 11 CFR 104.3(a).

The Audit staffreviewed all transfers the Committee received in 1998

from affiliated committees and determined that the Committee did not itemize on

Schedule A (Itemized Receipts) four transfers, totaling $10,910. These items, received

during the 1998 Year End reporting period, were comprised ofthree transfers from the

Association of State Democratic Chairs (ASDC), totaling $9,000, and one transfer from

the Democratic National Committee (DNC), in the amount of$1 ,91 O. According to the

disclosure reports filed by the ASDC and DNC, these transfers were proceeds ofjoint

fundraising activities. As required by the regulations, the Committee filed a memo

Schedule A to itemize its share ofthe gross proceeds for the transfer from the DNC but

did not do so for the three transfers from the ASDC.

At the exit conference, the Audit staff discussed this issue with the

Committee and provided them with a detailed schedule ofthe errors. The Committee

agreed to file amended reports to correct the discrepancies.

In the interim audit report, the Audit staff recommended that the

Committee file an amendment to its 1998 Year End report, which included a Schedule A

and memo Schedule A, as well as a Detailed Summary Page of Receipts and

Disbursements (Page 2, FEC Form 3) correcting these discrepancies.

In response to the interim audit report, the Committee filed an amended

Schedule A itemizing the four transfers not previously itemized, along with a corrected

Page 5 of 11 Approved 9/27/00
4

Detailed Summary Page ofReceipts and Disbursements, relative to its 1998 Year End

report. In addition, the Committee filed a memo Schedule A which noted $2,320 in total

unitemized receipts from the ASDC for the period covered by the 1998 Year End report.

B. DEBTS AND OBLIGATIONS

Section 434(b)(8) ofTitle 2 of the United States Code states, in part, that

each report filed under this section shall disclose the amount and nature of outstanding

debts and obligations owed by a political committee.

Section 104.3(d) ofTitle 11 ofthe Code of Federal Regulations states, in

part, that each report filed under I I CFR 104.I shall, on Schedule CorD, as appropriate,

disclose the amount and nature of outstanding debts and obligations owed by the

reporting committee.

Sections 104.1 lea) and (b) ofTitle II ofthe Code of Federal Regulations

state, in part, that debts and obligations owed by or to a political committee which

remain outstanding shall be continuously reported until extinguished. These debts and

obligations shall be reported on separate schedules together with a statement explaining

the circumstances and conditions under which each debt and obligation was incurred or

extinguished. A debt or obligation, the amount of which is $500 or less, shall be reported

as ofthe time payment is made or not later than 60 days after such obligation is incurred,

whichever comes first. A debt or obligation which is over $500 shall be reported as of

the date on which the debt or obligation is incurred, except that any obligation incurred

for rent, salary or other regularly reoccurring administrative expense shall not be reported

as a debt before the payment due date.

The Audit staff reviewed the Committee's disbursements to determine if

debts and obligations were reported as required by the Act and identified nine debts,

totaling $16,290, which were not reported. Five ofthese items, comprising 86% ofthe

dollar total ofthe nine items omitted, were related to payroll taxes owed to the Internal

Revenue Service and the State ofMaine for 1996, 1997, and 1998. Also, the Committee

reported an outstanding December 31, 1997 bank loan balance of $17,562 on Schedule D

(Debts and Obligations), but did not file a Schedule C (Loans), as required. 2 The

Committee did not respond to the Requests for Additional Information sent by the

Commission's Reports Analysis Division regarding this matter.

At the exit conference, the Audit staffdiscussed these issues with the

Committee and provided them with a detailed schedule which included a listing ofthe

debts not disclosed as required, along with the reporting period in which the debts should

The Committee initially disclosed the $20,000 loan, received April 25, 1997, on Schedule C and

filed a Schedule C-I (Loans and Lines of Credit from Lending Institutions) as required. Schedules

C were filed as required for subsequent reports, except as noted above. The loan was repaid on

June 7, 1999.

Page 6 of 11 Approved 9/27/00
5

have been disclosed. The Committee agreed to file amended reports to correct the

discrepancies.

In the interim audit report, the Audit staffrecommended that the

Committee file amended Schedules D correcting the above noted debt and

obligation errors and an amended Schedule C for the Year End 1997 report correctly

disclosing the outstanding bank loan balance as noted above.

In response to the interim audit report, the Committee filed amended

Schedules D which materially corrected the debt and obligation errors, as well as an

amended Schedule C ofthe Year End 1997 report which correctly disclosed the

. outstanding bank loan balancefor that reporting period.

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Page 8 of 11 Approved 9/27/00
FEDERAL ELECTION COMMISSION

WASHINGTON. 0 C. 204&3

September 29,2000

Mr. James S. Bowers, Treasurer

i¥ri Maine Democratic State Committee

\,,__ P.O. Box 5258

(jj Augusta, ME 04332

fiji

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Dear Mr. Bowers:

Attached please find the Report ofthe Audit Division on the Maine Democratic

State Committee. The Commission approved the report on September 27,2000.

The Commission approved Final Audit Report will be placed on the public record

ul on October 6,2000. Should you have any questions regarding the public release ofthe

rlJ report, please contact the Commission's Press Office at (202) 694-1220. Any questions

you have related to matters covered during the audit or in the report should be directed to

Gary Hache or Marty Favin ofthe Audit Division at (202) 694-1200 or toll free at (800)

424-9530.

Sincerely,

Assistant StaffDirector

Audit Division

Attachment as stated

Page 9 of II Approved 9/27/00
Page 10 of 11 Approved 9/27/00
CHRONOLOGY

MAINE DEMOCRATIC STATE COMMITTEE

•

Audit Fieldwork

Interim Audit Report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

3/28/00--6/22/00

8/17/00

9/15/00

9/27/00

Page 11 of II Approved 9/27/00

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