Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial compliance 

with the Act. 1 The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to the matter 

discussed in this report. 

1 52 U.S.C. §3011 l(b). 

Draft Final Audit Report of the 

Audit Division on the Friends of 

Erik Paulsen 

(January 1, 2015 - December 31, 2016) 

About the Campaign (p. 2) 

Friends of Erik Paulsen is the principal campaign committee for 

Erik Paulsen, Republican candidate for the United States House 

of Representatives from the state of Minnesota, 3rd District, and 

is headquartered in Eden Prairie, Minnesota. For more 

information, see the Campaign Organization Chart, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Other 

Political Committees 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Transfers to Other Authorized 

Committees 

o Refunds of Contributions 

Total Disbursements 

$2,505,856 

2,431,879 

16,698 

$4,954,433 

$ 5,713,973 

48,102 

14,150 

$ 5,776,225 

Finding and Recommendation (p. 3) 

• Receipt of Contributions in Excess of the Limit 
Draft Final Audit Report of the 

Audit Division on the 

Friends of Erik Paulsen 

(January 1, 2015 - December 31, 2016) 
Table of Contents 

Part I. Background 

Authority for Audit 

Scope of Audit 

Part II. Overview of Campaign 

Campaign Organization 

Overview of Financial Activity 

Part III. Summary 

Finding and Recommendation 

Part IV. Finding and Recommendation 

Receipt of Contributions in Excess of the Limit 

Page 

1 

1 

2 

2 

3 

4 
Part I 

Background 

Authority for Audit 

1 

This report is based on an audit of the Friends of Erik Paulsen (FEP), undertaken by the 

Audit Division of the Federal Election Commission (the Commission) in accordance with 

the Federal Election Campaign Act of 1971, as amended (the Act). The Audit Division 

conducted the audit pursuant to 52 U.S.C. §3011 l(b), which permits the Commission to 

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

report under 52 U.S.C. §30104. Prior to conducting any audit under this subsection, the 

Commission must perform an internal review of reports filed by selected committees to 

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

for substantial compliance with the Act. 52 U.S.C. §3011 l(b). 

Scope of Audit 

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

1. the receipt of excessive contributions; 

2. the receipt of contributions from prohibited sources; 

3. the disclosure of contributions received; 

4. the disclosure of individual contributors' occupation and name of employer; 

5. the consistency between reported figures and bank records; 

6. the completeness of records; and 

7. other committee operations necessary to the review. 
2 

Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration October 15, 2007 

• Audit Coverage January 1, 2015 - December 31, 2016 

Headquarters Eden Prairie, Minnesota 

Bank Information 

• Bank Depositories Three 

• Bank Accounts 2 checking; 1 savings; 3 investment 

Treasurer 

• Treasurer When Audit Was Conducted David Asp (12/28/2016 - Present) 

• Treasurer During Period Covered by Audit Reid LeBeau (10/15/2007 -12/27/2016) 

David Asp (12/28/2016-Present) 

Mana2ement Information 

• Attended FEC Campaign Finance Seminar Yes 

• Who Handled Accounting and Paid Staff 

Recordkeeping Tasks 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand @ January 1, 2015 $1,194,961 

Receipts 

0 Contributions from Individuals 2,505,856 

0 Contributions from Other Political 2,431,879 

Committees 

0 Other Receipts 16,698 

Total Receipts $4,954,433 

Disbursements 

0 Operating Expenditures 5,713,973 

0 Transfers to Other Authorized Committees 48,102 

0 Refunds of Contributions 14,150 

Total Disbursements $5,776,225 

Cash-on-hand @ December 31, 2016 $373,169 
Part Ill 

Summary 

Finding and Recommendation 

Receipt of Contributions in Excess of the Limit 

3 

During audit fieldwork, the Audit staff reviewed contributions from individuals to 

determine if any exceeded the contribution limit. This review indicated that FEP 

received apparent excessive contributions totaling $185,386. These errors occurred as a 

result of FEP not resolving the excessive portions of contributions by forwarding 

presumptive redesignation or reattribution letters to its contributors or issuing a refund of 

the excessive portion of contributions in a timely manner. In response to the exit 

conference, FEP untimely resolved excessive contributions from individuals totaling 

$50,600. In response to the Interim Audit Report recommendation, FEP stated that it 

believed that presumptive letters were sent timely to its contributors and, at most, the 

Audit staff should find that FEP had a "technical record-retention issue." FEP also 

presented 224 presumptive letters dated January 4, 2018, to untimely resolve the 

excessive contribution issue. (For more detail, seep. 4.) 
4 

Part IV 

Finding and Recommendation 

I Receipt of Contributions in Excess of the Limit 

Summary 

During audit fieldwork, the Audit staff reviewed contributions from individuals to 

determine if any exceeded the contribution limit. This review indicated that FEP 

received apparent excessive contributions totaling $185,386. These errors occurred as a 

result of FEP not resolving the excessive portions of contributions by forwarding 

presumptive redesignation or reattribution letters to its contributors or issuing a refund of 

the excessive portion of contributions in a timely manner. In response to the exit 

conference, FEP untimely resolved excessive contributions from individuals totaling 

$50,600. In response to the Interim Audit Report recommendation, FEP stated that it 

believed that presumptive letters were sent timely to its contributors and, at most, the 

Audit staff should find that FEP had a "technical record-retention issue." FEP also 

presented 224 presumptive letters dated January 4, 2018, to untimely resolve the 

excessive contribution issue. 

Legal Standard 

A. Authorized Committee Limits. An authorized committee may not receive more 

than a total of $2,700 per election from any one person or $5,000 per election from a 

multicandidate political committee. 52 U.S.C. §§30116; 11 CFR §§110.l(a) and (b) 

and 110.9. 

B. Handling Contributions That Appear Excessive. If a committee receives a 

contribution that appears to be excessive, the committee must either: 

• Return the questionable check to the donor; or 

• Deposit the check into its federal account and: 

• Keep enough money in the account to cover all potential refunds or establish a 

separate account in a campaign depository for such contributions; 

• Keep a written record explaining why the contribution may be illegal; 

• Include this explanation on Schedule A if the contribution has to be itemized 

before its legality is established; 

• Seek a reattribution or a redesignation of the excessive portion, following the 

instructions provided in the Commission regulations (see below for 

explanations of reattribution and redesignation); and 

• If the committee does not receive a proper reattribution or redesignation 

within 60 days after receiving the excessive contribution, refund the excessive 

portion to the donor. 11 CFR §§I03.3(b)(3), (4) and (5) and 

110.1 (k)(3)(ii)(B). 

C. Joint Contributions. Any contribution made by more than one person, except for a 

contribution made by a partnership, must include the signature of each contributor on 
the check, money order, or other negotiable instrument or in a separate writing. A 

joint contribution is attributed equally to each donor unless a statement indicates that 

the funds should be divided differently. 11 CFR §110.l(k)(l) and (2). 

5 

D. Reattribution of Excessive Contributions. The Commission regulations permit 

committees to ask donors of excessive contributions ( or contributions that exceed the 

committee's net debts outstanding) whether they had intended their contribution to be 

a joint contribution from more than one person and whether they would like to 

reattribute the excess amount to the other contributor. The committee must inform 

the contributor that: 

• The reattribution must be signed by both contributors; 

• The reattribution must be received by the committee within 60 days after the 

committee received the original contribution; and 

• The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.l(k)(3). 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper reattribution or refund the excessive portion to the donor. 11 CFR 

§§103.3(b)(3) and 110.l(k)(3)(ii)(B). Further, a political committee must retain 

written records concerning the reattribution in order for it to be effective. 11 CFR 

§110.1(1)(5). 

Notwithstanding the above, any excessive contribution that was made on a written 

instrument that is imprinted with the names of more than one individual may be 

attributed among the individuals listed unless instructed otherwise by the 

contributor(s). The committee must inform each contributor: 

• How the contribution was attributed; and 

• The contributor may instead request a refund of the excessive amount. 11 CFR 

§ 110.l (k)(3 )(ii)(B). 

E. Redesignation of Excessive Contributions. When an authorized candidate 

committee receives an excessive contribution ( or a contribution that exceeds the 

committee's net debts outstanding), the committee may ask the contributor to 

redesignate the excess portion of the contribution for use in another election. The 

committee must inform the contributor that: 

• The redesignation must be signed by the contributor; 

• The redesignation must be received by the committee within 60 days after the 

committee received the original contribution; and 

• The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.l(b)(5). 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper redesignation or refund the excessive portion to the donor. 11 CFR 

§§103.3(b)(3) and 110.l(b)(5)(ii)(A). Further, a political committee must retain 

written records concerning the redesignation in order for it to be effective. 11 CFR 

§ 110.1 (1)(5). 
When an individual makes an excessive contribution to a candidate's authorized 

committee, the campaign may presumptively redesignate the excessive portion to the 

general election if the contribution: 

• Is made before that candidate's primary election; 

• Is not designated in writing for a particular election; 

• Would be excessive if treated as a primary election contribution; and 

• As redesignated, does not cause the contributor to exceed any other contribution 

limit. 11 CFR §110.l(b)(S)(ii)(B)(l)-(4). 

The committee is required to notify the contributor of the redesignation within 60 

days of the treasurer's receipt of the contribution, and must offer the contributor the 

option to receive a refund instead. 11 CFR §l 10.l(b)(5)(ii)(B)(5) and (6). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff utilized sample testing and a review of other 

contributions not included in the sample population to identify apparent excessive 

contributions from individuals. 

Excessive Contributions-Testing Method 

Sample Projection Amount2 $153,586 

High Dollar Contribution Error Amount $31,800 

Total Amount of Excessive Contributions $185,386 

Reasons for Excessive Contributions 

Contributions not resolved via presumptive letter $182,686 or refund 

Contributions resolved-Untimely $2,7003 

Total Amount of Excessive Contributions $185,386 

2 The sample error amount ($153,586) was projected using a Monetary Unit Sample with a 95 percent 

confidence level. The sample estimate could be as low as $88,215 or as high as $247,564. 

3 The Audit staff was able to trace this refund to FEP's disbursement database. However, FEP has not 

provided evidence that this refund check has actually been negotiated. 

6 
B. Additional Information 

FEP did not maintain a separate account for questionable contributions. However, based 

on its cash-on-hand balance at the end of the cycle ($373,169), it appears that FEP 

maintained sufficient funds to make refunds of the apparent excessive contributions. 

C. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with the FEP Treasurer (Treasurer) at the exit 

conference and provided schedules of the apparent excessive contributions along with 

descriptions of actions necessary to resolve each. 

In response to the exit conference, the Treasurer submitted presumptive reattribution and 

redesignation letters that were sent to all the contributors identified by the Audit staff.4 

Many timely presumptive letters were also submitted in response to the exit conference. 

The excessive contributions resolved by these letters are not included in the amounts 

presented in this report. The Treasurer stated he would review contribution records to 

identify other contributions requiring presumptive letters along with descriptions of 

actions necessary to resolve each. 

The Treasurer also expressed FEP's commitment to resolving the issue of apparent 

excessive contributions and stated that during the campaign "contributors received 

solicitations with language informing them that their contributions could be reattributed" 

or "redesignated to comply with the federal limits." The Treasurer provided a signed 

letter from a former committee employee stating that she was the person responsible for 

"sending reallocation and redesignation letters on behalf of the Committee" during the 

cycle. The former employee stated that, consistent with her practice at the time, she sent 

presumptive letters to all individuals she determined to have given an excessive 

contribution, including those identified by the Audit staff. She believes that the reason 

copies of these letters are not available is because they were among letters she 

"inadvertently saved over when drafting new letters to be sent to other contributors." 

In response to the exit conference, FEP submitted the following documentation: 

Corrective Action Taken by Committee 

Presumptive Letters Sent-Untimely $50,600 

Amount of Excessive Contributions -Not Resolved $134,786 

The Interim Audit Report recommended that FEP provide evidence that demonstrated 

that the contributions totaling $134,786 were not excessive or that they were timely 

resolved. Absent such evidence, FEP should have resolved these excessive contributions 

4 FEP sent untimely presumptive letters to individuals who donated contributions in excess of the limit. 

These individuals were identified by the Audit staff in the high dollar review ($31,800) and the sample 

review ($18,800). 

7 
by (1) sending notices for those contributions that were eligible for presumptive 

redesignation/reattribution letters, informing contributors about how the excessive 

portions of their contributions were resolved and offering refunds, (2) refunding the 

excessive portion of each contribution that was not eligible for a presumptive 

redesignation/reattribution letter or making a payment to a governmental entity or to a 

qualified charitable organization and providing documentation, or (3) disclosing the 

contributions requiring refunds on Schedule D (Debts and Obligations) if funds were not 

available to make the necessary refunds. 

D. Committee Response to Interim Audit Report 

8 

In response to the Interim Audit Report recommendation, FEP disagreed with the Audit 

staffs conclusion that it received excessive contributions because, according to FEP, the 

projections from the statistical sampling were improper. FEP stated that " ... the sampled 

items relied on by the Audit Division were not excessive contributions ( or erroneous in 

any other way)." Further, FEP stated that it" ... provided the auditors with evidence 

demonstrating that none of the sample items involved excessive contributions - and the 

auditors agreed that all concerns regarding the sample items have been resolved." By 

providing the letter from its former employee, FEP believes it has demonstrated that 

every donor requiring a presumptive letter for the 2016 cycle has received a letter. As a 

result, FEP contended that the Audit staff should report no finding, or revise its finding to 

match the evidence submitted by FEP which demonstrates that it did not receive 

excessive contributions. Finally, FEP stated that the Audit staff's finding suggested a 

"technical record-retention issue" due to its maintenance ofredesignation/reattribution 

letters. 

The Audit staff notes that all errors identified in the sample represented excessive 

contributions. FEP did not provide presumptive letters sent to the contributors during the 

2016 cycle. However, FEP sent follow-up letters to its contributors during audit 

fieldwork and untimely resolved the identified sample errors. 

As for the remaining excessive errors in the population of contributions, the Audit staff 

acknowledged that FEP submitted a letter from a former employee attesting that 

presumptive letters were sent timely and that the electronic copies were deleted while 

saving subsequent presumptive letters. Although the letter from the former employee 

was helpful in that it provided information about FEP's procedures when it received the 

excessive contributions, it did not provide sufficient information or proof which would 

enable the Audit staff to independently verify that the presumptive letters were indeed 

timely sent to FEP's contributors. Lastly, FEP's statement that its situation resembled a 

"technical record-retention issue" is inaccurate as the regulations clearly state that a 

political committee must retain the written records concerning redesignation or 

reattribution for either to be effective. 

Notwithstanding the letter from the former employee, FEP also reviewed its contributor 

records and presented 2245 additional presumptive reattribution/redesignation letters for 

5 This amount does not include 15 duplicate presumptive letters sent to contributors for contributions 

totaling $36,200. 
9 

contributions totaling $391,950 which FEP sent to its contributors. These letters were 

dated January 4, 2018. The Audit staff reviewed the letters and concluded that FEP 

resolved all excessive contributions which could have been remedied with a presumptive 

reattribution and/or redesignation letter, albeit untimely.