FEDERAL ELECTION COMMISSION

WASHINGTON,D.C.20463

November 10, 2021

MEMORANDUM

To: The Commission

Through: Alec Palmer

Staff Director

From: Patricia C. Orrock

Chief Compliance Officer

Dayna C. Brown

Assistant Staff Director

Audit Division

Rickida Morcomb

Audit Manager

By: Brenda Wheeler

Lead Auditor

Subject: Audit Division Recommendation Memorandum on the Republican Party of

Minnesota - Federal (A19-09)

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit Reports),

the Audit staff presented the Draft Final Audit Report (DFAR) to the Republican Party of

Minnesota - Federal (RPOMF) on October 14, 2021 (see attachment). RPOMF did not

request an audit hearing or provide any additional comments in response to the DFAR.

This memorandum provides the Audit staff’s recommendation for each finding outlined in

the DFAR.
2

Finding 1. Recordkeeping for Employees

The Audit staff recommends that the Commission find that RPOMF failed to

maintain monthly payroll logs or equivalent records totaling $297,945 to document

the percentage of time each employee spent in connection with a federal election

for calendar years 2017 and 2018.

Finding 2. Recordkeeping for Communications

The Audit staff recommends that the Commission find that RPOMF failed to

maintain records in sufficient detail to verify the proper reporting for

communication disbursements totaling $712,662.

Finding 3. Reporting of Apparent Independent Expenditures

A. Reporting of Apparent Independent Expenditures

The Audit staff recommends that the Commission find that RPOMF failed

to properly disclose apparent independent expenditures totaling $710,834

on Schedule E (Independent Expenditures).

B. Volunteer Materials Exemption

The Audit staff recommends that the Commission find that RPOMF failed

to provide documentation to support $101,590 was volunteer exempt

activity and as a result, should be disclosed as independent expenditures on

Schedule E.

C. Failure to File 24/48-Hour Reports for Apparent Independent

Expenditures

The Audit staff recommends that the Commission find that RPOMF failed

to file 24/48-hour reports for apparent independent expenditures totaling

$704,265 and failed to file 24/48-hour reports for disbursements without

volunteer exempt documentation totaling $61,565.

Finding 4. Disclosure of Transfers and Allocation Ratios

A. Disclosure of Transfers

The Audit staff recommends that the Commission find that RPOMF failed

to correctly disclose transfers to affiliated/other party committees totaling

$64,303.

B. Disclosure of Allocation Ratios

The Audit staff recommends that the Commission find that RPOMF failed

to report allocation ratios on Schedule H2 (Allocation Ratios) for

associated fundraising expenses and as a result, applied the incorrect

allocation ratio for disbursements totaling $73,129.

Finding 5. Excessive Coordinated Party Expenditures

The Audit staff recommends that the Commission find that RPOMF made apparent

excessive coordinated expenditures for three candidates totaling $255,421.

Finding 6. Disclosure of Loans and Loan Repayments

The Audit staff recommends that the Commission find that RPOMF failed to

properly disclose the purpose and the terms of loans totaling $525,742 on Schedule
3

B, Line 21(b) (Federal Operating Expenditures), Schedule B, Line 26 (Loan

Repayments), Schedule C-1 (Loans and Line of Credit from Lending Institutions)

and Schedule C (Loans).

The Office of General Counsel has reviewed this memorandum and concurs with the

recommendations.

If this memorandum is approved, the Proposed Final Audit Report will be prepared and

circulated within 30 days of the Commission’s approval.

If this Audit Division Recommendation Memorandum is not approved on a tally vote,

Directive No. 70 states that the matter will be placed on the next regularly scheduled

open session agenda.

Documents related to this audit report can be viewed in the Voting Ballot Matters folder.

Should you have any questions, please contact Brenda Wheeler or Rickida Morcomb at

(202) 694-1200.

Attachment:

- Draft Final Audit Report of the Audit Division on the Republican Party of

Minnesota - Federal

cc: Office of General Counsel
Draft Final Audit Report of the

Audit Division on the Republican

Party of Minnesota - Federal

(January 1, 2017 - December 31, 2018)

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 any of

the matters discussed in

this report.

About the Committee (p. 2)

The Republican Party of Minnesota – Federal is a state party

committee headquartered in Minneapolis, Minnesota. For more

information, see the chart on the Committee Organization, p.2.

Financial Activity (p. 2)

• Receipts

o Contributions from Individuals

o Contributions from Political

Party and Other Political

Committees

o Transfers from Affiliates

o Loans Received

o Other Federal Receipts

o Transfers from Non-Federal

Account

Total Receipts

$2,668,979

590,309

568,580

383,040

712,648

513,974

$5,437,530

• Disbursements

o Operating Expenditures

o Allocated Federal/Non-Federal

Expenditures

o Loan Repayments

o Refund of Contributions

o Federal Election Activity

Total Disbursements

$2,060,106

1,579,656

503,221

5,385

1,298,837

$5,447,205

Findings and Recommendations (p. 3)

• Recordkeeping for Employees (Finding 1)

• Recordkeeping for Communications (Finding 2)

• Reporting of Apparent Independent Expenditures (Finding 3)

• Disclosure of Transfers and Allocation Ratios (Finding 4)

• Excessive Coordinated Party Expenditures (Finding 5)

• Disclosure of Loans and Loan Repayments (Finding 6)

1 52 U.S.C. §30111(b).
Draft Final Audit Report of the

Audit Division on the Republican

Party of Minnesota - Federal

(January 1, 2017 - December 31, 2018)
Table of Contents

Part I. Background

Page

Authority for Audit 1

Scope of Audit 1

Commission Guidance 1

Part II. Overview of Committee

Committee Organization 2

Overview of Financial Activity 2

Part III. Summaries

Findings and Recommendations 3

Part IV. Findings and Recommendations

Finding 1. Recordkeeping for Employees 6

Finding 2. Recordkeeping for Communications 7

Finding 3. Reporting of Apparent Independent Expenditures 10

Finding 4. Disclosure of Transfers and Allocation Ratios 17

Finding 5. Excessive Coordinated Party Expenditures 20

Finding 6. Disclosure of Loans and Loan Repayments 25
1

Part I

Background

Authority for Audit

This report is based on an audit of the Republican Party of Minnesota – Federal (RPOMF),

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. §30111(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. §30111(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 loans;

2. the disclosure of individual contributors’ occupation and name of employer;

3. the disclosure of disbursements, debts and obligations;

4. the disclosure of expenses allocated between federal and non-federal accounts;

5. the consistency between reported figures and bank records;

6. the completeness of records;

7. the disclosure of independent expenditures; and

8. other committee operations necessary to the review.

Commission Guidance

Request for Early Commission Consideration of a Legal Question

Pursuant to the Commission’s “Policy Statement Establishing a Program for Requesting

Consideration of Legal Questions by the Commission,” several state party committees

unaffiliated with RPOMF requested early consideration of a legal question raised during audits

covering the 2010 election cycle. Specifically, the Commission addressed whether monthly time

logs under 11 CFR §106.7(d)(1) were required for employees paid with 100 percent federal

funds.

The Commission concluded, by a vote of 5-1, that 11 CFR §106.7(d)(1) does require committees

to keep a monthly log for employees paid exclusively with federal funds. Exercising its

prosecutorial discretion, however, the Commission decided it will not pursue recordkeeping

violations for the failure to keep time logs or to provide affidavits to account for employee

salaries paid with 100 percent federal funds and reported as such. The Audit staff informed

RPOMF representatives of the payroll requirement and the Commission’s decision not to pursue

recordkeeping violations for failure to keep payroll logs for salaries paid and correctly reported

as 100 percent federal. This audit report does not include any findings or recommendations with

respect to RPOMF employees paid with 100 percent federal funds and reported as such.
2

Part II

Overview of Committee

Committee Organization

Important Dates

• Date of Registration August 8, 1975

• Audit Coverage January 1, 2017 – December 31, 2018

Headquarters Minneapolis, MN

Bank Information

• Bank Depositories One

• Bank Accounts One Federal; Two Non-Federal

Treasurer

• Treasurer When Audit Was Conducted Mark Blaxill (02/12/2021 – Present)

Bron Scherer (01/20/2012 – 02/11/2021)

• Treasurer During Period Covered by Audit Bron Scherer

Management Information

• Attended FEC Campaign Finance Seminar Yes

• Who Handled Accounting and

Recordkeeping Tasks

Paid Staff

Overview of Financial Activity

(Audited Amounts)

Cash on hand @ January 1, 2017 $ 12,718

Receipts

o Contributions from Individuals 2,668,979

o Contributions from Political Party and Other

Political Committees 590,309

o Transfers from Affiliates 568,580

o Loans Received 383,040

o Other Federal Receipts 712,648

o Transfers from Non-federal Account 513,974

Total Receipts $5,437,530

Disbursements

o Operating Expenditures 2,060,106

o Allocated Federal/Non-federal Expenditures 1,579,656

o Loan Repayments 503,221

o Refund of Contributions 5,385

o Federal Election Activity 1,298,837

Total Disbursements $5,447,205

Cash on hand @ December 31, 2018 $ 3,043
3

Part III

Summaries

Findings and Recommendations

Finding 1. Recordkeeping for Employees

During audit fieldwork, the Audit staff determined that RPOMF did not maintain any

monthly payroll logs, as required, to document the percentage of time each employee

spent in connection with a federal election. For 2017 and 2018, the Audit staff identified

payments to RPOMF employees totaling $297,945 for which RPOMF did not maintain

monthly payroll logs. This consisted of payroll which was allocated with federal and

non-federal funds and payroll paid exclusively with non-federal funds. In response to the

Interim Audit Report recommendation, RPOMF stated it “is in the process of

implementing a payroll log which will document for each payroll period (currently biweekly) the major tasks/projects (in hours) performed by RP[O]M[F] employees

spending time on both federal and/or non-federal (Minnesota Campaign Finance and

Public Disclosure Board) activities.” The Audit staff acknowledges RPOMF is in the

process of implementing recommendations outlined within the Interim Audit Report for

allocated federal and non-federal payroll.

(For more detail, see p. 6.)

Finding 2. Recordkeeping for Communications

During audit fieldwork, the Audit staff reviewed disbursements for communications to

verify the accuracy of the information and proper classification of transactions disclosed

on RPOMF’s reports. RPOMF reported 76 disbursements totaling $706,981, on

Schedule B (Itemized Disbursements), Line 21(b) (Other Federal Operating

Expenditures); Schedule B, Line 30(b) (Federal Election Activity Paid Entirely with

Federal Funds) and Schedule H4 (Disbursements for Allocated Federal /Non-Federal

Activity) with purposes including, “direct mail,” “direct mail advertising” or “party direct

mail.” Another four disbursements totaling $5,681 were from the Non-Federal account.

Documentation provided by RPOMF was insufficient to make a determination pertaining

to the purpose for these disbursements and verification as operating expenditures, federal

election activity, non-federal activity or allocated federal/non-federal activity. In

response to the Interim Audit Report recommendation, RPOMF stated it relied on thirdparty entities for production and dissemination of media, web advertisements, etc., and

relied on affiliated committees for approval and production of media. RPOMF did not

provide any new documentation. Absent additional documentation, the Audit staff

concludes RPOMF did not maintain, in sufficient detail, documentation that allows for

verification of proper reporting for communication disbursements totaling $712,662.

(For more detail, see p. 7.)
4

Finding 3. Reporting of Apparent Independent Expenditures

During audit fieldwork, the Audit staff reviewed expenditures totaling $710,834, that

RPOMF disclosed on Schedule B (Itemized Disbursements), Line 21(b) (Other Federal

Operating Expenditures); Schedule B, Line 30(b) (Federal Election Activity Paid Entirely

with Federal Funds) and Schedule H4 (Disbursements for Allocated Federal /NonFederal Activity), that appear to be independent expenditures that contain express

advocacy and should have been disclosed on Schedule E, Line 24 (Itemized Independent

Expenditures).

For the $710,834 disclosed as operating expenditures, federal election activity, or

allocated federal/non-federal activity which appear to be independent expenditures,

RPOMF did not file 24/48-hour reports totaling $704,265.

Additionally, the Audit staff identified five disbursements totaling $101,665 that RPOMF

invoices indicate were “volunteer driven,” which were disclosed as federal election

activity on Schedule B, Line 30(b) and operating expenditures on Schedule B, Line 21(b)

and appear to be independent expenditures requiring disclosure on Schedule E.

Furthermore, if the disbursements are determined to be independent expenditures, then

RPOMF may have been required to file 24/48-hour reports for $61,565 of the $101,665

expenditures, depending on the date of public dissemination.

In response to the Interim Audit Report recommendation, RPOMF stated the

expenditures referenced in this finding were all general party building fundraising for the

general fund which referenced multiple candidates and did not advocate or oppose one

single candidate. RPOMF did not provide any new documents, amend its disclosure

reports to report the transactions on Schedule E or address the potential requirement to

file 24/48-hour reports. Therefore, the Audit staff maintains RPOMF made apparent

independent expenditures totaling $710,834 and did not correct the public record by

amending the disclosure reports to include the transactions on Schedule E.

Regarding the five “volunteer driven” disbursements, RPOMF stated that the items were

either general party fundraising, voter list purchase, a candidate reimbursement, a noncandidate printed fan or paid GOTV calls. There was no response regarding the

requirement of filing of 24/48- hour reports. Based on RPOMF’s response, four of the

five disbursements, totaling $101,590, appear to be independent expenditures requiring

reporting on Schedule E and may have required the filing of 24/48-hour reports.

(For more detail, see p. 10.)

Finding 4. Disclosure of Transfers and Allocation Ratios

During audit fieldwork, the Audit staff identified two transfers to affiliated/other party

committees totaling $64,303 reported on Schedule H4 (Disbursements for Allocated

Federal/Non-Federal Activity). Party committee transfers do not qualify as allocable

activity for disclosure on Schedule H4 but should instead be disclosed on Schedule B

(Itemized Disbursements), Line 22 (Transfers to Affiliated/Other Party Committees). In

addition, the Audit staff identified two fundraisers that were not reported on Schedule H2

(Allocation Ratios), and RPOMF incorrectly applied the allocation ratio for
5

Administrative expenses on Schedule H4 for 30 disbursements related to these

fundraisers totaling $73,129. In response to the Interim Audit Report recommendation,

RPOMF filed Forms 99 (Miscellaneous Electronic Submission) correcting the public

record regarding the party committee transfers and the two fundraisers.

(For more detail, see p. 17.)

Finding 5. Excessive Coordinated Party Expenditures

During audit fieldwork, the Audit staff identified apparent coordinated expenditures for

three House candidates that exceeded the 2018 coordinated party expenditure limit by a

total of $255,421. In response to the Interim Audit Report recommendation, RPOMF did

not provide any new documentation. RPOMF stated that, “The media pieces referenced

were non-allocable volunteer driven mail. It is the RP[O]M[F]’s understanding if there is

a volunteer component, the expenditure does not count as a contribution to the

candidate.” Absent documentation to support the volunteer materials exemption, the

Audit staff maintains RPOMF made apparent excessive coordinated expenditures totaling

$255,421.

(For more detail, see p. 20.)

Finding 6. Disclosure of Loans and Loan Repayments

During audit fieldwork, the Audit staff determined that RPOMF failed to properly

disclose 50 transactions totaling $525,742. RPOMF did not properly disclose the correct

purpose for interest payments and loan repayments on Schedule B (Itemized

Disbursements), Line 21(b) (Federal Operating Expenditures) and Schedule B, Line 26

(Loan Repayments). RPOMF also disclosed the incorrect loan terms on Schedule C-1

(Loans and Line of Credit from Lending Institutions) and Schedule C (Loans). In

response to the Interim Audit Report recommendation, RPOMF filed Forms 99

(Miscellaneous Electronic Submission) for each affected report. The Forms 99 correctly

disclosed the loan terms that appear on Schedule C-1, the cumulative payment and the

outstanding amount at the close of the period on Schedule C. However, none of the

Forms 99 addressed the incorrect purposes disclosed for loan repayments and loan

interest payments on Schedule B, Line 26 and Line 21(b), respectively. As such, the

Audit staff concludes RPOMF did not materially correct the public record.

(For more detail, see p. 25.)
6

Finding 1. Recordkeeping for Employees

Part IV

Findings and Recommendations

Summary

During audit fieldwork, the Audit staff determined that RPOMF did not maintain any

monthly payroll logs, as required, to document the percentage of time each employee

spent in connection with a federal election. For 2017 and 2018, the Audit staff identified

payments to RPOMF employees totaling $297,945 for which RPOMF did not maintain

monthly payroll logs. This consisted of payroll which was allocated with federal and

non-federal funds and payroll paid exclusively with non-federal funds. In response to the

Interim Audit Report recommendation, RPOMF stated it “is in the process of

implementing a payroll log which will document for each payroll period (currently biweekly) the major tasks/projects (in hours) performed by RP[O]M[F] employees

spending time on both federal and/or non-federal (Minnesota Campaign Finance and

Public Disclosure Board) activities.” The Audit staff acknowledges RPOMF is in the

process of implementing recommendations outlined within the Interim Audit Report for

allocated federal and non-federal payroll.

Legal Standard

A. Maintenance of Monthly Logs. Party committees must keep a monthly log of the

percentage of time each employee spends in connection with a federal election.

Allocations of salaries, wages, and fringe benefits are to be undertaken as follows:

• Employees who spend 25 percent or less of their compensated time in a given

month on federal election activities must be paid either from the federal account

or be allocated as administrative costs;

• Employees who spend more than 25 percent of their compensated time in a given

month on federal election activities must be paid only from a federal account; and

• Employees who spend none of their compensated time in a given month on

federal election activities may be paid entirely with funds that comply with state

law. 11 CFR §106.7(d)(1).

B. Formal Requirements Regarding Reports and Statements. Each Political

Committee shall maintain records with respect to the matters required to be reported

which shall provide in sufficient detail the necessary information and data from which

the filed reports may be verified, explained, clarified, and checked for accuracy and

completeness. 11 CFR §104.14(b)(1).

Facts and Analysis

A. Facts

During audit fieldwork, the Audit staff reviewed disbursements for payroll. RPOMF did

not maintain any monthly payroll logs or equivalent records to document the percentage

of time each employee spent in connection with a federal election. These logs are
7

Finding 2. Recordkeeping for Communications

required to document the proper allocation of federal and non-federal funds used to pay

employee salaries and wages. For 2017 and 2018, RPOMF did not maintain monthly

logs for $297,945 in payroll.2 This amount included:

• Payroll totaling $290,060 for employees reported on Schedule H4 (Disbursements

for Allocated Federal and Non-Federal Activity) and paid with an allocation of

federal and non-federal funds during the same month; and

• Payroll totaling $7,885 for employees paid exclusively with non-federal funds in a

given month.

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with RPOMF representatives during the exit

conference and provided a schedule of the payroll transactions. RPOMF representatives

responded that RPOMF will implement a payroll log which will document for each

payroll period the major tasks/projects performed by RPOMF employees spending time

on both federal and/or non-federal activities.

The Interim Audit Report recommended that absent the provision of monthly payroll

logs, RPOMF implement a plan to maintain such monthly payroll logs in the future.

C. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, RPOMF stated that it “is in the

process of implementing a payroll log which will document for each payroll period

(currently bi-weekly) the major tasks/projects (in hours) performed by RP[O]M[F]

employees spending time on both federal and/or non-federal (Minnesota Campaign

Finance and Public Disclosure Board) activities.” RPOMF said the job descriptions for

the payroll in question “clearly state that such are involved principally in non-federal

activities” and were reported as non-federal activities. The Audit staff concludes that

RPOMF did not provide monthly payroll logs for the $297,945 in payroll, however,

RPOMF complied with the Interim Audit Report recommendation by implementing a

plan to maintain monthly payroll logs in the future.

The Audit staff maintains that RPOMF was required to maintain payroll logs for its

employees paid with exclusively non-federal funds. Absent the provision of monthly

logs specific to employees paid with exclusively non-federal funds, RPOMF may provide

evidence that records consistent with 11 CFR §104.14(b)(1) were maintained to

document that certain employees were involved in exclusively non-federal activities.

Summary

During audit fieldwork, the Audit staff reviewed disbursements for communications to

verify the accuracy of the information and proper classification of transactions disclosed

2 This total does not include payroll for employees paid with 100 percent federal funds and reported as

such (see Part I, Background, Commission Guidance, and Request for Early Commission Consideration

of a Legal Question, Page 1). Payroll amounts are stated net of taxes and fringe benefits.
8

on RPOMF’s reports. RPOMF reported 76 disbursements totaling $706,981, on

Schedule B (Itemized Disbursements), Line 21(b) (Other Federal Operating

Expenditures); Schedule B, Line 30(b) (Federal Election Activity Paid Entirely with

Federal Funds) and Schedule H4 (Disbursements for Allocated Federal /Nonfederal

Activity) with purposes including, “direct mail,” “direct mail advertising” or “party direct

mail.” Another four disbursements totaling $5,681 were from the non-federal account.

Documentation provided by RPOMF was insufficient to make a determination pertaining

to the purpose for these disbursements and verification as operating expenditures, federal

election activity, non-federal activity or allocated federal/non-federal activity. In

response to the Interim Audit Report recommendation, RPOMF stated it relied on thirdparty entities for production and dissemination of media, web advertisements, etc., and

relied on affiliated committees for approval and production of media. RPOMF did not

provide any new documentation. Absent additional documentation, the Audit staff

concludes RPOMF did not maintain, in sufficient detail, documentation that allows for

verification of proper reporting for communication disbursements totaling $712,662.

Legal Standard

A. Formal Requirements Regarding Reports and Statements. Each Political

Committee shall maintain records with respect to the matters required to be reported

which shall provide in sufficient detail the necessary information and data from which

the filed reports may be verified, explained, clarified, and checked for accuracy and

completeness. 11 CFR §104.14(b)(1).

B. Preserving Records and Copies of Reports. The treasurer of a political committee

must preserve all records and copies of reports for 3 years after the report is filed. 52

U.S.C. §30102(d).

Facts and Analysis

A. Facts

During audit fieldwork, the Audit staff reviewed disbursements for communications to

verify the accuracy of the information and proper classification of transactions disclosed

on the reports. RPOMF made 76 disbursements totaling $706,981 for which

documentation was insufficient to make a determination pertaining to whether these

disbursements were correctly reported on Schedule B, Line 21(b); Schedule B, Line 30

(b) and Schedule H4. Another four disbursements totaling $5,681 disclosed from the

non-federal account had insufficient documentation to make a determination whether the

disbursements were for non-federal activity, for a total of $712,662.3

The Audit staff’s analysis resulted in the following:

i. Disbursements - No Invoices or Copies of Communications Provided

($40,240)

3 $712,662 = $706,981 Federal Disbursements + $5,681 Non-Federal Disbursements
9

Disbursements totaling $40,240 were paid to three vendors and were disclosed on

Schedule B, Lines 21(b) and 30(b) with purposes such as “direct mail,” “direct

mail advertising” and “party direct mail,” but no invoices or associated

communications were provided. Without sufficient detail, the Audit staff was

unable to verify RPOMF’s reporting of these amounts as operating expenditures

or federal election activity. The Audit staff requested copies of the invoices and

the associated direct mail pieces for each of the disbursements. To date, these

invoices or other information to associate the payments to a particular

communication were not provided.

ii. Disbursements - Invoices Provided – No Copies of Communications

Provided ($672,422)

Disbursements totaling $666,741 were paid to 10 vendors and were disclosed on

Schedule B, Lines 21(b) and 30(b) and Schedule H4 with purposes such as “direct

mail,” “direct mail advertising” and “party direct mail.” In addition,

disbursements totaling $5,681 were paid from the non-federal account with

wording on the invoices such as “phone bank,” “county fair endorsed candidates’

graphic” and “plastic signs.” For these disbursements, RPOMF provided invoices

but did not provide information about the related communications. Without

sufficient detail, the Audit staff was unable to verify RPOMF’s reporting of these

amounts as operating expenditures, federal election activity, non-federal activity

or allocated federal/non-federal activity. The Audit staff requested copies of the

associated media pieces, mailers and scripts for each of the disbursements. To

date, these communications were not provided.

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with RPOMF representatives during the exit

conference and provided a schedule of the disbursements for which further records were

necessary to verify the accuracy of RPOMF’s reporting. In response to the exit

conference, RPOMF representatives stated RPOMF relied on affiliated committees for

the approval and production of some of the communication pieces and relied on thirdparty entities for the production and dissemination of communication pieces. However,

the third-party entities were not able to provide all of the requested missing media

documentation. RPOMF provided some additional communication pieces, which were

not a part of the finding amount.

The Interim Audit Report recommended that RPOMF provide, in sufficient detail,

documentation that allowed for verification of proper reporting for the communication

disbursements totaling $712,662.

C. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, RPOMF reiterated its previous

response that it relied on affiliated committees for the approval and production of some of

the communication pieces and relied on third- party entities for the production and

dissemination of communication pieces. RPOMF stated the third-party entities were not

able to provide all of the requested missing media documentation. RPOMF further stated
10

Finding 3. Reporting of Apparent Independent

Expenditures

that, “it located many of the missing media pieces” and submitted them to the Audit staff

previously. The Audit staff acknowledges the prior submissions and notes that they are

not included in this finding. In response to the Interim Audit Report, RPOMF did not

provide any new documentation. As such, the Audit staff concludes RPOMF did not

maintain, in sufficient detail, documentation that allows for verification of proper

reporting for communication disbursements totaling $712,662.

Summary

During audit fieldwork, the Audit staff reviewed expenditures totaling $710,834, that

RPOMF disclosed on Schedule B (Itemized Disbursements), Line 21(b) (Other Federal

Operating Expenditures); Schedule B, Line 30(b) (Federal Election Activity Paid Entirely

with Federal Funds) and Schedule H4 (Disbursements for Allocated Federal /Nonfederal

Activity), that appear to be independent expenditures that contain express advocacy and

should have been disclosed on Schedule E, Line 24 (Itemized Independent Expenditures).

For the $710,834 disclosed as operating expenditures, federal election activity, or

allocated federal/non-federal activity which appear to be independent expenditures,

RPOMF did not file 24/48-hour reports totaling $704,265.

Additionally, the Audit staff identified five disbursements totaling $101,665 that RPOMF

invoices indicate were “volunteer driven,” which were disclosed as federal election

activity on Schedule B, Line 30(b) and operating expenditures on Schedule B, Line 21(b)

and appear to be independent expenditures requiring disclosure on Schedule E.

Furthermore, if the disbursements are determined to be independent expenditures, then

RPOMF may have been required to file 24/48-hour reports for $61,565 of the $101,665

expenditures, depending on the date of public dissemination.

In response to the Interim Audit Report recommendation, RPOMF stated the

expenditures referenced in this finding were all general party building fundraising for the

general fund which referenced multiple candidates and did not advocate or oppose one

single candidate. RPOMF did not provide any new documents, amend its disclosure

reports to report the transactions on Schedule E or address the potential requirement to

file 24/48-hour reports. Therefore, the Audit staff maintains RPOMF made apparent

independent expenditures totaling $710,834 and did not correct the public record by

amending the disclosure reports to include the transactions on Schedule E.

Regarding the five “volunteer driven” disbursements, RPOMF stated that the items were

either general party fundraising, voter list purchase, a candidate reimbursement, a noncandidate printed fan or paid GOTV calls. There was no response regarding the

requirement of filing of 24/48-hour reports. Based on RPOMF’s response, four of the

five disbursements totaling $101,5906appear to be independent expenditures requiring

reporting on Schedule E and may have required filing of 24/48-hour reports.
11

Legal Standard

A. Definition of Independent Expenditures. An independent expenditure is an

expenditure made for a communication expressly advocating the election or defeat of

a clearly identified candidate that is not made in cooperation, consultation, or concert

with, or at the request or suggestion of, a candidate, a candidate’s authorized

committee, or their agents, or a political party or its agents.

A clearly identified candidate is one whose name, nickname, photograph or drawing

appears, or whose identity is apparent through unambiguous reference, such as “your

Congressman,” or through an unambiguous reference to his or her status as a

candidate, such as “the Democratic presidential nominee” or “Republican candidate

for Senate in this state.”

Expressly advocating means any communication that:

• Uses phrases such as “vote for the President” or “re-elect your Congressman” or

communications of campaign slogan(s) or individual word(s), which in context can

have no other reasonable meaning than to urge election or defeat of one or more

clearly identified candidates; or

• When taken as a whole and with limited references to external events, such as

proximity to the election, could be interpreted by a reasonable person only as

advocating the election or defeat of one or more clearly identified candidates. 11

CFR §§100.16(a), 100.17 and 100.22.

B. Disclosure Requirements – General Guidelines. An independent expenditure shall

be reported on Schedule E if, when added to other independent expenditures made to

the same payee during the same calendar year, it exceeds $200. Independent

expenditures made (i.e., publicly disseminated) prior to payment should be disclosed

as memo entries on Schedule E and as a debt on Schedule D. Independent

expenditures of $200 or less need not be itemized, though the committee must report

the total of those expenditures on line (b) on Schedule E. 11 CFR §§104.3(b)(3)(vii),

104.4(a) and 104.11.

C. Last-Minute Independent Expenditure Reports (24-Hour Reports). Any

independent expenditures aggregating $1,000 or more, with respect to any given

election, and made after the 20th day but more than 24 hours before the day of an

election must be reported and the report must be received by the Commission within

24 hours after the expenditure is made. A 24-hour report is required each time

additional independent expenditures aggregate $1,000 or more. The 24-hour report

must be filed on a Schedule E. The date that a communication is publicly

disseminated serves as the date that the Committee must use to determine whether the

total amount of independent expenditures has, in the aggregate, reached or exceeded

the threshold reporting amount of $1,000. 11 CFR §§104.4(f) and 104.5(g)(2).

D. Last-Minute Independent Expenditure Reports (48-Hour Reports). Any

independent expenditure aggregating $10,000 or more for an election in any calendar
12

year, up to and including the 20th day before an election, must disclose this activity

within 48 hours each time that the expenditures aggregate $10,000 or more. The

reports must be filed with the Commission within 48 hours after the expenditure is

made. The 48-hour report must be filed on a Schedule E. The date that a

communication is publicly disseminated serves as the date that the Committee must

use to determine whether the total amount of independent expenditures has, in the

aggregate, reached or exceeded the threshold reporting amount of $10,000. 11 CFR

§§104.4(f) and 104.5(g)(1).

E. Formal Requirements Regarding Reports and Statements. Each political

committee shall maintain records with respect to the matters required to be reported

which shall provide in sufficient detail the necessary information and data from which

the filed reports may be verified, explained, clarified, and checked for accuracy and

completeness. 11 CFR §104.14(b)(1).

F. Allocation of Expenses Between Candidates. Expenditures made on behalf of more

than one clearly identified federal candidate shall be attributed to each such candidate

according to the benefit expected to be derived. In the case of a publication or

broadcast communication, the attribution shall be determined by the proportion of

space or time devoted to all candidates. This method shall be used to allocate

payments involving both clearly identified federal candidates and one or more clearly

identified non-federal candidates. 11 CFR §106.1(a).

G. Volunteer Activity. The payment by a state committee of a political party of the

costs of campaign materials (such as pins, bumper stickers, handbills, brochures,

posters, party tabloids or newsletters, and yard signs) used by such committee in

connection with volunteer activities on behalf of any nominee(s) of such party is not a

contribution, provided that the following conditions are met:

• Such payment is not for cost incurred in connection with any broadcasting,

newspaper, magazine, bill board, direct mail, or similar type of general public

communication or political advertising. The term direct mail means any

mailing(s) by a commercial vendor or any mailing(s) made from commercial lists;

• The portion of the cost of such materials allocable to Federal candidates must be

paid from contributions subject to the limitations and prohibitions of the Act;

• Such payment is not made from contributions designated by the donor to be spent

on behalf of a particular candidate for federal office;

• Such materials are distributed by volunteers and not by commercial or for-profit

operations;

• If made by a political committee such payments shall be reported by the political

committee as a disbursement in accordance with 11 CFR §104.3 but need not be

allocated to specific candidates in committee reports; and

• The exemption is not applicable to campaign materials purchased by the national

party committees. 11 CFR §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR

§100.147 (a), (b), (c), (d), (e) and (g).
13

Facts and Analysis

A. Reporting of Apparent Independent Expenditures

1. Facts

During audit fieldwork, the Audit staff reviewed disbursements to ensure proper

reporting. The Audit staff noted that RPOMF did not disclose any independent

expenditures on Schedule E, however, it made apparent independent expenditures

totaling $710,834 and disclosed them on Schedule B, Line 21(b); Schedule B, Line

30(b) and Schedule H4. The expenditures were for 58 fundraising mailers, email ads

and campaign mailers which contained express advocacy. A breakdown analysis for

these expenditures is as follows:

a. Apparent Independent Expenditures Reported as Operating Expenditures,

Federal Election Activity (FEA) and Allocated Federal/Non-Federal Activity

(Associated Mailer and Invoice Provided under 11 CFR §100.22(a))

RPOMF made 55 disbursements for apparent independent expenditures totaling

$709,909 for which it provided copies of the mailers and ads with associated

invoices for the identified disbursements, and cancelled checks or wire transfer

documentation.4

The mailers and ads provided contained phrases such as, “Defeat Democrat

Senator Amy Klobuchar,” “Vote for our Republican candidates on the ballot,”

“We’ve got three outstanding national conservative leaders to re-elect:

Representatives Erik Paulsen, Tom Emmer and Jason Lewis,” “Next year, Senator

Amy Klobuchar has got to go!,” and "Re-elect Congressmen Erik Paulsen, Tom

Emmer and Jason Lewis to advance the reform-driven Trump Agenda." All of

these communications contained language expressly advocating the election or

defeat of a clearly identified candidate, as defined under 11 CFR §100.22(a).

b. Apparent Independent Expenditures Reported as Operating Expenditures

and Disbursements for Allocated Federal /Non-Federal (Associated Mailer

and Invoice Provided under 11 CFR §100.22(b))

RPOMF made three disbursements for apparent independent expenditures totaling

$925 for which it provided copies of the mailers and ads with the associated

invoices for the identified disbursements and cancelled checks or wire transfer

documentation.

The mailers contained the following phrases, “As we close in on the general

election November 6th....vote for our Republican candidates on the ballot! Please

spread the word far and wide, this election is too important for us to lose. It’s

time. We will TURN MINNESOTA RED,” “We are optimistic about our

opportunities this November and look forward to retiring Congressman Peterson.

The 2018 election year may be even more important than 2016. With ... two U.S.

Senate races, eight congressional seats...this is our time to sweep Minnesota and

4 For eight of these disbursements, RPOMF provided partial copies of the mailers and/or invoices.
14

TURN MINNESOTA RED,” and “...we know that voters are sticking with our

two Republican members of Congress....The Republican Party of Minnesota

believes in results, not resistance, and we look forward to re-electing these two

great Congressmen in November!” This communication names the congressional

candidates and shows their picture. Based on the definition of express advocacy

under 11 CFR §100.22(b), the Audit staff believed that these mailers could only

be interpreted by a reasonable person as advocating the election or defeat of a

clearly identified candidate.

The Audit staff noted that of the $710,834 in apparent independent expenditures,

seven telephone communication scripts totaling $191,925 only expressly advocated

the election or defeat of one or more clearly identified candidates if the caller reached

a specified point in the scripts provided by RPOMF.

2. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with the RPOMF representatives during the exit

conference and provided a schedule detailing these expenditures. RPOMF

representatives indicated that the expenditures were for general fundraising with a

call of action for giving money as opposed to containing express advocacy. In

response to the exit conference, RPOMF representatives stated that “...expenditures

referenced were all general party building fundraising for the committee’s general

fund. The letters and scripts contained multi-candidate references and did not

advocate or oppose one single candidate.” RPOMF also submitted 66 mailers and ad

pieces to the Audit staff, of which 56 were previously provided during fieldwork and

10 were partial as they were still missing identified media scripts.

The Audit staff maintained that the identified expenditures were apparent independent

expenditures. The Commission has generally affirmed that the cost of fundraising

communications may be independent expenditures if they contain express advocacy,

as in the Final Audit Reports of the National Campaign Fund, the Legacy Committee

Political Action Committee, the Conservative Majority Fund, and the Freedom’s

Defense Fund, though it has also lacked agreement on this issue, as in the Final Audit

Report of the Mississippi Republican Party. The Commission has also found reason

to believe that a failure to file independent expenditure reports for the costs of

fundraising letters expressly advocating the election or defeat of clearly identified

candidates violated the Federal Election Campaign Act.

The Interim Audit Report recommended that RPOMF provide documentation that

apparent independent expenditures, totaling $710,834, did not require reporting as

independent expenditures. The documentation should have also demonstrated that

the scripts either were not used or callers reading the scripts did not reach the point in

the scripts where the communication included express advocacy for telephone

communications totaling $191,925. Absent such documentation, the Interim Audit

Report recommended that RPOMF amend its reports to disclose these disbursements

as independent expenditures on Schedule E.
15

3. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, RPOMF reiterated its

position that the apparent independent expenditures identified in the audit “...were all

general party building fundraising for the committee’s general fund. The letters and

scripts contained multi-candidate references and did not advocate or oppose one

single candidate.” RPOMF did not provide any new documentation and did not

amend the disclosure reports to reflect the transactions in question on Schedule E.

The Audit staff maintains its position that, based on the content of documentation

previously provided, the communications contained language expressly advocating

the election or defeat of a clearly identified candidate, as defined under 11 CFR

§100.22(a). In addition, based on the definition of express advocacy under 11 CFR

§100.22(b), the Audit staff believes these mailers could only be interpreted by a

reasonable person as advocating the election or defeat of a clearly identified

candidate. Therefore, RPOMF made apparent independent expenditures totaling

$710,834 and did not correct the public record by amending the disclosure reports to

include the transactions on Schedule E.

B. Volunteer Materials Exemption

1. Facts

RPOMF reported five disbursements totaling $101,665 on Schedule B, Line 30(b) as

federal election activity. The reported purposes included “non-allocable FEA mail,”

“transportation for GOTV” and “GOTV calls.” The invoices for these disbursements

indicated “volunteer driven,” however, RPOMF did not provide any volunteer

documentation to support these particular disbursements.

The Commission has addressed the applicability of the volunteer materials exemption

in the Final Audit Reports of the Arizona Republican Party, the Democratic

Executive Committee of Florida, and the Tennessee Republican Party. In these

reports, the Commission recognized a lack of clarity regarding the application of the

volunteer materials exemption. The Commission had attempted to formulate a

consensus policy regarding what constitutes substantial volunteer involvement for the

purpose of applying the exemption5, but this was never achieved. Since a lack of

clarity exists concerning the application of the volunteer materials exemption, it

follows that the type and amount of documentation needed to support volunteer

involvement is also unclear.

2. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with RPOMF representatives during the exit

conference and provided a schedule detailing these expenditures. In response to the

exit conference, RPOMF representatives stated that RPOMF was unable to locate the

volunteer documentation for some of the identified expenditures and the remaining

5 Proposed Interim Enforcement Policy, Agenda document No. 10-16.

https://www.fec.gov/resources/updates/agendas/2010/mtgdoc1016.pdf
16

expenditures were “either general party fundraising, voter list purchase, a candidate

reimbursement, a non-candidate printed fan or paid GOTV calls.”

The Interim Audit Report recommended that RPOMF provide documentation and

evidence that apparent independent expenditures did not require reporting as

independent expenditures. Evidence could have included any further documentation

such as volunteer sign in sheets and photographs to support the involvement of

volunteers processing or distributing the communications. Absent such evidence, the

Interim Audit Report recommended RPOMF amend its reports to disclose the

disbursements as independent expenditures on Schedule E.

3. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, RPOMF reiterated its

response to the exit conference that it was unable to locate documentation for some of

the identified expenditures and the remaining expenditures “were either general party

fundraising, voter list purchase, a candidate reimbursement, a non-candidate printed

fan or paid GOTV calls.” RPOMF did not provide any new documentation. Based

on RPOMF’s response, four disbursements, totaling $101,5906, appear to be

independent expenditures requiring reporting on Schedule E and may have required

the filing of 24/48-hour reports.

C. Failure to File 24/48-Hour Reports for Apparent Independent Expenditures

1. Facts

In addition to not reporting any independent expenditures during the audit period,

RPOMF did not file any 24 or 48-hour reports.7 Of the $710,834 in apparent

independent expenditures reported as operating expenditures, federal election activity

and allocated federal/non-federal activity:

• RPOMF failed to file 48-hour reports totaling $676,953.

• RPOMF failed to file 24-hour reports totaling $27,312.

Absent evidence the expenditures totaling $101,5906 were not required to be reported

as independent expenditures, RPOMF may have also been required to file 24/48-hour

reports for these disbursements, which did not have the volunteer materials

exemption.

• RPOMF failed to file a 48-hour report totaling $36,565.

• RPOMF failed to file a 24-hour report totaling $25,000.

6 Regarding the fifth disbursement, after the issuance of the Interim Audit Report and further discussion,

the Audit staff accepts that the $75 for a bus reimbursement should have been reported as an in-kind

contribution to the candidate and is therefore not an apparent independent expenditure. This reduces the

violation amount from $101,665 to $101,590. In the absence of a known date for public dissemination,

the Audit staff used the invoice date of incurrence to determine if a 24/48-hour report was required.

7 The date the expenditure is publicly distributed serves as the date that the independent expenditure is

made for purposes of the additional 24/48-hour report filing requirements. In the absence of a known

date for public dissemination, the Audit staff used the invoice date of incurrence to determine if a 24/48-

hour report was required.
17

Finding 4. Disclosure of Transfers and Allocation Ratios

2. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter at the exit conference and provided RPOMF

representatives a schedule detailing the expenditures along with the volunteer

materials exemption. In response to the exit conference, RPOMF representatives

stated that “...expenditures referenced were all general party building fundraising for

the committee’s general fund. The letters and scripts contained multi-candidate

references and did not advocate or oppose one single candidate.”

Absent documentation that the apparent independent expenditures totaling $805,8558

did not require reporting as independent expenditures, the Interim Audit Report

recommended that RPOMF provide documentation to support the date of public

dissemination for each identified expenditure to determine whether 24/48-hour

reports were required to be filed.

3. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, RPOMF did not provide

any new documentation and did not submit a statement regarding the failure to file

24/48-hour reports. Absent documentation, the Audit staff maintains RPOMF may

have failed to file 24/48-hour reports.

Summary

During audit fieldwork, the Audit staff identified two transfers to affiliated/other party

committees totaling $64,303 reported on Schedule H4 (Disbursements for Allocated

Federal/Non-Federal Activity). Party committee transfers do not qualify as allocable

activity for disclosure on Schedule H4 but should instead be disclosed on Schedule B

(Itemized Disbursements), Line 22 (Transfers to Affiliated/Other Party Committees). In

addition, the Audit staff identified two fundraisers that were not reported on Schedule H2

(Allocation Ratios), and RPOMF incorrectly applied the allocation ratio for

Administrative expenses on Schedule H4 for 30 disbursements related to these

fundraisers totaling $73,129. In response to the Interim Audit Report recommendation,

RPOMF filed Forms 99 (Miscellaneous Electronic Submission) correcting the public

record regarding the party committee transfers and the two fundraisers.

Legal Standard

A. Transfers. All disbursements, contributions, expenditures, and transfers by the

committee in connection with any Federal election shall be made from its Federal

account. 11 CFR §102.5(a)(1)(i).

B. Allocation Ratio for Shared Fundraising Expenses. If a committee raises both

federal and non-federal funds through the same fundraising program or event, it must

8 $805,855 = $676,953 + $27,312 + $101,590
18

allocate the direct cost of the fundraising event based upon the ratio of funds received

by the federal account to the total amount raised for the event. 11 CFR §106.7(d)(4).

C. Reporting of Allocation of Direct Cost for Shared Fundraising. In each report

disclosing a disbursement for the direct costs of a fundraising program, the committee

shall:

• Assign a unique identifying title or code to each such program or activity,

• State the allocation ratio calculated for the program or activity according to 11

CFR 106.6(d), and

• Explain the manner in which the ratio was derived.

• The committee shall also summarize the total amounts spent by the Federal and

non-Federal accounts that year, to date, for each such program or activity. 11

CFR §104.10(b)(2).

D. Reporting of Allocations of Shared Expenses. When disclosing an allocable

disbursement, a State, district, or local committee shall

• State and explain the allocation percentages to be applied to each category of

allocable activity;

• State the category of activity for which each allocated disbursement was made in

each subsequent report in the calendar year itemizing an allocated disbursement;

and

• Summarize the total amounts expended from Federal and Non-Federal accounts,

or from allocation accounts, that year to date for each such category. 11 CFR

§104.17(b)(1)(i) and (ii).

Facts and Analysis

A. Disclosure of Transfers

1. Facts

During audit fieldwork, the Audit staff reviewed transfers to affiliated/other party

committees and identified two transfers totaling $64,303 reported on Schedule H4.

One transfer totaling $16,072 was to the Republican National Committee, and the

second transfer totaling $48,231 was to the Missouri Republican State CommitteeFederal. Transfers to affiliated/other party committees do not qualify as allocable

activity for disclosure on Schedule H4 but should instead be disclosed on Schedule B,

Line 22. Based on a review of all allocable activity and amounts transferred from the

non-federal account, it was determined that RPOMF did not make an overpayment

from the non-federal account for its share of allocable expenses.

2. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with RPOMF representatives during the exit

conference and provided a schedule of the incorrectly disclosed transfers. In response

to the exit conference, RPOMF representatives acknowledged that the two transfers

referenced did not qualify as allocable activity, were disclosed incorrectly on the

wrong schedule, and provided a draft Form 99 (Miscellaneous Electronic
19

Submission). As of the date of the Interim Audit Report, RPOMF had not formally

filed a Form 99 with the Commission.

The Interim Audit Report recommended that RPOMF amend its disclosure reports or

file a Form 99 (Miscellaneous Electronic Submission)9to correctly disclose the

transfers to affiliated/other party committees on Schedule B, Line 22.

3. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, RPOMF filed a Form 99

acknowledging the party committee transfers should not have been reported on

Schedule H4 and instead should have been disclosed on Schedule B, Line 22. The

Audit staff acknowledges RPOMF complied with the Interim Audit Report

recommendation by filing a Form 99 disclosing all the necessary information.

B. Disclosure of Allocation Ratios

1. Facts

The Audit staff reviewed allocable disbursements and identified two fundraising

events that raised funds for RPOMF's federal and non-federal accounts. These

fundraising events were not reported on Schedule H2 and had associated expenses

disclosed on Schedule H4.

The Audit staff applied the “funds received”10 method to determine the allocation

ratio for the direct costs of each fundraiser. Based on the funds received method,

RPOMF applied the incorrect allocation ratio for 30 disbursements totaling $73,129.

For these disbursements, RPOMF applied the Administrative allocation ratio instead

of the correct fundraising event ratio.

Based on a review of all allocable activity and amounts transferred from the nonfederal account, it was determined that RPOMF did not make an overpayment from

the non-federal account for its share of allocable expenses. However, RPOMF should

amend its reports to correct the disclosure of these allocation ratios.

2. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with RPOMF representatives during the exit

conference and provided a schedule of the fundraiser allocation ratios not reported on

Schedule H2 and the fundraising related disbursements incorrectly allocated on

Schedule H4. In response to the exit conference, RPOMF representatives

acknowledged that the two fundraisers should have been disclosed on Schedule H2

using the funds raised method of allocation. RPOMF provided a draft Form 99 and a

draft Schedule H2 for the Audit staff’s review. In addition, RPOMF representatives

acknowledged that the fundraising expenses were incorrectly reported on Schedule

9 RPOMF was advised by the Audit staff that if it chose to file a Form 99, instead of amending its

disclosure reports, the form must contain all pertinent information that is required on each schedule.

10 The “funds received” method is used to allocate the cost of fundraising expenses by calculating the ratio

of federal funds received to total receipts for the program or event.
20

Finding 5. Excessive Coordinated Party Expenditures

H4 by using the Administration allocation ratio instead of the fundraising allocation

ratio. RPOMF provided draft Forms 99. As of the date of the Interim Audit Report,

RPOMF had not formally filed the Forms 99 with the Commission.

The Interim Audit Report recommended that RPOMF amend its disclosure reports or

file a Form 99 (Miscellaneous Electronic Submission)11 to correctly disclose the

fundraising events on Schedule H2 and correctly disclose the allocable fundraising

expenses on Schedule H4.

3. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, RPOMF filed a Form 99

acknowledging disclosures for fundraising costs were incorrectly allocated as

administrative expenses on Schedule H4. The Form 99 narrative included the proper

allocation ratios for costs resulting from fundraisers in 2017 and 2018. RPOMF also

filed an amended Schedule H2 disclosing the two fundraising events. The Audit staff

acknowledges RPOMF complied with the Interim Audit Report recommendation by

filing a Form 99 disclosing all the necessary information.

Summary

During audit fieldwork, the Audit staff identified apparent coordinated expenditures for

three House candidates that exceeded the 2018 coordinated party expenditure limit by a

total of $255,421. In response to the Interim Audit Report recommendation, RPOMF did

not provide any new documentation. RPOMF stated that, “The media pieces referenced

were non-allocable volunteer driven mail. It is the RP[O]M[F]’s understanding if there is

a volunteer component, the expenditure does not count as a contribution to the

candidate.” Absent documentation to support the volunteer materials exemption, the

Audit staff maintains RPOMF made apparent excessive coordinated expenditures totaling

$255,421.

Legal Standard

A. Coordinated Party Expenditures. National party committees and state party

committees are permitted to purchase goods and services on behalf of candidates in

the general election—over and above the contributions that are subject to contribution

limits. Such purchases are referred to as “coordinated party expenditures.” They are

subject to the following rules:

• The amount spent on “coordinated party expenditures” is limited by statutory

formulas that are based on the Cost of Living Adjustment (COLA) and the voting

age population;

• Party committees are permitted to coordinate the spending with the candidate

committees;

11 See supra footnote 9.
21

• The parties may make these expenditures only in connection with the general

election;

• The party committees—not the candidates—are responsible for reporting these

expenditures; and

• If the party committee exceeds the limits on coordinated party expenditures, the

excess amount is considered an in-kind contribution, subject to the contribution

limits. 52 U.S.C. §30116(d) and 11 CFR §§109.30 and 109.32.

B. Assignment of Coordinated Party Expenditure Limit. A political party may

assign its authority to make coordinated party expenditures to another political party

committee. Such an assignment must be made in writing, state the amount of the

authority assigned, and be received by the assignee before any coordinated party

expenditure is made pursuant to the assignment. The political party committee that is

assigned authority to make coordinated party expenditures must maintain the written

assignment for at least three years. 11 CFR §§104.14 and 109.33(a) and (c).

C. Volunteer Activity. The payment by a state committee of a political party of the

costs of campaign materials (such as pins, bumper stickers, handbills, brochures,

posters, party tabloids or newsletters, and yard signs) used by such committee in

connection with volunteer activities on behalf of any nominee(s) of such party is not a

contribution, provided that the following conditions are met:

1. Such payment is not for costs incurred in connection with any broadcasting,

newspaper, magazine, bill board, direct mail, or similar type of general public

communication or political advertising. The term direct mail means any

mailing(s) by a commercial vendor or any mailing(s) made from commercial lists.

2. The portion of the cost of such materials allocable to Federal candidates must be

paid from contributions subject to the limitations and prohibitions of the Act.

3. Such payment is not made from contributions designated by the donor to be spent

on behalf of a particular candidate for Federal office.

4. Such materials are distributed by volunteers and not by commercial or for-profit

operations.

5. If made by a political committee, such payments shall be reported by the political

committee as a disbursement in accordance with 11 CFR §104.3 but need not be

allocated to specific candidates in committee reports.

6. The exemption is not applicable to campaign materials purchased by the national

party committees. 11 CFR §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR

§100.147 (a), (b), (c), (d), (e) and (g).

D. Coordinated Party Communication. A political party communication is

coordinated with a candidate, a candidate’s authorized committee, or agent of any of

the foregoing, when the communication satisfies the following conditions:

(1) The communication is paid for by a political party committee or its agent.

(2) The communication satisfies at least one of the content standards.

• Must expressly advocate a candidate’s election of defeat 11 CFR §100.22(a)

and (b).
22

• Involve the dissemination, distribution or republication of a candidate’s

campaign materials.

• Refers to a federal candidate, is directed to the candidate’s constituents and is

distributed within certain time frame before an election.

(3) The communication satisfies at least one of the conduct standards in 11 CFR

§109.21(d)(1) through (d)(6), subject to the provisions of 11 CFR §109.21(e), (g),

and (h).

• Must have been created, produced or distributed at the request of the

candidate or its’ agent.

• Developed with a “material involvement” of the candidate.

• Created, produced or distributed after “substantial discussion” with the

candidate or his agents.

• The use of a common vendor in the creation, production or distribution of a

communication. 11 CFR §109.37.

E. Reporting Coordinated Party Expenditures. Each political committee shall report

the full name of each person who receives any expenditure from the reporting

committee during the reporting period in connection with an expenditure under 11

CFR Part 109, Subpart D (52 U.S.C. §30116(d)), together with the date, amount and

purpose of any such expenditure as well as the name of, and office sought by the

candidate on whose behalf the expenditure is made. 11 CFR §104.3 (b)(1)(viii).

F. Limits on Contributions Made by State and Local Party Committees.

State and local party committees must comply with the contribution limits below:

• $5,000 per election to a Federal campaign if the contributing committee has

qualified as a multicandidate committee.

• $2,700 per election to a Federal campaign if the contributing committee has not

qualified as a multicandidate committee.

• $5,000 per year to a separate segregated fund (corporate or labor PAC) or a

nonconnected committee.

• Unlimited transfers to other party committees. 52 U.S.C. §30116(a).

Facts and Analysis

A. Facts

The coordinated expenditure limit during the 2018 election cycle for a House candidate

in the state of Minnesota was $49,700 each for the state and national party committees.

RPOMF and the Republican National Committee (RNC) each transferred their

coordinated expenditure limit spending authority to the National Republican

Congressional Committee (NRCC) to make coordinated expenditures on behalf of House

candidates Erik Paulsen (Minnesota District 03), Jason Lewis (Minnesota District 02),

and Pete Stauber (Minnesota District 08).

During audit fieldwork, the Audit staff’s review of disbursements identified apparent

coordinated expenditures made on behalf of Friends of Erik Paulsen consisting of one

direct mail piece totaling $23,166 that was reported on Schedule B, Line 30(b). In
23

addition, RPOMF made apparent coordinated expenditures on behalf of Jason Lewis for

Congress consisting of nine direct mail pieces totaling $179,049 that were reported on

Schedule B, Line 30(b) and Schedule H4. Finally, RPOMF made apparent coordinated

expenditures on behalf of Pete Stauber for Congress Volunteer Committee consisting of

four direct mail pieces totaling $68,206 that were reported on Schedule B, Line 30(b) and

Schedule H4. These apparent coordinated expenditures were made subsequent to

RPOMF transferring its coordinated expenditure limit spending authority to the NRCC.12

As a result, these expenditures were in excess of the authorized coordinated spending

limit for each candidate and resulted in an apparent excessive in-kind contribution to each

candidate.

The Audit staff’s analysis was based on a three-pronged test to determine whether a

communication is a party coordinated communication. A communication must satisfy all

three prongs of the test to be considered a party coordinated expenditure. The threeprong test consists of a payment prong, a content prong and a conduct prong.

• Payment Prong means the communication is paid for, in whole or in part, by a

person other than the candidate. All communications in this finding were paid by

RPOMF and traced to its federal account.

• Content Prong means the communication must meet any one of these three

standards to meet the content prong:

• Expressly advocates the election or defeat of a clearly identified candidate for

federal office per 11 CFR §100.22(a)or (b); or

• Involves the dissemination, distribution or republication of a candidate’s

campaign materials; or

• Refers to a clearly identified federal candidate and is publicly distributed in

the identified candidate’s jurisdiction within 90 days of the candidate’s

general election.

All communications in this finding contained express advocacy for a clearly

identified federal candidate per 11 CFR §100.22(a) or (b) or referred to a clearly

identified federal candidate and was publicly distributed in the identified

candidate’s jurisdiction within 90 days of the candidate’s general election.

• Conduct Prong means the communication must have been one of the following:

• Created, produced or distributed at the request of the candidate or its agents;

or

• Developed with a material involvement of the candidate; or

• Created, produced or distributed after substantial discussion with the

candidate or its agents; or

12 RPOMF transferred its coordinated expenditure limit spending authority to the NRCC on behalf of

House candidates Erik Paulsen (Minnesota District 03) on 09/07/18, Jason Lewis (Minnesota District 02)

on 10/02/18, and Pete Stauber (Minnesota District 08) on 09/07/18.
24

• Involved the use of a common vendor by the candidate committee and the

party committee in the creation, production or distribution of a

communication; or

• A former employee/independent contractor used or conveyed information

about the plans, projects, activities or needs of the candidate to create the

communication.

All the communications in this finding contained the following disclaimers:

“Paid for by Republican Party of Minnesota and authorized by Friends of Erik

Paulsen,” “Paid for by Republican Party of Minnesota and authorized by Jason

Lewis for Congress,” or “Paid for by the Republican Party of Minnesota and

authorized by Pete Stauber for Congress Volunteer Committee.” In addition, all

three candidate committees and RPOMF employed a common vendor in the

creation, production or distribution of the communications.

The following chart details the total amount of apparent coordinated expenditures and the

resulting apparent excessive in-kind contributions.

RPOMF Apparent

Coordinated

Expenditures

Friends of

Erik Paulsen

Jason Lewis

for Congress

Pete Stauber for

Congress

Volunteer

Committee

Total

Reported Expenditures $ 23,166 $ 179,049 $ 68,206

Less: RPOMF

Spending Limit (0) (0) (0)

Over Limit (In-kind

Contribution)13 $ 23,166 $ 179,049 $ 68,206

Less: Allowable

Contribution14 ($5,000) ($5,000) ($5,000)

Excessive In-kind

Contributions $ 18,166 $ 174,049 $ 63,206 $ 255,421

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with RPOMF representatives during the exit

conference and provided a schedule of the apparent excessive in-kind contributions. In

response to the exit conference, RPOMF representatives stated that these mail pieces

were non-allocable volunteer driven mail, covered under the volunteer materials

exemption, and therefore did not count as a contribution to the candidate. RPOMF

provided photos of volunteer activity for the Erik Paulsen mailer, however, the content of

13 Total amount over the coordinated expenditure limit before adjusting for allowable contributions was

$270,421.

14 RPOMF did not report any contributions to federal candidates during the 2018 election cycle.
25

Finding 6. Disclosure of Loans and Loan Repayments

the photos did not identify the mailer in question.15 RPOMF did not provide photos of

volunteer activity for the other mailers.

The Commission has addressed the applicability of the volunteer materials exemption in

the Final Audit Reports of the Arizona Republican Party, the Democratic Executive

Committee of Florida, and the Tennessee Republican Party. In these reports, the

Commission recognized a lack of clarity regarding the application of the volunteer

materials exemption. The Commission had attempted to formulate a consensus policy

regarding what constitutes substantial volunteer involvement for the purpose of applying

the exemption16, but this was never achieved. Since a lack of clarity exists concerning

the application of the volunteer materials exemption, it follows that the type and amount

of documentation needed to support volunteer involvement is also unclear.

The Interim Audit Report recommended that RPOMF demonstrate that it did not exceed

its coordinated spending limit on behalf of Friends of Erik Paulsen, Jason Lewis for

Congress, and Pete Stauber for Congress Volunteer Committee. Evidence could have

included sign in sheets and pictures of volunteers sorting and bundling the identified mail

pieces. Absent such evidence, the Interim Audit Report recommended that RPOMF seek

reimbursements from the respective committees for Erik Paulsen in the amount of

$18,166, Jason Lewis in the amount of $174,049, and Pete Stauber in the amount of

$63,206.

C. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, RPOMF reiterated its position

provided at the exit conference by stating, “The media pieces referenced were nonallocable volunteer driven mail. It is the RP[O]M[F]’s understanding if there is a

volunteer component, the expenditure does not count as a contribution to the candidate.”

The Audit staff notes RPOMF did not provide any new documentation to support

volunteers were used and did not provide any documentation that it sought

reimbursements from the three candidates. Absent documentation, the Audit staff

maintains RPOMF made apparent excessive coordinated expenditures totaling $255,421.

Summary

During audit fieldwork, the Audit staff determined that RPOMF failed to properly

disclose 50 transactions totaling $525,742. RPOMF did not properly disclose the correct

purpose for interest payments and loan repayments on Schedule B (Itemized

Disbursements), Line 21(b) (Federal Operating Expenditures) and Schedule B, Line 26

15 The Audit staff notes that RPOMF was able to provide some evidence for the volunteer materials

exemption totaling $94,361. This amount is not included in the apparent coordinated expenditures total

noted above. RPOMF provided pictures of individuals sorting and moving the mailers to trucks along

with the volunteers’ name and phone number.

16 Proposed Interim Enforcement Policy, Agenda document No. 10-16.

https://www.fec.gov/resources/updates/agendas/2010/mtgdoc1016.pdf.
26

(Loan Repayments). RPOMF also disclosed the incorrect loan terms on Schedule C-1

(Loans and Line of Credit from Lending Institutions) and Schedule C (Loans). In

response to the Interim Audit Report recommendation, RPOMF filed Forms 99

(Miscellaneous Electronic Submission) for each affected report. The Forms 99 correctly

disclosed the loan terms that appear on Schedule C-1, the cumulative payment and the

outstanding amount at the close of the period on Schedule C. However, none of the

Forms 99 addressed the incorrect purposes disclosed for loan repayments and loan

interest payments on Schedule B, Line 26 and Line 21(b), respectively. As such, the

Audit staff concludes RPOMF did not materially correct the public record.

Legal Standard

A. Continuous Reporting Required. A political committee must disclose the amount

and nature of outstanding debts and obligations until those debts are extinguished. 52

U.S.C. §30104(b).

B. Itemizing Loans. Each person who makes a loan to the political committee during

the reporting period must be disclosed with the following information:

• Identification of any endorser or guarantor of the loan;

• The date the loan was made;

• The amount of the loan. 11 CFR §104.3(a)(4)(iv).

C. Disclosure of Expenditures. A political committee must disclose each person to

whom an expenditure in an aggregate amount or value in excess of $200 within the

calendar year is made by the reporting committee to meet the committee's operating

expenses, together with the date, amount, and purpose of such operating expenditure.

Purpose means a brief statement or description of why the disbursement was made.

11 CFR §104.3(b)(3).

D. Reporting Bank Loans, Home Equity Loans and Other Lines of Credit. A

political committee must disclose in the report covering the period when the loan was

obtained on Schedules C-1:

• The date, amount, and interest rate of the loan;

• The name and address of the lending institution; and

• The types and value of the collateral or other sources of repayment that secure the

loan, if any. 11 CFR §104.3(d)(4).

Facts and Analysis

A. Facts

During audit fieldwork, the Audit staff reviewed two bank loans ($693,040) and one line

of credit ($100,000) to RPOMF totaling $793,040. One of the loans and the line of credit

originated prior to the audit period but still carried outstanding balances as of the January

1, 2017, the beginning of the audit period. Based on the review of loans and draws on the

line of credit, the Audit staff determined that RPOMF disclosed incorrect purposes for

loan repayments and interest payments on Schedule B, Lines 26 and 21(b), respectively,

and/or incorrect or incomplete disclosure information on Schedules C-1 and C when
27

compared to the loan agreements. These errors consisted of 50 transactions totaling

$525,742.

These errors consisted of disclosing incorrect information including: terms for due dates,

incorrect incurred dates, incorrect interest rate, marking the loans as unsecured despite

the bank agreements indicating the loans were secured with collateral, incorrect purpose

for interest payments and incorrect purpose for bank loan repayments. The loans and line

of credit documentation provided by RPOMF did not support the information that was

reported on the disclosure reports.

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with RPOMF representatives during the exit

conference and provided a schedule of the loan interest repayments and loan repayments

disclosed incorrectly.

In response to the exit conference, RPOMF representatives acknowledged the disclosure

errors and stated:

“Regarding the incorrect reporting of RP[O]M[F] bank note (loan) details in terms of:

maturity date of notes, interest rates, collateral, note date, the RP[O]M[F] as noted in

correspondence to the FEC and in various memoranda to the RP[O]M[F]’s FEC

analyst, the RP[O]M[F]’s FEC reporting software17 had a significant, and at the time,

unsolved issue in this area. While we knew on each monthly filing as indicated to the

FEC auditors that certain loan disclosures were not accurate and in spite of attempting

to obtain corrected fields from our FEC filing software18 package, we were not

successful from approximately May of 2017 through November of 2018. It should be

noted that all loan dollar activity in terms of loan advances, loan payments, interest

expense paid, and end of the reporting period loan balances were accurate in our filed

FEC reports. The correct interest rate, incur date, due date and secured checked box

are noted as well as a digital Schedule C-1 with the bank address and authorized bank

representative’s name and electronic signature in our response in the attachment

labeled “Finding 6 response”. The RP[O]M[F] will work closely with our FEC

analyst to properly amend the affected FEC reports with respect to these loan terms,

although we hope that the attached response in the excel file and the attached Schedule

C-1 will satisfy our obligation. We are not confident our software will be able to

properly produce amended reports from 2017-2018 without further errors. The loan

information has already corrected and the interest rate, incur date, due date and the

secured box checked is correct as filed.”

RPOMF provided draft Forms 99 and a draft Schedule C-1. As of the date of the Interim

Audit Report, RPOMF had not formally filed the Forms 99 or amended the disclosure

reports inclusive of the corrected Schedule C-1.

17 RPOMF purchased and used third-party software to prepare and file its disclosure reports.

18 See supra footnote 17.
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The Interim Audit Report recommended that RPOMF provide documentation

demonstrating that the identified loan interest payments and loan repayments were

correctly disclosed. Absent such documentation, the Interim Audit Report recommended

that RPOMF amend its reports or file a Form 99 (Miscellaneous Electronic Submission)19

to disclose the correct information on Schedule B, Schedule C, and Schedule C-1.

C. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, RPOMF reiterated its statement

provided in response to the exit conference and filed Forms 99. The Forms 99 correctly

disclosed the loan terms that appear on Schedule C and Schedule C-1, the cumulative

payment and the outstanding amount at the close of the period that corrected the public

record for both Schedule C and Schedule C1. However, none of the Forms 99 addressed

the incorrect purposes disclosed for loan repayments and loan interest payments on

Schedule B, Line 26 and Line 21(b), respectively. RPOMF also filed a Form 99 for

Schedule C-1 disclosing all pertinent information that appears on Schedule C-1. The

Audit staff concludes RPOMF did not materially correct the public record because the

Forms 99 filed do not contain all pertinent information on each Schedule B required to

correct the purpose for interest payments and loan repayments.

19 See supra footnote 9.