FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

July 25,2017 

MEMORANDUM 

To: 

Through: 

From: 

The Commission 

Alec Palmer 

Staff Director 

By: 

Subject: 

Patricia C. Orrock 

Chief Compliance Officer 

Thomas E. Hintermister ^ff 

Assistant Staff Director 

Audit Division 

Marty Favin 

Audit Manager 

Robert MorcomI 

Lead Auditor 

Audit Division Recommendation Memorandum on the Illinois Republican 

Party (IRP)(A13-09) 

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

the Audit staff presented the Draft Final Audit Report (DFAR) to IRP on March 29,2017 

(see attachment). In response to the DFAR dated April 17,2017, IRP did not provide any 

new information and requested an audit hearing which occurred on June 22,2017. 

This memorandum provides the Audit staffs recommendation for each finding outlined in 

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

with the recommendations. 

Finding 1. Misstatement of Financial Activity 

In response to the Interim Audit Report, IRP filed amendments that materially 

corrected the misstatements, for both 2011 and 2012. IRP had no additional 

comments in response to the DFAR. 

At die audit hearing, IRP reiterated that it had filed corrective amendments. 
The Audit staff recommends that the Commission find that in 2011, IRP 

overstated its receipts by $36,327, its disbursements by $46,370 and understated 

its ending cash by $13,717; and in 2012, IRP understated its receipts by $254,528 

and its disbursements by $295,544. 

Finding 2. Reporting of Apparent Independent Expenditures 

In response to the Interim Audit Report, IRP stated that all mailers were nonallocable, candidate specific volunteer mass mailings. IRP also provided a third 

affidavit from a former IRP Deputy Executive Director who stated that IRP 

supported its federal candidates through the use of non-allocable mail processed by 

volunteers. In the DFAR, the Audit staff removed four mailers from this finding 

because the documentation, which included photographs and sign-in sheets 

directly connected to the mailers, is consistent with evidence in past audits. As a 

result, the four mailers are no longer considered independent expenditures. In 

response to the DFAR, IRP noted that the executive leadership of IRP changed 

soon after the 2Q12 General Election and that records were not properly preserved. 

IRP states that they do not possess any additional support for the use of volunteers 

or information regarding the mailers referenced in this finding. In addition, IRP 

contends that no 24 or 48 hour reports needed to be filed for the communications 

At the audit hearing, IRP counsel stated that the 27 mailers in support of federal 

candidates were not independent expenditures but were non-allocable mail. He 

added that volunteer involvement demonstrated by the quantum of evidence IRP 

provided to the Audit staff demonstrated this claim. This evidence included 

photographs of volunteers; volunteer sign-in sheets; and sworn affidavits of 

individuals with direct personal knowledge of IRP's mail program for 2011 -2012. 

The Audit staff recommends that the Commission find that IRP failed to report 39 

mailers containing express advocacy (12 mailers supported with invoices totaling 

$239,154 and 27 mailers without invoices); and failed to file either 24 or 48 hour 

reports for the 39 mailers. 

Finding 3. Recordkeeping for Communications 

In response to the Interim Audit Report, IRP stated that it searched its records and 

was not able to locate additional documents for the 19 expenditures totaling 

$357,613. IRP had no additional comments in response to the DFAR. 

At the audit hearing, IRP reiterated that it has performed a thorough search and no 

additional documents were located. 

The Audit staff recommends that the Commission find that IRP did not provide the 

necessary records pertaining to 19 disbursements totaling $357,613. 

Finding 4. Receipt of Apparent Prohibited In-Kind Contributions 

In response to the Interim Audit Report, IRP did not specifically address the 

apparent prohibited in-kind contribution consisting of postage apparently paid on 
its behalf totaling $72,880. In response to the DFAR, IRP contended that the 

amounts identified were permissibly spent by IRP on behalf of the Walsh and 

Plummer campaigns for non-allocabie mail. In addition, IRP stated it continues to 

search for records to support this contention. 

At the audit hearing, IRP counsel stated that they have not been able to determine 

whether the $72,880 in postage costs identified on the invoices has been paid or 

who paid it. He added that they contacted the National Republican Congressional 

Committee (NRCC) to see if they had any relevant information and that after the 

election, it has been difficult to trwk down anyone with knowledge of this activity. 

Counsel further stated that they reached out to the mail house vendor but received 

no further clarification from them. 

The Audit staff recommends that the Commission find that IRP accepted a 

prohibited in-kind contribution totaling $72,880. 

i 

Finding 5. Reporting of Debts and Obligations 

In response to the Interim Audit Report, IRP amended its disclosure reports to 

materially correct the disclosure of debts and obligations to 14 vendors totaling 

$257,396 on Schedule D (Debts and Obligations). IRP had no additional 

comments in response to the DFAR. 

At the audit hearing, IRP reiterated that it had filed corrective amendments. 

The Audit staff recommends that the Corhmission find that IRP failed to report 

debts and obligations totaling $257,396. 

Finding 6. Recordkeeping for Employees 

In response to the Interim Audit Report, IRP acknowledged that it did not possess 

any monthly payroll logs for employees for the 2011 - 2012 time period. IRP 

stated that going forward, IRP will require all of its employees who are paid by 

both federal and non-federal funds to maintain monthly logs of the time each 

spends on federal and non-federal activities. IRP had no additional comments in 

response to the DFAR. 

At the audit hearing, IRP reiterated that since the 2014 election cycle, it now 

requires all of its employees to maintain monthly logs of the time each spends on 

federal and state activities. 

The Audit staff recommends that the Commission find that IRP did not maintain 

monthly logs for $558,089' in payroll disbursements. This amount includes 

payroll paid as follows to IRP employees: 

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

such. Payroll amounts are stated net of taxes and fnnge benefits (See Commission Guidance, p. I of the 

Draft Final Audit Report). Also, It does not Include contract labor totaling $7,800.00. 
• Employees reported on Schedule H4 and paid with federal and nonfederal funds during the same month totaling $542,812 and; 

• Employees paid exclusively with non-federal funds in a given month 

totaling $15,277. 

If this memorandum is approved, a Proposed Final Audit Report will be prepared within 

30 days of the Commission's vote. 

In case of an objection, Directive No. 70 states that the Audit Division 

Recommendation Memorandum 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 Robert Morcomb or Marty Favin at 694-

1200. 

I 

Attachment: 

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

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

Audit Division on the Illinois 

Republican Party 

(January 1, 2011 - December 31, 2012) 

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 i 

the threshold 

requirements for 

substantial compliance 

with the Ac 

determir 

com: 

the It 

prohibitii 

disclosure 

of the Act. 

Future Actioi 

The Commission i 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Committee 

The Illinois Republican PartyJ 

headquartered in Chicago, 

the chart on the Commi 

Financial 

• Receipts / < 

o ContribuTio] 

o Contributioi 

Committees 

I from A 

^ ^jmmittees 

o ~ 

o 

Total 

committee 

more information, see 

on. p.2. 

$ 1,129,720 

1,201,954 

Account 

I Disbursenrente 

Operating^penditures 

[E^eral;Election Activity 

sutions to Federal Candidates 

ler Disbursements 

NTotal Disbursements 

1,576,813 

395,959 

344,928 

$ 4,649,374 

$ 1,295,631 

3,122,532 

5,500 

163,600 

$4,587,263 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Reporting of Apparent Independent Expenditures 

(Finding 2) 

• Recordkeeping for Communications (Finding 3) 

• Receipt of Apparent Prohibited In-Kind Contributions 

(Finding 4) 

• Reporting of Debts and Obligations (Finding 5) 

• Recordkeeping for Employees (Finding 6) 

' 52 U.S.C. §30111(b). 

^ IRP had a Levin account that began the audit period with a balance of $0, made no expenditures for 

Levin activity, and an ending balance of S4S9. 
Draft Final Audit Report of the 

Audit Division on the 

Illinois Republican Party 

(January 1, 2011 - December 31, 2012) 
Table of Contents 

Page 

Parti. Background 

Authority for Audit 

Scope of Audit 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Recomm^b^tions 

Finding 1. Misstatement of Financial Ac^^ 

Finding 2. Reporting of Apparent Independent E tures 

jmunications 

In-Kind Cbn^butions 

Finding 3. Recordkeeping for Ccmmuni 

Finding 4. Receipt of Apparent ProKibih 

Findings. Reporting of Debts and\ 

Finding 6. Recordkeeping for Empl 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Illinois Republican Party (IRP), 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'^t is required to file a 

report under 52 U.S.C. §30104. Prior to conducting any audit^i^der mis subsection, the 

Commission must perform an internal review of reports fil^iw^s;elected committees to 

determine if the reports filed by a particular committee qi^t the4^reshold requirements 

for substantial compliance with the Act. 52 U.S.C. §30.1 M;^b). 

Scope of Audit 

Following Commission-approved procedure! 

factors and as a result, this audit examined: 

1. the disclosure of individual contributors' occupati' 

the disclosure of disbursements, ^bts.^d obligatii 

the disclosure of expenses allocated bi, 

the consistency between reported fij— 

the completeness of records; 

the disclosure of i: 

other committee 

2. 

3. 

4. 

5. 

6. 

7. 

Commission 

Request f^Early.^mm 

Pursuaqt^to the Coi^^ssi 

Con^id^tion of Legal 

unaffili^^\v|th IRP req 

audits covmq^the 2010 e! 

monthly time Ibg^under 1 

percent federal 

uated vi 

name of employer; 

federal 

bank recordi 

accounts; 

Consideration of a Legal Question 

I's "Roliqy Statement Establishing a Program for Requesting 

^tions Commission," several state party committees 

early consideration of a legal question raised during 

lion cycle. Specifically, the Commission addressed whether 

CFR § 106.7(d)(1) were required for employees paid with 100 

The Commission coficluded, 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, die 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 IRP representatives of the payroll log requirement and of 

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 IRP employees 

paid with 100 percent federal funds and reported as such. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

e Date of Registration July 10,1976 

e Audit Coverage January 1,2011 - December 31,2012 

Headquarters Chicago, Illinois>^''^ 

Bank Information /< 

e Bank Depositories One 

a Bank Accounts Four Fejiergl and T^ovt^on-federal 

Treasurer \\ 

e Treasurer When Audit Was Conducted 

J. 

^udy Diekelman - May 20^2Q14 - Present 

iDave Syve?§Qn - through Mgy 2014 

• Treasurer During Period Covered by Audit D^vjp'S.yver^n\ y 

Management Information 

• Attended Commission Campaign Firi^ce^ 

Seminar \ 

NO N\ 

\ 

e Who Handled Accounting and 

Recordkeeping Tasks 'X 

v^id^and Voluhtee^ Staff 

\ 

nciu Activity 

dited AjD^unts) 

Cash-on-haqd"® Jahuary^lf 20i>I \ $ 24,000 

Receipts'^ ^ \ \ \ ^ :^ 

o CoifhiButibns from Indiv^idu'als )/ 1,129,720 

o ContributPons ^m Political Committees 1,201,954 

o Transfers from Afhliated and Other Political 

Committees \ \ J/ 

1,576,813 

o Transfers from Noh-ifedibral Account 395,959 

o Other Receipts y 344,928 

Total Receipts $ 4,649374 

Disbursements 

o Operating Expenditures 1,295,631 

o Federal Election Activity 3,122,532 

o Contributions to Federal Candidates 5,500 

o Other Disbursements 163,600 

Total Disbursements $ 4,587,263 

Cash-on-hand @ December 31,2012 $86,111 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of IRP's reported financial activity with bank records 

revealed a misstatement of receipts, disbursements and ending cash/^^11 and a misstatement 

of receipts and disbursements for 2012. In 2011, IRP overstated jts^c^ts by $36,327, its 

disbursements by $46,370 and understated its ending cash by Sj3,7R- I" 2012, IRP 

understated its receipts by $254,528 and its disbursements 1 

In response to the Interim Audit Report recommendatiblCTF^ amended fts^isclosure reports to 

materially correct the misstatements for both 201 Lan^ 2012.^(For more d^aiCsee^. 6.) 

•^\"N V Finding 2. Reporting of Apparent Indieitendient Expenditures 

During audit fieldwork, the Audit staff reviewed disbursentents totaling $273,126 that IRP 

[^.Election Activitv'P^aid Entirely with Federal 

i^ie^ted^independrat^pehditures that should have 

[epehden| Expenditures)^ 

\\ 

i^de'spfficient documentatioi^ditaining to dissemination dates to 

loits^wbre requireo'do be filed for the apparent independent 

6. ll^jalso did not prp^^de invoices associated with 27 mailers 

y as^fmed underJ^CFR 100.22 (a). 

disclosed on Schedule B, Line 30(b), (F( 

Funds), that appeared to be mailers or m* 

been disclosed on Schedule E, Line 24, 

Additionally, IRP did not 

verify whether 24/48-h( 

expenditures totalini 

that contained express ad 

^udin^^mrt recomhiendation, IRP stated "...that these 27 direct 

!ib.n-allb(^able, candidate-specific volunteer mass mailings." IRP 

*'s fpinier Deputy Executive Director who stated that during 

candidates through the use of non-allocable mail 

In response t^the~Int 

mail comnmnications 

supplieid-aNⅈ^ affidavit; 

the 2012 c^l^I-^ suppc 

processed by ^Ipnt^rs. 

The Audit staff reexanained^ documentation provided by IRP related to the volunteer 

materials exemption fon^pecific communications totaling $33,972 and determined the 

disbursements were not^ndependent expenditures. For the remaining communications 

consisting of $239,154 ($273,126 - $33,972) and the 27 mailers with no invoices that IRP 

claims the volunteer materials exemption is applicable, the Audit staff again recommends that 

the IRP provide further evidence to support the application of volunteer materials exemption to 

the specific communications involved. Absent further evidence that these communications 

qualify for the volunteer materials exemption, the Audit staff considers these communications 

to be independent expenditures. (For more detail, see p. 8.) 
Finding 3. Recordkeeping for Communications 

During audit fieldwork, the Audit staff reviewed disbursements to verify the accuracy of the 

information and proper classification of transactions disclosed on reports. IRP reported 19 

expenditures totaling $357,613,^ on Schedule B, Line 30(b) and Schedule H4 (Disbursements 

for Allocated Federal/Non-federal Activity) with the purposes of FEA Volunteer Mail, 

Advocacy calls for Federal candidates. Direct Mail Services, equipment and phone minutes for 

Federal candidates and Auto-Dialer for Federal candidates. Documentation that was provided 

by IRP was insufficient to make a determination pertaining to the purpose for these 

disbursements and verification as Federal Election Activity or Allocated Federal/Non-federal 

Activity. 

In response to the Interim Audit Report recommendation, IRP.sfate^that it has searched its 

records and was unable to locate additional documents t^^^^tia^^se disclosures. Absent 

the provision of these records, the Audit staff consider^e-niraer a vimidon of the 

recordkeeping requirements at 11 CFR §104.14(b)Cl').''(For more detail, see^l4.) 

i-Kind 

iUted in-kind contributions 

•^kind contributions consisted 

Finding 4. Receipt of Apparent 

Contributions 

During audit fieldwork, the Audit staff iS^ntiried apparent | 

totaling $72,880 to the benefit of IRP. The apphient prohibit 

of postage for campaign mailers invoiced to^RP-bq^apparently ^doy an unknown source. In 

response to the Interim Audit Report recoml^ndation^I^~did^t specifically address the 

amounts for postage apparently paid on its befialf^lRP has^nofcomplied with the 

recommendation to identi^f He^st^ube of paymW for the postage. Absent such a 

demonstration, the $72^0.in post^^ costs are cqnsidered a prohibited contribution to IRP. 

(For more detail, see p. 

Findins 

iffieldworkXeXudit 

-Rcj^rt: 

During 

14 vend^rMotaling $294,1 

Interim Audit^eport recoi 

the disclosure ofldbbts and obi 

[DM 

Lnot 

id Obligations 

that IRP failed to report debts and obligations to 

sn^^re D (Debts and Obligations). In response to the 

ioi^RP amended its disclosure reports to materially correct 

ions to these vendors. (For more detail, see p. 18.) 

Finding 6. Rdcidrd^eping for Employees 

During audit fieldwork/^e Audit staff determined that IRP 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 2011 and 2012, the Audit staff identified payments to IRP 

employees totaling $558,089 for which IRP did not maintain monthly payroll logs. This 

consisted of $542,812 for which payroll was allocated with federal and non-federal funds, and 

$15,277 for which payroll was exclusively non-federal. In response to the Interim Audit Report 

recommendation, IRP acknowledged that it does not possess any monthly payroll logs for 

' Two disbursements totaling SS2,S04 were not reported, but are included in the $357,613. 

* This amount will be updated to $257,396 based on additional information reviewed in response to IRP's response 

to the Interim Audit Report. 
employees for the 2011 - 2012 time period. IRP stated that it did maintain these logs during the 

2014 election cycle and going forward, they will continue to maintain monthly payroll logs. As 

such, IRP has complied with the Interim Audit Report recommendation by providing details of 

its plan to maintain monthly payroll logs in the future. (For more detail, see p. 19.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Siimmaiy 

During audit fieldwork, a comparison of IRP's reported financial activity with bank records 

revealed a misstatement of receipts, disbursements and ending cash^r^^l 1 and a misstatement 

of receipts and disbursements for 2012. In 2011, IRP overstated.it^ceipts by $36,327, its 

disbursements by $46,370 and understated its ending cash In 2012, IRP 

understated its receipts by $254,528 and its disbursements 

In response to the Interim Audit Report recommendatipnTlRP amended its^isclosure reports to 

materially correct the misstatements for both 201 l. ah^2012.^ 

Legal Standard 

Contents of Reports. Each report must disclose: \^\ 

• the amount of cash-on-hand at the b^inning and end of Hu'reporting period; 

• the total amount of receipts for the repWin^eriod and for^e^e^lendar year; 

• the total amount of disbursements for th^^portin^ period an^for the calendar year; and 

certain transactions that require itemization on^Seti^qlc A^Itemized Receipts) or Schedule 

B (Itemized Disburseme^^). 52 U.S.C. §3^\M(b)(l), (^^(3), (4) and (5). 

\ 

Facta and Anah 

A. Facts 

As part of au^t-'fieldi^rl^,^he A^dit^talf licbnciled IRP's reported financial activity with its 

bank recojds for 201 l^d 2012. Tte'recraciliation determined that for 2011, IRP misstated 

receipts,<^isbursements andvending ca^l^d for 2012, misstated receipts and disbursements. 

The following charts outline thAdiscrepancies between IRP's disclosure reports and its bank 

records. N. \ 

\ 

\20114^ported Activity i to Bank Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

® January 1,2011 

$20,326 $24,000 $3,674 

Understated 

Receipts $776,115 $739,788 $36,327 

Overstated 

Disbursements $749,945 $703,575 $46,370 

Overstated 

Ending Cash Balance @ 

December 31,2011 

$46,496 $60,213 $13,717 

Understated 
The beginning cash balance was understated by $3,674 and is unexplained, but likely resulted 

irom prior-period discrepancies. 

The overstatement of receipts resulted from the following: 

• Transfers from the non-federal account, reported in error 

• Unexplained differences 

Overstatement of Reeeipts 

The overstatement of disbursements resulted from the following: 

• The net over reporting of disbursements 

• Unexplained differences 

Net Overstatement of Disbursements 

- $32,070 

- 4,257 

- iS36.327 

- $46,612 

J42 

-mm 

The Audit staff identified 29 disbursements totaling $52^262 srted in January ^ 

2011, but not found on bank statements provided. IRR/changra depositori^^rior to the audit 

cycle. The Audit staff requested the bank statement^f the prior depositotyTdrJhe month of 

January 2011. These statement(s) were not provjdW^qthe A^d|t staff. IRP stated'^ey 

requested the bank statements but were not able to ^tmnrjhem.-^e $13,717 upaerstatement of 

the ending cash balance resulted from the misstatementssfesdribed above. 

2012 F 

< 

/ 

1 1 

1 

Reported \\ •^Bank Records\ ^ Discrepancy 

Beginning Cash Balance 

^ January 1,2012 

$45,72 P\ $14,492 

Understated 

Receipts -~N$3^655,057 $3,909,585 $254,528 

Understated 

Disbursements V $3,588,143 

-

$3,883,687 $295,544 

Understated 

Ending Caslu'^aitce' -

(®Decemb^31,2012\N 

\^$113,?10- $86,111 $27,299 

Overstated 

The understa^ent of receipts iesultq^'^m the following: 

• Transfdrs'i&pm Politick ^ommittees 

• In-kind con^bptions ^m Political Committees 

• Transfers fron^the^n^-federal account 

• Settlement Accdimting Fees, not reported 

• In-kind postage paid by other than IRP® 

• Unexplained differences 

Understatement of Receipts 

+ 

+ 

+ 

+ 

+ 

+ 

$50,000 

.33,973 

36,453 

22,126 

72,880 

39,096 

+$254.52g 

^ IRP filed an amended report that reduced its beginning cash by a total of S77S irom the reported 2011 ending 

cash. 

' The source of the payments has not been identified by IRP to the Audit staff. See Finding 4. 
The understatement of disbursements resulted from the following: 

• Under-reporting of disbursements 

• In-kind postage paid by other than IRP 

• Underreporting of in-kinds from Political Committees 

• Settlement of Accounting Fees, not reported 

• Unexplained differences 

Net Understatement of Disbursements 

+$168,321 

+ 72,880 

+ 33,973 

+ 22,126 

- 1,756 

+$295.544 

The $27,299 overstatement of ending cash balance resulted from the .misstatements described 

above. 

B. Interim Audit Report & Audit Division Recommendat 

At the exit conference, the Audit staff provided work papers^d discu^'bd the reporting errors 

that caused the misstatements with IRP representatives^^Fl^ asked questions about several 

items and stated that they would file the amendment^fo ensure that the IBJ*>rop(^s were 

accurate. 

The Interim Audit recommended that IRP amend its disc 

misstatements for 2011 and 2012. 

\. 

reports to correct the 

iendatiQn^IRP fended its disclosure reports to 

l.l;;^£ind^l-2 re^rts. 

C. Committee Response to Interim Audii 

In response to the Interim Audit Report reed: 

materially correct the misstatements for both 

Finding 2. ReS^r^g 6l^Apparent Independent ESxpenditures 

Summarv^ 

During audiffieldworl^tlMXpdit^t^^viiBwed disbursements totaling $273,126 that IRP 

disclospd'(m Schedule B, One'^O(b), (p^ral Election Activity Paid Entirely with Federal 

Funds), th^araq^d to be muliprs or;;media-related independent expenditures that should have 

been disclose^on^ Schedule E),Line 24, (Independent Expenditures). 

Additionally, IRP dicknbt pj^ide sufficient documentation pertaining to dissemination dates to 

verify whether 24/48-houp.reports were required to be filed for the apparent independent 

expenditures totaling $273,126. IRP also did not provide invoices associated with 27 mailers 

that contained express advocacy as defined under 11 CFR 100.22 (a). 

In response to the Interim Audit Report recommendation, IRP stated "...that these 27 direct 

mail communications were non-allocable, candidate-specific volunteer mass mailings." IRP 

supplied a third affidavit from IRP's former Deputy Executive Director who stated that during 

the 2012 cycle, IRP supported its federal candidates through the use of non-allocable mail 

processed by volunteers. 
The Audit stalf reexamined the documentation provided by IRP related to the volunteer 

materials exemption for specific communications totaling $33,972 and determined the 

disbursements were not independent expenditures. For the remaining communications 

consisting of $239,154 ($273,126 - $33,972) and the 27 mailers with no invoices that IRP 

claims the volunteer materials exemption is applicable, the Audit staff again recommends that 

the IRP provide further evidence to support the application of volunteer materials exemption to 

the specific communications involved. Absent further evidence that these communications 

qualify for the volunteer materials exemption, the Audit staff considers these communications 

to be independent expenditures. 

Legal Standard 

A. Definition of Independent Expenditures. The term "indepeiraent expenditure" means an 

expenditure by a person for a communication expressly advoeatiilg^e election or defeat of a 

clearly identified candidate that is not made in coordinatiqnS^th any^qwdidate or authorized 

committee or agent of a candidate. No expenditure shal^be;cohsideredimf'^cndent if the 

person making the expenditure allows a candidate, a-^'khdidate's authorized,cbmmittee or their 

agents, or a political party committee or its agents;:tp become Ipaterially inv^yed^^decisions 

regarding the communication as described in 1 l'6FRs,l()9.21(m(^.), or shares fii^ncial 

responsibility for the cost of production or dissemiiiatioinivitniwy such person. 11 CFR 

§100.16(a)&(c). 

B. Expressly Advocating. Expressly ad 

phrases such as "vote for the president,' 

nominee," "cast your ballot for Ae Republi 

Senate in Georgia," accom 

campaign slogan(s) or inaividi 

X 

m^ans any^^^unication that - (a) Uses 

y^ur Con^ssgaan," "support the Democratic 

chdldn^F4°r^ Republican challenger for U.S. 

a picture oll^ne or moj» candidate(s), or communications of 

Xs), whicli\in context can have no other reasonable 

blect; 

inNchi 

meaning than to urgeifiie>elbction oV ^efeat of on^pr.^ore clearly identified candidate(s). 

(b) When taken as a whol&^'dNwith limited reference to external events, such as the proximity to 

' ^'by~a.i:^piiable person as containing advocacy of the 

il^arly identified candidate(s). 11 CFR §100.22. 

the election, could only be ini 

election or d^eSfoTonf OMTH 

C. Dis^l^ure^Requiremeh^ 

reported on ^hedule E (ir ' 

independent exp^imres 

$200. Independem^xpendii 

disclosed as memo entries oi 

Generaf Guidelines. An independent expenditure shall be 

Independent Expenditures) if, when added to other 

the same payee during the same calendar year, it exceeds 

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

Ichedule E and as a debt on Schedule D. Independent 

expenditures of $200 or le^ 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. 

D. 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 

20"* 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 

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. 
10 

reached or exceeded the threshold reporting amount of $1,000. 11 CFR §§104.4(f) and 

104.5(g)(2). 

E. Independent Expenditure Reports (48-IIour Reports). Any independent expenditures 

aggregating $10,000 or more with respect to any given election, at any time during a calendar 

year, up to and including the 20th day before an election, must be disclosed within 48 hours 

each time the expenditures aggregate $10,000 or more. The reports must be received by the 

Commission wi^in 48 hours after the expenditure is made. 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 10^5(^X1). 

F. Formal Requirements Regarding Reports and Statenietft^NEach political committee 

shall maintain records with respect to the matters required to^e repoE^>which shall provide in 

sufficient detail the necessary information and data fron^li^n>the filed>^orts may be 

verified, explained, clarified, and checked for accura^y^d completenes^l CFR 

§104.14(b)(l). 

G. Volunteer Aetivity. The payment by a state comiilittBe'^f a political party"of the costs of 

campaign materials (such as pins, bumper^ickers, handbill^brochures, posters, party tabloids 

or newsletters, and yard signs) used by su^cQq[imittee in cont|^tmn with volunteer activities 

on behalf of any nominee(s) of such party i^ot^^ico^ribution/^irpvitfed that the conditions 

below are met. 

1. Such payment is not for costs inci 

magazine, bill boa^!<i^^^mail, or sir 

political advertising Th^^ direct: 

2. 

3. 

4. 

Th^ 

vendor or any^ailihg(s) 

The portion of the 

from cratributions suDji 

Such'payme'nt-4s . „ .Fnt>4s iiot^ade.^m not^atie contril 

[f of a particul^wdi^^fo 

Is are I' "" 

mectiom ^th any broadcasting, newspaper, 

- type of gcmeral public communication or 

leans any mailing(s) by a commercial 

I from comihercial lists. 

^-matgrials dlprable to Federal candidates must be paid 

" 'tafipns and prohibitions of the Act. 

tions designated by the donor to be spent on 

office. 

volunteers and not by commercial or for-profit 

5. If mad^yVpolitical dpmmittee, such payments shall be reported by the political 

committers a>(|isbur^ment in accordance with 11 CFR §104.3 but need not be 

allocated to specific'pandidates in committee reports. 

6. The exemption is^t applicable to campaign materials purchased by the national party 

committees. 11 t¥R §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR §100.147 (a), (b), 

(c),(d),(e)and(g). 
11 

Facts and Analjrsis 

A. Reporting of Apparent Independent Expenditures 

1. Facts 

During audit fieidwork, the Audit staff reviewed disbursements to ensure proper reporting. 

The Audit staff notes that IRP did not disclose any independent expenditures on Schedule E, 

however it made apparent media-related expenditures totaling $273,126 and disclosed them 

as Federal Election Activity (FEA). These conununications, as weH as 27 other mailers that 

are not associated with invoices, were identified as possible indraendgnt expenditures. To 

document the use of volunteers, IRP provided four volunteer'sign in sheets, two sworn 

affidavits for which the authors attest to the use of volunte^i^in^l the mailers and 24 

photographs of volunteer involvement in seven of th^lUers.' BMed on the documentation 

provided, the Audit staff was only able to match foi^nf^ij^ and two sign in sheets to 

photographs for which an invoice was provided.ytptaling $33,972, se^^^^bfelow. Two 

additional sign in sheets were provided, how^rf they coi^ld not be assc^i^^ith invoices 

for mailers, see (b.) below. Of the two sign i^li^ts>^a^^id not be asso^ated with 

invoices, only one could be associated with a mailen^^-^ 

A breakdown analysis of these ex; I is as follows 

a. Apparent Independent Expenditui^^epQrted I A Volunteer Mail 

(Associated Invoice Provided) \\ / 

IRP made 16 ^arehMndependenV^penditur^otaling $273,126 for which it 

provided a.copy of the mailer with ^associated invoice. Mailers totaling $33,972 

for which^IR^ pipvided two sign in sn^t^>and photographs are included in the 

$273,126 totar.\^corqing~to.the Audh'Staff, each of these mailers contained 

ating.^i^i^ction or defeat of a clearly identified 

r 11 CFR§ 100.22(a), or when taken as a whole and with 

Its could only be interpreted by a reasonable 

:y of the election or defeat of one or more clearly 

lefined under 11 CFR § 100.22(b). 

language 

(^didate-t^definec 

/ dimited referen^p 

^^^\person as containii^g adv( 

ideiitified candidatte(s) as^ 

b. ApparenHi ApparenHndepi^ent \\ Expenditures Reported as FEA Volunteer Mail (No 

Invoice^Aaso^ted) 

IRP providej^>27 different mailers that contained language expressly advocating the 

election or defeat of clearly identified candidates, as defined under 11 CFR 

100.22(a). 

IRP did not provide sufficient information to allow each of the 27 communications 

to be associated with an invoice. Without this additional information, the Audit 

staff is unable to calculate thie disbursement amount for the 27 mailers. 

This documentation was provided both during fieidwork and in response to the exit conference. There were 10 

additional photographs provided by IRP that appear to contain similar individuals at the same facility, however, 

the Audit staff was not able to associate them with any of the mailers or sign in sheets provided by IRP. 
12 

c. Volunteer Material Exemption 

In response to the Audit's staffs request during fieldwork for documentation to 

support the volunteer materials exemption that the committee reported, IRP provided 

24 pictures of individuals sorting, bundling and placing the mailers into mail bags. 

IRP supplied three volunteer sign in sheets for three different mailers. Seven 

different mailers can be seen in the pictures provided. Each of the volunteer sign in 

sheets contained two names. Two of the sign in sheets were dated September 13, 

2012 and each had the name of a Republican congressional candidate. 

The Commission has addressed the applicability of the^vplwtger materials 

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

Democratic Executive Committee of Florida, and. t^d^^essee Republican Party. 

In these reports, the Commission recognized a Idck of clarit^'^regarding the 

application of the volunteer materials exemj^oh^'kie Comnu^sion had attempted to 

formulate a consensus policy regarding wHat constitutes subsmtial^olunteer 

involvement for the purpose of applyin^the exembtion,' but this\»s'^er 

achieved. Since a lack of clarity exislts cbqcb|iiing^e.^pplication opAie volunteer 

materials exemption, it follows that the typd^a^'amount of documentation needed to 

support volunteer involvement, is also unclear. 

In view of the uncertainty rega^ng^he-annount of ^|u^er involvement needed to 

qualify for the volunteer materia^\exemptidh^as well^as the amount of 

documentation required to support\Wch;>ifrexemptiph, the Audit staff recommended 

that, IRP provi^mqre^detailed inforaiation andjdocumentation for any volunteer 

involvemrat-as^ciat^with each maiW. 

2. Interim Audit A^udit-Division Recommendation 

This issue y^as presented at^e^mitxoii^r^ce. The Audit staff provided a schedule 

detailing-^dsTe'xpenditures tqlRP representatives. IRP representatives stated that the 

exp^it'ures were no^^(iepende^^expenditures but were non-allocable mailers. IRP 

officialised that the di^t maiPe^cpenditures were for candidate specific mass mailings 

for whicfisvolunteers wer&utilized. 

\ J In response to th^eyit conference, IRP provided one additional sign in sheet that was dated 

September 20,2ul5''t<^ocument the use of volunteers in their mail program. They also 

provided two swonrqfifdavits from individuals. In one sworn affidavit, an individual 

explained that he o^rsaw the volunteer component of IRP's mail program and that for 

every mail piece that IRP sent on behalf of federal candidates, volunteers processed those 

mail pieces in accordance with FEC guidelines. Further, the individual described the 

process performed by the volunteers as follows: the volunteers unpacked mail pieces; sorted 

by address; banded together mail pieces, placed them in bags and loaded them for transport. 

In the second sworn affidavit another individual stated he would go on to become the 

volunteer coordinator and that as a regular volunteer for IRP, he spent a great deal of time 

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

' IRP provided three sign in sheets during field work. 
13 

processing volunteer mail for IRP on behalf of Republican congressional candidates. He 

described the same basic process as the first individual about the involvement of the 

volunteers IRP used for Republican candidates for Congress. 

The Interim Audit Report recommended that IRP provide: 

• Additional invoices and/or information for the 27 mailers containing express advocacy; 

and 

• Documentation and evidence that apparent independent expenditures totaling $273,126 

and the 27 mailers containing express advocacy did not require reporting as independent 

expenditures. 

In addition the Interim Audit Report recommended absent 

reports to disclose these disbursements as independent 

submit revised procedures for reporting independent expej 

3. Committee Response to Interim Audit Reppit 

In response to the Interim Audit Report recomt^endation,' 

mail communications were non-allocable, candii 

referred to two sworn affidavits it previously provi 

committee individuals who were involved in its mail 

volunteer component of the volunteervnii^l^Both sworn 

which IRP volunteers regularly process^all^f-IRP's non 

third sworn affidavit from IRP's former^epui^^Ej^cutive 

2012 cycle, IRP supporte4.its federal ' ' ^ 

processed by voluni 

icl^evidence, IRP amend its 

idit^s on Schedule E and 

litures. ^ 

stated "...that ^e^e 27 direct 

ilunteerma^ailings." IRP 

Audit staff from two 

. that were responsible for the 

j^ayits^described the process by 

[email. IRP supplied a 

ir who stated that in the 

iu^^i?use of non-allocable mail 

With respect to thd'fo^ inailer^ tjotaling $33,47^^or which IRP provided two sign in sheets 

and photographs, the Au^^^ta^^ieves the 4pcumentation provided in support of the 

volunteer ntiateiials exem^ipiixjs consisteji^ith such evidence provided in past audits. As 

a result,'4ie^e di^utsements are^o longer being considered independent expenditures. For 

the reihiffming 12 mailem totalii^23^?lS4 ($273,126 - $33,972) and the 27 mailers without 

inv^fcbSt^t IRP claim^e^volunt^e'r materials exemption is applicable, the Audit staff 

again recommends that 11^ provide further evidence to support the application of the 

volunteer mat^als exemption to the specific communications involved. Such evidence will 

assist the Comm^ision iii djetermining if the volunteer materials exemption is applicable to 

these communicationsi-^/ 

B. Failure to File 24/4lB-Hour Reports for Independent Expenditures 

1. Facts 

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

did not file 24 or 48-hour reports for any independent expenditures. Therefore, the apparent 

independent expenditures identified above by the Audit staff may also have required such 

filings. 
14 

2. Interim Audit Report & Audit Division Recommendation 

This issue was presented at the exit conference. The Audit staff provided a schedule 

detailing these expenditures to IRP representatives. IRP representatives stated that the 

expenditures were not independent expenditures but were non-allocable mailers that used 

volunteers. 

The Interim Audit Report recommended that IRP provide documentation to support the date 

of public dissemination for each of the 16 apparent independent expenditures totaling 

$273,126 and the 27 mailers to determine whether a 24 or 48 hounreport was required. 

3. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendation,>UlP^^^lt^ that all direct mail at 

issue was intended to be processed as non-allocable maii^^and nots^Mndependent 

expenditures. With respect to the four mailers totalipg^^3i^972 for u(^ich IRP provided two 

sign in sheets and photographs, the Audit staff belidves the documentatiomprovided in 

support of the volunteer materials exemption js^cbnsi 

past audits. As a result, these disbursements 

expenditures. Absent further evidence that the 

$239,154 ($273,126 - $33,972) qualify for the voluni 

considers the 39 (27+12) apparent independent expendi 

expenditures that also required either 24Kpr>^~^hour reports. 

'ith such evic 

it|ig consic 

ice-pfovided in 

i^independent 

immunications totaling 

rials exemption, the Audit staff 

^above to be independent 

I Finding 3. Recor4fcef ptng for 

V. 

ations 

Summaiy \^, \V 

During audit fieldwork, the «^ait^tafl[r^iewed4isbursements to verify the accuracy of the 

information a^proper cl^sifie^ti'on oflransactions disclosed on reports. IRP reported 19 

expenditi^^f^ling^3^^6|3,'°W'S.chedule B, Line 30(b) and Schedule H4 (Disbursements 

for All^i^^Federal/Non^:^eral with the purposes of FEA Volunteer Mail, 

Advoc^^qU^for Federal c^idate^Direct Mail Services, equipment and phone minutes for 

Federal candidq^vpnd Auto-^ialer for Federal candidates. Documentation that was provided 

by IRP was insinftcierit to mak^a determination pertaining to the puipose for these 

disbursements and vq^ficatipp'^s Federal Election Activity or Allocated Federal/Non-federai 

Activity. 

In response to the Interim Audit Report recommendation, IRP stated that it has searched its 

records and was unable to locate additional documents to substantiate these disclosures. Absent 

the provision of these records, the Audit staff considers the matter a violation of the 

recordkeeping requirements at 11 CFR §104.14(b)(1). 

Two disbursements totaling $52,304 were not reported, but are included in the $357,613. 
15 

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.i4(b)(l). 

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 disbu^idqms to verilfy^e^accuracy of the 

information and proper classification of transactions-^T^losed on reportsNlj^reported 19 

expenditures totaling $357,613 for which documentation was^i^ufficient to nme^ 

determination pertaining to whether these disbure^en^SNwere^mctly report^^n Schedule B, 

Line 30(b) or Schedule H4. 

The Audit staffs analysis resulted in the'foUowing: 

i. Disbursements- No Invoices or Conies ofCommunicatioiis Provided ($280.277^ 

Disbursements totaling.$280,277 wer6^aj^t6 fdurjimPVendors and three phone bank 

vendors, and wer^iklq^d^n Schedule^and Schedule H4, with purposes of FEA 

Volunteer Mail,/A^ocacy.ca|ls for Fedem candidates. Direct Mail Services, equipment 

and phone mintfte^Qf Fedqral candidates^^uto-Dialer for Federal candidates. 

Without sufficient aqtdils,^^T\udlt staff i^unable to verify IRP's reporting of these 

amou^S'as Federal EfeqUd^XStivity^fAllocated Federal/Non-federal Activity. The 

Audit^st^^fiirqu^ed copqs of the invmces for the associated mail pieces and phone 

bai^cripts for eaqh phon^^ui^ement. To date, these invoices or other information 

ns^a^ciate the payments to a j^icular communication have not been provided. 

ii. Disbursenrents- Invoices Provided - Not Able to Associate with Conies of 

Communications 

IRP reported ^ying;dfsbursements totaling $77,336" to two mail vendors. IRP 

disclosed three ^wrs'ements on Schedule B, Line 30(b) with purposes of "FEA 

Volunteer Mail - Walsh". For these disbursements, IRP provided invoices but did not 

provide information about the related mail communications. Without sufficient details, 

the Audit staff is unable to verify IRP's reporting of these amounts as FEA Volunteer 

Mail. The Audit staff requested information that would allow an association between 

the invoice and the communication, however, to date IRP has not provided this 

information. 

'' The amount of invoices associated for these mailers is $129,490. This is part of Finding 4. 
16 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staif presented IRP schedules of the disbursements for which 

further records were necessary to verify the accuracy of reporting. At that time the Audit staff 

again requested that IRP provide invoices, copies of communications and scripts that would 

associate each invoice to the corresponding communication to the committee disclosure reports. 

The Interim Audit Report recommended that IRP provide the invoices, scripts and associated 

mail communications for the disbursements totaling $357,613. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, IRP stated that it searched its records 

and was not able to locate additional documents to substantiate the^di^osures. Absent the 

provision of the records, the Audit staff considers the matter a yiola^ion of the recordkeeping 

requirements at 11 CFR §104.14(b)(1). 

Finding 4. Receipt of Apparent 

Contributions 

Summary 

During audit fieldwork, the Audit staff i 

totaling $72,880 to the benefit of IRP. THt 

of postage for campaign mailers invoiced 

response to the Interim Audit Report recoi 

amounts for postage apparratly paid on its bel 

recommendation to identi^ll^ource of pa; 

demonstration, the $72,880Jn postage costs are 

Legal StaiK 

A. Receipt Q: 

led apparent pr^milhted in-kind contributions 

It prohibiteiSx^kind contributions consisted 

itly pj^doy an unknown source. In 

specifically address the 

RP has^f complied with the 

it for the postage. Absent such a 

sidered a prohibited contribution to IRP. 

AvtionT^Geheral Prohibition. Candidates and committees 

of money, in-kind contributions or loans): 

'^f thofollowing prohibited sources: 

any incorporated organization, including a non-stock 

irated membership organization, and an incoiporated 

trohiMt 

sf^accept comrij; 

e of anof 

2. From>^ie^asury 

• COTp^tions I 

cor 

cooperath 

• Labor Orgahj^tions; or 

• National Be 

3. Federal Govemment Contractors (including partnerships, individuals, and sole 

proprietors who have contracts with the federal govemment); and 

4. Foreign Nationals (including individuals who are not U.S. citizens and not lawfully 

admitted for permanent residence; foreign govemments and foreign political parties; and 

groups organized under the laws of a foreign country or groups whose principal place of 

business is in a foreign country, as defined in 22 U.S.C. §611(b)). 52 U.S.C. §§30119 

and 30121. 
17 

B. Contribution. A gift, subscription, loan (except a loan made in accordance with 11 CFR 

100.72 and 100.73), advance, or deposit of money or anything of value made by any person 

for the purpose of influencing any election for federal office is a contribution. The term 

anything of value includes all in-kind contributions, of any goods or services without charge 

or at a charge that is less than the usual and normal charge for such goods or services. 11 

CFR §100.52. 

Facts and Analysis 

A. Facts /V 

During audit fieldwork, the Audit staff identified apparent prohibit^'ii^kind contributions 

totaling $72,880. The apparent prohibited in-kind contributions-consisted of payments for 

postage paid directly to a mail vendor used by IRP for at least^^nml^rs that IRP sent out. 

This amount was identified from invoices IRP provided ^fWre foi^wqCongressional 

candidates, Joe Walsh for Congress Committee and Plimm^ for Congre^k>y Contained on 

each of the 14 invoices was an amount for postage thread. Postage - Paid D^ectly to Mail 

House". IRP bank statements, both federal and noQ-federal, do not show thes^^tarounts being 

paid. The amount paid for postage that could not b^lr^ed tO/ffiR bank statemrafs is $72,880. 

However, the Audit staff notes that other mailings ass^iafed'^itlitlandidates that IRP sent out 

appeared to involve postage paid for by ^e Candidates' wthbrized committees. For example, 

the Randy Hultgren for Congress commit(;ee,"transferred $71^79 to IRP and reported the 

transfers as, "Direct Mail Production." IR^repQhed spending V7.0ii^2 for three mailers in 

which the purpose was, FEA Volunteer Maif Hulfgnen for Congrgsl 

\\ ^ / 

B. Interim Audit Report ^ Addit Division Rii^ommemlfition 

At the exit conference, jKe'Audit^taffi provided the supporting documentation and work papers 

for the apparent prohibiteidTi^-kind'cyntributions. N^^IRP representative stated that the 

amounts were for one of thARepubli^ Congress^nal candidates. 

The InteriinXudrt Riepq^recomntended that IRP provide evidence demonstrating that the inkind contributions in questjohswei^i^e with permissible funds or refund such contributions. 

In addifiioh,^e Interim Audit Report i^ommended that if funds are not available to make the 

necessary refunds or disgorgement, IBLP should disclose the contributions requiring refunds on 

Schedule D (Debts and Obligations) until funds become available to make such refunds. 

C. Committee Response t^-'Interim Audit Report 

In response to the InterinvAudit Report recommendation, IRP did not specifically address the 

amounts for postage apparently paid on its behalf. IRP has not compli^ with the 

recommendation to identify the source of payment for the postage. Absent such a 

demonstration, the $72,880 in postage costs are considered a prohibited contribution to IRP. 

" A complete set of invoices was not supplied. The amount of the possible prohibited contributions may be 

higher. 

" IRP reported receiving $112,000 from the Joe Walsh for Congress Committee along with SSO.OOO from the 

Plummer for Congress Committee. 
18 

Finding 5. Reporting of Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff noted that IRP failed to report debts and obligations to 

14 vendors totaling $294,117*'* on Schedule D (Debts and Obligations). In response to the 

Interim Audit Report recommendation, IRP amended its disclosure reports to materially correct 

the disclosure of debts and obligations to these vendors. 

Legal Standard 

A. Continuous Reporting Required. A political committee must^i^cl^e the amount and 

nature of outstanding debts and obligations until those debts are^tiriguished. 52 U.S.C. 

§30104(b)(8) and 11 CFR §§104.3(d) and 104.11(a). ^ 

B. Separate Schedules. A political committee must filt^parate sched^qs for debts owed by 

and to the committee with a statement explaining the oircumstences and cohttitions under which 

each debt and obligation was incurred or extingui§h^.\l 1 CF^ 104.11 (a). 

C. Itemizing Debts and Obligations. ^ 

• A debt of $500 or less must be reported as of the time parent is made or not later 60 days 

after such obligation is incurred, whie|i.^ver^comes first. ^ 

• A debt exceeding $500 must be disclosecrin-the report that cqyers the date on which the 

debt was incurred. 11 CFR §104.1 l(b).\\ .. ^ 

Facts and Analysis^ 

A. Facts , j , 

During audit fieldwork, fhe Aydit staff reviewed 11^ disbursement records and disclosure 

reports for proper reporting of deljts-aiidjobligati^s. The review identified debts and 

obligations to.^.ve5d6rs4otalin^'$294,rr7'®--not reported on Schedule D (Debts and 

Obliptions^'^f these'd^b&,^$ 173^348'^ was incurred during the audit period and $120,769 

was incij^^Nprior to the audit'perio^>w<^;iemained outstanding as of the beginning of the audit 

period.^ Bas^d^on the records, Aese v^dors provided mainly legal services, accounting 

services, telem^etmg and m^iljservices. 

B. Interim Audit R^o^t &^^dit Division Recommendation 

The Audit staff discussedreporting of debts and obligations with IRP's representatives at 

the exit conference and<provided work papers detailing the unreported debts. Representatives 

said they would research this matter and provide additional documentation. IRP representatives 

stated that they would amend their reports. 

Additional records were requested at the exit conference relating to possible debt amounts that IRP disclosed on 

a separate filing prior to fieldwork. Those records were not provided to the Audit staff. This amount is update 

to $257,396. 

IRP provided the Audit staff with 177 invoices for 724 disbursements. 

" Each debt in this amount was counted once even if it requires disclosure over multiple periods. This amount has 

been updated to $257,396. 

" This amount has been updated to $136,627. 
19 

The Interim Audit Report recommended that IRP amend its disclosure reports to disclose these 

debts. 

C. Committee Response to Interim Audit Response 

In response to the Interim Audit Report recommendation, IRP amended its disclosure reports to 

materially correct the disclosure of debts and obligations to these vendors. In addition, IRP 

acknowl^ged that the items identified in the Interim Audit Report "...arguably should have 

been reported as debt on Schedule D during the relevant reporting period." 

Finding 6, Recordkeeping for Employees. 

Summary 

During audit fieldwork, the Audit staff determined thanRP^id not maintmliNwy monthly 

payroll logs, as required, to document the percentag^of time each employTO.spent m connection 

with a federal election. For 2011 and 2012, the Au^staff id^ified paymema^^P 

employees totaling $558,089for which IRP did nohii^n^^nienthly payrolMogs. This 

consisted of $542,812 for which payroll was allocated with federal and non-federal funds, and 

$15,277 for which payroll was exclusivdW-non-federal. In response to the Interim Audit Report 

recommendation, IRP acknowledged that it^bs.n^ possess any mon^ly payroll logs for 

employees for the 2011 - 2012 time period^RP.^ted.diat it did^ipdintain these logs during the 

2014 election cycle and going forwa^, they will corainjie"to.mmfltain monthly payroll logs. As 

such, IRP has complied with-thelqterim Audii^eport recon^radation by providing details of 

its plan to maintain mon|hLy'payl^^|ogs in the mture. ^ 

Legtd Standard 

[non|hLy'payrolf>|o 

^ V Maintenance of Monthly I^ra-.y'Pait}^mmitte^s!^ust keep a monthly log of the percentage 

of time each employee spqndsiq^conn^ibn--wM a federal election. Allocations of salaries, 

wages, and^hge ben^t^ar^to be^^rtaken as follows: 

• ^fnmloyees who speqd 25 perc^nf^ less of their compensated time in a given month on 

fe^^'lelection activiljie^ must^bfe paid either from the federal account or be allocated as 

admimst^iye costs; ^ j 

• employees^^hQ spend more than .25 percent of their compensated time in a given month 

on federal eleqtibn activities must be paid only from a federal account; and, 

• employees whot'^TOnd 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)(l). 

Facts and Analysis 

A. Facts 

Prior to audit fieldwork, the Audit staff was informed by IRP that it did not maintain any 

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

" IRP did not have employees paid with a mixture of federal and non-federal funds and exclusively non-federal 

funds during the same month. 
20 

connection with a federal election. These logs are required to document the proper allocation of 

federal and non-federal funds used to pay employee salaries and wages. For 2011 and 2012, 

IRP did not maintain monthly logs for $558,089'^ in payroll disbursements. This amount 

includes payroll paid as follows to IRP employees. 

• Employees reported on Schedule H4 and paid with federal and non-federal funds during 

the same month (totaling $542,812) and; 

• Employees paid exclusively with non-federal funds in a given month (totaling $15,277). 

B. Interim Audit Report & Audit Division Recommendation 

Prior to audit fieldwork and at the exit conference, the Audit staf^^scuraed the payroll 

recordkeeping matter with IRP's representative and counsel. IRP counsel noted that IRP did 

not maintain payrolls during the 2011-2012 election cycle, ho^^^,'):umntly does maintain the 

payroll logs. 

The Interim Audit Report recommended that IRP ^vide evidence that it mmptained monthly 

time logs to document the percentage of time an |imlQyee spbnt in connectira^^federal 

election; or implement a plan to maintain monthly pa>^l^gs^iih^e future, 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, IRP^^knowledged that it did not 

possess any monthly payroll logs for emplowes^^^^ 2011 - 2pi2:;^me period. IRP stated 

that it maintained these logs during the 20I4^jectibn aiid-going (bfward, IRP will require all of 

its employees who are paid by both federal andmo^-fed^ral fwds to maintain monthly logs of 

the time each spends on f^di^l.and^non-federm^^ivities. ^ such, IRP has complied with the 

Interim Audit Report recpinmen^ia|ion by providing details of its plan to maintain monthly 

payroll logs in the fut 

" This total does not include payroll for employees paid with 100 percent federal fonds and reported as such (see 

Part I, Background, Commission Guidance, Request for Early Commission Consideration of a Legal Question, 

Page 1). Payroll amounts are stated net of taxes and fringe benefits.