Draft Final Audit Report of the Audit 

Division on McCain-Palin 2008 Inc. 

and McCain-Palin Compliance Fund, 

Inc. 

March 24, 2008 - December 31, 2008 

Why the Audit Was 

Done 

Federal law requires the 

Conunission to audit 

every political committee 

established by a 

Presidential candidate 

who receives general 

fiinds for the general 

campaign.' The audit 

determines whether tiie 

candidate was entitied to 

all of the general fimds 

received, whether the 

campaign used the 

general fimds in 

accordance with th( 

and whether the t 

otherwise complied wi 

the linutati 

prohibiti^B, and 

disclo^t requiremeni 

of tneeH|on law. 

Future Act 

The CommissioT 

initiate an enforcei 

action, at a later tim^ 

with respect to any of the 

matters discussed in this 

report. 

About the General Conunittj 

McCam-Palui 2008 Inc. (GeneralJpnnShtee) is the principal campaign 

committee for Senator John S J|^B^n, the Republican Party's 

nominee for the office of Praffi^Byie United States. The Creneral 

Coinmittee is currentiy heaoKiartereaBiVashington, DC. For more 

information, see the cj|^B^ Oampaign^B^ization, p. 2. 

Financ: 

Comniittee 

• Receipts 

leral Funds Ri 

Jlp Operatini 

_/e d 

OdkrRi 

Toti|B|Keipts 

Disbursements 

o Operat^ Expenditures 

Loan Rwyments 

isbursements 

o lorarDisbursements 

itures 

$ 84,103,800 

9,318,570 

17,076,880 

1,154,733 

$ 111,653,983 

$ 92.083,836 

17,076,880 

1.491,107 

$ 110,651,823 

Ling and Recommendation for the 

Creneral Committee (p. 5) 

Campaign Travel Billmg for Press 

26U.S.C. §9007(a). 
i\bout the Compliance Fund 

The McCam-Palin Compliance Fund, Inc. (Compliance Fund) was established pursuant 

to 11 CFR §9003.3(a)(l)(i). The Compliance Fund accepts conttibutions to be used 

solely for legal and accounting services to ensure compliance with tiie Federal Election 

Campaign Act (tiie Act). These contributions mclude tfae Compliance Fund's share of 

conttibutions from affiliated joint fundraising committees. The Compliance Fund is 

currently headquartered in Washington, DC. An overview of financial activity for the 

Compliance Fund is presented below. 

Financial Activity of the Compliance 

• Receipts 

o Contributions 

o From Other Authorized Committees 

o Offsets to Operating Expenditures 

o Other Receipts 

o Total Receipts 

• Disbursements 

o Operating Expenditures 

o All Other Disbursements 

o Total Disbursements 

Finding and 

Compliance"^ 

H,675,642 

,112,237 

24,787,879 
About Joint Fundraising Committees 

This audit included seven jomt fimdraising coinmittees. Each of the joint fimdraismg 

coinmittees is headquartered in Alexandria, Virginia and was an authorized committee of 

tiie candidates, John McCain and Sarah Palin. The combined financial activity of these 

joint fimdraising coinmittees is presented below and the financial activity of each of tiiese 

committees is presented on page 4. 

Financial Activity of the Joint Fundraising Committees 

• Receipts 

o Contributions 

o From Other Autiiorized Committees 

o Offsets to Operating Expenditures 

o Total Receipts 

• Disbursements 

o Operating Expenditures 

All Otiier Disbursements 

Total Disbursements 

207,620,125 

812,325 

159,926 

Finding and Recommendation 

Committees (p. 5 

Based on tiie limitedjnmu 

presented by the sefAipint ft 

material non-complij 

$ 30,374^ 

167,116,292 

$ 197/191,195 

t Fundraising 

s and statEments filed and the records 

tees, the Audit staff did not discover any 
Draft Final Audit Report of the 

Audit Division on 

McCain-PaUn 2008 Inc. and 

McCain-Palin Compliance Fund, 

Inc. 

March 24. 2008 - D 2008 
Table of Contents 

Parti. Background 

Authority for Audit 

Scope of Audit 

Inventory of Records 

Part n. Overview of Campaign 

Campaign Organization 

Joint Fundraismg Conunittees 

Overview of Fmancial Activity 

Page 

Part m. Summaries 

Findmg and Recommendation - General 

Findmg and Reconunendation - Compliance Fi 

Finding and Recommendation - Jomt Fimdraismg 

Part IV. Finding and Rec 

General Committee 

Campaign Travel Bii 

Party. Fin 

Compliance 

Failure 

tion for the 

endation for the Joint 

19 

Findin^nd 

^g Connyttei 

le linutedHamination of the reports and statements filed and the 

id, the ^dit staff discovered no material non-compliance. 21 

Partvn. AttoHment 

Statement of Ne^utstanding Qualified Campaign Expenses 22 
Parti 

Background 

Authority for Audit 

This report is based on audits of McCain-Palin 2008 Inc. (General Conunittee), McCainPalin Compliance Fund, Inc. (Compliance Fund), and seven joint fimdraising coinmittees 

affiliated witii the Compliance Fund, undertaken by tiie Audit Division of the Federal 

Biection Commission (the Conunission) as mandated by Section 9007(a) of Titie 26 of 

the United States Code. That section states that "after each 

Conimission shall conduct a thorough exammation and audit 

expenses of the candidates of each political party for Presi 

includes joint fundraismg conimittees authorized by tfae 

9009(b) of Titie 26 of tiie United States Code sttites, 

conduct other exammations and audits as it deems 

al election, the 

lifted campaign 

Vice President." This 

, Section 

mmission may 

Scope of Audit 

The audits of the General Committee and Complis 

1. the receipt of excessive contributions and loans; 

tiie receipt of conttibutions from njubited sources;^ 

the receipt of ttansfers from other lBM|j ^ commit 

the disclosure of contributions and raisIeR^^fiiyed; 

the disclosure of disbursements, debt^id 

the recordkeepuig praflj^^d completiu^of recdl 

the consistency bgpeS^^Bted figures%id bank records; 

the accuracy o^j^AfitatemeHof Net OutsSnding Qualified Campaign Expenses; 

the campaigns' conHjmiceAfaspendmg iHtations; and 

other camoaien operSAfl^RM^H^b^eview. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

10 

The 

ex 

1. 

2. 

3. 

tiien 

tiie 

the proper 

Fund; and 

lisin| committees affiliated with the Compliance Fund 

inttifajSttons and loans; 

intributions among joint fimdraising participants; 

penses and net amounts ttansferred to the Compliance 

4. the consistency oHFeen reported figures and bank records. 

Inventory of Records 

The Audit staff routinely conducts an inventory of campaign records before it begins tiie 

audit fieldwork. The records for each of tiie audited conunittees were complete and the 

fieldwork began immediately. 
Part II 

Overview of Campaign 

Campaign Organization 

Joint 

Of the ^^UlA^int fundrais 

in April 200S^d three regis 

Alexandria, Vi^^^and Lisa 

fundraising comnS^is maim 

committee maintain 

)mnuLi|p,^our registered with the Federal Election Commission 

m ^i^st 2008. These committees are headquartered in 

kker is the Treasurer for each coinmittee. Bach of six joint 

led a suigle bank account, and the seventh joint fimdraismg 

accounts. 
Overview of Financial Activity 

(Audited Amounts) 

General 

Committee 

Compliance 

Fund 

Opening Cash Balance- $0 $0 

Receipts 

• Contributions $9,679,490 

• Federal Funds Received $84,103,800 

• From Other Authorized Committees PT5.046,453 

• Offsets to Operating Expenditures 9,318lMk 1.131,139 

• Loans Received 17,0'W80^ 

• Other Receipts Jft^3 ^m^l,782 

Total Receipts 1(11,65^,983 $4m|864 

Disbursements 

• Operatmg Expenditures *^^^|083i^ $11,675JC 

• Transfers to Other Authorized 

Coinmittees 

222502 

Refunds to Conttibutors 

Odier Disbursements 

Total Disbursements 

Closing Cash Bals 

"$110^ 

108 $1,002,160 

551,599 

12,338,136 

$24.787.879 

$23,540,985 

Part III 

Summaries 

General Committee 

Campaign Travel Billing for Press 

The General Committee received reimbursements totaling $344,892 from the Press for 

campaign ttavel, which was above the maximum amount billable to the Press. The 

Conunission's regulations provide that a 10 percent markup on the actual cost of 

ttansportation and services may be billed to the Press. The GengAConxmittee stated 

that tiie excess reimbursement from the Press for ttavel was ajKaUooition of billing 

proceeds, requning tiie General Cominittee to pay John M<j^^^nnR inc. (the Prunary 

Committee) for the excess funds collected. 

In response to tiie Preliminary Audit Report, the ^^^rConunitteeTM^ined that it 

used a reasonable process for the allocation ofB^s reimbursements berUhctiie two 

conimittees tiiat is consistent with Commissio^^^ent^^ell as GeneilBKccepted 

Accounting Principles (GAAP). The General ComBteyB^ucplained itscontention 

that any apparent excess of Press reimbursements coInH^ durmg the term of the 

contract could be corrected by makirifc^iavment to the^B|^y Committee. The 

General Coinmittee requested that theWH^|^on permitsiwis&r from the General 

Committee to tiie Primary Conunittee t^es^^^^natter. nRe event that the 

Commission does not permit the ttansfer^e GjpRKkmjmiitee requests that it be 

allowed to disgorge the^MKive Press reiiUa^em^iiMKhe U.S. Treasury. The 

General Committee h«veM^^ e ConmiKion shoulnfmd tiiat tiie Press 

reimbursements wflBorrecti^Bculated resuking in no violation of tfae Act, and that the 

General Committee u9l|mninKinunediatel w more detail, see p. 6.) 

Comi 

FaHn^o File 

The Coni^B^e Fund fail 

$240,700 tiil^u^e receivei 

Audit Report, tHIfemplij 

Lounrotices 

^o file48-hour notices for 169 contributions totaling 

irior to tiie general election. In response to the Preliminary 

Fund explained that it faad experienced a one-time datamanagement errorlH^fbutside vendor relatmg to tfae 48-faour notice requirement. The 

Compliance Fund hsSakcn measures to ensure tfaat this unintentional oversight was 

corrected. The Compliance Fund believes that the Commission sfaould fmd tiiere was no 

violation of tiie 48-hour notice requirement and that tfae Compliance Fund sfaould be able 

to terminate immediately. (For more detail, see p. 19.) 

Joint Fundraising Committees 

Based upon tfae limited examination of tfae reports and statements filed, and tfae records 

presented by seven joint fimdraismg conimittees, the Audit staff discovered no material 

non-compliance. (For more detail, see p. 21.) 
Part IV 

Finding and Reconunendation for the 

General Committee 

I Campaign Travel Billing for Press 

billal 

Summaiy 

The General Committee received reimbursements totalmg $344, 

campaign ttavel, whicfa was above the maximum amount 

Commission's regulations provide that a 10 percent marku] 

ttansportation and services may be billed to tiie Press, 

tiiat tiie excess reimbursement from tfae Press for ttavi 

proceeds, requiruig tfae General Committee to pay 

Comminee) for tfae excess funds collected. 

a 

ain 2001 

from the Press for 

Press. Tfae 

actual cost of 

Conunittee stated 

ition of billing 

. (tfae Primary 

In response to tfae Preliminary Audit Report, tfae CSll^ral O^l^^ittee maint^ed tfaat it 

used a reasonable process for tfae allocation of Press^BKursements between tfae two 

conimittees tfaat is consistent witfa Coxmnission precedeSj^ell as Generally Accepted 

Accounting Principles (GAAP). The cB^BlCommittee a^gcplftincd its contention 

that any apparent excess of Press reimoECT^^^gllected diHIgtfae term of tiie 

conttact could be corrected by making a p|vm^HB||^muil^ Coinmittee. The 

General Committee reque^^tiiat the Conwu^n peHBrtransfer from tfae General 

Committee to the Prim^K^Blittee to resHre tfae mall&. In tfae event tfaat tfae 

Conimission does 

allowed to disgorj 

General Committee belS 

reimburse] 

General^Jmmitl 

irmit tiHransfer, the^neral Cominittee requests that it be 

LcessiwPress reimbuwtients to tiie U.S. Treasury. The 

sfaould find tfaat tfae Press 

king in no violation of tfae Act, and tfaat tiie 

^rmimimmediately. 

A. ExpenaBhres for TraBiortaUon and Services Made Available to Media 

Personnel amB|cret SerCe. Expenditures by an autfaorized committee for 

ttansportation, ?W| d s^Jces or facilities (including an ttavel, ground ttansportation, 

housmg, meals, telqn^^service and computers) provided to media personnel. Secret 

Service personnel o^Btional security staff will be considered qualified campaign 

expenses, and, except for costs relating to Secret Service personnel or national security 

staff, will be subject to tiie overall expenditure limitations of 11 CFR 9003.2(a)(1) and 

(b)(1). 11 CFR §9004.6. 

B. BUling Media Personnel for Transportation and Services. The committee shall 

provide each media representative, no later than 60 days from tfae campaign ttavel or 

event, an itemized bill tiiat specifies tfae amounts cfaarged for air and ground 

ttansportation for eadi segment of tfae ttip, meals and otfaer billable items specified in tfae 

Wfaite House Press Corps Travel Policies and Procedures issued by tfae Wfaite House 

Travel Office. 11 CFR §9004.6(b)(3). 
C. Reimbursement Limits for Transportation and Services of Media Personnel. 

The amount of reimbursement sought from media personnel shall not exceed 110 percent 

of tfae media representative pro rata sfaare (or a reasonable estimate of tfae media 

representative's pro rata sfaare) of tfae actual cost of ttansportation and services made 

available. Any reimbursement received in excess of tfais amount sfaall be retumed to tfae 

media representtitive. 11 CFR §9004.6(b) and (d)(1). 

p. Pro Rata Share Definition. A media representative's pro rata sfaare shall be 

calculated by dividing the total actual cost of tfae ttansportation and services provided by 

tfae total number of individuals to wfaom ttansportation and services were made available 

(to include conunittee staff, media personnel. Secret Service 'itpfiWil CFR 

§9004.6(b)(2). 

E. Administrative Costs for Transportation and SenKs ol 

committee may deduct from the amount of exDendituA|Sabiect to 

the reimbursements paid by media representative^BF ttaSbportation 

the actual cost of the ttansportation and servic^^rovided^ tfae media n 

The committee may deduct an additional am^umBtiie renuirsements 

media representatives, representmg the incurred aflWstnv^costs of 3 

conunittee may deduct an amount in excess of 3 per< 

costs actually incurred by the commi^^nproviding se 

laPersonneL The 

iverall limitation 

ices, up to 

tives. 

from 

cent. Tfae 

tiie committee is able to document tfae 

incurred. 

For tfae purposes of tfae 

by the committee inj^mg 

tiiese services are jfiAaned b 

§9004.6(0). 

unt of admit 

resenting the administtative 

to the media, provided that 

re costs actually 

isttativeW^ts mclude all costs incurred 

p and seeking reimbursement, whether 

orjndependent conttactors. 11 CFR 

F. Attri 

and 

wh 

nominal 

sfaall be 

on general 

even if tfae ttavel 

for campaign-related transportation, food 

a candidate, sfaall be atttibuted according to 

ttaVHCburs on or before tfae date of tfae candidate's 

ry eKction expense. Travel to and from tfae conventions 

election. Travel by a person who is working exclusively 

preparations sfaall be considered a general election expense, 

tiie candidate's nomination. 11 CFR §9034.4(e)(7). 

G. Travel Suppoiwocumentation. For eacfa ttip, an ituierary sfaall be prepared and 

made available by the oommittee for Coinmission inspection. The itinerary shall show 

tiie time of arrival and departure and tfae type of events faeld. 

For ttips by govemment conveyance or by cfaarter, a list of all passengers, along witfa a 

designation bf wfaich passengers are and wfaich are not campaign-related, sfaall be made 

available for Conimission uispection. When required to be created, a copy of the 

government's or charter company's official manifest sfaall also be maintained and made 

available by tiie committee. 11 CFR §9004.7(b)(3) and (4). 
H. Assets Purchased from the Primary flection Committee. If capital assets are 

obtained from tfae candidate's priniary election coinmittee, the purchase price shall be 

considered to be 60 percent of tfae origmal cost of sucfa assets to tfae candidate's primary 

election committee. 11 CFR §9004.9(d)(l)(ii). 

Facts and Analysis 

A. Facts 

In 2008, the Press covering the campaign of tfae Presidential candidate (Jofan McCain) 

and the Vice Presidential candidate (Sarah Palin) ttavelled predommately on two aircraft 

chartered by tiie campaign. Tfae aircraft for tfae Presidential candidate was tiie same 

aircraft used by Jofan McCain 2008, Inc. (tfae Primary ConimitteeA|d was cfaartered 

tfarough Swift Air, LLC (Swift Air). Tfae aircraft for tfae ViceJKsidSttial candidate was 

cfaartered through JetBlue Airways Corporation shortiy bejMMte Republican National 

Convention. The Press also occasionally ttavelled on ainut cm^bjed by the General 

Committee tiirough CSI Aviation Services (CSI) an4^^V>und tti^ortation 

throughout the campaign. 

As cited above, tfae amount of reimbursement 

exceed 110 percent of tiie media representative's 

of the media representative's pro rata share) of the ai 

services made available. Any reimbiltement received 

retumed to the media representative. fll^^^9004. 

la personneiwul not 

or a reasonsDle estimate 

st of ttansportation and 

s of this amount shall be 

Tfae General Committee contends that it did not^CiMB^s^^avel reimbursement above 

the 110 percent allowed)Mi|^gulations^ffi|^eGen^^Ki^ calculated total 

ttansportation costs foj^menHko be $4,5(JK558, eqiuomg 106 percent of the cost 

calculated by tfae ComHtee. Tfae G^^al Conunittee actually received 

$4,476,728 from the I^^gs reSbursement f(wavel. 

During fid^Pii^B^udi!W|fcalculal6Plliat tfae (jeneral Committee received Press 

ttavel ]]«bursemecl^Kces^Bfae 110 percent allowed by tfae regulations. The Audit 

staf^^^Mlated the totaN^rata Bnjj^rtation cost for tiie Press to be $3,756,215 and a 

maximiS^noimt billabllntiie (110 percent of cost) of $4,131,836.^ Based on 

tiie Audit sflBscalculatioBf ttansportation costs, tiie General Committee is required to 

reftmd to tiie^^$344,8V($4,476,728 - $4,131,836). 

The mam differencSV^een tfae General Committee's figure and tiie Audit staffs figure 

is tiie calculation foiyrotal ttansportation costs. The General Coinmittee disagreed with 

tiie Audit staffs cost calculation metiiods witfa respect to cfaarter fiigfats associated witfa 

the aucraft used by the Presidential candidate. The General Conimittee also did not agree 

with the Audit staffs initial application of aircraft reconfiguration costs. 

^ The (jeneral Conunittee billed at 106 percent, but was able to document admmistrative costs to allow 

billing up to 110 percent for all modes of ttansportation. In determming die amount billable to die Press, 

die Audit staff credited die (jeneral Coimnittee fbr any under billing of die Press associated widi any one 

aircraft or mode of transportation. Li odier words, any under billing of die Press fbr travel on die aircraft 

for the Vice Presidential candidate, CSI chartered aircraft, and ground transportation was applied to any 

overbilling of die Press that may have occurred for travel on die Presidential aircraft. 
The Audit staff calculated ttansportation costs based on actual hours used only by the 

General Conimittee durmg tfae general campaign. Tfae General Committee, in conttast, 

calculated ttansportation costs based on tfae life of tfae cfaarter conttact, wfaicfa covered 

botfa tfae priniary and general campaign periods. 

Applying Cost on Aircraft for Presidential Candidate 

The Primary Coinmittee and tiie General Committee cfaartered a Boeing 737-400 from 

Swift Air for use by tfae Presidential candidate. The Swift Air conttact covered tfae period 

from June 30,2008 through November 15,2008. The conttact stipulated payments 

totaling $6,384,000 to be paid m 19 weekly installments of $336,000. The conttact 

covered nuie weeks for the Primary Committee and ten weeks for the General 

Conimittee. The conttact also required the General ConunitteejHKimary Coinmittee 

to pay costs for fiiel, catering, passenger taxes, and ground hajMng fees. There was also 

by the Prunary 

^e Conimittee 

craftlwpfiguration costs. 

an aircraft reconfiguration cost of $650,000 that was paid 

Conunittee. The General Committee coirectiy reimburs 

$390,000 ($650,000 less 40 percent depreciation) foj^s 

The contract allowed 22.4 fright hours per we^ 

life of the conttact. If the full fright hours p( 

to subsequent week(s). If the conttacted 22.4 

no accumulated unused hours were available, there 

additional hour. Neither the Primary mj^^eral Comnil 

frigfat faours in a week. Tfae General CoH^ifi^used 140.: 

Conimittee used 111.8 frigfat faours duriiqLtfac 

.6 frigfac^uj^r tfae 

own, tfae faoi^^lled over 

eek were e;roeeded and 

arge of $15,000 per 

exceeded tfae 22.4 

urs and tfae Primary 

Tfae General Committ 

August 29,2008, an^ 

included cfaarges 

^^^ ^ furst weefl^l&tallm^payment of $336,000 on 

SSelSMoayments oi|4,047,4(£ to Swift Air. Tfais amount 

caterH, passenger%re^ and ground faandling fees. 

For tfae first ^eelLDf tfae 

conttact 

under ti^contract. ii 

we^)^^re calculated 

tfae estinfl^Lfright hours 

The calculal^^icluded 

hourly charte^^^alculal 

rate, tiie segment«ftLwi 

A^ommittee used the total cost of tfae 

id divideTITby tfae remaining number of faours available 

ig umndho^ paid for by tfae Primary Cominittee. Later 

tfae a^Bfit yet to be paid on the conttact and dividing it by 

wouro be used ui tfae future, based on weekly averages, 

fnfiguration costs. Tfais metfaod caused a fructuation of die 

from as low as $11,569 to as faigifa as $39,715. Using tiiis 

Calculated and divided by tfae number of passengers. 

Tfae Audit staff calcinated tiie cfaarter rate per frigfat faour for Swift Air by takmg tiie 

conttact weekly installment ($336,000) and dividing tfaat by tfae actual weekly faours 

frown. Tfae costs of fiiel, catering, passenger taxes, ground faandluig, and certam 

reconfrguration costs were tfaen added to determine the total segment cost. Tfae cost per 

passenger was tfaen calculated by dividmg tfae total segment cost by the total number of 

passengers on the segment. 

Applying Reconflguration Costs 

The Audit staff and the General Coinmittee did not mitially agree on the amount of 

aircraft reconfiguration costs billable to the Press. Historically, tfae Conunission faas 

allowed tiie Press to be billed only for tfae ancraft reconfiguration costs tfaat could 
10 

reasonably considered as faaving benefited tfae Press. The General Conunittee believes all 

costs for reconfrguring an aurcraft at tfae beginning and at tfae end of tfae campaign sfaould 

be considered wfaen calculating tfae billable amount for tfae Press. Tfae General 

Committee also stated tfaat part of tfae ancraft reconfiguration cost was to bring tfae 

aircraft uito compliance with Federal Aviation Admmisttation safety standards that 

ultimately benefited tfae safety of all passengers includmg tfae Press. 

B. Preliminary Audit Report & Audit Division Recommendation 

Tfae issue of press ttavel reimbursement was presented at tfae exit conference. In 

response, tfae General Committee submitted tfae following points for tfae Coinmission's 

consideration. 

Cost Calculation 

The General Conimittee made a comparison between tfae 

spanned both tfae primary and general election periods, 

were analyzed during previous presidential audits: 

2000, and Kerry-Edwards in 2004. Tfae General Commit 

Audit staffs calculation of tfae faourly rate for^n^ancrs 

audit, wfaicfa accumulated all operating costs ^fi^nlded 

of faours frown by eacfa aircraft. By applying tfae si 

tiie Swift An conttact ($6,384,000 divided by 252.11^ 

contends that its cost calculations us^faLbilling tfae 

conttact, whicfa 

simin^ircraft conttacts tfaat 

ipm nBLBusfa-Cfaeney m 

specifrcaBkferenced the 

^from tfae 1990^M^emp 

total by tfae a^HSI number 

Latton to tfae ennre amount of 

lown), the General Conunittee 

re accurate. 

The Audit staff agrees that if the Generaauoi 

conttaa amount for both, the primary an^enei 

aircraft reconfigurationjaglMLdid not re( 

exceeded tfae maximjyallo 

tiiose costs atttibq^llAto tfae 

ttavel cost that tfae GeiHLCo 

consistent witi^gyel cos 

CFR §90yf^B^hich s 

transpoMdon sfaallffl^Hjibut 

tfae ^MBfitaff used onlylkgene] 

weekly in^^own by thSene] 

^as usinvoie total Swift Air 

nods, as well as tiie fidl 

ravel reflRursement from the Press that 

y the regulVtions. However, as ui Dole-Kemp only 

al Conuninreshould be used in detennining tfae 

e may biinrme Press. Tfais conclusion is 

residential audits and is supported by 11 

m partTIK expenditures for campaign-related 

jng to when the ttavel occurs. As in Dole-Kemp, 

^tion operating cost ($4,047,402) and the actual 

ommittee when calculatmg the billable cost to the 

Press. Thi^^i^^ore apprSiate metfaod wfaen calculatmg costs and billing for 

campaign ttave^y^g theleneral election period. 

The General CommlH^rovided a spreadsheet that spanned tfae primary and general 

election periods and^lieid on adjusting the per-faour billing rates on a segment-bysegment basis due to using fewer fright faours tfaan available in tfae Swift Air conttact. 

The General Committee made the spreadsheet available to demonsttate tiiat tiie Priniary 

and General Committees' billmg allocation was based on total costs ($6,354,859) tfaat 

were lower tiian the conttact amount ($6,384,000). The General Conmiittee contends 

tfaat no overbillmg of tiie Press could faave occurred since tiie difference ($29,141) was 

never billed to the Press by tiie Primary conimittee during week eight. However, it 

appears tiiat tiie General Committee did bill tills difference to tiie Press^. Therefore, tiie 

^ Durmg die second week of die general campaign, tfae (Seneral Committee calculated Press billing by 

using the total cost of die contract ($6,384,000) and subtracting die amount of die contract aheady billed 

($2,140,752) to arrive at die remaining balance of die contract The helicopter cost ($29,141) was included 
11 

General Committee included the total conttact amount in calculating tfae billing 

allocation. 

Tfae Audit staff used tiie weekly $336,000 mstallment divided by tfae actual hours frown 

weekly during tiie general election period for billing calculations (plus the fiiel, catering, 

taxes, and ground faandling fees). The General Coimnittee explained that tiie Audit 

staffs calculations had tfae benefrt of hindsight because, due to the fast pace of the 

election campaign, tfae actual frying hours were unknown at the tune of billing. 

Therefore, estimates of pro rata share faad to be used m order to be in compliance witfa tiie 

regulations to bill media representatives witiiin 60 days of ttavel. Tfae General 

Committee believes tfaat tfae Audit staffs metfaodology would be in confrict witfa 11 CFR 

§9004.6(b)(3), which says, in part, that media representatives sl^g0l^c given a bill that 

specifies amounts charged for au: and ground for each segmei 

The Audit staffs metfaodology does not confrict witfa 11< 

tfae actual frigfat faours are known soon after frights o( 

required 60 days to provide the Press witfa an iteim^ bH 

cfaarged for air ttansportation for each segmen^^ie trip.^ 

Committee invoiced tiie Press on average 12^la^pftpr coi 

allowing time to use the actual fright hours for tiie 

known at tfae time of billing also could faave been 

passenger. This method would inconlbate adiustuig fof 

Gen^B^ccepted Aa 

The Genc^jCommittee e^ 

GAAP to s« m its metii( 

tiiat the Audit^PLdid not 

Specifrcally, the 

cash-basis of acco 

cash-basis accounti; 

6(b)(3), given tiiat 

tiierel^^^ withm tiie 

tiiat specifiHbP amounts 

It appears th? 

etion of each^^^l week, 

e^billable tra^l costs 

^etemune tfae cost per 

y frigfat faours. 

Tfae General Comnuttee also referenced^ 

it used tiie same billing metfaodology and^ 

an adverse audit finding 

correction to the acc{ 

the same billing 

the overbilling of tfae 

2000 Busfa-ChgmGenel 

CommitXemffKmB^atioi 

Cfaen^oidit and explained tfaat 

it, wfaicfa did not include 

dit staff suggestmg that a 

Audit staff acknowledges tiiat 

-Cheney; however, tfae amoimt of 

eimore, tfaere is no indication tfaat tfae 

costs associated witfa tfae Busfa Primary 

^les(GAAP) 

everal accounting principles and standards under 

logy for billmg tfae Press. The General Committee believes 

ply the appropriate accounting basis m its analysis, 

nunittee believes tfaat the Audit staff incorrectiy applied a 

instead of an accrual-basis m its analysis of Press billing. Under 

^ revenue is recorded when cash is received and an expense is 

recorded wfaen casfa is paid. In accrual-basis accounting, revenue is recognized wfaen it is 

eamed (or wfaen services are performed) and expenses are recognized wfaen tfaey are 

mcurred.^ The General Committee contends tiiat under accrual-basis accounting, tfae 

objective is to ensure tfaat events tiiat diange an entity's financial statements are recorded 

m tiie periods m wfaicfa tfae events occur, ratfaer tfaan only m tfae periods during wfaich tiie 

entity receives or pays cash. The General Committee also contends tfaat tfae matcfaing 

in die $2,140,752 already billed. The remaining balance of the contract was dien divided by the average 

estimated flight hours remaining on the contract to determine die adjusted charter rate for die week. 

* "Accounting Principles 7* Edition". Jerry J. Weygandt PhD, CPA, Donald E. Kieso PhD, CPA, Paul D. 

Kimmel PhD, CPA, page 90. 
12 

principle under GAAP dictates that expenses are recognized when the revenue is 

recognized, and therefore that the entne cost of the conttact should be used when 

calculating billing for ttavel. 

The Audit staff agrees tfaat tfae matchmg principle dictates tfaat expenses be recognized 

wfaen the revenue is recognized. In tum, the revenue recognition principle recognizes 

revenue in the period in whicfa it is eamed. Since tfae period and activity audited was tfae 

general election period, tfae Audit staff correctiy applied tiie $4,047,402 cost for the 

general election portion of the Swift Air conttact and related expenses. 

The issue is not whetfaer tfae casfa or accrual-basis of accoimting is applied to tfae 

ttansportation costs and revenue generated fiom billing tfae PressAl^avel; nor is tfaere a 

question of tfae matching principle under GAAP. At issue isjKtherme activity of a 

separate reporting and corporate entity (the Primary CommM|wiould be recognized by 

the General Coinmittee and by tfais audit. An underlyingBsunri^^ GAAP is that 

every entity is separate and, therefore, the revenues ajfj^OiSinses or^|h entity sfaould be 

recognized as sucfa. As previously noted, recogniHgtii^activity of tnAKo entities 

separately is fiirtfaer supported by 11 CFR §90^^e)(7), whicfa states iir 

expenditures for campaign-related ttansportaff^^^^be «^uted accordiSRb when 

tfae ttavel occurs. Tfaerefore, tfae General Conunitt^H^wrre^gnize onl^hose 

transportation costs from September 1^ 2008, through^HSniber 4,2008, in tfae 

calculation for billing tfae Press. 

stated tfai 

any^mnuat benefited 

mcludeaiH|e billable 

Audit staffnB|Bd its calc 

Tfae Audit stafffB^ot uicj 

tiie cost for a divra^cu 

costs since tfae Gene 

campaign. As a res 

Reconfiguration 

Tfae General Committee believes tfaat and 

the asset in service and 

asset when it was p 

Conunittee conte 

since tfae Press used tHI 

costs are a part of placing 

'costs w^ihcluded in tiie value of tfae 

Conunittee. Tfaerefore, tfae General 

uld be billed to tfae Press pro rata 

and ^ffSrdiscussions witfa tfae Audit staff, tfae General 

LecomMjjatiop costs incurred, witfa tfae exception of decals and 

campBmaff, sucfa as divider-curtain expenses, sfaould be 

t. Aner considering tfae General Committee's response, tfae 

ion of aurcraft reconfiguration costs billable to tfae Press, 

e costs for pamting and applying logos totaling $161,386 or 

totalmg $1,167 in tfae calculation for billable reconfiguration 

bnunittee mdicated tiiat tfaese items benefited only tfae 

tiie Audit staff calculated $487,447 ($650,000 - $161,386 -

$1,167) in reconfiguration costs billable to all ttavelers for botfa tfae primary and general 

periods. After subttactmg 60 percent of tiie accepted reconfiguration cost because tfae 

asset was purcfaased from tfae Primary Conunittee, tfae Audit staff calculated $292,468 

($487,447 X 60%) of aurcraft reconfiguration costs as billable during tfae general period. 

Tfae Audit staff divided tfais amoimt by tiie total 140.3 frigfat faours frown by tfae General 

Committee to determme tfae amount of aurcraft reconfrguration costs atttributed to eacfa 

segment. 
13 

Other Considerations 

Tfae General Committee stated tfaat tfae Audit staff and tfae Conunission faave allowed for 

ttansfers and repayments between primary and general election presidential committees 

with respect to otiier types of vendors. The General Conimittee believes that any excess 

funds from tfae Press for ttavel are no different tfaan deposits related to otfaer vendors such 

as tiiose for telephone conttacts, media placement refiinds, or lease agreements, for wfaicfa 

repayments sometimes are necessary to ensure tiiat a primary committee does not 

subsidize a general committee. 

Tfae General Conimittee also contends tfaat it would not be reasonable to force campaigns 

to renegotiate and redraft every legal conttact tiiat exists to sepa|fl^|rimary and general 

activity. To refiind tfae Press would involve more tfaan 700 sevate buling ttansactions 

and it would "go agamst many of tfae intemal ethics policiyH^evarious news 

organizations.. .who are not allowed to receive passage i^uscoul^^ates on campaign 

transportation so as to not unduly infruence tfaeur covp^eSf tfae caAi^tes.* 

Tfae Audit staff acknowledges tfae administtati 

refimdmg tfae Press. Historically, tfae Comm 

made on a pro rata basis, such as in the 1996 

each billing to tiie I^ess. The General Committee's 

Primary Conunittee, would be consi(^^^non-qualifi 

repayment. The regulations state tiiat 

related expenses because tfaese expensed 

CFR §9002.11(a). 

Tfae General CommittKrece 

were above tfae m^^^^nm amo 

to faave billed an amouiphsit Wi 

eacfa paid itssl^j&of tfae 

Altiiouglylf^Qll^^alimi 

billmeJvmade. TnvlBetta 

election co; 

it may be inv(^fc^yitfa 

refimds to tHKess to be 

>ratiier tfaan recalculatmg 

^ve suggestion, refimdmg tfae 

aign expense subject to 

cannot incur primarytfae general election. 11 

ts firomfrie Press for campaign ttavel tiiat 

s. Tfae Priniary Cominittee appears 

The Primary and General Committee 

Press and Secret Service accordingly, 

be billed, tiiere is no requirement tiiat any 

e provided at no cost. 

The Geno^Committee isBrrect Aat there are ttansactions between the Primary and 

General Con^ktees in maH Presidential campaigns in whicfa eitfaer tfae primary or 

general electiol^niublicl Junded. Assets, ranging from offrce equipment to service 

deposits to, as inQB|cay^u'craft confrguration, often are purcfaased. In eacfa case, value 

is ttansferred betweeHne two committees. For example, if tfae General Conunittee 

purchases security d^osits, it gives casfa for tfae rigfat to continue tfae service and recover 

tfae deposit after tfae campaign. No sucfa exchange is involved m tiie proposed ttansfer to 

the Primary Committee in this case. 

Tfae General Committee does not dispute tiiat it received more reimbursements from the 

Press during tfae general election period, but tiie General Committee believes a more 

appropriate term is misallocation of Press ttavel reunbursement received between tfae 

General Committee and tfae Primary Conunittee. Tfae General Committee's metfaodology 

may accurately refrect tfae comparative actual use of tfae aurcraft between tfae Primary 

(111.8 frigfat faours) and General Coinmittees (140.3 frigfat faours), but it does not refrect 

tfae comparative actual costs paid by each committee. The General Committee did not 
14 

exceed the overall expenditure linutation, even with the excessive Press reimbursements. 

However, the purpose is to match the cost of the campaign to the proper election and 

spending limit. For tfaese reasons and tfaose noted above, tfae reimbursements totaling 

$344,892 tfaat tfae General Conimittee received from tfae press were above the maximum 

amoimt billable under the regulations. 

Tfae Preliminary Audit Report recommended tfaat tfae General Conimittee demonsttate it 

did not receive reimbursements from the Press for campaign ttavel that were above tfae 

maximum amount billable. Absent such evidence, tfae General Coinmittee was to retum, 

on a pro rata basis, $344,892 to Press representatives and provide documentation to 

support tfae refunds. 

C. Committee Response to Preliminary Audit Report 

Tfae General Coinmittee submitted a response to the Prelii 

December 20,2011, wfaicfa addressed tfae findmg concei 

travel, lhe General Committee argued tfaat there m 

Primary Conimittee and the General Committee u»i a res 

allocation of Press reimbursements between tha^raunitte< 

Commission precedent as well as Generally i<rcclHd A( 

General Conimittee also argued tfaat if tfaere was a 

between tfae two conmiittees, a payment to tfae Prims 

Ludit Report on 

[g PrSn|unbursement for 

rerbillfflMiecause **tfae 

sonable prS^^to predict tfae 

tfaat is "connmt^itfa tfae 

iting PrinciplSrThe 

ittoh of Press rdmbursement 

littee can correct it. 

The General Committee discussed tfae 

General Conmiittee maintained tfaat became 

spanned nine weeks of tfae Primary and t»w 

necessary to bill based^||nHDture cost o 

asserted tfaat tiie Priq^yCd 

process to predict^ll^^tual. 

General Coinmittee aMMs.Pri; 

some detail tii^iffrculty 

knew whg^l^Mi^^|ts wi 

applytivnxed cost^Bktiie 

fro\yll^^^nown. AccoBugly, 

$15,000pMigfat faour. ^Bfa w< 

frown ail 

general electid 

its approaiC^^Ai^s billing. The 

gxx with^wift Aur for aur ttavel 

ral campaigns, it was 

nttact^he General Coinmittee also 

and theleneral Committee "used a reasonable 

per allocatiloof press reimbursements between the 

CommitteVnhe General Committee described in 

mg process due to tfae fact tfaat wfaile tfaey 

tfae cdiMhed period, tfaey would not know faow to 

as completed and the actual number of hours 

imary Coinmittee began billmg at the rate of 

& faave been tfae actual conttact price per faour faad it 

in tiie conttact. By tiie time tfae billing began in tiie 

eral Committee faad to face tfae fact tfaat tfae total price of 

tfae conttact less 

to be flown would 

outstanding balance^ 

fright hours billed to date required that the remaining hours 

! valued at a faigfaer rate in order to account for tiie remainmg 

contraa. 

Tfae General Committee stated tfae following: 

'The Audit Division acknowledges that the Committees' metfaod for 

predicting tfae proper allocation of Press reimbursements between tfae General 

Conimittee and tfae Primary Committee *refrect[s] tfae comparative actual use 

of tiie aucraft between tiie Prunary and General (Conunittees...* Tfae Audit 

Division nonetfaeless advocates a new, never-before-announced tecfanique for 

calculating a ttavel segment's faourly rate, and by extension, tiie proper 

allocation of Press reimbursements: divide eacfa weekly installment of tfae 
15 

$6,384,000 Swift Air payment 'divided by the actual weekly faours frown 

during the general election period..."' 

"The Audit Division's metfaod is convenientiy simple. But this simplicity is 

wrought by ignoring important realities about the Swift Aur conttact. For one, 

the Swift Aur conttact was jointiy faeld by tfae Primary Coinmittee and tfae 

General Conimittee. It spanned four montfas, sttaddling tfae divide between 

primary and general-election periods. Tfae Committees and Swift An 

intended tfais exact structure. A four-montfa conttact faeld by two entities is 

manifestiy different tfaan a two-month conttact held by one. Tfae Audit 

Division, however, wants to now artificially bisect tfae Swift Air conttact 

witfaout even considering wfaetfaer tfae parties would faave^mctured two 

separate two-montfa conttacts another way. For instan^^R^Mnount and 

frequency of the weekly installment payments mightJBe been different, and 

tiie costs certainly would faave been greater sincej«)nHor in tfae cost of 

securing a dedicated aircraft is tfae lease's duratiomThe ^^LDivision 

cannot disregard a conttact's fimdamental eJ^Rli^switiiout n^j^lysis 

spuming into tfae realm of fiction.' 

isaction was^H^ 

The payment and the 

Jout a particular week's 

it week's frigfat faours. 

"Tfae Audit Division also ignores tfaat 

$6,384,000 fee in excfaange for up to 425.( 

hours were divided mto equal weekly instalh 

fixed installment payment wAwf in exchange 

Dividing a week's installment 

tfaerefore does not refrect wfaat a^ 

cost" were. Yet tfae Audit Divisiol 

simplify tfae faom^HM^alculatioi 

faours ratiier ti^^laffi^until tfae enS 

actual frigh^Aurs overWich to spreal 

is indeed atttao^^It inBferes with ac 

"total 

^y the weeS^Bttud fright hours 

It's faoiu^Fate and "total actual 

, presumably to 

one u^^nly a week's actual frigfat 

f tfae comract to determine faow many 

e^$6,384,000 frxed fee. Simplicity 

tely calculatmg eacfa travel 

ion metfaod for a ttavel segment's faourly rate, on 

not l^^i^unterfactuals. It recognizes tiie Swift Air 

doimro, is more consistent witfa Conunission 

neralfiy Accepted Accountmg Principles. The Prunary 

eral Conimittee therefore used a reasonable process to 

iroper allocation of Press reimbursements between tfae 

Tfae General Commj^lEe tfaen asserted tfaat tfae calculation metfaod used by tfae 

Conunittees is more consistent witfa Conunission precedent. It defined Commission 

precedent by citing die metfaods used by three other campaigns. Dole - Kemp 1996, 

Kerry - Edwards 2004, and Bush - Cheney 2000, and mamtammg tfaat its metiiod 

coincided closely with tiiose of tiie campaigns cited. Tfae General Coinmittee contends 

that the Kerry-Edwards 2004 charter "sttaddled tfae primary- and general-election 

periods," like the Swift Air conttact. The General Committee also mamtains that its 

methodology is more consistent with GAAP. 

Further, the General Committee states that tfae Audit staff "relied on non-GAAP cashbasis accounting to estimate the frxed-expense sfaare of eacfa ttavel segment's total actual 
16 

cost of tfae ttansportation" and points out, "The Commission has endorsed GAAP's use in 

presidential campaign audits and cited GAAP to make an adverse audit finding against 

tfae Kerry-Edwards Campaign." 

Tfae General Cominittee goes on to state: 

"Tfae Primary Conunittee and tfae General Coinmittee used GAAP-compliant 

accrual-basis accounting to calculate tfae fixed-expense sfaare of eacfa ttavel 

segment's "total actual cost of tfae ttansportation." Accrual-basis accounting 

required tiiat tfae Swifr Aur conttact expenses (and offsets to tfaose expenses in 

tfae form of Press reimbursements) were recognized as actual fright faours were 

used. A portion of tfae Swift Air conttact's frxed cost was a^gned to eacfa 

ttavel segment using a depreciation tecfanique called tho^lffi^f production" 

metiiod, wfaich is expressed as Cost / Estimated Unit||^Depreciation Per Unit 

Produced (i.e. $6,384,000 /Estinmted Flight Houjjp^l^^ Hourly Rate). 

The "units of production" method was most amsroLiate neBhecause the 

actual fright hours, and thus the actual contnR^gt^, were IK 

ratably over tfae individual weeks of tfae^^ract.' 

"By conttast, tfae Audit Division relieraMn-GAjRcash-basis acCHRiting 

to estimate the fixed-expense sfaare of eadnB^l^lpntot's "total actual cost 

of tiie ttansportation. Tfae Audit staff used th^Ekly $336,000 installment as 

tfae ttigger for recording expel^j^and offsets to^B^expenses m tiie form of 

Press reimbursements). Like aS^^hasis accountW|[||fai» simplifies tiie 

hourly rate calculations smce oiinns^V|^^eek's ^pSd fright hours ratiier 

than waiting until tfae end of tfae contrac^Nntaun^f ow many actual frigfat 

faours over wfaidUnHsad the $6,^M)0 fixecM^But agam, like all cashbasis accountij^Wii^^i not offer «illy accurate picture of the ttansaction 

here becaus^lflbeek's uBallment pa^^^it was not paid to Swift Air m 

exchange for t^veek'Aistallment otmBat faours.' 

Tfae Generi 

method 

with 

eve 

m on GAAP by stating,".. .the calculation 

littee and'tfae General Conunittee is more consistent 

ifore used a reasonable process to predict tfae 

ibursements between tfae Conimittees." 

In tiie concli!n|Lpf its resSise, the General Committee ofrered its rationale in opposing 

the Audit stafrM|dtion tS a payment to tiie Priniary Conunittee to correct tfae 

imbalance would cl^^ ^ an impermissible use of public funding resulting in a nonqualifred campaign g|^se subject to repayment, lhe General Committee makes four 

arguments. 

1. Funds received under curcumstances outside Part 9005 (conceming the general 

election public grant), such as Press reimbursements, are not similarly 

restticted and tiierefore tfaeur use is not restticted. 

2. Because tiie primary campaign is long over, tfae General Committee will not 

actually incur any primary-related expenses. Tfae ttansfer is simply to correct 

wfaat the Audit Division views as tiie original "misdeposit"(sic) of Press 

reimbursements. 
17 

3. The ttansfer would not be a "non-qualified expense" because in the past, tiie 

Conunission has repeatedly permitted ttansfers from publicly fimded generalelection conimittees to their affiliated primary-election conunittees to correct 

misallocation and similar issues. 

4. Finally, a General-to-Primary Committee ttansfer should not be prevented 

under the Audit Division's "non-qualified expense" rationale because the only 

reason for this misallocation issue is the Coinmission's failure to provide 

guidance on how to prospectively calculate tfae fixed-cost portion of a 

particular ttavel segment's "total actual cost of... ttansportation." Tfae 

Primary Coinmittee and tfae General Committee faad no notice tiiat tiiey were 

not using the Commission's preferred calculation method. 

The Audit staff notes tfaat tfae General Committee's respoi 

Report concedes tfaat an imbalance existed between the 

tiie Press during tfae primary portion of tfae Swift Air 

period attributable to general portion. The imbala« n 

Coinmittee billuig the Press for reimbursements^a lowi 

would have suggested during tiie primary peslfflBhe Aui 

amount represented by what tfae General Conuni 

represents tiie amount tiie General Committee overcfal 

general election period. 

Preliminary Audit 

it sought from 

»ught during tfae 

ited from tlflB^iary 

Jiourly rate ^Blgtual cost 

itaff maintainsllt the 

ibalance" anally 

tfae ttavelmg Press during tfae 

Tfae Audit staff concedes tfaat tfae Genen 

imbalance is accurate. It explains faow tfal 

tfae primary period, and tjafittieral Comm! 

period; tfais is essentiaj^^n^Bdem. The 

during tfae general^l^jgn by ^^eding 110 

mcuired for ttanspoi 

^s explaipi6n of tfae origui of tfae 

billed significantiy less in 

>illed sHRigher rate in tfae general 

eneral Coimnittee over billed tfae Press 

;ent of the actual reimbursable cost 

and 

The Gene 

up to 

fall^ 

additio; 

frigfat 

Should tiie 

would be entitii 

arose because 

tiie cSmSct as a "fixed $6,384,000 fee in excfaange for 

ion of tfae conttact was 19 weeks witfa nine weeks 

t ten weeks m tfae general period. Tfaere were 

General Committee could fly up to 22.4 faours of 

itional faours frown would be billed at $15,0(X) per faour. 

use tfae entire allotment of 22.4 faours in a given week, it 

any faours not used m a successive week. This issue never 

paign ever exceeded tfae weekly allotment of 22.4 faours. 

Tfae General Committee objected to tiie Audit staff's calculation of fixed costs based only 

on tfae portion of tfae conttact tfaat applied solely to tfae general election period. The Audit 

staff notes tiiat the only portion of the Swift Aur conttact for whicfa the General 

Committee was responsible was tiie final ten weeks. The General Committee seemed to 

faave understood tfaat it was liable for tiie portion of tiie conttact begmning in tfae 

conttact's tentfa week because that is faow tiie conttact obligation was paid. The Primary 

Coinmittee was not permitted to pay for any of tfae conttact beyond its obligation 

because, in so doing, tfae Primary Committee would faave made a conttibution to tfae 

General Conunittee. Tfais would not faave faelped the General Committee since it was 
18 

limited to the federal grant. The Audit staff necessarily focused on the fixed cost 

incurred and paid during the general election period. 

Tfae General Committee also objected to tfae Audit staff calculation of weekly frxed costs 

based on payments each week divided by tiie hours flown that week. The General 

Committee contention tiiat "tfae payment and tfae faours were divided into equal weekly 

installments, but a particular week's fixed installment payment was not in exchange for 

that week's flight faours" does not square witfa tfae facts. Swift Aur did uitend tfaat it be 

paid weekly for services provided under the conttact, and it limited tfae services to be 

provided on a weekly basis to a maximum of 22.4 of fligfat faours. Swift Aur charged tfae 

General Committee weekly for its services and monitored total use weekly to determine 

wfaetfaer it faad provided services beyond the number of hours preAibed in the contract. 

As a consequence, the Audit staff believes that its method ofjpdinguie fixed payment 

by tfae number of faours flown provides a reasonable calcub^R^^ixed weekly costs. 

Moreover, tiiis metfaod will associate tiie correct weekly^furly^^Lbased on tfae 

campaign's use eacfa week. 

The General Coinmittee makes a case for its m|Adolog>^eing consistdButtUhe past 

campaigns of Dole-Kemp 1996, Bush-Cfaene^^ynd Mky-Edwards 2oWTfae Audit 

staff notes tiiat Dole-Kemp 1996 faad a distinct comAy^the^eneral elecnon and is not 

comparable to tfae problems of a conttact spanning twH^tions as laid out by tfae 

General Conmiittee. Tfae audit of BuBCbeney 2000 uicMbes tiiat tiiis committee did 

not materially overcfaarge tfae Press for 

Committee cited the audit of Keiry-EdWkds 

campaign had received bankable flight fad 

campaign. In tiiis instai^Bajjlfommissiol 

reimburse tfae primacwunpflMfor tfaese flij 

to avoid a prohibi^^fl^Bttibuti^from the priJ 

Furtiier, the Audit st 

Committees aifiJixxiited i 

provided 

they nvireceive rei 

Gen^^Hommittee 

related tta!^^Biftially, tfae General 

ihictL foiBatfaat the general 

led by tfae priniary 

^muneciniat tfae general campaign sfaould 

it faours. The reimbursement was required 

campaign to tiie general campaign. 

^s issue IS nc^bt metiiodology but of results. 

seek as reimbursement for ttavel 

nceiBLestablis^Bministtative costs of ten percent of the total, 

lemeinBLno jnore than 110 percent of actual costs. The 

reimovements m total tfaat exceeded 110 percent. 

Tfae Geners 

conttact tfaat 

calculations, the 

outiined above, the 

Withm the general 

d to the Audit staff calculations based on the period of tiie 

e general election. It maintained that by using these 

is resortmg to (non-GAAP) cash-basis accountmg. As 

of the review was necessarily the general election period, 

ion period, tfae Audit staff matcfaed, on a weekly basis, the 

services received witii the conttaa cost paid. In sunimary, the amount tiie Press was 

overcharged is the difference between the maximum amount tfae Audit staff calculated as 

^ The audit of Kerry-Edwards 2004 found no material non-compliance with press billing. Apart from the 

fact diat die K^rry-Edwards 2004 charter contract spanned the primary and general election, there is littie 

similarity between tiie two campaigns. The repayment of banked hours was unrelated to press billing in 

Kerry-Edwards 2004. Indeed, Keny-Edwards 2004 recognized tiiat the banked hours were appropriately 

an asset of die primary campaign and had calculated a repayment equal to 99 percent of the amount 

identified in die audit; this amount eventually was repaid. 
19 

appropriately billable and the reimbursements actually received in tfae general election 

period. 

The General Committee made arguments for allowing a ttansfer to tfae Primary 

Committee to correct tfae imbalance. Tfae Audit staff acknowledges tfaat ttansfers were 

sometunes permitted between tiie primary and general coinmittees in Presidential 

campaigns wfaen it faas been sfaown in tfae course of an audit tfaat fimds or obligations 

belonging to a primary or general committee were m tfae possession of tfae other. Tfais is 

not the case in tfais instance. 

The General Committee believes tfaat the Conunission should frnd that tfae Press 

reimbursements were calculated conectiy, resulting ui no violatj^^f^tfae Act, and tfaat 

tfae General Conunittee may terminate immediately. 

In the frnal analysis, the focus of the audit is tfae Generi 

staff mamtains tiiat tfae General Conunittee received, 

general election campaign period, wfaicfa in tfae a, 

allowed, and tfaat the General Committee shou! 

Press representatives and provide document 

tfae U.S. Treasury, faowever, may be acceptable 

reconstruct the precise amounts owed to Press repress 

Partv 

Finding 

Compli 

such, tfae Audit 

during tfae 

xceeded tliSBudmum 

pro rata basM|a44892 to 

refunds. DSorgementto 

mmittee i^mable to 

es. 

ndlRon for the 

Si 

Tfae Com^^ce Fund failBto frle 48-faour notices for 169 contributions totaling 

$240,700 th^B|re receivenprior to the general election. In response to tiie Prelinunary 

Audit Report, tHMunpliace Fund explained that it had experienced a one-time datamanagement enrorl^Mn outside vendor relating to tfae 48-faoiir notice requirement. Tfae 

Compliance Fund fa^aken measures to ensure tfaat tfais unmtentional oversight was 

corrected. The Compliance Fimd believes that tiie Commission should frnd tfaere was no 

violation of tiie 48-faour notice requurement and that the Compliance Fund sfaould be able 

to terminate inunediately 

Legal standard 

48-Hour Notification of Contributions. An authorized comnuttee of a candidate must 

file special notices regarding contributions of $1,000 or more received less than 20 days 

but more than 48 hours before any election in which the candidate is ruiming. This rule 

applies to all types of conttibutions to any autfaorized conimittee of tfae candidate. 11 

CFR §104.5(f). 
20 

Facts and Analjrsis 

A. Facts 

Tfae general election was faeld on November 4,2008. Conttibutions of $1,000 or more 

received by tiie Compliance Fund between October 16,2008, and November 1,2008, 

requured tfae filmg of 48-faour notices (FEC Form 6 - 48-Hour Notice of Contributions/ 

Loans Received). The Audit staff isolated 589 contributions, totaling $871,260, wfaich 

requured the filmg of tfaese 48-faour notices. A review of tiiese records identified 169 

contributions, totalmg $240,700, for wfaicfa the Compliance Fund failed to frle the 48-

hour notices. 

B. Preliminary Audit Report & Audit Division Recommeni 

The Audit staff discussed tfais matter witiii Compliance Fundj^esentatives at tfae exit 

conference and provided a scfaedule of tfae contributions i^^HI^^8-faour notice filings. 

In response. Compliance Fund representatives stated tfaane msflnhad been addressed 

previously in a letter to the Reports Analysis Divisiog|^Dd\eiteratec^^"48-faour notices 

were not required for many of the identifred conttMuonst as they wenlh^ly 

redesignations or reattributions that took placeJnmig tiie 48-faour notice^nuluig 

period." Compliance Fund representatives a)^o^^^tiiatM|||e Complianc«K 

normal practice of frlmg a 48-faour notice was not ranu«ror^ remaining^oup of 

contributions, due to data-management errors made b^Koutside vendor. To elaborate, 

tfae Compliance Fund's outside data-n|yement vendol^n^ed' tfais group of 

conttibutions witfa an incorrect date inWl^luse and consinu^ failed to locate the 

group in a subsequent, computerized se£CKhi^^^g^tioiis Miiiring a 48-Hour Notice. 

Tfae Compliance Fund has now taken meluTes^^Q^^i^ide vendor to ensure tiiat 

tfais unintentional overeuHfefe^rrected, aiu^^iplianSPund staff believes tfaat tfais was 

a one-time occunrenc 

Additionally, Complii 

intended to boujloligfat^ 

campaij 

electic 

any,^R[Hdate's electioi 

compliainBldtfa Federal 

maintauis 

tiie 2008 

Fund was therefd! 

reliance on an outsic 

^undBoiesentativesphpfaasized tfaat "48-Hour Notices are 

utions tfaat a candidate migfat deploy for 

s adv^SS&ig and get-out-tfae-vote efforts, during an 

tioiflBtfaeCompliance Fund, however, may not be used for 

mayoBfsupport legal and accounting services to ensure 

It skould also be noted that tfae Compliance Fund today 

0 million, meanuig tfaat tfaese funds received sfaortly before 

faave not been spent for any purpose. The Compliance 

aterial violation of tfae 48-faour notice requirement when its 

caused it to delay disclosure of donations that would only 

fund lawyers' and a^untants' legal compliance activities. For tfaese same reasons, tiie 

Compliance Fund sfaould not be fmed for tiiis vendor failure even if tfae Commission 

somefaow fmds tfaat a technical mfrrmgement of tfae 48-faour notice requirement occurred." 

Tfae Preliminary Audit Report recommended tiiat tiie Compliance Fund provide: 

• documentation to demonstrate tfaat tfae contributions ui question 

were included properly in 48-hoiir notices; or 

• documentation establishing tfaat tfae contributions were not subjea 

to 48-faour notifrcation; and/or 

• any fiirtfaer written conunents it considered relevant. 
21 

C. Committee Response to the Preliminary Audit Report 

In response to tfae Preliminary Audit Report, tiie Compliance Fimd reiterated tfae 

arguments mentioned above conceming tfae filing of 48-faour notices. Specifically, tiie 

Compliance Fund maintained tiiat tfae Conunission mcorrectly identified conttibutions 

tfaat were redesignated durmg the 48-hour notice reportuig period or refunded 

inunediately following receipt. For otfaer conttibutions, tfae Compliance Fund stated that 

it did not follow the normal practice of filing 48-hour notices due to data-management 

errors by its outside vendor. Furthermore, the Compliance Fund again stated tfaat tfae 

fiinds received sfaortiy before tfae 2008 general election still faave not been spent for any 

purpose, and it reiterated its belief tiiat 48-faour notices are mtended to disclose any lastmmute conttibutions that can be used for campaign-related activities and not for 

donations to tfae legal and accounting activities of tfae Complianotf^d. 

Tfae Audit staff acknowledges tfaat tfae majority of 48-ho 

result of a data management error as indicated by the C 

however, that none of the contributions it had identi 

Also, tfae conttibutions that tfae Compliance FimdJ^ntnii 

Preliminary Audit Report, at footnote 56, actu^^^^ere n 

notice period but refunded after the notice penocAiLer No: 

these contributions required a 48-hour notice. 

Part VI 

Finding and Reco] 

Joint FumjAUng Ci 

not fried were tfae 

^liancHbnd. It also noted, 

contributions.^ 

in its respS^kto tfae 

f ived during iMm^u r 

berl,2008)7Ps sucfa. 

n for the 

Based upon the limit 

presenteid byth^even jo 

material o^HM^Biceof tfae repcHPand statements fried and tfae records 

tees, tfae Audit staff discovered no 

^ The Compliance Fund's response to the Preliminary Audit Report mistakenly includes the example, at 

foomote S5, of a redesignated contribution from Eileen Kamerick on 10/23/08. This contribution, 

totaling $1,500, was reported as a memo entry redesignation from die primary on die Compliance Fund's 

Post-General 2008 disclosure report and not included in die Audit staff's review of 48-hour notices. A 

subsequent credit card contribution made on die committee's website from Eileen Kamerick totaling 

$1,000 on 10/29/08 was also reported on die Compliance FUnd's Post-(jeneral 2008 disclosure report and 

was included in this review. 
22 

Part VII 

Attachment 

McCain-Palm 2008 Inc. 

Statement of Net Outstanding Qualified Campaign Expenses 

As of December 4,2008 

As Determined on December 31,2011 

Cash in Bank 

Accounts Receivable: 

Due from die Compliance Fund 

Due from die Primary Committee 

Due from Other Vendors 

TOTAL ASSETS 

Obligations 

Accounts Payable: 

For Qualified Campaign Expenses 

Due to die Compliance Funi 

Due to die Primary Co 

Payment to Press for 

Amount Due 

Disgorge] 

Disgorg^IBnt of Stal^ 

Winding oBLposts: 

Actual: Decel^5,2008 to EVmber 31,2011 

TOTAL OBUG Jsi ^ 

NET OUTSTANDING^AUFIED CAMPAIGN EXPENSES (DEFICIT) 

$8,448,103 

$100,107 

$167,828 

$344,892 (c) 

$58,319 (d) 

$2,882 (e) 

$1.806.303 (f) 

$10,928,434 

$10,928,434 

($0) 

(a) This amount lepicsents repayments for expenditures paid by General, $87,217 for Secret Service shortfall for campaign travel, $76,841 for 

transfers, and $2,399,908 for S percent allocable portion of media costs. A receivable for $97,149 is due for compliance-related windingdown costs. 

(b) This amount represents Press and Secret Service receipts, media refunds dirough June 30,2011, interest eamed, capital assets sold, and capital 

assets in-house to be sold. 

(c) Tliis amount represents payment due to PKss as discussed in the Campaign Travel Billing fbr Press finding on page 7. 

(d) This amount represents a disgorgement made on Jan. 2,2009 for interest 

(e) This amount represents a disgorgement made on Jan. 2,2010 for stale-dated checks. 

(f) Tlie General Committee has not exceeded the windfaig-down cost limitation at 11 CFR §9004.11(b).