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MEMORANDUM

TO:

PROM:

SUBJECT:

FEDERAL ELECTION COMMISSION

WASHINCTON, D.C. 20463

A8S-25

April 10, 1987

FRED EILAND

PRESS OFFICER

ROBERT J. COSTA~fJ.~ 41 lJli7

ASSISTANT STAFF ~clr~ -. - - ~l AUDIT DIVISION

PUBLIC ISSUANCE OF FINAL AUDIT REPORT - POPULIST PARTY

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Attached please find a copy of the final audit report of Populist Party which was approved by the Commission on

March 23, 1987.

Informational copies of the report have been received

by all parties involved and the report may be released to

the pUblic.

Attachment as stated

cc. FEC Library

RAD

vPbblic Disclosure

Office of 'General Counsel
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fEDERAL ELECTION COMMISSION

WASHINCTON. D,C. aM6S

ABS-2S

REPORT OF T.S! AUDIT DIVISION

ON '1'8£

POPOLIST PARTY

I. Baekgrounc1

A. Overview

This report is based on an audit of the Populist Party (-the'Committee-), undertaken by the Audit Division of the

Federal Eleetion Commission in aeeordanee with the provisions of

the Federal Election Campaign Act of 1971, as amended (-the Aet-). The auc1it was condueted pursuant to Section 438 (b) of

Title 2 of the United States Code which states, in part, that the

Commission may conduct audits and field investigations of any politieal committee required to file a report under seetion 434

of this title. Prior to conducting any audit under this section,

the Commission shall perform an internal review of reports filed

by selected committees to determine if the reports filed by a

particular committee meet the threshold requirements for

substantial compliance with the Act.

The Committee registered with the Federal Eleetion

Commission on July 2, 1984. During the period au~ited, the

Committee maintained its headquarters In Washington, D.C. The

audit covered the period March 1, 1984 through December 31, 1984, the closing date for the latest report which was filed at the

time the audit was approved. The Committee reported a cash

balance on March 1. 1984 of $-0-, total receipts of $E6l,3Bl.84J

total disbursements of $6S8,~63.21J and a cash balance on

December 31, 19B4 of $2,71B.63.

This audit report is based on documents and workpapers Which support each of its factual statements. They form part of

the record .upon which the Commission based its decisions on the

matters in the report and were available to the Commissioners ant

appropriate staff for review•

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B. Key Personnel ,

~he Treasurer of the Committee ~uring the perl04 covere~ by the .u~it ~as Ms. Clara Sanaahl.

c. Scope

The au~it included such tests as verification of total reporte~ receipts and expenditures and individual transactions,

review of required supporting documentation, analysis of

Committee ~ebts and obligations, and such other audit proce~ures

as deemed necessary under the circumstances. However, although the contribution records provided by the Committee meet the

recordkeeping requirements of 2 U.S.C. 5 432(c) and 11 C.F.R. 5

102.9(a), the records were not maintained in a manner which

allowea testing for correct aggregate contributor totals and

proper itemization•

II. Audit Findings ana Recommendations

A. Itemization of Receipts

Section ~34(b) (3) (A) of Title 2 of the United States

Code states, in part, that each report shall disclose the

identification of each person who makes a contribution to the

reporting committee during the reporting period, whose

contribution or contributions have an aggregate amount or value

in excess of $200 within the calendar year.

Under 2 U.S.C. 5 434(b) (3) (G) each report shall ~isclose the identification of each person who provides any dividend, interest, or other receipt to the reporting committee

in an aggregate amount or value in excess of $200, together with

the date and amount of such receipt.

During the course of the review of receipts, it was

noted that the Committee failed to itemize 23 contributors whose

contributions aggregated in excess of $200 and totaled $8,845.

In addition, the Committee failed to itemize a $60,000 receipt.

The Committee spokesman did not know why those

contributions were not itemized but said the preparer of the

reports probably did not know that the $60,000 receipt had to be

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At the close of the fieldwork the Au~it staff proviaed the Committee with a list identifying the contributions that were

not properly aisclosed•
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~he Auait staff secommended in the interim audit report that the Committee, within 30 days of receipt of the· report, amend its reports to properly itemize the contributions and

receipts noted above.

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contained in the interim audit report, disclosed tbe

aforementioned receipts In amended reports filed on August 7, 1986.

Recommendation

~he Auait staff recommends no further action with respect to

the disclosure of the receipts in question.

B. Itemization of Disbursements

Section 434(b) (5) (A) of ~itle 2 of the United States

Code, requires that a political committee itemize the name and

address of each person to whom an expenditure, In an aggregate

amount or value in excess of $200, is made together with the

date, amount and purpose of such expenditure.

~he Committee's disbursement records were reviewed to

determine whether all disbursements requiring itemization were

itemized on the Committee's disclosure reports. ~he

disbursements listed below were not itemized as required.

It was further noted that 4 disbursements, totaling $9,811.66,

were not properly itemized. Committee representatives did not

know Why the disbursements noted above were not itemized as

required. The Committee was provided with a schedule of the

above items at the exit conference.

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eight wire transfers totaling $7,500,

one disbursement for $60,000•

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The Audit staff recommended that, within 30 days of

receipt of the interim audit report, the Committee amend its

reports to correct the itemization problem noted above.

The amended reports filed by the Committee on 8/7/86

contained adequate itemization relative to those disbursements

not itemized in the original reporta •

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Recommen~ation

!'he Au~lt ataff recommen~s no further action.· -

. '. c. Documentation for Disbursements

Section 432 (c) (5) of Title 2 of the Onlte~ States Co~e

.- . '-" atates, in part, that the treasurer of a political committee

aha11 keep an account of the name an~ address of every person to

whom any disbursement is made, the date, amount, an~ purpose of

the disbursement, including a receipt, invoice or cancelled check

for each disbursement in excess of $200.

Sections 104.3(b) (3) (1) (A) an~ (8) of Title 11 of the Co~e of Federal Regulations define wpurposew as a brief statement

or description of why the disbursement was ma~e an~ specifically

states that descriptions such as Wother expensesw, wexpenses·, and wexpense reimbursement· do meet the requirements of this

aection.

The Committee did not have a receipt or invoice for 25

wire transfers totaling $46,5000 The Committee spokesman acknowledged that the Committee did not attempt to obtain the

required documentation for any of the wire transfers. Further,

the Committee did not maintain records to document the purpose of

8 disbursements, totaling $5,317.72, that were issued by check.

The Committee was given a schedule containing the wire

transfers and disbursements by check at the exit conference.

The Audit staff recommended that, within 30 days of

receipt of the interim audit report, the Committee obtain and

make available for the Audit staff's review documentation for

disbursements which meets the requirements of the Act.

In response to the interim audit report, the Committee

presented (1) photocopies of letters (undated) addressed to the

payees 1/ In which a request is made to supply documentation, and

(2) responses from certain payees which provided adequate documentation.

11 In the.case of 8 disbursements, totaling $10,000, the letter

was addressed to the Committee's National Campaign Consultant who, according to the letter, Wmaintained direct

supervision over much of the party's expenditure., particularly In the realm.of ballot access efforts. w

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D. Reporting of Debts ana Obligations

Section 434 (b) (B) of Title 2 of the Unitea States coae

reQuires each report fllea by the treasurer of a political committee to aisclose the amount ana nature of outstanding debts

and obligations owed bf the committee.

Recommenaatlon

Ba.ea on the efforts made by the Committee (s•• 11 C.P.R. 5

104.7) and our review of the documentation pre.ented, the Audit

staff recommends no further action with relp8ct to the $51,817.72 ($46,500 + '5,317.72) In disbursements di8cu8sed above.

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Section 104.11(a) of Title 11 of the Code of Federal

Regulations states, in part, that debts and obligations shall be

continuously reportea until extinguished. In addition, 11 C.F.R.

5 104.11(b) states, in part, that debts of $500 or less shall be

reported no later than 60 days after the obligation Is incurred • Debts in excess of $500 shall be reported at the time of the

transaction.

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During the audit, it was noted that the Committee

failed to disclose one debt of $6,380.66. In addition, 35 debts

totaling $317,212.98 disclosed on its reports (Schedule D) should have been disclosed when incurred on previously filed

disclosure r~ports•

The Audit staff also noted that debts owed to two

vendors were underreported by $33,376.93 and $87,347.55,

respectively, on the Committee's Year-end Report, resulting in

the total amount of debt owed by the Committee as of December 31,

1984 to be understated by $120,724.48.

A spokesman for the Committee said that debts were not

disclosed prior to the Year-end Report because the Committee did

not have enough information to determine the to~al amount of

their debt.

The Committee was provided with Information regarding unreported and improperly reported debt at the exit conference •

The Audit staff recommended that, within 30 days of

receipt of ~he interim audit report, the Committee amend its " reports to properly disclose the one debt ($6,380.66) that was

not reported and debts to the vendors that were understated

($120,724.48). The Audit staff recommended no further action on

the 35 debts, totaling $317,212.98, that were disclosed late•

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As part of Ita response to the interim audit report, the Committee filed amended debt achedules for Ita 118e Year-end

Report. ~he understatementa noted above were corrected via the

amendment filed on 8/7/86, bowever, the Committee did not

recognize any amounts owed for administrative services prOVided In necember, 198e. ~he Audit staff estimated that the value of

the aervices vas $12,435.03. ~he Committee, In Ita 7/1/86

response, stated that it vas not billed for personnel, rent and

telephone expenses for December, 1984 aince the party's activities came to a close as of November 30, 1984. !I It should

be noted that the Committee continued to receive and deposit contributions and make disbursements after 11/30/84.

Recommendation

~he Audit ataff recommends no further action at this time.

B. Disclosure of Loans

Section 434(b) (3) (E) of Title 2 of the United States

Code requires that each report shall disclose the identification

of each person who makes a loan to the reporting committee during the reporting period, together with the identification of any endorser or guarantor of 8uch loan, and date and amount or value

of such loan.

In addition, 11 C.P.R. S 104.3(d) requires the

disclosure of the amount and nature of outstanding debts and

obligations on Schedule C (Loans) or Schedule D (Debts and

Obligations), as appropriate.

During the review of the Committee's loan activity, it

was noted that the Committee failed to itemize the receipt of a

$7,500 loan on Schedule A (Itemized Receipts) and the repayment of the loan on Schedule B (Itemized Disbursements), as required • In addition, the Comml~tee failed to iteml~e a $600 loan made on

Beheau!e C (Loana).

!I Conversely, in its 5/5/86 response, the Committee provided a

statement, dated 12/31/84, in which the estimated cost of

services for December, 1984 was included in the amount of

$12,435.03. No mention of this inconsistency was contained

.' in·the Committee's 8/7/86 response.
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'. ~he realon given for thele omilsions was the report preparer'a lack of experience in matters regarding 'the

requirements of the Act. . ,

. ~he Audit staff recommended in the interim au~it report that, within 30 ~aY8 of receipt of the report, the Committee

amend itl reports to properly disclose these loans.

. ~he Committee filed amended reports on 8/7/86 in Which

all omissions but the $7,SOO loan repayment were corrected.

Although the Schedule B for the $7,SOO loan repayment wal not

included with amendments filed, the Committee did inclu~e an

amended Schedule C showing the liquidation of the loan and also

listed the $7,SOO on the amended Detailed Summary Page for line

24 (Loan Repayments Made). On October 23, 1986, the Committee

filed the Schedule B itemizing the $7,SOO loan repayment.

Recommendation

Since the Committee has clarified the public record

regarding the aforementioned debts, the Audit staff recommends no

further action regarding the disclosure of these transactions.

F. Matters Referred to the Office of General Counsel

Certain matters noted during the audit were referred to

the Commission's Office of General Counsel.