FEDERAL ELECTION COMMISSION

WASHINGTON, D.C 20463

December 30,1999

MEMORANDUM

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

FRIENDS OF MAJOR OWENS

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERTlCOSTA

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

FROM:

TO:

1'-_ , -,

Attached please find a copy ofthe final audit report ~UJd related documents on

Friends ofMajor Owens which was approved by the Commission on December 16, 1999,

Informational copies of the report have been received by all parties involved and

the report may be released to the public on December 30,1999,

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Reports Analysis Division

FEC Library
•

REPORT OF THE AUDIT DIVISION

ON

FRIENDS OF MAJOR OWENS

Approved December 16, 1999

FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

WASHINGTON, D.C.
TABLE OF CONTENTS

FRIENDS OF MAJOR OWENS

PAGE

l.d;~

ru Executive Summary

:;roiJ

i'<~, Final Audit Report 3

!J4! Background ., .J uj

0 Findings 4

f:-,,::

~~"'" Transmittal to Committee 9 ~;<:!

n' Chronolo!:,'y 1\ 10'

ill
A99-08

FEDERAL ELECTION COMMISSION

WASHINGTON. D.C. 20463

FRIENDS OF MAJOR OWENS

EXECUTIVE SUMMARY

Friends ofMajor Owens (the Committee) registered with the Federal Election

Commission on July 22, 1991, as the principal campaign committee ofMajor R. Owens,

Democratic candidate for the U.S. House of'Representatives from the state ofNew York,

12th District.

The audit was conducted pursuant to Section 438(b), which states that the

Commission may conduct audits of any political committee whose reports fail to meet the

threshold level of compliance set by the Commission.

The findings arising from the audit were presented to the Committee at an exit

conference held at the completion of fieldwork on August 12, 1999 and later, in <In

interim audit report. The following is an overview ofthe findings contained in the tinal

audit report

Misstatement of Financial Activity - 2 U.S.C. §434(b)(l),(2) and (4). The

Audit staffs reconciliation ofthe Committee's reported activity to its bank activity

revealed materialmisstatcments

In response to the interim audit report, the Committee filed amended reports

which materially corrected these misstatements.

Itemization ofContributions from Individuals - 2 U.S.C. §434(b)(3)(A).

Contributions from individuals were not itemized on Schedules A as required.

In response to the interim audit report, the Committee filed amended Schedules A

disclosing the contributions.

Disclosure ofContributions from Political Committees - 2 U.S.C.

§§434(b)(3)(B) and 431(l3)(B). Contributions from political committees were not

properly disclosed. The disclosure errors consisted of omitted aggregate year-to-date

amounts, incorrect contribution amounts, and inaccurate dates.

In response to the interim audit report, the Committee filed amended Schedules A

correcting the above irregularities.

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Itcmization and Disclosure of Disburscments-2 U.S.C. §434(b)(5)(A).

Disbursements totaling $27,583 were not itemized on the Committee's disclosure reports

as required. Further, with respect to those itemized on Schedules B, ten disbursements

totaling $15,867 were not disclosed properly. Disclosure errors consisted ofinaccurate

amounts, incorrect payee names, and inaccurate purposes.

In response to the interim audit report, the Committee filed amended Schedules B

correcting those disbursements requiring itemization and the disclosure irregularities

noted above.

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Page 2 of 11 Approved 12/16/99
FEDERAL ElECTION COMMISSION

WASHINGTON. O,c. 204&3

A99-08

This report is based on an audit of Friends ofMajor Owens (the

Committee), undertaken by the Audit Division ofthe Federal Election Commission in

accordance with the provisions ofthe Federal Election Campaign Act of 1971, as

amended (the Act). The audit was conducted pursuant to Section 438(b) of Title 2 ofthe

United States Code which states, in part, that the Commission may conduct audits and

fIeld investigations of any political committee required to file a report under Section 434

of this title. Prior to conducting any audit under this subsection, the Commission shall

perform an internal review ofreports tiled by selected committces to determine if the

reports filed by a particular committee meet the threshold requirements for substantial

compliance with the Act.

1. BACKGROUND

A.

REPORT OF THE A UDIT DIVISION

ON

FRIENDS OFMAJOR OWENS

AUDIT AUTHORITY

B. AUDIT COVERAGE

The audit covered the period January 1, 1997 through December 31, 1998.

The Committee reported a beginning cash balance of $15,056 total receipts for the period

of $151 ,065; total disbursements for the period of$120,201; and, an ending cash balance

of$45,920. 1

C. COMMITTEE ORGANIZATION

The Committee registered with the Federal Election Commission on July

22, 1991, as the principal campaign committee for Major R. Owens, Democratic

candidate for the U.S. House ofRepresentatives from the State ofNew York, 12th

District. The Treasurer ofthe Committee during the audit period was Asquith D. Reid,

who continues to serve in that capacity. The Committee maintains its headquarters in

Brooklyn, New York.

Reported figures are material',y misstated. See Finding II. A. Misstatement Of Financial Activity.

Page 3 of 11 Approved 12/16/99
To manage its financial activity, the Committee used one bank account.

From this account, the Committee made approximately 400 disbursements. The

Committee received contributions from individuals totaling $52,256. In addition, the

Committee received 82 contributions from political committees totaling $116,873.

D. AUDIT SCOPE AND PROCEDURES

The audit included testing ofthe following general categories:

I. The receipt of contributions or loans in excess ofthe statutory

limitations;

2. The receipt of contributions from prohibited sources, such as those

from corporations or ~abor organizations;

3.

4.

Proper disclosure of contributions from individuals, political

committees and other entities, to include the itemization of

contributions when required, as well as the completeness and

accuracy ofthe information disclosed (see Findings II. B. & C.);

Proper disclosure of disbursements including the itemization of

disbursements when required, as well as the completeness and

accuracy of the information disclosed (see Finding II. D.);

5. Proper disclosure of Committee debts and obligations;

6. The accuracy of total reported receipts, disbursements and cash

balances as compared to Committee bank records (see Finding II,

A.);

7. Adequate recordkeeping of committee transactions; and,

8. Other audit procedures that were deemed necessary in the situation.

Unless specifically discussed below, no material non-compliance with

statutory or regulatory requirements was detected. It should be noted that the

Commission may pursue further any of the matters discussed in this report in an

enforcement action.

II. AUDIT FINDINGS AND RECOMMENDATIONS

A. MISSTATEMENT OF FINANCIAL ACTIVITY

Sections 434(b)(1), (2), and (4) ofTitle 2 ofthe United States Code state,

in part, that a political committee shall disclose the amount of cash on hand at the

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begilUling of the reporting period and the total amount of all receipts and the total amount

of all disbursements for the reporting period and calendar year.

The Audit staffs reconciliation ofthe Committee's reported financial

activity to its bank activity revealed material misstatements with respect to beginning

cash-on-hand, receipts, disbursements, and ending cash-on-hand for calendar years 1997

and 1998. The Committee did not maintain records to show the derivation of its reported

amounts.

Reported cash-on-hand at January 1, 1997 was $15,056, the correct

amount is $1,515. Apparently reporting errors which occurred prior to the audit period

caused this misstatement. Reported receipts for calendar years 1997 and 1998 were

understated by a net amount of $18,064. The net understatement was due to the

Committee not reporting contributions from individuals ($16,064) and PACs ($2,000).

Reported disbursements for calendar years 1997 and 1998 were understated by a net

amount of $26,316. The net understatement was primarily due the Committee not

reporting certain disbursements totaling $27,591. Finally, reported ending cash-on-hand

at December 31, 1998 was misstated by $21,793 due to the irregularities noted above.

At the exit conference, the Committee's representative was provided

copies of the Audit staffs 1997 and J998 bank reconciliation workpapers. Thc

misstatement for each year was discussed. The Committee representative stated that

amended disclosure reports would be filed to correct the public record.

In the interim ,lUdit report, the Audit staffreeonullended that the

Committee file amended reports for calendar years 1997 and 1998 including corrected

Summary and Detailed Summary Pages, as well as, amended Schedules A and/or

Schedules B, as appropriate.

In response to the interim audit report, the Committee filed amended

disclosure reports for calendar years 1997 and 1998 that materially complied with the

above recommendation.

B. ITEMIZATION OF CONTRIBUTIONS FROM INDIVIDUALS

Section 434(b)(3)(A) ofTitle 2 ofthe United States Code states that each

report under this section shall disclose the identification of each person (other than a

political committee) 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, together with the date and amount of any such

contribution.

The Audit staffreviewed contributions from individuals totaling $42,895.

It was determined that 12 ofthese contributions, totaling $5,775, were not itemized on

Schedules A as required. Eight of these contributions should have been itemized on the

Page 5 of 11 Approved 12/16/99
1998 July 15 Quarterly Report, the remaining 4 should have been itemized on the 3D-Day

Post-Election Report following the General Election.

At the exit conference, the Committee's representative was informed of

this matter and provided a copy of the workpapers detailing the irregularities noted above.

The representative agreed to file amended Schedules A.

In the interim report the Audit staff recommended that the Committee file

amended Schedules A to disclose properly the contributions at issue. For each reporting

period for whieh amendments were required, corrected Summary and Detailed Summary

Pages were to be included.

In response to the interim audit report, the Committee filed amended

Schedules A disclosing the above contributions.

C. DISCLOSURE OF CONTRIBUTIONS FROM POLrTICAL COMMITTEES

Section 434(b)(3)(B) ofl'itIe 2 of the United States Code states that each

report under this section shall disclose the identification of each political committee

which makes a contribution to the reporting committee during the reporting period,

together with the dilte and illl10unt of any such contribution.

Section 431 (13)(B) ofTitle 2 of the United States Code defines the term

"identitkalion" to be, in the case of any other person, the full name and address ofsnch

person.

The Committee did not disclose properly 23 contributions from political

committees, totaling $41,400. Disclosure errors consisted of: omitted aggregate year-todate amounts, incorrect contribution amounts and inaccurate dates.

At the exit conference, the Committee's representative was informed of

this matter ;md provided a copy of the workpapers detailing the irregularities noted above.

The representative indicated that amended reports would be filed to correct the public

record.

In the interim audit report, the Audit staffrecommended that the

Committee file amended Schedules A to disclose correctly the contributions at issue.

In response to the interim audit report, the Committee filed amended

Schedules A correcting the irregularities noted above.

D. ITEMIZATION AND DISCLOSURE OF DISBURSEMENTS

Section 434(b)(S)(A) of Title 2 of the United States Code states that each

report shall disclose the name and address of each person to whom an expenditure in an

Page 6 of II Approved 12/16/99
CHRONOLOGY

FRIENDS OF MAJOR OWENS

Audit Fieldwork

Interim Audit Report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

06/14/99 - 08112/99

10/08/99

11/29/99

12/16/99

Page 11 of 11 Approved 12/16/99
FEDERAL ELECTION COMMISSION

WASHINGTON. DC. 204(,3

•

December 21, 1999

Mr. Asquith D. Reid, Treasurer

Friends ofMajor Owens

P.O. Box 2265

Brooklyn, New York 11202

Dear Mr. Reid:

Attached please find the Report of the Audit Division on Friends ofMajor Owens.

The Commission approved the report on December 16, 1999.

The Commission approved Final Audit Report will be placed on the public record

on December 30, 1999. Should you have any questions regarding the public release of

the report, please contact the Commission's Press Oflice at (202) 694-1220.

Any questions you may have related to matters covered during the audit or in the

report should be directed to Lorenzo David or Tom Nurthen of the Audit Division at

(202) 694- J200 or toll free at (800) 424-9530.

obert J. Costa

Assistant Staff Director

Audit Division

Attachment as stated

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Page 10 of 11 Approved 12116/99
aggregate amount or value in excess of $200 within the calendar year is made by the

reporting committee to meet a candidate or committee operating expense, together with

the date, amount, and purpose ofsuch operating expenditure.

The Audit staffreviewed 236 disbursements, totaling $129,774 which

were required to be itemized. Of these, it was determined that 52, totaling $27,583, were

not itemized on Schedules B as required.

Further, with respect to those itemized on Schedule B, the Audit staff

identified 10 disbursements, totaling $15,867, that were not disclosed properly. This

represents approximately 24% ofthe total dollar amount of disbursements itemized on

the Committee's reports. Disclosure errors consisted of: inaccurate amounts, incorrect

payee names, and inaccurate purposes.

At the exit conference, the Audit staff provided the Committee's

representative with workpapers detailing the above. The Committee representative

indicated amended Schedules B would be filed.

In the interim audit report, the Audit staff recommended that the

Committee file amended Schedules B to disclose properly the disbursements at issue.

In response to tbe interim audit report, the Committee filed amended

Schedules I3 disclosing those disbursements required to be itemized and correcting the

disclosure irregularities noted above.

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