Part II |
Overview of Campaign

Campaign Organization

Important Dates | Schneider for Congress

e Date of Registration March 14, 2002

e Audit Coverage January 1, 2001 — December 31, 2002
Headquarters Sarasota, Florida

Bank Information
e Bank Depositories 1

e Bank Accounts 1 Checking Account
Treasurer

e Treasurer When Audit Was Conducted Harold B. Schneider
¢ Treasurer During Period Covered by Audit Carroll F. Johnson

Management Information
e Attended FEC Campaign Finance Seminar No

¢ Used Commonly Available Campaign .
Management Software Package FECFile
¢ Who Handled Accounting and Recordkeeping

Volunteer Staff

Tasks
Overview of Financial Activity
(Audited Amounts)

Cash on hand @ February 5, 2002 $ 0
e Receipts

© Contributions 308,442

© Candidate Loans 85,500

o Other Receipts 6,744
¢ Total Receipts $ 400,686
e Disbursements

© Operating Expenditures 339,418

o Refund of Contributions 250
e Total Disbursements | $ 339,668

Cash on hand @ December 31, 2002 | $ 61,018



A. Disclosure of Operating Expenditures

The Audit staff identified expenditures totaling $120,627 reported on Schedules B
(Itemized Disbursements) that lacked or inadequately disclosed the required
information. The majority of these expenditures did not have or inadequately
disclosed the required memo entries to original vendors for reimbursements to
individuals. The remaining expenditures lacked adequate disclosure of the
address, purpose, amount, or election designation.

Disclosure of Candidate Loans

Candidate loans totaling $85,500 reported on Schedules C (Loans) lacked the
required disclosure information. For all reporting periods except the July
Quarterly 2002 report, the date incurred, due date, and/or interest rate was not
disclosed.

Disclosure of Debts and Obligations

The Audit staff identified debts and obligations totaling $27,811 reported on
Schedules D (Debts and Obligations) that lacked or inadequately disclosed the
required information. SFC reported “Miscellaneous Debts — estimate (not yet
billed)”, but did not disclose the full name and address of each creditor, the
outstanding beginning and ending balances, any amount incurred during the
reporting period, any payment made during the reporting period and the nature or
purpose of each debt. In addition, SFC inadequately disclosed a debt to Xpedite
Systems, Inc. by not including the amount of debt in dispute. Finally, SFC did
not disclose a disputed debt totaling $8,032 to its former F inance Chair.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that SFC:

Disclose on Schedules B the correct address, purpose, amount, or election
designation of expenditures;

Disclose on Schedules B, for reimbursements to individuals (excluding personal
travel and subsistence), a memo entry including the name and address of the
original vendor, as well as the date, amount and purpose of the original purchase;
Disclose on Schedules C the date incurred, the original source and amount of the
loan, the due date, the interest rate, the cumulative payment, and the outstanding
balance of candidate loans;

Delete the Schedule D entries for the “Miscellaneous Debts — estimate (not yet
billed)”, and disclose the full name and address of each creditor, the outstanding
beginning and ending balances, any amount incurred during the reporting period,
any payment made during the reporting period and the nature or purpose of each
debt; and

Disclose on Schedules D, with Tespect to disputed debts, any amounts paid to the
creditor, any amount SFC admits it owes and the amount the creditor claims is
owed.

In response, SFC filed amended reports correctly disclosing the expenditures, candidate
loans, and debts and obligations discussed above.



Part IV
Findings and Recommendations

| Finding 1. Disclosure of Earmarked Contributions

Summary

A review of SFC's reported receipts identified contributions received through a conduit
that lacked or inadequately disclosed information required by the Act. SFC complied
with the Audit staff's recommendation by filing amended reports correctly disclosing
these receipts.

Legal Standard

A. Definition of a Conduit. Anyone who receives and forwards an earmarked
contribution to a candidate committee is considered a conduit. 11 CFR §110.6(b)(2)

B. Definition of an earmarked contribution. An earmarked contribution is one which
the contributor directs (either orally or in writing) to a clearly identified candidate or
his or her authorized committee through an intermediary or conduit. 11 CFR
§110.6(b)(1)

C. Required Information for Contributions from Individuals Received From a
Conduit. For each itemized contribution from an individual forwarded by a conduit,
the recipient committee must report the following information:

The contributor’s full name and address (including zip code);

The contributor’s occupation and the name of his or her employer;

The date of receipt (the date the conduit received the contribution);

The amount of the contribution;

The election cycle-to-date total of all contributions from the same individual;

The full name and address of the conduit; and

The date and total amount of earmarked contributions received from the conduit.

11 CFR §§100.12, 104.3(a)(4), 110.6(c) and 2 U.S.C. §434(b)(3)(A).

Facts and Analysis

A review of SFC's reported receipts identified earmarked contributions received through
a conduit, MoveOn.org PAC, totaling $87,888. SFC reported these contributions on
Schedule A, line 11(a) (Contributions from individuals/persons other than political
committees), but did not disclose information relative to the conduit. Additionally, SFC
did not report the conduit transfers as memo entries on line 11(c)(Contributions from
other political committees).

The disclosure requirements for contributions received through conduits are flexible. The
recipient committee may either:



Part ITI
Summary

Findings and Recommendations

Finding 1. Disclosure of Earmarked Contributions

A review of SFC's reported receipts identified contributions received through a conduit
that lacked or inadequately disclosed information required by the Act. SFC complied
with the Audit staff's recommendation by filing amended reports correctly disclosing
these receipts. (For more detail, see p. 4)

Finding 2. Disclosure of Expenditures, Candidate Loans,

and Other Debts

A review of SFC's reported expenditures, candidate loans, and debts and obligations
identified a significant number of transactions that lacked or inadequately disclosed
information required by the Act. SFC complied with the Audit staffs recommendation
by filing amended reports correctly disclosing these expenditures, candidate loans, and
debts and obligations. (For more detail, see p. 5)



¢ Name and address of the payee; and

© Purpose (a brief description of why the disbursement was made—see below). 11
CFR §104.3(b)(4)(i).

B. Examples of Purpose.

¢ Adequate Descriptions. Examples of adequate descriptions of “purpose” include
the following: dinner expenses, media, salary, polling, travel, party fees, phone
banks, travel expenses, travel expense reimbursement, catering costs, loan
repayment, or contribution refund. 11 CFR §104.3 (b)(4)(i)(A).

¢ Inadequate Descriptions. The following descriptions do not meet the requirement
for reporting “purpose”: advance, election day expenses, other expenses, expense
reimbursement, miscellaneous, outside services, get-out-the-vote, and voter
registration. 11 CFR §104.3 (b)(4)(i)(A).

is)

Reporting Outstanding Loans. A political committee must disclose the date
incurred, the original source and amount of the loan, the due date, the interest rate, the
cumulative payment, and the outstanding balance. In addition, if there are any
endorsers or guarantors, their mailing address along with the name of their employer
and occupation must be disclosed. 11 CFR §§100.7(a)(1) and 104.3(d).

D. Itemizing Debts and Obligations. A debt of $500 or less must be teported once it
has been outstanding 60 days from the date incurred (the date of the transaction); the
committee reports it on the next regularly scheduled report. A debt exceeding $500
must be disclosed in the report that covers the date on which the debt was incurred.
11 CFR §104.11(b).

E. Reporting Outstanding Debts. A political committee must disclose the full name
and address of each creditor, the outstanding beginning and ending balances, any
amount incurred during the reporting period, any payment made during the reporting
period and the nature or purpose of each debt until those debts are extinguished.
When any debt is settled for less than the reported amount or value, each report shall
contain a statement as to the circumstances and conditions under which the debt was
extinguished and the amount paid. 2 U.S.C §434(b)(8) and 11 CFR §§104.3(d),
104.11(a) and 116.7.

F. Reporting Disputed Debts. A political committee shall report a disputed debt if the
creditor has provided something of value to the political committee. Until the dispute
is resolved, the political committee shall disclose on the appropriate reports any
amounts paid to the creditor, any amount the political committee admits it owes and
the amount the creditor claims is owed. 11 CFR §116.10(a).

Facts and Analysis

A review of SFC's reported expenditures, candidate loans, and debts and obligations
identified a significant number of transactions that lacked or inadequately disclosed
information required by the Act.



FEDERAL ELECTION COMMISSION
WASHINGTON, D.C. 20463

June 28, 2004
MEMORANDUM
TO: PRESS OFFICE
FROM: JOSEPH F. STOLTZ
ASSISTANT STAFF CTOR
AUDIT DIVISION /[

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON
SCHNEIDER FOR CONGRESS (A03-16)

Attached please find a copy of the final audit report and related documents on
Schneider for Congress, which was approved by the Commission on June 18, 2004.

Informational copies of the report have been received by all parties involved and
the report may be released to the public.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library
Web Manager


1. Itemize all transfers received from the conduit on Schedule A, line 11(c) (Other
Political Committees) and include memo entries on Schedule A, line 11(a)
(Individuals/Persons Other Than Political Committees) for only those individual
contributions that aggregate greater than $200; or,

2. Report all contributions received through the conduit on Schedule A, line 11(a) as
contributions from individuals and provide memo entries on Schedule A, line
11(c) for the amount of the conduit transfers.

In either case, the disclosure of the itemizable individual contributions on Schedule A,
line 11(a) must include the contributor’s name, full identification, date the contribution
was received by the conduit and the amount. Further, all contributions received from a
conduit and itemized on line 11(a) must also include the identification of the conduit, and
the date and amount of the conduit’s transfer.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that SFC:

© Disclose “Earmarked Contribution” in the description field on Schedule A, line
11(a) for all contributions received through the conduit that required itemization.
Additionally, include a memo text entry for each of these contributions containing
the contributor’s last and first name, the conduit’s full identification, and the date
and amount of the transfer in which the contribution was received; and,

e Disclose as memo entries on Schedule A, line 11(c) the name of the conduit,
along with the date, amount of each transfer, and “Earmarked Contribution” in the
description field.

In response, SFC filed amended reports correctly disclosing the receipts discussed above.

Finding 2. Disclosure of Expenditures, Candidate Loans,
and Other Debts

Summary

A review of SFC's reported expenditures, candidate loans, and debts and obligations
identified a significant number of transactions that lacked or inadequately disclosed
information required by the Act. SFC complied with the Audit staff's recommendation
by filing amended reports correctly disclosing these expenditures, candidate loans, and
debts and obligations.

Legal Standard

A. Reporting Operating Expenditures. When operating expenditures (including
certain debts and obligations) to the same person exceed $200 in an election cycle,
the committee must report the:
e Amount;
e Date when the expenditure was made;



Part I
Background

Authority for Audit

This report is based on an audit of Schneider for Congress, 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 2 U.S.C. §438(b), which permits the Commission to
conduct audits and field investigations of any political committee that is required to file a
report under 2 U.S.C. §434. Prior to conducting any audit under this subsection, the
Commission must perform an internal review of reports filed by selected committees to
determine if the reports filed by a particular committee meet the threshold requirements
for substantial compliance with the Act. 2 U.S.C. §438(b).

Scope of Audit

Following Commission approved procedures, the Audit staff evaluated various factors
and as a result, this audit examined:

The receipt of contributions from prohibited sources.

The disclosure of contributions received.

The disclosure of disbursements, debts and obligations.

The consistency between reported figures and bank records.

The completeness of records.

Other committee operations necessary to the review.

AWRWNS

Changes to the Law

On March 27, 2002, President Bush signed into law the Bipartisan Campaign Reform Act
of 2002 (BCRA). The BCRA contains many substantial and technical changes to the
federal campaign finance law. Most of the changes became effective November 6, 2002.
Except for the period November 7, 2002, through December 31, 2002, the period covered
by this audit pre-dates these changes. Therefore, the statutory and regulatory
requirements cited in this report are those that were in effect during the audit period.


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Changes to the Law

Part II. Overview of Campaign
Campaign Organization
Overview of Financial Activity

Part III. Summary
Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Disclosure of Earmarked Contributions
Finding 2. Disclosure of Expenditures, Candidate Loans, and Other Debts

Page

wn


Report of the
Audit Division on

Schneider for Congress
January 1, 2001 - December 31, 2002

Why the Audit About the Committee (p. 2)

Was Done Schneider for Congress (SFC) is the principal campaign
Federal law permits the committee for Jan Schneider, Democratic candidate for the U.S.
Commission to conduct House of Representatives from the state of F! lorida, 13th
audits and field District. SFC is headquartered in Sarasota, Florida. For more
investigations of any information, see the chart on the Campaign Organization, p. 2.
political committee that is

required to file reports Financial Activity (p. 2)

under the Federal ¢ Receipts

Election Campaign Act © Contributions $ 308,442
(the Act). The o Candidate Loans 85,500
Commission generally © Other Receipts 6,744
conducts such audits o Total Receipts $ 400,686
when a committee

appears not to have met ¢ Disbursements

the threshold © Operating Expenditures $ 339,418
requirements for © Refund of Contributions 250
substantial compliance o Total Disbursements $ 339,668
with the Act.' The audit

determines whether the Findings and Recommendations (p. 3)
committee complied with Disclosure of Earmarked Contributions (Finding 1)

the limitations, ¢ Disclosure of Expenditures, Candidate Loans, and Other
prohibitions and Debts (Finding 2)

disclosure requirements

of the Act.

Future Action
The Commission may
initiate an enforcement
action, at a later time,
with respect to any of the
matters discussed in this
report.

 2US.C. §438(b).