SHARON SNYDER

PRESS OFFICE

MEMORANDUM

TO:

FROM:

Ft [)ERA tEL ECT10\i Cl)\ , \ 11 5SI()N

March 28, 1994

ROBERT J. COSTA --

~C-- N "-

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

BJOOS683

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

AMERICANS FOR HARKIN, INC.

Attached please find a copy of the final audit report

-and--re-lated--documents on Americ_ans for Harkin, Inc. which was

approved by the Commission on Marcn- 15,1994.

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: Office of General Counsel

Office of Public Disclosure~

Reports Analysis Division

FEe Library
REPORT OF THE Al'DIT Df\'ISI()'

()~

.. -.

-' '-

Americans for Harkin, Inc.

Appro\'ed \larch 15.. 1994

"~..

i I DER.\L FI ECTIl)\ Ct)\I\tl:v,H),\

999 E STREET, '.\\',

\\ .\SHI'GTO', D.C.
REPORT OF THE AtJDIT DIVISION

ON

Americans for Harkin, Inc.

FEDERAL ELECTION COMMI~SION

999 E STREET, N.W.

WASHI"GTOS, D.C.
rI

I

I

CONTENTS

Executive Summary

Final Audit Report

Background

Findings

Legal Analysis

Supplemental Legal Analysis

Transmittal to Treasurer

Trans.ittal to Candidate

- - ChronologyPage

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AK004780

rINAL AUDIT REPORT

ON

AMERICANS Foa HARKIN, INC.

EXECUTIVE SUMMARY

Aaericans for Barkin, Inc. (the Co.-itt•• > reqist@red with

the rederal Election Coaaission on Sept.abet 23, 1991. The

Co..itt•• va. the principal caapaign coaaitt•• of senator To.

Barkin candidate for the 1992 De.ocratic pre.idential

no.ination.

The audit vas conducted pursuant to 26 u.s.c. 59038(a).

7he finding_ of the audit v.~. pE•••nt.~ to ~h. Coaaitt•• at an exit conference held at the conclusion of ~b. audit ~-fie-ldverk--(Noveaber 17,_ ~19?2) and in the interi. audit report

approved by the Co..i ••ion on -Jun-.- 17, 1993, .nd~ ca-t~i~fied-~by~ -the

Co..i.sion on Nov.aber 9, 1993.1/ The Coaaitt•• vaa qiven an

opportunity to r••pond to the fInding_ both after the exit

conference and after receipt of the interia audit report. These

responses have been included in the findings set forth in this

report.

In the final audit report, the Coaai••ion ••de an initial

deter.in.tion that the Coaaitt•• pay the u.s. Treasury a total

of $26,878 in connection with the Coaaitt••'. receipt of

aatching funds in .xc••• of the Candidate'. entitle••nt: and the

Coaaitt••'. i.aue of eh.cks which vete not cashed (stale-dated).

In addition, the Coaai••ion deter.ined that a payaent to the

u.s. Treaaury of $33,033 i. required in connection with the

Coaaitt••'. receipt of prohibited contributions fro. individuals

and exc•••ive contributions fro. individuals and political

co..itt.... Th••e transactions and other .atter. are suaaarized

below.

!/ Following the decision by the D.C. Court of Appeals, in FEe

v. NRA Political Victory Fund, et al., (No. 91-5360, sliP--

Ope at 2), that the composition of the Federal Election

Coasission violated the Constitution'••eparation of

povers, the Commission reconstituted itself on October 26,

1993, and ratified its earlier approval of the Interi.

Report on Noveaber 9, 1993.

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A Arent Prohibited Cor orate Contributions - 2 u.s.c.

S441b(a). T e interim report require t e Committee to make a

payment to the u.s. Treasury in the amount of $7,373,

representing the value of unresolved corporate contributions.

Counsel for the Committee objected to the demand for payaent,

arguing that the Commission has no authority to require such

payments and that the auditor's method of sa.plin9~/ to project

these payments is invalid. However, the Commission did not find

the Coaaitte.'s arguments persuasive.

Use of Cor orate and Labor Or anizAtion Aircraft - 11 erR

1114. (e). Can i ates (or persons tray. ing on e a f of a

candidate) who use aircraft owned by a corporation or labor

union aust pay the corporation or the labor organization for the

travel in advance. For travel to a city served by regularly

scheduled co..ercial service, the candidate coaaitt•• aust pay

the first class air fare. The interia report reco..ended that,

absent evidence to the contrary, the Coaaitt•••ake a pa~nt to

the u.s. Treasury in the aaount of $7,036, representing the

underpayment for use of such aircraft. In response, the

Committ.e provided infora.tion d.aonstrating that it had

co.plied with the regulation in calculating the a.aunts paid to

the corporation and labor union.

- - ~-arent-ExcessiveContributions - 2 U.. S.C.SS441a(a)(1} and

(2). lfhe interi. report contained -a Hreco...ndation- that theCoaaittee make payments to the u.s. Treasury in the a.ounts of

$22,060 and $3,600, representing the value of unresolved

excessive contributions fro. individuals and political

committees, respectively. Counsel for the Coaaittee objected to

the de.and for payaent on the baaia that the Coaai••ion has no

authority to require such payaents. The Co..i ••ion did not find

the Coaaitte.'. arqu••nta persuasive.

Misstateaent of Financial Activit - 2 u.s.c. SI434(b)(1),

<2}, an ( ). On ltS lac osure reports, as initially filed,

for the period June 3, 1991, through August 31, 1992, the

Committee ai.stated ita financial activity. The Coamitt•• filed

amended reports which corrected the .i••tateaentl.

Iteaization of Receipts and Disbursements - 2 U.S.C.

S434(b), 11 erR 1104.3. On its disclosure reports filed prior

to the co...nceaent of audit fieldwork a nuaber of receipts and

disburse.ents were not itemized as required. The Committee

filed amended reports which corrected the itemization errors.

~/ On May S, 1992, the Commission adopted a policy of using

sampling techniques to project prohibited and excessive

contributions and, based on the projection, to require

repayments to the Treasury_

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Omission of Disclosure Information - 2 u.s.c. 1434 (b), 2

U.S.C. S431(13), 11 erR S102.9, 11 crR $104.3, 11 erR s 104.7.

On its initial reports, the Committee did not disclose

adequately certain information related to disbursements and the

identification of contributors. At the exit conference,

Coamission staff inforaed the Committee that (a) the Committee

had failed to disclose the occupation and name of ••ployer of a

nuaber of contributors who, in the a99regate, had contributed

over $600,00; and (b) the Committee had failed to use its best

efforts to obtain, maintain and report this information, as

required under 11 erR l04.7(b). The Coaaittee subaitt.d amended

reports which corrected the oaissions, except with respect to

disbursements .ad. fro. the Coaaittee's payroll account.

Funds Received in Excess of Entitl•••nt - 26

u.s.c. S «). In t e ina au t report t. 0 ..i ••10n

.ad. an initial deter.ination that a repa~.nt of $24,595 to the

u.s. Treasury vas required. This determination was based on an

analysis of the Coaaitt••'. Stat.aent of Net Outstanding Caapaign Obligations and relevant receipts activity, which

showed that the Candidate received .atching funds in excess of

the ••ount to which b. va. entitled.

_Stale-dated Co.-itt.e Checks - 11 erR 59038.6. Finally,

the final audit report requltedthe Coaait-t•• to I>&Y- to the U._5 ..

Treasury $2,283, representing the value of stale-dated checks.

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A~004211

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REPORT OF THE AUDIT DIVISION

ON

AMERICANS FOR HARKIN, INC.

I. Background

A. Audit Authority

This report is based on an audit of Americans for

Harkin, Inc. {the Committee). The audit is .andated by Section

9038(a) of Title 26 of the United States Code. That ••ctjon

states that "after each a.tching payaent period, the Co.-i••ion

shall conduct a thorougb .xaa1n&tio~,>~!,~. audit of, the qualified

caapaign expenses of every candidate and bi••~~Yl~ ~~t••• who received payaents under Section 9031.- Also Section 9039(b)

of--'rftle-26 -of tbe--United-St-at-e-5- Code and _Secti_on 9038 .. 1(a}(2) of

the Co.-i••ion' a .equlationa .tate that the co..f••-fon-.ay- -eonductother exasinations and audits fro. ti•• to ti•• as it deea.

nece.sary_

In addition to ex.aining the receipt and use of rederal

funds, the audit seeks to deter.ine if the caapaigD b•• a.terially

co.plied with the li.itationa, prohibitions and disclosure

requireaents of the Federal Election Caapaign Act of 1971, as

aaended.

B. Audit Coverage

The audit covered the period fro. the Coaaittee's

inception, June 3, 1991 through August 31, 1992. Durinq this

period, the Coaaittee reports reflect an opening cash balance of

$-0-, total receipts of $5,668,468, total disburseaents of

$5,387,092, and a closing cash balance of $144,134.1/ In addition,

a limited review of the Coaaittee's transactions vas conducted

through March 22, 1993, for purposes of determining the

Committee's remaining matching fund entitlement based on its

financial position.

!I These totals do not foot due to various math errors. {See

Finding II.C. \. All figures are rounded to the nearest

dollar.

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C. ~~mpai9n Organization

The Committee registered with the Federal Election

Commission on September 23, 1991. The Treasurer of the Committee

during the period covered by the audit was Larry Hawkins. The

current Treasurer is also Larry Hawkins.

Ourinq the period audited, the campaign established

offices in lS states in addition to its national headquarters

located in Bethesda, Maryland. The campaign's current offices are

in washington, D.C.

To manage its financial activity, the campaign

maintained nine bank accounts at various times. Fro. the above

accounts, the Co..ittee issued approximately 4,108 checks in

payment for goods and services. Also, the Co.-ittee received

approximately 43,388 contributions from 34,275 individuals

totaling $2,6S5~641 and 193 contributions fro. political

coaaittees totaling $325,025.

In addition to contributions, the ca.paiqn received

$2,103,362 in matching fund. fro. the United States TreasucI.

This amount represents 1S\ of the $13,810,000 aaxlau. entlt ••ent -- that any candidate could receive. The candidate was deterained

eliqible to receive matching funds on-Noveabec 27, 1991. T_hrough

February, 1993, the caapaign sade a total of 15 matching funds --- requests totaling $2,253,220. The Coaaiasion certified 93\ of the

requested a.ount. Por aatching fund purposes, the Coaais.ion

determined that Senator Barkin's candidacy ended March 9, 1992.

This deteraination was based on a public statement by the

Candidate. The Coaaitt•• haa continued to receive .atching fund

payaents to defray expenses incurred through March 9, 1992 and to

help defray the cost of winding down the campaign.

Attachment 1 to this report is a copy of the

Coaaission's .ost recent Report on Financial Activity for this

campaign. The a.ounts shown are as reported to the Coaaission by

the C01lUlittee.

Da Audit Scope and Procedures

In addition to a review of the the Committee's

expenditures to determine the qualified and non-qualified campaign

expenses incurred by the campaign, the audit covered the following

general categories:

1. The campaign's compliance with statutory limitations

with respect to the receipt of contributions or loans

(see Findings II.B.1. and 2.);

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2. the campaign's compliance with the statutory

requirements regarding the receipt of contributions from

prohibited sources, such as those from corporations or

labor organizations (see Findings II~A.l. and 2.);

3. proper disclosure of contributions from individuals,

political committees and other entities, to include the

it.alsation of contributions when required, as vell as,

the completeness and accuracy of the information

disclosed (see Finding II.D.l. and E.l.);

4. proper disclosure of disburseaents including the

itemization of disbursements when required, as well as,

the completeness and accuracy of the infor.etlon

disclosed (see Findin9s l1.D.2. and B.2.);

5. proper disclosure of campaign debts and obligations;

6.

......

.... """I •

r 8.

.;~

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the accuracy of total reported receipts, disburseaents

and cash bal.nee. as co.pared to caapaign bank recorda

(see Finding II.C.);

adequate recordkeeping for ca.paign transactions;

accuracy o-f---t.h-. -Stat••entaf Net OUtstandinq_-Caapalgn

Obligations filed by the caapaign to disclose its

financial condition and establish continuing aatcbing

fund entitle.ent (s•• rindings III.A. and III.B.),

9. the caapaign's coapliance with spending Ii_itationa; and

10. other audit procedures that were dee••d necessary in the

situation.

~:~ In addition, on April 20, 1992, the Audit staff

conducted an inventory of the Coaaittee'& records to deter.ine if

-(' they were saterially complete and in an auditahle condition. A

letter, dated May 5, 1992, notified the Comaittee that records

pertaining to several areas of the pending audit were not aade

available for review. Furthermore, the letter informed the

Committee that if at the conclusion of a 30 day period ending June

8, 1992, the items listed on the letter had not been provided, the

Commission would issue subpoenas for the production of those

records. Records provided in response to our May 5, 1992 request

were deemed sufficient to commence fieldwork.

At the Entrance Conference on June 15, 1992, the Audit

staff informed the Committee that a request would be made to the

Office of General Counsel for subpoenas to be issued to its direct

mail vendor for the production of all documents which detailed the

amount and destination of direct mail distributed by the

committee.

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4

The subpoena to the Committee's direct mail vendor was

approved by the Commission on July 13, 1992. On August 20, 1992,

in response to the subpoena issued, the Audit staff received

sufficient records from the Committee's direct mail vendor.

unless specifically discussed below, no material noncompliance 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. Findings and Recommendations - Non-Repayment Matters

Introduction to Findings

In liqht of an October 22, 1993 decision by the Court of

Appeals for the D.C. Circuit in FEC v. NRA Political Victory Fund

et al., the Coaaission reconsidered the interia audit report and

voted its approval on November 9, 1993. As a result of this

action, the Coaaittee vas afforded an additional 30 days to

supplement its earlier response received on September 7, 1993. On

Noveaber 22, 1993, Couns.l to the Co..itte. indicated that no

supplemental response would be made.

A. Prohibited Contributions

1. Apparent- Corpo-rate Contributions

Section 441b(a) of Title 2 of the United States

Code states, in part, that it is unlawful for any national bank or

any corporation organized by authority of any law of Congress to

make a contribution or expenditure in connection with any election

to any p!)litical office or for any corporation whatever, or labor

organization, to .ake a contribution or expenditure in connection

with any election to federal office and further states that it is

unlawful for any candidate, political comaittee or any other

person knowingly to accept or receive a~y contribution prohibited

by this section.

The Commission notified the Co••ittee by letter

dated June 2, 1992, that a sampling technique would be used to

identify the dollar amount of prohibited contributions received by

the Committee. The letter states, in part, ·Commission

requlations provide 30 days in which to refund contributions which

appear to be prohibited. (See 11 C.F.R. l03.3(b)(1) and (2)). The

Commission will no longer recognize any untiaely refunds made more

than 60 days following a candidate's date of ineligibility or

after the date of receipt of this letter, whichever is later.

Contributions resolved by the committees outside these time

periods are considered untimely and in violation of the

Commission's regulations. The Committee received the letter June

6, 1992.

Our sample review of contributions identified a

material dollar amount of prohibited contributions. The sample

projected that the total dollar value of prohibited contributions

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in the population was $7,123. As of the conclusion of audit

fieldwork, the Committee had made no refunds relative to the

aforementioned items. In addition, one prohibited contribution of

$250 was identified in a 100\ review of selected contributions.

The Committee did not establish a separate bank

account for the deposit of potential prohibited contributions;

however, the account balances maintained in the Committee's

reqular accounts vere greater than the cuaulative total of the

prohibited contributions deposited. (See 11 CaF.R. Sl03.3(b)(4»).

All prohibited contributions identified during the

reviews were verified by the appropriate Secretaries of state.

At the Exit Conference, the Coamittee was provided

schedules and relevant check copies to support the prohibited

contributions identified. Committee personnel had no coaaent.

with respect to the iteas noted above. Further, the Co.-ittee

stated that they would respond to our findings after receipt of

the interia audit report.

In the interim audit report, the Audit Staff

recoaaended that the Co..itt••4-.on.tr.~ that the contributions

discussed above are not prohibited or aake a payment to the United

Sta-ted Treasury in the a.aunt of $7,373.

In response to the interia report, Counsel for the

Co.-ittee objected to the Co.-ission'. de.and for payaents of

$7,373 for alleged apparent corporate contributions. The

objection is based on arquaents that the Co.-ission has no

authority in the audit process to require payaents of prohibited

or excessive contributions and that the auditors' ••thod of

sampling to project these payaente i. invalid.

Counsel states correctly that the Federal Election

Campaign Act requires publicly funded presidential

candidates/coaaitt••• to .ake repayaents to the United States

Treasury under very specific circumstances (26 u.s.c. 19038 (b)(l)

and (2)) and that the payaents requested for prohibited and

excessive contributions fit neither of the categories. Further,

Counsel notes that the only other authority granted the Coaaission

to require any payment of aoney is found in the civil penalty

provisions at 2 u.s.c. S431(g).

However, the payments at issue are not repayments

or civil penalties. These payments are in accordance with the

policy adopted by the Commission for use in 1992 Title 26 audits.~/

This sampling technique is the same technique used

by the Commission since 1980 to determine the value of matchable

~/ The Commission approved this policy on May 5, 1992.

Committees were informed by letter dated June 2, 1992.

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contributions contained in a submission made by a presidential

primary candidate.~/

Counsel for the Committee contends that "the

combination of sampling with selected 100' review of certain

transactions is an invalid methodology that may result in

overstated projections." Counsel states,

"The auditors sampled a population

(contributions received by the Committee) and

on the basis of the number of prohibited or

excessive contributions found in the sa.ple,

used a statistical estimate to project an

amount based on the total population. In

addition to the estimate based on the sample,

the auditors conducted an additional selected

100\ review of certain ite.s either in the

same population or in a discretely identIfied

portion of the overall po~ulation, and

included those items as a ditional prohibited

and exc•••ive aaounta on top of the

statistical estimate based on the population.

Tbis ..thod,cl••~~¥ r.sults in an overstated

a.ount.- (Eaphaais not in oriqinal)

Counsel further states,

"The audit division's logic would allow for an

estimate by sa.ple, followed by a 100\ review

of a certain segaent of the population known

to contain errors (such as all refunds). This

would, of course, lead to an overestiaate of

prohibited contributions just as the auditors

have done .. "

Contrary to the contention apparently being .ade by

Counsel to the Coaaittee, it should be noted that the Audit staff

performed two separate and distinct reviews. Certain

contributions were tested on a sample basis while other

contributions were tested on a 100\ basise Contributions reviewed

on a 100' basis were not included in the population from which the

sample was selected. Rather, as explained below, the 100\ review

items were a separate group of contributions.

On June 30, 1992, the Committee's Assistant

Treasurer was informed that contributor information for 20

deposits into the Committee's bank account was not entered into

the Committee's receipts database. The Committee requested the

~/ This technique was recommended by the firm of Ernst &

Whinney (now Ernst & Young> in a 1979 report to the

Commission entitled Report on Study of Selected Sampling

Procedure.

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information from the bank. It was received on August 26, 1992,

subsequent to the Audit staff's sample review of contributions

contained on the receipts database.

No overstatement occurs when the amount resulting

from the separate and distinct 100\ review is added to the

projected amount based on the sample. Counsel's arquaents on

methodology used are flawed at best.

Counsel also states that the final audit report

should be revised to require the Comaitte@ to refund to the

contributors the $750 [$500 in corporation contributions

identified in the sa.pie and $250 identified in the 100\ review]

in actual corporate contributions inadvertently accepted.

The Committee has not complied with the

recoaaendation contained in the interi. audit report. Arguaents

submitted questioninq the Coaaiasian's authority to require a

payment or the aethodology eaployed by the Audit staff are not

persuasive!/i therefore a payaent ($7,373) to the United States

Treasury is varranted. Further, the Audit staff has recognized

this a.ount as a qualified caapaign expense, and as such, included

this a.ount on the BOCO stat••ent (S•• Finding III. A.) ."*'- "<'r ~'4<.~

Recouendationll

The Audit staff reco...nds that the Coaaittee be required to

make a payment to the United States Treasury in the aaount of

$1,373, representing the value of unresolved corporate

contributions.

2. Use of Corporate and Labor Organization Aircraft

Section 114.9(e)(1){i} of Title 11 of the Code of

Federal Requlations states that a candidate, candidate'. agent, or

person traveling on behalf of a candidate who uses an airplane

which is owned or leased by a corporation or labor organization

other than a corporation or labor organization licensed to offer

commercial services for travel in connection with a Federal

election aust, in advance, reimburse the corporation or labor

organization in the case of travel to a city served by requlaely

scheduled commercial service, the first class air fare.

During the review of the Committee's transactions

relative to payments for air transportation services, the Audit

staff identified Committee disbursements to one corporation and

one labor organization. The name of the corporation was

HealthSouth Rehabilitation Corporation and the labor organization

Please refer to attached legal analysis (pages 2-5), dated

1/19/94, for a discussion of selected court cases which support

both the Commission's authority to require payaent and the

methodology employed.

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8

identified was the Machinists and Aerospace Workers International

Association (Machinists Association). These organizations do not

appear to be licensed to offer commercial services for travel as

part of their normal business operations. The corporate status of

the firm noted above was confirmed with the appropriate Secretary

of State. The Audit staff compared the Comaittee's payments for

flights which occurred between December 1991 and Karch 1992 to the

lowest non-discounted first class fares charged by commercial

airlines which regularly served the same cities.

Our analysis of the corporate aircraft usage

revealed that the corporation billed the Coaaittee $5,473 and

received a like payment prior to the flights. However, an

apparent underbillinq and underpayment of $1,193 exists; this

represents the difference between the amount billed/paid ($5,473)

and the value ($6,666) calculated by the Audit staff using the

lowest non-discounted first class fare available en the date of

the flight.

Based on the analysis of the Machinists

Association's aircraft usage by the Coaaitt••, it was noted that

the Machinists Association billed the Coaaitt.e $35,705 and was

paid $35,961 prior to or on the date of the flight. Bowever, an

apparent underbilling and underpayment of $5,843 exist.; this i~~r~sents the difference ~~~ween the a.aunt paid ($35,961) and

the value ($41,804) calculated by the Audit staff- us-ingthe_l()_west

non-discounted first class fare available on the date of the .

fli9ht •

Thus a total of $41,434 ($35,961 + $5,473) was paid

for the above flight actiVity which resulted in a total

underpayment of $7,036 ($1,193 + $5,843). The Co.-ittee vas

provided copies of audit workpapers detailing the aforeaentioned

matter.

The Coaaittee responded that it used appropriate

first class airfares in calculating the amounts paid. The

Committee noted that their rates were obtained in each case by the

campaign scheduler who contacted Carroll Travel for the first

class fares for each 1e9 of the trip as of the date of travel.

To support its first class fares, the Committee

prOVided the Audit staff with copies of a statement fro. its

campaign scheduler, the scheduler's notes of conversations with

Carroll Travel, and a statement from the owner of Carroll Travel.

The Audit staff's analysis of the information

provided by the Committee indicated that the first class fares

obtained by the Committee were, in many cases, discounted. In

some instances, first class fares used by the Committee were

identical to those identified by the Audit staff. Not

withstanding the Committee's efforts, the Audit staff maintains

its position that the Committee's use of corporate and labor

organization aircraft resulted in an underpayment of $7,036.

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(
The interim audit report recommended that the

Committee provide information which demonstrates that the

aforementioned activity is in accordance with 11 C.F.R. S114.9(e)

or absent such a showing, make a payment of $7,036 to the United

States Treasury.

Counsel for the Committee raised the same objection

to this recomaendation as was raised in Section 1 above. For the

reasons stated in Section 1 above, Counsel's arguments questioning

the Commission'S authority to require payments to the United

States Treasury are not persuasive.

In addition, Counsel states that nothing in the

regulations requires that the Committee reiaburse in the amount of

the highest first class airfare available on any particular date.

The Committee subaitted an affidavit of Mr. Stuart

Carroll, owner of Carroll Travel, the agency which regularly

provided travel-related services to the Committee. The affidavit

states, in part:

ftThe PEC's Interia Audit £in~in9s,~ndicat.

that the Harkin Campaign Co.-itt•• did not use

fares tha~ ~epresented a non-discounted first

class airfare. The-ter. in -disput.e- here is

'non-discounted'. I £ir.1y state that I

provided the Barkin CaapaigD Coaaittee in

every instance, to the best of .y ability, a

valid, industry standard, non-discounted first

cIa•• air fare. The caapaign coaaittee has

obtained a listing of the various first class

airfares available for use on the dates in

question. As you can see, there are a number

of cate90ries: 'F', 'F9', 'PN', and 'F28'.

The 'F' and 'F9' cate90ri•• represent

non-discounted, unrestricted fares. In every

instance, ay agency quoted the ca.paign an

'F9' or other applicable non-discounted first

class category fare."

According to airfare information provided by

General Services Adainistration Transportation Audit Division,

first class airfares are listed for unrestricted (code F), for

night travel (code FN) and for other service (codes F9 and F28).

The rates shown for code F first class accommodations are higher

than the other first class rates. Generally this is because

conditions accompany the lower fares, such as: the tickets must

be purchased within a certain time, or travel is restricted to

certain days or times.

The regulation at 11 C.F.R. Sl14.9te) requires that

first class airfare be used as a basis to determine the amount

reimbursed, apparently in an attempt to equate a non-scheduled

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10

corporate aircraft trip to that of a scheduled commercial fli9ht

with the same origin and destination points and of an equivalent

level of service.5f In the Audit staff's opinion, travel

encumbered with conditions such as those stated above does not

equate with the unrestricted use of a corporate or labor

organization aircraft, therefore, reimbursement for less than a

non-discounted first class rate with no conditions attached is

contrary to the intent of the the regulation.

However, because of the specific facts presented in

this report and the inherent difficulty presented to committ.es in

determining first class rates in the context of 11 C.F.R. S

114.9(e)'s prepayaent requirement, the Coaaittee'. approach il

reasonable and further action does not see. warranted ..

B. Apparent Excessive Contributions

1. Contributions fro. Individuals

Section 441a(a){1)(A) of Title 2 of the United

States Code states that no person shall .ake contributions to any

candidate with respect to any election for Federal office which,

in the aggregate, exceed $1,000.00.

Section 11.0.• 1(k) of Title 11 of the Code of Federal

Requlations states, in part, -that any cantt'ibu·t-ien-aade-.-by aQ_J:e _ than one peeson, except for a contribution aade by a partnership,

shall include the signature of each contributor on the check,

aoney order, or other negotiable instru••nt or in a separate

vritinq. A contribution .ade by aore than one person that does

not indicate the aaount to be attributed to each contributor shall

be attributed equally to each contributor. If. contribution to a

candidate on its face or when aggregated with other contributions

fro. the sam. contributor exceeds the liaitations on

contributions, the treasurer .ay ask the contributor whether the

contribution was intended to be a joint contribution by .ore than

one person. A contribution shall be considered to be reattributed

to another contributor if the treasurer of the recipient political

committee asks the contributor whether the contribution is

intended to be a joint contribution by aore than one person, and

informs the contributor that he or she may request the return of

the excessive portion of the contribution if it is not intended to

be a joint contribution; and within sixty days fro. the date of

the treasurer's receipt of the contribution, the contributors

provide the treasurer with a written reattribution of the

contribution, which is signed by each contributor, and which

indicates the a.aunt to be attributed to each contributor if equal

attribution is not intended.

~/ When the re9~lations were adopted in 1976, prior to the

deregulation of the airline industry, there was generally,

little price variation between carriers for a given trip.

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Section l03.3(b)(3) of Title 11 of the Code of

Federal Regulations states, in part, that contributions which

exceed the contribution limitation may be deposited into a

campaign depository. If any such contribution is deposited, the

treasurer may request redesignation or reattribution of the

contribution by the contributor in accordance with 11 C.r.R.

SSllO.l(b) and 110.1(k), as appropriate. If a redesignation or

reattribution is not obtained, the treasurer shall, within 60 days

of the treasurer's receipt of the contribution, refund the

contribution to the contributor.

Section 110.1(1) of Title 11 of the Code of Federal

Requlations states, in part, that if a political committe.

receives a written reattribution of a contribution to a different

contributor, the treasurer shall retain the written reattribution

signed by each contributor. If a political coaaittee does not

retain the written records concerning reattribution as required,

the reattribution shall not be effective, and the original

attribution shall control.

Yhe COaPi.sion notified the Coaaittee by letter

dated June 2, 1992, that a saap1in9 technique would be used to

identify the dollar aaount of exc••sive contcibutions received by

the COlUDittee. The letter stat••, in part, -Co..l.sion -", ",

regula-tions- p-rovid~__ 30__ days in which to refund contributions which

appear to be prohibited, and 60 days in -which -to- s-eek _ __ __ _ reattribution, redesignation or refund of excessive contributions

(11 C.F.R. l03.3.(b){l) (2) and (3)}. The Coaaissicn vill no

longer recognize any untiaely refunds, redesignationa or

reattributions aade more than 60 days following a candidate'S date

of ineligibility or after the date of receipt of this letter,

whichever 11 later. Contributions resolved by the coaaitt••• outside these ti.e periods are considered untiaely and in

violation of the Commission's regulations. The Committee received

the letter June 6, 1992.

Our sa.ple review of contributions identified a

material dollar amount of unresolved excessive contributions. The

sample projected that the total dollar value of unresolved

excessive contributions in the population was $5,460. To date the

Committee has not provided the Audit staff information relative to

any refunds of the items noted. In addition, twenty-two

unresolved excessive contributions, totaling $16,600, were

identified in a 100\ review of selected contributions.

The Committee did not establish a separate bank

account for making refunds; however, the account balances

maintained in the bank accounts were greater than the cumulative

total of the aforementioned excessive contributions. (See 11

C.F.R. §103.3(b)(4»).

At the Exit Conference the Committee was provided

with a schedule of the apparent excessive contributions. The

Committee had no comments with regard to the excessive

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12

contributions. Further, the Committee stated that they would

respond to our findings after receipt of the interim audit report.

The interim audit report recommended that the

Committee either provide evidence that the contributions in

question are not excessive or make a payment to the United States

Treasury in the a.ount of $22,060.

Counsel for the Committee raised the same

objections to this recommendation as were raised in response to

the recommendation in rindinq II.A.l. above. Further, Counsel

contends that $2,250 had already been refunded by the Committ@e

prior to the June notification and should not be included in the

payment a.ount to the Treasury.

However, the Audit staff notes that only $1,500 in

refund checks written prior to the June notification letter are

included in the excessive a.aunt. Those checks had not cleared

the Committee's bank as of November 1992 and are, therefore,

considered unresolved.

The arguments submitted questioning the

Co..i ••ion'. authority to require a payaent or the methodology

eaployed by the Audit staff are not persuasive: therefore a

-payment ($22#060) i._~ wa__r_~anted. The Audit staff has recognized

this a.ount as a qualified c-aap-ai-gn expens-e, and- as -such J included

the a.ount on the NOCO stateaent (see Findinq III.A.)

Recoaaendation 12

The Audit staff recoaaends that the Coaaittee be required to

.ake a payaent to the United States TreaBury in the a.ount of

$22,060 representing the value of unresolved excessive

contributions received fro. individuals.

2 • Excessive Contributions From Political Coaaittees

Section 441a{a){2)(A) of Title 2 of the United

States Code states that no aulticandidate political coaaittee

shall make contributions to any candidate and his authorized

political coaaittees with respect to any election for rederal

office which, in the aggregate, exceed $5,000.

The Audit staff performed a review of contributions

received from political committees and identified three

contributors whose contributions exceeded the limit by $3,600. As

of the end of audit fieldwork, no refunds were made.

The Committee did not establish a separate bank

account for making refunds; however, the account balances

maintained in the bank accounts were greater than the cumulative

total of the excessive contrlbutions. (See 11 C.F.R.

Sl03.3(b)(4)) .

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13

At the Exit Conference the Committee was provided

with a detailed schedule, as well as relevant check copies

relative to these unresolved excessive contributions. The

Committee did not provide any explanation for the above noted

errors. Further, the Committee stated that they would respond to

our findings after receipt of the interim audit report.

The interim audit report recommended that the

Committe. either provide evidence that the contributions in

question are not excessive or make a payment to the United States

Treasury in the amount of $3,600.

Counsel for the Committee raised the same

objections to this recommendation as were raised in response to

the recoaaendation in Finding II.A.I. above.

The arguaents submitted questioning the

Commission's authority to require a payment or the aethodology

eaployed by the Audit staff are not persuasive; therefore a

payment ($3,600) is warranted. The Audit staff has recognized

this .aount:" "ag a quali fied ca.paiiJD expense, and as such, included

the a.cunt on the NOCO statement. (See Findin9 III.A.)

C' Recoaaendation 13

The Audit staff recoaaends that the- Coaaitt•• be required--to

~, aake a payaent to the United States Treasury in the aaount of

$3,600 representing the a.ount of unresolved excessive

contributions received fro. political coaaitt.ess

c. Misstate.ent of Financial Activity

Sections 434(b)(1), (2), and (4) of Title 2 of the

United States Code, state in relevant part, that each report shall

disclose the a.ount of cash on hand at the beginning of the

reporting period, and the total a.ount of receipts and

disburseaents received or .ade during the reporting period and

calendar year.

The Audit staff performed a reconciliation of the

Committee's bank account activity to the activity on its

disclosure reports for the period June 3, 1991 through August 31,

1992. The reconciliation indicated that the reports initially

filed contained material misstatements. Prior to the conclusion

of audit fieldwork the Committee filed amended reports for the

period June 3, 1991 through January 31, 1992. However, the

amendments did not correct the misstatements.

For the period June 3, 1991 through December 31, 1991,

reported disbursements were overstated by a net amount of

$19,511.28. The components of the misstatement are:

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The reported ending balanc@ at December 31, 1991 vas

understated by $23,992, resulting primarily from the misstatement

detailed above.

For the period January 1, 1992 through August 31, 1992,

reported disbursements were understated by $194,085. Ending cash

for the period was overstated by $78,404, resulting primarily from

the misstateaent in disbursements.

14

Reported Disbursements as Amended

Disbursements Reported Twice

Disbursements not Reported

Unexplained Difference

Adjusted 1991 Disbursements

$2,011,203

(65,931)

12,560

33,859

$1.991,692

According to the Committee's Assistant Treasurer, the

disbursements were not reported due to the following reasons: 1)

For the period 2/1/92 - 2/29/92, aaounts coded ,to certain expense

codes in the Coaaittee's co.puter system were omitted fro. the

disclosure report; 2) For the period 3/1/92 - 3/31/92, the

Coaaittee did not maintain the information required to be reported

-for disbursements ,from its field account, how(I!ver the inforaation

vas SUbsequently obtained from -theCo-..ittcee's-bank ..

In addition, the Coaaittee did not report $12,745 in

disburse.ents fro. its payroll account or $49,381 in disburseaents

made during the period 4/1/92 - 8/31/92.

At the Exit Conference the Coaaittee was given schedules

which outlined the aisstateaents.

The interia audit report recommended that the Coaaittee

file amended reports to correct the aisstatements noted.

In response to the interim audit report, the Coaaittee

stated that amended reports had been filed which materially

corrected mistakes that resulted fro. inadvertent errors in

reporting disbursements. The Committee noted that the aistakes

were due primarily to staff shortages and the inexperience of

those staff in the accounting department.

The Committee filed amended reports on August 31, 1993,

which materially corrected the misstatements.

D. Itemization of Receipts and Disbursements

1. Receipts

Section 434/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

Page 18

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(
15

reporting committee during the reporting period, whose

contribution or contributions have an aggregate amount or value in

excess of $200 within the calendar year, or in any lesser amount

if the reporting committee should so elect, together with the date

and amount of any such contribution.

The Audit staff conducted a sample review of

contributions, the results of which indicated that a material

a.aunt of contributions were not iteaized as required on

disclosure reports initially filed. The identified exceptions,

when used to estimate the total amount of contributions not

it••ized resulted in a projected amount of $136,877. Further, we

identified twenty-two additional contributions totaling

$5,950 which were not itemized as required.

Subsequent to the commencement of audit fieldwork,

the Committee filed amended reports which materially corrected

the errors noted above.

2. Disbursements

Sections 434tb)(4)(A) and (S)(A) of Title 2 of the

United stat•• Code state that each repo~.t shall di,.~.~O•• expenditures .ade to meet candidate or co..ittee operating . _exp~n_s~.s; and the name and address of each person to whoa an

expenditure -In a-o- -a~9re9ate-a-mount·-o[ -value in excess_ of _.$200.

within the calendar year is aade by the reporting coaaittee to

a.et a candidate or committee operating expense, together with the

date, a.ount, and purpose of such operatin9 expenditure.

Section l04.3(b)(4)(i) of Title 11 of the Code of

Federal Re9ulations, states In part, that .ach report shall

disclose the total a.aunt of all disburse.ent. for the reporting

period and for the calendar year. Each authorized co..ittee shall

report the full na•• and address of each person to whoa an

expenditure in an aqqregate a.aunt or value in excess of $200

within the calendar year is made by the reporting coaaittee to

meet the coaaittee's operating expenses, together with the date,

a.ount and purpose of each expenditure.

a. Regular Accounts

The Audit staff performed a sample review of

Committee disbursements made from its regular <excludes field and

payroll accounts) bank accounts for the period of inception

(6/3/91) through June 30, 1992. With respect to itemization, the

Audit staff identified a material number of disbursement

transactions that were not itemized as required on Committee

disclosure reports filed prior to the beginning of audit

fieldwork. The Committee's Assistant Treasurer attributed the

itemization problems to the Committee's late start and a failure

to have sufficient systems in place.

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16

On August 26, 1992, the Committee filed

amended disclosure reports for the period from inception through

January 31, 1992 which materially corrected the problems noted for

that period. However, at the close of fieldwork the Committee had

not filed amended reports for the period subsequent to January 31,

1992. At the exit conference held on Noveaber 17, 1992, the

Committee had no further comment on the itemization errors noted

above. Further, the Coamittee stated that they would respond to

our findings after receipt of the interim audit report.

In the interim audit report, the Audit staff

recommended that the Committee file a.ended Schedules B-P to

correct the iteBization errors made subsequent to January 31,

1992. On August 31, 1993, the Committee filed a.ended disclosure

reports which aaterially corrected the itemization errors.

b. Field Account (Drafts)

The Audit staff performed a sa.ple review of

disburseaents aade fro. the Co..ittee'. field account. Although

this account was opened in 1991, most of the activity occurred

between January 1992 and Karcb 199~. Our review indicated that

very few disbursements .ade from the field account vere lteaized

o'n- the Comaittee's disclosure reports filed prior to the

COlUllenceaent of audit fieldwo-rk. Further, -for, the repox_t c()vering

,:-"\ March 1992, $27,289 in disbursement activity was not included fli-- '('-

reported totals (See rinding II.C.).

Before this matter vas brought to the

Committee's attention, the Coaaittee stated that all disburseaent

it••• were iteaized on Schedules B-P regardle.s of aaount. When

asked, during the fieldwork, to explain why the March 1992 draft

activity was oaitted fro. the disclosure reports, the Assistant

Treasurer noted that the Coaaittee had only recently (9/92)

obtained inforaation fro. the bank relative to the drafts which

cleared the March bank state.ent. The Assistant Treasurer further

stated that the February 1992 disclosure reports needed to be

amended because Schedules B-P contained only partial disburse.ent

amounts for soa. vendors.

On August 26, 1992, the Coamittee filed

amended disclosure reports for the period fro. inception through

January 31, 1992 which materially corrected the problems noted for'

that period. However, at the close of fieldwork the Committee had

not filed amended reports for the period subsequent to January 31,

1992. At the exit conference, the Committee had no additional

comments with regard to field account activity. Further, the

Committee stated that they would respond to our findings after

receipt of the interim audit report.

The interim audit report recommended that

the Committee file amended Schedules B-P to reflect the required

itemization of draft account disbursements made subsequent to

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t4

17

January 31, 1992. The amendaents filed on August 31, 1993 by the

Committee materially corrected the itemization errors.

c. Payroll Account

The Audit staff reviewed, on a sample basis,

disburs~ments made from the Committee's payroll account for the

period inception through August 31, 1992. This review indicated

that the Coaaittee failed to itemize a material number of payroll

transactions which required itemization. It vas also noted that

the Committee did not itemize any payroll transactions on its

"arch 1992 disclosure report. When asked during fieldwork, to

explain this omission, Coaaittee personnel stated that they had

merely forgotten to report the March Payroll and would be

filing amended disclosure reports.

Amended disclosure reports were filed by the

Committee on June 18, 1992 and August 26, 1992, however the

itemization errors discussed above were not .aterially corrected.

In the interi. audit report, the Audi~ staff

recommended that the Co..ittee file Amended Schedules B-P within

30 calendar days to correct the above it,.izat~,21}1',,~rrors.

In response to the recoaaendation in the

interia audit -report, -th-e-c-oeaitteefile-daaended discJosure

reports on August 31, 1993 which aaterially corrected the

~, iteaization errors relative to its payroll activity.

d. Selected Review of Oisburseaents

The Audit staff conducted a review of selected

Coaaittee disburseaents for the period inception through June 30,

1992, and noted 38 disburse.ents, totaling $265,418, that were

not iteaized as required on Co.-ittee disclosure reports filed

prior to the co..enee••nt of audit fieldwork. Our review of

amendments filed on August 26, 1992 indicated that the Coaaittee

had materially corrected these iteaization problems.

E. Omission of Disclosure Information

1. Receipts

Section 434 (b)(3)(A) of Title 2 of the United

States Code states, in part, that each political committee shall

disclose the identity of all persons who make a contribution to

the reporting committee during the reporting period, whose

contribution or contributions have an aggregate amount or value in

excess of S200 within the calendar year. Section 431{13} of this

Title defines "identification" to mean, "in the case of any

Page 21

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a~Jif,ij

--~~1

18

individual, the name, mailing address, and the occupation of such

individual, as well as the name of his or her employer, and in the

case of any other person, the full name and address of such person.~ In addition, 11 eFR Sl04.3(a)(4) requires that in

addition to the above, the aggregate year-to-date totals for such

contributions be reported.

Section l02.9(d) of Title 11 of the Code of Federal

Requlations states, in part, that in perfor.ing recordkeeping

duties, the treasurer or his or her authorized agent shall use his

or her best efforts to obtain, maintain, and submit the required

information and shall keep a record of such efforts.

Section 104.7 of Title 11 of the Code of Federal

Regulations states that if best efforts have been used to obtain,

maintain, and sub.it the information required by the Act for the

political committee, any report of such committee shall be

considered in co.pliance with the Act. With regard to reporting

the identification as defined at 11 eFR 100.12 of each person

whose contribution(s) to the coaaittee and its affiliated

coaaittees a99reqate in excess of $200 in a calendar year

(pursuant to 11 CPR 104.3(a)(4), the treasurer will not be deeaed

to have exerci••d best effocts to obtain the required inforaation

unless he or she has aade at least one effort per solicitation __ ei~her by a written request or by an oral request documented in

wei ting-to -obtain such info-raati-on -f [oa- the conte ibut_o_r. f()r _

purposes of 11 erR l04.7(b), such effort shall consist of a clear

request for the infor.ation (i.e., naae, .ailing address,

occupation, and na•• of ••ployer) which request infor•• the

contributor that the reporting of such information is required by

law.

The Audit staff perfor.ed a review of contributions

from individuals and identified a material number of errors

relative to the ite.ization (or lack thereof) of contributors'

occupation and naa. of e.ployer. The errors, when used to

esti.ate the dollar value of all report errors, result in a

projection of $605,314, which represents approximately 50\ of the

dollar value of all iteaized contributions. In most cases, the

Committee had no documentation in the receipts file to show that

the information had been requested or that the contributor had

submitted the information. In other cases, the information had

been provided by the contributor but the Committee did not report

the information.

Our review of response devices found in Committee recei~t records and a review of the Committee database did not

establish that the Committee exercised best efforts to obtain,

maintain and disclose the requlred information. The Committee's

receipts file made available did not contain any other information

(such as copies of letters to the contributors or phone logs)

which could be used to demonst:ate "Best Efforts."

Page 22.

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19

-"""~--C~"""""'''"'''~'~~~~----''-~~_lIII!lJIIIIIJ!I~II!II'J!IlI!I'~~''--~ .. \liliiii:~1IIII!II!lI!Il1IIIJI!!!II!!II~ilJIlI!!\!!Il!i~!JIlII_J., llIIII!!.'II!IlX:_'

I

j

1

I

At the exit conference the Committee was informed

of the aforementioned errors. A Committee representative stated

that the Committee could establish an association between the

receipts on the database and a fundraising code which could then

be related to a solicitation device. The Committee noted that the

relationship of the receipts to the solicitation devices sent out

to the contributors for each fundraising drive would establish

that "Best Efforts" had been made by the Committee.

Within the 10 day period following the exit

conference, the Co.-ittee submitted information in an effort to

demonstrate that it had exercised -Best Efforts." The inforaation

consisted of the program languAge used to extract froa the

database the contributor records which did not contain full

occupation and naa. of employer inforaation, and a listing of

contributors to !boa the Committee was in the process of sending

letters requestinq the required information. In addition, the

Coaaittee also submitted response devices which, according to the

Coaaittee, were examples of the response devices "aIvaya W included

with solicitations for contributions. The davie•• contained

requests for the required inforMation.

Although the Com.mittee stated that~".'n<" is""sociation _ betw~,n__ tl!e receipts database and a fundraisin9 code could be

established, 'the-iriforaation submitted does not address this_e_

Regarding the proqraa language submitted, the Coaaittee did not

provide evidence of its use during the campaign period. In the

Audit staff's opinion, the infor.ation provided does not

demonstrate that the Co.-ittee exercised "Best Effortse"

The interi. audit report reco..ended that the

Coaaittee de.onstrate that WSest Efforts" were exercised in

attempting to obtain the occupation and nea. of e.ployer; or amend

its Schedules A-P to include the occupation and naa. of e.ployer

in the instances where the information was oaitted.

In response to the interim audit report, the

Committee provided an affidavit fro. its Finance Director. The

affidavit stated, in part, that:

"all solicitations for fundraising events

which were sent out by the Committee always

included one of two standard reply cards, as

attached. If the card was not fully filled

out, someone on the fundraising staff placed

at least one call to the donor to try t~

obtain all the necessary contributor

information."

Counsel for the Committee stated that,

Page 23

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20

"Both cards contain a clear request and convey

that information is required, thus satisfying

the requirements of 11 erR Sl04.7(b)."

The Audit staff is unclear of the Committee's

meaning, when it states, wall solicitations for fundraisinq events

which were sent out by the Committee." The Audit staff questions

whether "standard reply cards" were sent out with all

solicitations for contributions, such as with direct mail

solicitations or only in connection with specific events (e.g.,

"November 21st Reception- or "cocktail reception") such as those

described on the copies of the "standard reply cards" submitted

with the Committee's response.

The Committee also provided the Audit staff copies

of response letters and a listing of contributors who received

follow-up letters requestin9 the required infor••tion. The

Committee's response stated that the request for contributor

information was sent to 2,601 individuals and responses were

received froa 988 individuals; and the contributor inforaation

received was included on a••nded reports filed by the Coaaittee.

The Coaaitt•• also noted that the auditors were advised at the

Exit Conference that the contributors who had failed to produce

the contributor information had been sent an additional letter

requesting the fn~or.ation.

The Audit staff reviewed the Co..ittee's amended

reports and the aaterial provided by the Coaaittee. Witb respect

to the "standard reply cards·, the Audit staff acknowledges that

lanqu&ge in coapliance with the regulations is included. Bowever,

the "standard reply cards· subaitted relate to specific

fundraising events and do not d••onstrate that the Co.-itt•• exercised "best efforts· during the entire campaign period. The

Committee did not sub.it a telephone log in support of its efforts

to obtain information by telephone.

The Audit staff notes that the letters sent to

contributors requesting additional information are dated Nove.ber

17, 1992, - the date of the Exit Conference. In addition, our

review of the listing provided, representing contributors who

received follow-up letters identified 118 instances where no

address is recorded for the contributor.

Notwithstanding the above, the Committee, based on

its actions subsequent to November 17, 1992, has demonstrated

"best efforts" to obtain, maintain and disclose the requested

information.

Page 24

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21

\...

2. Disbursements

a. Regular Accounts

Section 434{b)(4) and (5)(A) of Title 2 of the

United States Code states, in part, that each report shall

disclose for the reporting period and calendar year, the total

amount of all disbursements, the name and address of each person

to whom an expenditure in an aggregate a.aunt or value in excess

of $200 within the calendar year is made by the reporting

co.-ittee to meet a candidate or committee operating expense,

t0gether with the date, a.aunt, and purpose of such operatin9

expenditure.

Section l04.3(b)(4)(i)(A) of Title 11 of the

Code of Federal Regulations states, in relevant part, that each

report filed shall disclose the total aaount of all disbura•••nts

for the reporting period and for the calendar year. Each

authorized committee shall report the full name and address of

each person to whoa an expenditure in an aggregate amount or value

in excess of $200 within the calendar year is made by the

reporting coaaitt•• to •••t the ~~..ittee's operating expenses,

toqether with the date, a.aunt and purpose of each expenditure. As

---used in _llCFR l04.3(b)(4), purpose means a brief stateaent or

description of why the disburseaent was aade.

The Audit staff's review of Committee

disbursements aade fro. its regular (excludes payroll and field

accounts) accounts and iteaized on the reports for the period fro.

inception through June 30, 1992 indicated that a material nuaber

of the iteaiz.d entries were incorrect as to the a.ount or the

payee'. addre.s vas a1.8in9. ror exaaple, the March 1992

disclosure report, although prepared manually, contained no

addresses (street, number, city and state) for those transactions.

On June 18, 1992 and August 26, 1992, the Coaaittee filed a.ended

disclosure reports which did not materially correct the disclosure

problems noted above.

The recommendation in the interim audit report

required the Committee to file amended Schedules B-P to correct

the public record. In its response, Counsel to the Coamittee

stated that, "The Committee exercised every effort to obtain and

report full information on disbursements, notwithstanding the fact

that the Committee had severely limited resources and

inexperienced staff." On August 31, 1993, the Committee filed

amended Schedules B-P which materially corrected the public

record.

b. Payroll Account

Our review of disbursements made from the

payroll account for the period from inception through August 31,

1992 and itemized on Committee reports revealed that for a

Page 25

3/15/94
~~-'-W"",""""""""""'~'~_" - ~~g.;~,-,.-.~""". 'C~~~~t_-,- """"""'-"'lI~'"'l'!'._~4-~~~~~'!li!i!II'I'IIl~""""""'~~ _

'-'*¥I:~ t.C'~'~

- -j

22

material number of itemized entries the payee's address was

omitted. It was noted that a majority of those omissions involved

entries dated July 1992.

On June 18, 1992 and August 26, 1992, the

Committee filed amended disclosure reports, however no corrections

were made with respect to the item. mentioned above. The

Committee was notified of the above noted errors.

The interim audit report recoaaended that the

Committee file amended Schedules B-P to correct the errors. The

Coaaittee's response stated that amendments were filed which

materially corrected the omitted itemization inforaation. On

August 31, 1993, the Coaaittee filed a.ended disclosure reports,

however the errors noted in the interim audit report were not

corrected.

III. Findings and Recommendations - Repayaent Issue.

A. Deteraination of Net outstanding Campaign Obligations

Section 9034.5(a} of Title 11 of the Code of rederal

Requlations require. that witbin lS calendar day. after the

candidate's date of ineligibility, the candidate shall sub_it a

statement of net outs~an~in9 campaign obli9ations which reflects

the total of all outstanding obli9ations for quali-fi-ed caapaign_

expenses plus estiaated necessary winding down costs.

In addition, Section 9034.1(b) of Title 11 of the Code

of Federal Regulations states, in part, that if on the date of

ineligibility a candidate has net outstanding c ••paign obligations

as defined under 11 erR $9034.5, that candidate ..y continue to

receive matching payaents provided that on the date of payaent

there are remaining net outstanding campaign obligations.

~_;--" Senator Harkin's date of ineligibility was March 9,

19928 The Audit staff reviewed the Coaaittee's financial activity ~- through August 31, 1992, analyzed winding down costs, and prepared

the Statement of Net OUtstanding Campaign Obligations ("NOCO") as

of August 3, 1992, which appears below:

Page 26

3/15/94

(
!jIil\ .

23

:.>~---~~~..1lI!!I!! ..•!!!l!!l! .. !IlIl!IJI41!!11!l! •.~~.-'.••a~.-,-:;II!I!ll,lij

?:~~

Americans for Harkin, Inc.

Audited Statement of Net Outstanding Campaign Obligations (NOCO)

at August 3, 1992

(Determined as of 11/5/92)

Assets

{-

t

Current Assets:

Cash on Hand

Accounts Receivable

Matching Funds

{Certified 7/31/92}

Total Current Assets

Capital Assets

Total Assets

Liabilities

'-,

'_A~~o~n~s Payable for

Qualifle-d'Caapaign'

Expenses through

7/31/92

$ 86,685 ~/

15,625

28,498

$130,808

7,000

$366,520 ~I

$137,808

·-'Aaount Payable to u.s. Treasury:

- Estimated Winding Down Costs

paid through 3/22/93: $103,186 ~/

Estimated Winding Down Costs

3/22/93 through 1996

$ 35,316 ~/

85,000 !f

Total Winding Down $188,186

Total Liabilities $590,022

Net Outstanding Campaign Obligations (Deficit) ($452,214)

Page 27

3/15/94
24

~/

~/

FOOTNOTES TO NOCO

This amount does not reflect a reduction for certain

outstanding checks determined to be stale-dated.

The Audit staff initially verified accounts payable of

$332,793 as of AU9ust 3, 1992. However, subsequent to Audit

fieldwork, the Committee provided a listinq of accounts

payable totaling $368,803 which reflected an increase in that

figure by $36,010. At that time, no documentation was

provided to support this increase. In response to the

interim audit report, the Committee provided documentation to

support $33,728 of the $36,010.

Consists of amounts discussed in Findings:

II.A.l. - Prohibited Contributions

II.B.1. - Excessive Contributions

Individuals

II.B.2. - Excessive Contributions

Political Committees

$ 7,373

22,060

3,600

III.C. Stale-dated Checks

§35,316

r

... ~/ This figure represents actual winding down costs paid for the

period August 3, 1992 through March 22, 1993. Not included

is approxiaately $1,000 in tax penalties and/or

insufficiently documented payments to taxing authorities.

This represents the Committee's calculation of its winding

down estiaates fro. March 23, 1993 through 1996. The Audit

staff will review reports and records as necessary to co.pare

actual expenses to these estimates.

Page 28

3/15/94
2S

In response to the interim audit report, Counsel for the

Committee stated the following with respect to the NOCO:

~the Committee notes that it disputes the

auditors' methodology for determining whether

a candidate has received funds in excess of

his or her entitlement. In order to make this

determination, the auditors create a fictional

NOCO statement modified with hindsight but

purportedly creating a picture of a committee

as of an arbitrary date- - in this case August

3, 1992. In fact, the auditors' NOCO does not

provide an accurate financial picture of the

committee either as of the date of

ineligibility or at any later date. The

Coaaittee believes that its NOCO state.ents

filed periodically as required by the

regulation present the most accurate snap shot

of the Committee's financial status as of each

particular date.

The Coaaitt.e thus objects to the use of

the auditors' revised NOCO as of Auqust 3,

1992 as the basis for determining when it was - no --lonqer--el-i(jible -to receive addi tional

matching funds.-

The Co..itt.e'. position is neither persuasive nor on

point. While it is true that .etching fund payaents after the

candidate's date of ineligibility are based on the repr••entations

aade by the Coaaittee in its NOCO state••nts, the•• atate.ent. are

not audited at the tiae of payaent. One of the purposes of the

post-primary audit is to deter.ine if the candidate received

.atching funds to which he vas not entitled (see 26 u.s.c.

19038(a) and (b). Such deteraination is based on an exaaination,

after the fact, of the various co.ponents of the NOCO stateaent(s)

on which such payments are based, as well as the i.pact on

reaaininq entitleaent of private contributions received by the

Coamittee after the candidate's date of ineligibility.

B. Katching Funds Received in Excess of Entitlement

Section 9038(b)(1) of Title 26 of the United States Code

states if the Commission determines that any portion of the

payments made to a candidate from the matching payment account was

in excess of the ag9regate amount of payments to which such

candidate was entitled under section 9034, it shall notify the

candidate, and the candidate shall pay to the Secretary an a.aunt

equal to the amount of excess payments.

Section 9034.1(b) of Title 11 of the Code of Federal

Regulations states if on the date of ineligibility a candidate has

Page 29

3 /15/94
26

net outstanding campaign obligations as defined under 11 erR

9034aS, that candidate may continue to receive matching payments

for matchable contributions received and deposited on or before

December 31 of the Presidential election year provided that on the

date of payment there are remaining net outstanding campaiqn

obligations, i.e., the sum of the contributions received on or

after the date of ineligibility plus matching funds received on or

after the date of ineligibility is less than the candidat@'s net

outstanding campaign obligations. This entitlement will be equal

to the lesser of: (1) the a.ount of contributions subaitted for

matching; or (2) the remaining net outstanding campaign

obligations.

As of August 3, 1992, the Candidate's reaaininq aatching

fund entitlement was $452,214. Using the Coamittee's contribution

records, bank records and disclosure reports, it was determined

that as of February 1, 1993 the Committee received combined

private and public funding of $388,659. On February 2, 1993, the

Committee received a matching fund payment in the amount of

$73,603. This payment exceeded the amount to which the Candidate

was entitled by $10,047. On March 2, 1993# the Coamittee received

its final matching fund payaent of $14,547, bringing the total

aaount of aatching funds received which exceeds the Candidate's

entitlement to $24,595.

Recommendation 14

The Audit Division reco..ends that the Commission make an

initial deteraination that the Candidate vas not entitled to

$24,5956/ in aatchinq funds and therefor., the Coaaittee repay

$24,S9S-to the united States Treasury pursuant to 26 u.s.c.

S9038(b)(1).

c. Stale-dated Committee Checks

Section 9038.6 of Title 11 of the Code of Federal

Regulations states, in part, that if the Committee has checks

outstanding to creditors that have not been cashed, the Coaaittee

shall notify the Co..ission of its efforts to locate the payees,

if such efforts have been necessary, and its efforts to encourage

the payees to cash the outstanding checks. The Committee shall

~/ Since an estimate ($85,000) for winding down costs through

1996 was a component of the NOCO statement presented on page

23, the Audit staff will review Committee records and reports

after receipt of its response to this report. Any revision

to the amount considered repayable will be contained in the

Commission's final determination.

Page 30

3/15/94
$ -

also submit a check for the total amount of such outstanding

checks, payable to the United States Treasury.

During the review of Coamittee disbursement activity,

the Audit staff identified nineteen checKs made payable to vendors

which had yet to be cashed as of Auqust 31, 1992. Those checks

totaled $11,208 and were dated fro. January 9, 1992 through March

12, 1992.

At the Exit Conference on November 17, 1992, the Audit

staff provided the Committee with a schedule of the stal@-dated

checks. When asked whether those vendors had been contacted to

determine the status of the outstanding checks, Coaaittee

officials replied that they had not seen the outstanding check

list before. rurther, the Committee stated that they would

respond to our findings after receipt of the interim audit report~

On Deceaber 3, 1992, the Coaaitt•• provided a aeaorandum

to the Audit staff in which ten stale-dated checks ($9,361)

were addressed. The Coaaittee stated that the checks were: (a)

lost (one check for $127), (b) Dot paid by its bank (four checks

for $360), (e) apparently voided and replaced or related to

instances where no obligation nov exists due to cancellation of

the event or planned purchase (five checks for $8,874). Bowever,

no-documentation such as the actual voided check, replacement

check, or corresponden-ce -fro. the named payee was _pre~e_nted. Not

withstanding the above, the Audit staff was able to reduce th-e--

a.aunt of stale-dated checks by $348.

In the interi. audit report, it was recommended that the

Committee present evidence that:

The checks were not outstanding (i.e., copies of

the front and back of the negotiated checks) or

the outstanding checks were voided (copies of the

voided checks with evidence that no Committee

obliqation exists, or copies of negotiated

replacement checks); and

the Committee attempted to locate the payees

to encourage them to cash the outstanding checks.

In response to the interim audit report, the Committee

provided evidence to demonstrate that checks totaling $8,578

either have been replaced and cashed or involve instances where no

Committee obligation existed. Accordingly, the Audit staff has

reduced the amount of stale-dated checks to $2,283.

Recommendation *5

The Audit staff recommends that the Committee be required to

make a payment to the United States Treasury in the amount of

$2,283 representing the amount of stale-dated Committee checks.

Page 31

3/15/94
28

IV. Recap of Amounts Due to the United States Treasury

Section 9038.1{c)(1)(v) of Title 11 of the Code of Federal

Regulations states that preliminary calculations regardinq future

repayments to the u.s. Treasury aay be contained within the

interim audit report. Pursuant to 59038.2(a)(2) of this Title the

Commission will notify the candidate of any repayaent

determinations not later than three years after the end of the

aatching payment period. The issuance of the interia audit report

to the candidate (date of service Jun. 18, 1992) constituted

notice for purposes of the thr•• year period.

Reflected below are a.ounts due the United States Treasury as

noted in this report.

Finding Subject Alaount

I~.A.l. Apparent Prohibited Contribution.-

Individuals $ 7,373

II.B.1. Apparent Bxcessive ContributionsIndividuals 22,060

II.B.2. Apparent Excessive Contribution.-

political Committees 3,600

111.8 Ratching Funds Received in Excesa f of Entitle.ent 24,595

III.C. Stale-dated Coaaittee Checks 2,283

Total SS?,?!1

Page 32

3/15/94
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(f hU'MIQh (MNtmbt' J f. H'91)

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'A} ;",1,;'1" ...._~ltt.~fI,.'"\~,~.?__,.__S".. t:.?53 194. S8•. 7'2 ('.,S70) 1181.711 S.~~,J7'.S2_~

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.

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(Ttlfouqh (lft<WnhM 3' '19J)

("'~.t"~g f .'""'Pt f ._"""

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so

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S'.,"I

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$5.170

$0

H •. Tt]

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"~~:.~~__.__.._. ''')O.~~,'.?'."._.~.!.!?11c._~~_rUt .--!J.1'_3.J13 'f3'.013 MS,lfJ7.11e '51.280,121 St,1Ot.• " '418.'S2

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.......,

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I'~"

1".8.110

I"

so

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.....".. ttu.h

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so

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"< ,..!!!' A~.".__~~~~..~~ft, !.OO .....S~.:.~~:.2"~? .S" .8!'.413 $7' .• 3" '.',..:..,!!,'.I'. '30,OS•.•' "'4.•03

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.........f..,· ... f', 1#\ I'~() "9 $0 so '5'5.1'5 to so so

so

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( ...._-'"~,-J.'.I~' _

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t ~~ t

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i l 1~.'tII~ ,. 701 It"}'} so SO ~ :

~.

f

I

', ..!,ew Oht r.,! -_. '~~.~t~ ..!.,", ...._-,_J..!..~~~.?..!-~_,_. . SO

',' ~~..!!!!.__._ ... S'" ""•.no _SI.~~~_'-","-,..1llfl _':>041.831 'ff
The Office of General Counsel has reviewed the Final

Audit Report on Aaericans for Harkin, Inc. (~the Coaaittee")

submitted to this Office on November 5, 1993.!1 The following

memorandua provide. our comments on the proposed report. If

you have any questions concernlnq our comments, please

contact Jane Whang, or Peter Blumberg, the staff memb~rs

assigned to this audit .

PlEPlORANDU",

-n . ... '....,.

THROUGH:

FROM:

SUBJECT:

Rober~ J. Costa

Assistant Sta~ff. ector

Audit Division

John C. sur[~~/ Staff Dire~

Lawrence 11. Nbble./-

General Counsel 'L'c' .

Associate

u. aeight-Cole.an

General Counsel

W

Lore-rizo' Holsloway ...y.~

Assistant General Counsel

Peter G. Blumbercf:)/_Q

Attorney Tbr'.:;:>

Jane whanq"h\ f;'~ Law ele r It ~t'J C, '1

Proposed Final Audit Report on Aaericans for

Harkin, Inc. (LRA .402/AR 193-6)

• 1 Slnce :he p::>p:)sed rl::a~ ,;.1:::": ?'?F':::: j=~s ;!:::: :,:-:::·.;je ~'<~

:n a t t e r sex emp t f rem pub::.: j:. S -: : : s'..1 :: e '_: :i .-j e r: 1 1 ':. f . R. § 2.";, "#f'

recommend that the Ccmm~ss:.:~·s j:s:~ss:.=n cf th~s document Ce

conducted In open seSSlC~. :~r~u~~out our comments, "FECA~ ref~rs

~o the Federal Electlcn :a:npa:~:1 A:~ -:f ~91:, as amended, 2 !J.3<~.

SS 4 31- 5 5, and ff Mat chi n g Pay:rle n A: ,:" ref e r s tot he Pre siden t :. 3

Prlmary Matching Payment Acc~u~t A::, :6 U.S.C. 55 9031-9042.

Page 3S

3/15/94
Qtg ! X - ZiC . j , ,I,

J

We concur with the findings :~ the proposed Final

A~dlt Report which ate ~~t dis=uss@d separately below. The

:~::~wing are :~mments G~ F:~d~ngs ::.A.l.-2. 1 and ::.8.1.-2.

~: ~he pr~F~sed Report.

I. APPARENT PROHIBITED AND EXCESSIVE CONTRIBUTIONS

(II.A.i t II.B.1., 11.8 .. 2.)

The Int@rim Audit Report recommended that the

~~mmittee pay to the U~lted States T:easury a s~m of $33,034

In prohlbited and exceSSlve contributicns. The Committe.

objects to these recommendations on two bases. The Commlttee

argues that the auditors' methods of ~sin9 projected

estlmates through sampling, in addition to a 100\ review,

results in an overstatement of the amount of excessive or

prohibited contributions. The Committee also argues that the

Commission's June 1992 letter, which inforaed all of the

pr@sidential committees that sampling would be used and that

excessive and prohibited contributions must be paid to the

Treasury, is an invalidly promulgated rul•. ~/ The Committee

further contends that the Commission does not have the

authority under either the FECA or the regulations, to

require disgorgeaent to the United Stat•• Tte.sury.ll

This Office agrees with the use of sampling and

concurs with the Audit staff's reco1lA.ndatiori that: -these

excessive and prohibited contributions be paid to the

Treasury. The use of statistical sa.pling for projecting

certain coaponents of a large universe, such as excessive and

prohibited contributions, is a legally acceptable technique.

See, e.g., Chaves Count Home Health Service v. Sullivan, 931

F.2d 914 (D .. C. Clr. 1), cert. enie, S.Ct. 4

(1993)(sampling audit used to recoup Kedicaid overpayments to

2/ The Commission approved ~~e use =f sampll~g f~r presidentla:

audits on May 5, 1992, a~d ~~f~r~ed ~~eslden~:a: :~mmltte~s 1;;

a : e t e r d ate d J u n e .2 i : 9 :.. : a:. s a ~;: : : :1 9 .~. '::' '-i ::= t:- : ""' :: S :. :1 ? : :"

used :n audlts. The C~m~:ss::~ 3:5: ~e::mm€~~~~ :-a: :~~SO

:~nt::b~~:=~s ~~resol~ed a~:~~ ~: ~3;5 =~ ;3:~ "': :~e ~~~~S~:;_

3 The Commlt:ee als~ ~:~ej 3 :~~~~3: :'::'n=~r~ ~::~ ~~e :5S~~ -~

~""'~'~''-a'''''''''r\ ,..,~ reoay-el"''' -1g .. C ... -.o\: :::lo .. ·-... 2 ... .-·'· .............. a .. ~t-.g 1""", .. r _ • a ...; '- • ... .. ...... l-.. ., ); ....., ..... .~i ... _ -A _ _ _ .. w' ::A _ _ _ ,. ';;..J:. ......... it • _ .. _ _ • __ .... _ _ ....

Au d i t Rep 0 r ': doe 5 not ::::1 S : :. : ..; : e ". :: : :. : :. :: a :. ::"'. , -, ''; d e r 2 6 u. s ' -: . S 9-)38\ =;. The Fl~al Avj:.~ s,e;:::: :3:,*,.j :~e :':1:.~:.a: :-epay=ne~t:

determlnatlon wlll :lkely Ce :.ss~ed ~:':~ln ~hree years after :~e

end cf ~he matchlng payme~~ ~e~:.:j ~a~:.~g t~lS a:-gument me::. 3~~

:: :.F.R. S 9038.2.

Page 36

3/15/94

(
....... -

~~ >-lnn,r~·fttn:f.--CO -1<btr.t e- :,-;--,;0" a---·.............-w-»_._>~. -'--'-". -"'Y_--"'~_~""'''_&4__r.~~ __,.

Proposed Final Audlt ••port on

Americans for Harkin, Inc.

(LRA '402/A~ 193-6)

Page 3

health ca~e providers upheld) .!I In the instant case, the

auditors performed a 100' review of those accounts that were

elther faclally excessive, or were at discrepancy with the

:~~mitteets contributlon tape.~/ A sample projectl=n was

~=~e ~n :he rest of the ::mmitteefs accounts. Therefore, ~~e

sampl~ es~~mate and the 100\ review were based on t~c

separa~e ?~pulatlons, and not subject to overstatement. H~wever, be(:ause of the Committee's apparent confusion

regarding the auditing methods, we r.commend that the report

:nclude a dlScussion clarlfylng the auditors' methods.

Nothing in the FECA or the requlations prevents the

Commission fr~m requesting such a payment to the Treasury.

In fact, the Commlssion has requested pay••nts to the

:reasury in slmilar situations. The regulations for

stale-dated checks explicitly prOVide that any refund checks

from a co:mittee that have not been presented for payment by

the payee shall be paid to the Treasury. 11 C.r.A. S 9038.6.

The Commission's requirement of payment of excessive and

prohibited contributions to the Treasury is consistent with

the treatment of stale-dated checks because both scenarios

require a payment to the Treasury to account tor all funds

that hav.been r.talae._~ the coaaitt•• that ahould havaj..•"-1.

been promptly returned to the contributor~ Co.pare 11 C.F.R. -.- S >903.8 .. 6 wit_hll_C .. '.R. S 103.3 (the Committee's treasurer is

responsibIef'or exa.·lnin~9 all cont-rtbutions to-~id.nt-ify

unlawful contributions that must be refunded to the

contributors within 30 or 60 days). The Coaaission

anticipated such payaents to the Treasury when it stated in

an advisory opinion that refunds should be made to the

federal government, or state or local govern.enta, where a

committee could not deteraine the identity of the oriqinal

contributor. See AdVisory Opinion ("AO") 1991-39.!/

The equitable doctrine of disqorqe••nt also supports a

payment to the Treasury. See generally United States v.

4/ See also MiChi¥an Cep't of EdUCe v. u.s. oep't of Educ., 875

F.2d lI9b T6th Cir.989) (statistical sa.pling generally upheld

when audits of the universe of cases would be "impossible"); State

of Georgia v. Califano, 446 F. Supp. 404, 409 'N.D. Ga.

19~i}istatistical sampling upheld, and "recognized as a ~alld

audlt ~echnique"~.

jepos:.:s :~a;: :'':5 ba':ches ", .. ::::-1+:::::-'J::0r.S s~:·...·,?:, :~'? 3'~:j:::~s

requested cO~les :f tnose jepcs::s ~f :~~:~s :ha: ~e:e n:: :~ :"~

:: ::; n t r :. b \; : :. :: n : 1 S . :'h e s e j,:? P0 S : +: S ..... e ::- e ::--. e =- e '; :. e·...·e d ':' :i a :::

basls.

6: :~e aud:tors do net ~n~~ :~e ~~e~tlty :f :~e ~::glnal

contr:b~~~r «hen sampling ;'5 used ':~ ~r~Jec: the exceSSlve and

prchlolted contrlbutlons.

Page 37

3/15/94
, ""'"' } -- '

~M" atfr'.'rf8'tl. -"~-C' JitO'l,N'r-.; J '.' 0 S to.

Proposed Final Audit Report on

Americans for Harkin, Inc.

(LRA t402/AR .93-6)

Page 4

Bonanno Or- anized Crime famil of La Cosa Nostra, 683 r.

Supp. 1411 (E.O.N.Y. 19 Si, a ... 'd, 879 F.2d ... (2d Cie.

~989)(disgcrgeme~t held to be appropriate, non-punitlve

remedy? . -; ,i A paymen t to :he r rea su ry is an equi tab1e remedy f~r =~ntrlbutions ~hat have ~een a==epted In excess of the l~mits of 2 U.S.C. S 441a or from soucces prohlbited by 2

U.S.c. S 441b. Disgcrgement in this instance is conSlstent

wlth past ~~~mlssion practlce. See Matter Under Review

("MUR") 1704 (Mandale. (based upon preliminary estiaates, th.

Commission directed respondents to pay $3S0~OOO to the United

States Treasury fer contributlons that would have @xceeded

the limitations of 2 U.S.C. S 441a\; see also Plaintiff's M~tion to Effectuate Judgment, FEC v.-pQpUITSt Party, No.

92-0614(HHG)(O.D.C. filed May 4, 1993).

With respect to the issue of notice, agencies are

required to coaply with the Administrative Procedure Act's

("the APA") notice and comment provisions for "legislative

rules" It issues, by giving notice in the Federal Register

(or actual notice) at least 30 days in advance of the rule's

effective date, and by qivinq interested parties -an

opportunity to participate in the rul@makinq through

sub.i••ion of v~itt.n deta r " views, or arqu••nta, witb or

without opportunity for oral presentation.- 5 U.S.C. S 553

fb-) 'and -(Ct. However cf an ex~mption from these requirements

is created for -interpretative rules, gene'.l stat•••ftts of

policy, or rules of agency organization, procedure or

practice." 5 u.s.c. S 553(b)(3)(A). An agency aak•• a

general policy statement if the announceaent either acts

prospectively or leaves the agency and its decision-makers

free to exercise discretion. American Bus ASI'n v. U.5.# 627

F.2d 525, 529 (D.C* Cir .. 1980).

The distinctions between general statements of policy

or interpretative rules, and "le9islative rul••,· (which

require notice-and-coament) are nebulous, but courts have

looked variously at whether the agency pronounc•••nt

"substantially alter{s] the rights or interestl of requlated

parties," American Hospital Ass'n v. Bowen, 834 r.2d 1037,

l041(O.C. cir. 1987), and whether it acts prospectively.

American Bus Ass'n, 627 F.2d at 529. An interpretative rule

merely states what an agency thlnks the statute means, and

"reminds affected parties of eXlst:~g dutles" ~hlle a

"legislative rule" :rea~es ~e~ _a~, r:~h~s :r ~~~:~S.

D:sQcr~e~er.t e::~l~a:es :~e ::~m:ss::~ts ~ee~ t~ monlt~r 3

~ommltte~'s-:efunds cf l::ega: ::~~::c~:::~s. :t:5 also eaSle:

for a commlttee t~ ~ake =ne ~ay~e~: :~ :~e ::easury, as opposed ::

refundlng ~u:tlple cont::but:o~s.

page 38

3/15/94
~~--o- <,~- 'ptW.Of 8fiUUa "1:0 i<GUVt e • -.c~-oT~a·~~~-·'-"-~~~""'·-

I proposed 'inal Audit Report on

Americans for Harkin, tnc~

(LRA t402/AR '93-6)

Paq4t S

General Motors Co. v Ruck@lshaus, -~: :.2d 1561, 1565 (D.C.

:It". :gS4', =ert. denied, -i"7: :';.5. :J74 \~98S'i.8.·

The 1992 :etter ~: pres:dent:a: committees fal:s ~l:~:~ ~~e interpretlve =~:e exemp::cn of 5 u.s.c.

S 353 t \; 3 -. A \. ~t does net s~..lbstant:ally alter the

Commlt~ee's =lghts or l~terests. Rath@r, it is int@rpreting

a c~rre~t re;~:atl~n. Section 9038.1~a (2) allows t~e

Comm:SSlon to conduct examlnatlons and audits "as it deems ne~essar1 t~ carry out the previsions of this subchapter.~

The letter lnform@d the Commlttee that sampling would be used

as a techniq~e for reviewing exceSSlve and prohibited

contributions, which is a necessary part of the audit and

examination process.~/ Further, the letter was defining the

audit method that would be employed to conduct an examination

of the Committee's contributions. Since the letter notified

the committees of the future intent to "make 80re extensive

use of statistical sa.pIing," it was prospective. See Letter

from Commisslon to Presidential Commit~ees, June 2,-r992.

f

: ...........

The requirement that the Coaaittee disgorge unlawfully

retained contributlons to the Treasury is not a new policy

which si9nific..~.ff.cts coaaitt•••' rights or interests.

A policy state.ant does not "alter the rights or interests of -- pa-r-tie-s, -although it aay alt_er _th_e manner in which parties

present themselves or their viewpoints to theagenc·y .•

American Hasp. Ass'n, 834 F.2d at 1041 (emphasis

added](citing Batterton v. Marshall, 648 r.2d 694, 707 (D.C.

eir. 1980». The co..ittees' rights and inter.sts have not

been affected here. Their duty with respect to i11e9al

contributions is to redesiqnate, reattribute, or refund these

contributions within either 30 or 60 days, pursuant to 11

C.F.R. 5 103.3. Therefore, the Co.-itte. has a general duty

to relinquish unlawfully retained contributions. The 1992

letter does not alter this duty; it only notifies committees

that all such unti••ly unresolved contributions must be paid

to the United States Treasury.

8/ Interpretative rules can ~e f~und in the Commission's Financial

Control and Com liance Manual :~r Pcesldentlal Prima! Candidates

Receiving Pub ic Financing, a~j :~ ~he GUldellne for ?resentatlon

1:1 Good Order, (the "Gul:je~::-:e" . 7!"'.e 3Ul:1ell:1e, ~8r ~xa:nple, :5

a '_"''"'mpr~h~ns···- -..1 • ~.... i ... _ se"_ ....... _....1: r-,'Qc. -" - - - -.:-_....... ---~_ - -- - ... " ~....... - - oos ... _ "Qqupc:::."'",~ .. _ - _ _ _ .. •• -:" .1~~!"':'h'n'" \ ':l _ _ t _ .....

~~nds. ~~::e ~he prc~ed~:es ~:: ~3::~:~? ~~~~ S~t~lSS_~~5 ~:e

: :: u n d a ': :: :. F . R S 9 0 36. : :: ...: :. j : :. -, e S'jPr; : e :"\ e r; ~;. '=

regulatlons by se~::~g f:::~ 3 '~n::=:~ ~:r~a: f~r :~e

t::esen~at1cn cf ::-eq'Jests :-::- :'"13t:~:.:.? p3y;nents" ty ·~h!..C'h

c=mml::ees ~us: co~ply. 3~:~e:~~e. a: ::.

9 Samp:lng lS net a ~ek :e:;.~:.~~e ~:~~:.n ':~e Commlssion, ~hl~~

has been ~Sl~g the sampl~ng ~e~~=d s:~:e 1geO to administer the

matchl~g funds submlSSlons. See:: :.F.R. S 9036.4(b}.

Page 39

3/15/94
1'teatotandua !oloUW'rtJ .~--"eol't-. " Proposed Final Audit Report on

Americans foc Harkin, Inc.

(LRA t402/AR '93-6)

page 6

II. USE or CORPORATE AND LABOR ORGANIZATION AIRCRAFT

(II.A.2.)

:~e prcpcsed Flnal Audit Report rec~mmends that :~e

:~~~~5s~=n determl~e that the Commlttee pay the u.s. Treasury S~;C36f :epresentlog underpayments for the use of corporate a~d la=cr ~rgan:zation aircraft. By using unrestricted, non-dls:~unted f.(st class fare schedules provided by the

General SeCVlces Administrat~on "GSA"), the auditors

=a:culated that the Committee had underpaid a labor

==ganlzation and a corporation f~r various flights pr~vided

t~ the Commlttee. The Committee, however, responded with an

affidavit from its travel agent asserting that the Committee

based its fare calculation on non-discounted first class

fares. The Committee also contended that because the GSA

fare schedules are unavailable to them, it is impossible to

conform to that type of calculation system.

We disagree with the report's finding that the

Committee underpaid the corporation and labor or9anization,

and recommend that the report be revised to note that the

Committee's fare calculations are acceptable. Section 114.9

only specifies that first class far•• be used in'the payment

calculation, and the regulation does not address the issue of

'vliethec discoun"ted- or restricted_ fares can __ be used in

deteraining the proper reiaburseaent. Rowever, because -the - service provided by labor organizations and corporations

pursuant to the requlation is outside of their ordinary

course of business and because committees usually receive

unrestricted service, we believe that committees should use

unrestricted, non-discounted fares in their calculations.

See Meaorandua to Robert J. Costa, Re: proposed rinal Audit

Report for Wilder for President (December 10, 1993).

Nevertheless, in this case, we believe the Committee

acted reasonably and in co~formance with the requlation, even

if the GSA fare schedule indicates that higher far•• should

have been paid. The GSA fare schedule was only deslqned

pursuant to an Audit Division request, and these fares are

not generally available to committees or the public.

Committees can only conform to the regulation by having a

travel agent calculate the appropriate fare for them.10/ In

t his case, the Comm itte e a p pea =- 5 t h a·..·e mad e eve r y f ;;as b 1e

attempt to conform with :he :e?~:a~:~~. 7~~y hav~ s~bml:~~j

a n a f f ida OJ i t fro m the i r =a "-" '=: 3 eo ~: 5 ': 3 -: :. :; fJ hat. ....., !"!", '?

... J , C mm1 t tee s c u 1d cal: :...... :,:: 5.; ::- '::" e A'..1 :j 1. t :> :. '.' :. s :. -: '::: :: '? :.

:~e c:;rrect fares, 8C :::e ::~:::.ss:::"': :=-'~:j :ssue a fare s:-;.~ju:-?

a: the start :f ~he elec:::;. :1·::e. =~: :~ese optl~ns appear t~ =~

burdensome to commlttees, a5 ~e:: 35 ~3~. :~e Audl: Dl~:SlC~ a~~

the CommlSSlon. Because t~ese :p::.:~s ~ere not avai:able to

c~mmittees in t~e 1992 elec:::n :y::e, :~e only ~anner c:

==mpllance ~as reliance on :ra~e: 3;e;.,:sl ~uotes.

Page 40

3/15/94
~-'~~""••cfr~inau.~o "loSi-it JO;"~~~'Sta

'ropo••d Pinal Audit ~.port on

Americans for Harkin, tnc.

(LRA '402/A~ '93-8)

Page 7

test of his ability, he quoted the "valid, industry s~andard

non-discounted !lrst class alr fare" to the Commlttee fer

~:-:ese flights.

F~rthert the Commlttee'S fare calculations a:e ~~t

s~ts:a~~:ally jl~fetent fr~m ~~~ GSA :ares. In scme ~~sta~:~s ~~e :~mmlttee-quc~ed ~are ~as the precise GSA face.

and most ~ther tlmes the fare differential was

between S4-$140.11 In many instances the Commlt~ee personnel

~ere flying at hours when ~~:y restricted or discounted fares

were offered to the public, and that explains why the

~~mmittee travel agent quoted them what the auditors believe

is a discounted or restricted fare.12/ The mOlt practical :a~d effective) way to conform to ana enforce section 114.9

is to have committee travel agents calculate the fares based

en th@ non-discounted first class fares available at that

time. Because the Committee substantially conformed to the

regulation, we recommend that no repayment be sought for the

apparent underpayments.

Finally, we disagree with the Final Audit Report's

recommendation that any payment for underpaid reimbursements

for aircraft travel be aade to the Tr••sury. The us. of

sampling and the inability to identify contributors justified

-dis"gorgelle-nt t-o~""theTreasury in the instances involVing

apparent exce.live and prohibi ted contributions in IS II.A.--l.

and 1I.8.1.-2. of the report. Because the apparent

prohibited contributions aade through aircraft service

underpayments were not discovered through sa.pling and

because the contributors are identifiable, refunds should be

.ade to the corporation and labor organization at issue.

Further, requiring a refund to the identifiable contributors

in this instance would be consistent with the treat••nt for

repayments on loans and staff advances which result in

prohibited or exc•••ive contributions. See Meaorandua to

11/ The auditors calculated that Committe. personnel made 10

trips with 29 leg8 on corporate and labor orqanizations aircraft.

84 tickets were issued and paid for on these flights, of which, 3-

Commlttee fares matched the GSA fare, and 27 Committee fares were

within $4-$140 of the GSA fare. :0 fares were off by 5166-$384

per ticket.

:2/ Many of the dis==e~a~::~s ~e~.~e~ ~~~ ~~~ :3~~ 3~~ :~~~:~:~O

: a :- e a p pea t' 0 n f 11 g h t 5 a e :: :- :' ::' m:. ': ':. '= ;:- e =- :; : ;. :; &:3: :- --,:) '. -",,' -? .:: .( e : .

. hen U 5 U a 1:. y ::' est r : : e d :- a ': e:; 3:' e .3 ': a :. : :; t:' : ~:- :~, '? ;:' '..: C : : : '

f~rthermore, the report aFFe3:'s :: ::~~::::e the C:m~l::~~ ~::

~slng »code F9" fares beca~se :~~se f~~~s a:e ~~~y ~se~ t2

-:: ale u : ate non - dis cc un ted :':; e - ..... a ',~ sec '.' :. : e . H Q we\' e r I a 1: the

flights in question are c~e-.ay·f:l?~ts, thus, :t appears that ~~e

Comm1ttee used the correc~ :a:-e :cde. ~he audlt~rs shc~ld, a: 3

~lnlmum, explain in the rep8rt .~y t~e "~~de f-9" one-way fares

are :ess appropriate than :he "c~:ie r" fares WhlCh they sugges:,

Page 41

3 '15/94
~n-au

Proposed Final Audi.t aeport on

Americans for Harkin, Inc.

(LRA '402/A~ 193-6)

Page 8

Robert J& ~osta, Re: proposed Interim Audit Report for Wilder

f~r President (April 22, 1993}.131 However, if the report is r~·l:.sed to require no repaymentfor the apparent ~~detpayments, the issue of ~ho is to receive the payment

'J:':': ::e ~~ct.l~,

13/ Loans and staff advances which result in excessive or

prohibited contributions are not dis90rged to the Treasury because

it is assumed that the lender or staff ••aber did not intend on

making a contribution and expected to be repaid by the coaaittee,

and thus, it would be unfair to have the coaaitt•• pay the

Treasury, rather than refund the contributions. Se. Operational

Guidelines for the Applications of 11 C.F.R. S 11~, Staff

Advances (March 2, 1993).

14/ We also note that the Audit Division's repayment calculatlcn

includes underbilled tickets for the press traveling on these

fllghts. Section 114.9(el only requires a payment for

underbillings for air travel by "a ::andidate, candldat~'s a::e:--.:,

;,,( person traveling on behalf C'f a candldate," anj ma~~s ... ~­

menticn of the press. Theref:~~. b~~aus~ t~~re :5 ~~

Justl::~a~ion to compel the C~mmlt~~e t~ pay fC'r t~e un~~~t::::-:

of the press, 'Ne would suggest that t~e payment, 1: any, te

adjusted t~ 55,406.60, by subtra:~:r.? :r.e Sl,629 1n press

underbilllngs. Further, t~e aud:t~rs have lndicated that t~e

Commlttee accepted reimbursements from press organizations f:~

travel expenses pald by the Cornmlt:ee pursuant t~ 11 C.F.R.

S 9034.61 bi, although it cannot ce :onfirmed whether

re1mbursements were made for the fl~ghts at issue here.

Page 42

3/15/94
ftEMORANDUM

......... '-

TO:

THROUGH:

FROM:

SUBJECT:

Robert J. Costa

Assistant Staff . ector

A.udit Oivisio

John C. Suri a

Staff Dire it r

Lawrence M. N~ble General Coun!iel ~-

Kia Bri9ht-cLl.aanl(A~ Associate Gereral Counsel

Lorenzo Holloway ~~Ig. Assistant General Counsel

Peter G. Blullberq P~R

Attorney -/

Proposed Final Audit Report on Americans for

Harkin, Inc. (LRA t402/AR 193-6)

The Office of General Counsel ha. reviewed the

additional finding in the final Audit Report on Aaericans for

Harkin, Inc. (-the Coaaittee·) subaitted to this Office on

February 28, 1994. The followin9 a.aocandu. provid•• our

comments on the proposed report. If you have any questions,

pleas. contact Peter Blumberg, the attorney assiqned to this

audit.

We concur with the additional finding and

recommendation that the Commlttee repay $24 f 595 to the u.s.

Treasury for aatching funds received in excess of entitlement ! III.C.). On the candidate's date of ineligibility, he had

net outstanding campaign obligations as defined under 11

C.F.R. S 9034.5. Thus, the candidate could continue to

receive matchlng fund payments after the date of

ineligibility as long as the combination of future private

contributions and matching funds did not exceed his net

outstanding campaign obligations. See 11 C.r.R. S 9034.1{b).

The February 1993 matching fun1 payment eliminated the

candidate'S net outstanding campaign obligations. Therefore,

Page 43

3,/15/94
<~ ..-..'-~ ....... -_'....-=--.--... ~--->.....-~:~~~~.~'W:'~.....~~~~~~

Proposed Pinal Audit R.port on

Amerieans for H.r'ln~ Inc.

{LaA '402/~ 193-'>

'a9- 2

th. portion of the February 1993 payment exceeding the

candidate's outstanding obligation and all of the March 1993

must be repaid. See 11 C.r.R. S 9038.2Cb}(1}(i}.

Page 44

3/15/94
BJOOS6S5

March 22, 1994

L

~r, tarry Hawkins, Treasurer

=/0 Lynn Utrecht, General Counsel

Americans for Harkin, Inc.

Oldaker, Ryan' Leonard

818 Connecticut Ave., N.W., Suite 1100

washlnqton, D.C. 20006

Dear Mr. Hawkins:

Attached, please find the Final Audit leport on Aaericans for

Harkin, Inc. The Coaaission approved this report on March 15,

1994. As noted on page 4 of the report, the Co.-i••ion ••y pursue

any of the ••tters discussed in an enforce.ent action.

In accordance vith 11 c.r.R. S9038.2(c)(1) and (d)(l), the

-(;o..ts_l!on_ has _ade an initial detar.in.tion that tbe eandldate is

to repay to fhe -Secreta-ry- of- t.he---Tr•••ury $~6~_878 vi thin 90 dayl

alter .ervice of this report (Jun. 21, 1994). Snould the

Candidate dispute the Co..i ••ion's deterainatlon that a repayment

is reqUired, Coaaission requlations at 11 c.r.a. S9038.2(c}(2>

prOVide the Candidate with an opportunity to aubalt in vritin9,

within 30 calendar days after service of the Co..ission'. notice

<April 21, 1994), legal and tactual ••terials to de.on.teat. that

no repay••nt, or a l ••••r repayaent, is required. rurther, 11

C.F.R. S9038.2(c)(]) peraita _ Candidate who ha. eubaitted written

materials, to reque.t an opportunity to .ate an oral pr••entation

in open •••Iion ba••d on the 1-9a1 and factual .at.rial.

5ubaitted.

The Coaai.lion vill consider any vritten 189&1 and factual

materials lubaitted by the Candidate within the 30 day period in

aakin9 a final repayaent deteraination. Such ••terials a.y b.

submitted by coun••l if the Candidate 10 elects. If the Candidate

decide. to file. r••ponse to the initial repayaent deteraination,

plea.e contact 11a L. Briqht-Cole.an of the Office of General

Counsel at (202) 219-3690 or toll tree at (SaO) 424-9530. If the

Candidate doe. not dispute this initial deterainaticn within the

30 day period prOVided, it will be considered final.

In addition, the Co.-ission deterained that a pay••nt to the ~.S. Treasury in the a.ount of 533,033 repr•••nt1n9 the value of

unresolved excessive and prohibited contributions. The CoaalSSlon

adapted this policy for the 1992 prelidential cycle, and so ~nformed Americans for Harkin, Inc. by a lett4r dated June 2,

:992.

Page 45

3/15/94
tetter to The Honorable Tos Harkin

Page 2

Any questions you aay have related to matters covered during

the audit or in the report should be directed to Lorenzo David or

Wanda Thomas of the Audit Division at (202) 219-3720 or toll free

at (800) 424-9530.

Sincerely, ,......-, A

~,/ ROb;;:' / ~~.~ Assistant Staff Director

Audit Oivilion

Attach.ents:

rinal Audit Report

Leejal Arialysia- -dated 1/19-/94 -and-- 3/7/94

Page 46

3/15/94
BJOOS6S3

Mar~h 22, 1994

.. _.

. ,

The Honorable To. Harkin

c/o Lynn Utrecht, General Couns.l

A••rican 5 for Hark i n I Inc.

oldaker, Ryan, Leonard

818 Connecticut Ave., N.~., Suite 1100

Washington, D.C. 20006

Dear Senator Harkin:

Attached, plea.e find the Pinal Audit Report on ~.rican. for

Harkin, Inc. The Co.-ission approved this repoct on March 15,

1994. Aa noted on page 4 of the report, the Co..l ••ion ••y pursue

any of the aatters dilcussed in an enforce••nt action.

In accordance vith 11 C.r.R. S9038.2(c)(1) and (d)(l), the

Coaaission has aade an initial deterainatlon th.~ ·t~. Candld.te i.

t·a repay to the Seer.·t·.cy of .the Tr••'\IJ.y,_$,~.6,87. within 90 days after service of this report (June 21, 1994). -'-- S-hoU'ld the

Candidate dispute the Coaaislion's deterainaticn that a repayment

il required, Cosaission regulations at 11 c.r.a. S9038.2(c)(2)

provide the Candidate with an opportunity to subalt 1n wrltin9,

within 30 calendar days after service of the Co..i.sion'. notice

(April 21, 1994), 1e981 and factual aat.rials to d••on.trate that

no repayaent, or a 1••••r repay••nt, is required. rurth.r, 11

c.r.l. S9038.2(c)(]) peraits a Candidate who ha. aubaitted written

materials, to request an opportunity to ••ke an oral pre.entation

in open ••••ion ba ••d on the 1-9.1 and factual .aterials

sub.itted.

The Coaai••ion vill consider any written 1e,al and factual

material••ubaitted by the Candidate within the 30 day period in

makin9 a final repayaant deterain.tion. Such ••tarial. aay be

subaitted by coun••l if the Candidate so elect.. If the Candidate

decide. to file • r.spon•• to the initial repayaent deteraination,

ple.le contact Xi. L. Briqht-Col••an of the Office of General

Coun••l at (202) 219-3690 or toll tr•• at (800) 424-9530. It the

Candidate doe. not di.pute this initial deterain.tion within the

30 day period provided, it will be considered final.

In addition, the Cosailsion det.rained that a pay.ent to the

U.S. Tre.lury in the a.ount of $33,033 repre.enting the value of

unresolved excessive and prohibited contribution. ia required.

The Coaai ••ion adapted thia policy for the 1992 pr.sidential

cycle, and so infor••d Americana for Harkin, Inc. by a letter

dated June 2, :992.

Page 47

3/15/94
tetter to tarry Hawklns, Tr~asurer

Page 2

Any questions you may have related to matters covered durl~q

the audit or in the report should be directed to Lorenzo Oavid or

Wanda Thoa.s of the Audit Oivision at (202) 219-3720 or toll tree

at tSOO) 424-9530.

Sinc.r~ .1

-P-/ffi--

Robert ~/co.ta

Assistant Staff Director

Audit Division

Attaeh••nts:

Final Audit Report

Le9a1 Analysis dated 1/19/94 and 3/1/94 (

Page 48

3/15/94
Chronoloqy - Americans for Harkin, Inc.

Pre-Audit Inventory Commenced

Audit Fieldwork

Response Received to Interim

Audit Report

Final Audit Report Approved

Page 49

3/15/94

April 20, 1992

June 15, 1992

September 7, 1993

March lS, 1994
(
Pufi!icvl.scr8StlFj;""'

RECEIVED , C~rH'.) 1 .FEDERAL ELECTIO '-"'Jr _r -1

COMMISSION j

SEC~ETARIAT

June 2, 1994

MEMORANDUM

TO:

THROUGH:

FROM:

SUBJECT:

THE COK"nSS~O~ ')

JOHN c. SU~~!r \

STAFF DIRE~

ASSISTANT

ROBERT J. CO~TA StAFF DIRECT~R­ ~~ AUDIT DIVIs'ION

I

PAY"ENT O~ $35,316 RECEIVED FROM AMERICANS FOR BARKIN

__ __ _This informational memorandum is to advise you of a

$35 I 316- payme-nt- rece i-ved from -Ame-r-icansFoI' -Hark i_.n ttb~

Coamittee). The payment is a partial payment received in

response to the $59,911 initial repayment determination

contained in the final audit report and represents stale dated

checks ($2,283), receipt of prohibited contributions ($7,373)

and receipt of contributions in excess of contributor's

limitations ($25,660). The Committee has not repaid $24,595

which represents matching funds received in excess of

entitlement. The Audit staff is currently reviewing the

Committee's response to the matching fund entitlement finding.

Attached is a copy of the check, the letter which

accompanied the payment, and the receipt showing delivery to the

Department of Treasury.

Should you have any questions regarding the payment please

contact Ray Lisi at 219-3720.

Attachments as s~atej
, ,\ ) , \

) , $.'J-"~

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.-.-".- ··r

'10951

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U'O ItDq 5 It.· 1:05 ...0005 2 21: 2iO(; 5 50 53111'

I
OLDAKER, RYAN Or LEONARD

ATTOANtyS AT LAW

818 CONNECTICUT AvENUl:, N,W

S .... lTE I! 00

WAS~!NGTON. O.C, 2000e

May 25, 1994

Kim Bright-Coleman, Esq.

:\ssociate General Counsel

Federal Election Commission

999 E Street. N.W.

Viashington, D.C. 20463

Dear ~1s. Bright..Coleman:

f' ....

I .. L.,J -

v ..,

Enclosed is a check in the amount of $35,316 payable to the United States Treasury, as

requested by the Federal Election Commission in its letter of March 22, 1994. As the Committee

set forth in its Response to the Interim Audit Report, the Committee believes there are significant

legal issues underlying- the -C-ommission·s reqU<:St that _thi~ amount be paid to the Treasury.

Hov,'ever, the Committee has decided to make the payment, and- bririg- these~ISsUeS (0- the

Commission's attention as reasons why the Commission should take no further action \\ith respect

to these matters.

for the reasons set forth below, the Committee respectfully requests that the Commission

accept this payment as final resolution of the excessive and prohibited refund issues and take no

further action "With respect to them.

I. A.s u~e Committee noted in its response to the Interim Audit Repo~ there are

significant problems and uncertainties Yfith the application of sampling and the projection of the

amounts of \;olations. These problems are summarized below.

1. The Commission's authority to request payments to the Treasury based on

projections is uncertain. This is a departure from past practice and was implemented. not through

regulations as was the CornnUssion'ts policy regarding stale-dated checks, but through the issuance

of a policy statement v.ithout any opportunity for comment. Thus~ there are t\\·o legal issues --

the authority of the Commission to require payment to the TreasUJ')' instead of refunds to the

contn ~utors. ~'1d the legality ofthe use ofstatistical sampling to project the amount of violations.

:\5 to the payment to the Treasury, this is a major departure from the

Corn.mission·s past practice. and the Comminee believes that such a policy should be

implemented. if at alL through regulations, as the Commission did \\ith stale·dated checks. The

Comminee believes that the requirement to pay these amounts to the treasury is a ne\\' rule of 13\1.

that the Commission is required to establish through regulations. 2 USC §437f(b). ~1oreover~
because this policy \\"as not published for comment. there are several issues that \\'e believe the

Commission may not have fully considered. For example. if excessive contributions are not

refunded to the contributor.. what will the etTect be on a contributor \\'ho may have exceeded his

or her $25,000 annual limit? Ordinarily. such contributors seek to mitigate their \'iolation bv

requesting refunds. Yet. under the Commission'ls policy the Committee ,""culd either be required

to refund such contributions t\\;ce -- ('nee to the Treasury and once to the ('ontributor -.. or to

leave a contributor \\;thoat the ability to mitigate.

Thus~ in order to fully consider the impact of this policy \\"e believe that the

Commission should implement this policy only after an opportunity for public COrTlInent

As to the use of statistical sampling for projecting the amount of violatio~ it is

unclear whether the Commission has the authority to use sampling to establish the amount of

violations. The cases cited by the Commission are in the dramatically different context of

Medicare and Medicaid fraud, where the courts noted that there was no practical way to audit

each and every transaetion4 In fac~ in the case of publicly financed candidates, the auditors do

review each and every contribution check. The Commission may have difficulty in persuading

the courts that this is the same type of situation as the ~1edicare fraud cases relied upon.

Moreover, medicare fraud is unlike regulation of campaign activity in which there are core First

Amendment issues at stake.

2. In addition to the legal Wlcertainties underlying this policy. there are several

additional reasons why the Commission should -implement such a policy, if at alL -only through

regulations. Fi~ the auditors have stated that this method has been "approved" as valid. Yet.

the approved use of the sampling technique was for a ""'ery different purpose -- the review of

matching fund submissions. In fac~ that is a ~iery different use and it operated very differently

from the use of sampling to project violations. In revie\\'ing matching fund submissions.. the

sampling was done on a rolling basis. Thus. as the Committee s expertise in revie\\ing

contributions and preparing submissions increased~ the hold back percentage could decrease, The

auditor's current use of sampling to project violations does not take such changes over time into

account. 1

-~ Second. the auditors' selection of some portions of the population to perform a 100%

revle\\' may skew the results. The auditors admit that they selected some subsets of contributions

to perform a 1000/0 review precisely because they believed those portions of the contribution

population would include more problems. It is unknO\\ll \'that is the effect of such a method of

1 The apparent corporate contributions found by the auditors illustrate the possibility that the

auditors' method does not accuratel~ retlect the (offiJnittee's changing abi!lt~ to s"reen for

prohibiteds and excessives. The auditors found only 3 prohibited contributlons. totaling $750.

.-\11 three v.'ere received on or before October 10. 1991. The Committee regIstered on September

23. 1991. The fact that the auditors found no later prohibited contributions suggests strongl~ !hat

the Committee staff simply became more sophisticated at finding thenl and rejecting them. and

that there were no prohibited contributions received after October 10. 1991. instead of $7.000 in

prohibiteds after that date.

.. ,<,

I

j

)

I

i

I
combined sampling \\;th I~/O revie\\', Thus~ it is incorrect for the auditors to imrl~ that this

method has someho\\f been approved or ft"1und valid as the auditors are using it to project the

amounts of violations. This is an adJitional reason \\~hy the use of the sampling and the specific

methodology used should be put out for comment so that the Commission can obtain expen

advice on its validity.

The Committee ~lie\es that the amounts of the projected excessi\e and prohihlted

contributions are likely to be overstated ba..~d on the auditors· methodology. :-\5 a result the

Commission should not in additicn seek any penalties from the Committee since the paynlent

made to the Treasury is likely to be more than the actual amounts of such UIU'esolved

contributions.

II. The amounts of unresolved excessive and prohibited contributions identified by the

auditors. even if the projected numbers are accepted, are statistically insignificant. The

Committee received contributions of over 3.500,000. The total amount of prohibiteds found \\'as

$750; the projected amount \\'as S7~373 (0.2% of total individual contributions). The total

amount of excessive individual contributions found Vias S18.150~ the projected amount was

$22,060 (0.70/0 of total iru:1i,,;dual contributions), The total amount of excessive P:\.C

contributions was $3,600 (O.S°1e of total P.;'\C contributions).

Although the audit report notes that th~ amounts are deemed material, it is hard to

imagine wtlat materiality threshold would find O.2~/o. 0.7°10 and O.8~tO to be material. Certainly"

these are extremel)' small percentages of COmmittee receipts and suggest that the Committee did

an excellent job in reviev.ing and processing its contributions. \\tith over S3.5 minion in

contribution receip~ the Committee Vv1lS bound to make some mistakes. These percentages of

errors are very small. For this reason.. the Commission should t.ake no further action \\1th respect

to these issues.:

Ill. As noted in the Committee s response to the Initial Repayment Determinalio~ the

Committee has insufficient funds left to pay its outstanding obligations and \\inding do\\'n costs.

Thus* the Committee has no funds to pay any C1\;) penalties. The Committee would like to

disburse its remaining funds and terminate as quickly as possible. For this reason~ the Committee

decided to pay the amount requested by the Commission in the beliefthat the Commission should

accept this payment as fmal settlement of these matters. The Committee urges the Commission

to consider the Committee's financial situation in resolving this matter.

CONCLCSION

For the reasons outlined 3M\e. the Committee respectfully requests that the Commlssion

The Commission should also take Into account that the Committee follov.ed LJ,e

Commission's lnstruction in L~e June :. 199~ letter, It is the Committee's belief that all

presidential campaigns v.·ere not treated the same \\ith respect to this refund issue, and the

Committee should certainly not be penahzed for follov.ing the CommIssion's direction and

holding onto these exceSS1Ves and proh.ibiteds instead of refunding them.
accept this payment and take no further action \\ith respect to the Committee's unresolved

excessive and prohibited contributions, To the best of the Committee'ts kno\\·I~ge. the

Commission has found no other violations of any provisions of the Act or regulations \tilth

respect to the Committee. This is unusual for a presidential campaign and demonstrates that the

Committee made significant good faith efforts to comply \\ith the requirements of the Act and

the regulations and \'-as successful in so doing. LTnder these circumstances~ no further action is

\\'ammted.

Respectfully submitted~

L~n

+~Utrecht

General Counsel

Americans for H~ Inc.
Rrtf.~rtl

frof f4Al fi I r.naN CO"'~I~, ~,lf:H

n('f 1(. f "r Cl td RAL 1'{\"W~f t

tlAY ZG II 01 PH '94

I I I I I j •• I 'I, I I I I

AMERICANS FOR HARKIN 7·91 I I

• I I I P. O. 80X 2308' I I I "I I I •

I WASHINGTON, DC 20013 ' I

CRESTAR BANK, N.A

WASHINGTON, DC

1&-52

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10951

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_.t!~k,-- .... '. '4OT "£0 Sl(iNATURE {. .-li'.~ •..L .. _ ..~~._~_..L.. ,.

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o.s .. 1'reasury

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I' , • I t I I I , , '5/24/94 $3£,>,316.00 , t I , I I , Ii'I I , ,

Thirty-Five Thousand, Three Hundred and~Sixteen Dollars and no/cents----------

PAY , I , I ' I I I I • It. t" I I

TOt HE: , I I , i, I • , I I

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£2 ax Ak, 2 4 -ai .~2_ .., _"_"

~~:~

June 1, 1994

RECEIPT FROK THE

UNITED STATES DEPARTMENT OF TREASURY

FOR A

PAYMENT TO THE GENERAL FUND OF THE U. S. TREASURY

Received on June 1, 1994, from the Federal Election Commission

(by hand delivery), a check drawn on Crestar Bank (Check 110951)

in the amount of $35,316. The check represents a payaent from

Americans For Harkin for stale dated checks ($2,283), receipt of

prohibited contributions ($7,373) and receipt of contributions

in excess of contributor's limitation ($25,660).

The payment should be deposited into the General Fund of the

u. S.--Treasury__

Americans for Harkin

Amount of Payment: $35,316

Presented by: Received by:

Federal Election Commission
1:xi~hl- CN\ernOJ\ ""'" ,~-

BEFORE THE FEDERAL ELECTION COMMISSION

In the "atte, of )

)

Aaericans for Barkin, Inc. -- propo••d )

Final ••payaent Deteraination and )

Statesent of Reasons. )

CERTIFICATION

LIU\ 1.02

It Marjorie W. Emmons, Secretary of the rederal Election

- Ca-aiss·ion-,· do he.re.by _.c.e.rt.i fy. t"a~.. on July. 19, 1994_, the

:'" Co.-i.sion decided by a vote of 5-0 to take the following

actions in the above-captioned .atter:

1. Make a final determination that Americans for

Harkin, Inc. repay $2,283 to the United

Stat•• Treasury.

2. Approve the Stat••ent of Reasons supporting

the rinal Repayment Determination, .s

reco•••nded in the General Counsel'. Report

dated July 13, 1994.

(continued)
Federal Election Commission

Certification for Americana for

Harkin, Inc.

July 19, 1994

3. Cancel the oral presentation scheduled tor

AU9ust 3, 1994.

4. _ Approve the appropriate letter, •• reco...nded in the General Couns.l'. Report

dated July 13, 1994.

'age 2

Coaais.ionerl Aikens, Elliott, McGarry, Potter, and Thoaas

vot~d ~tfirmativ.ly for the decision; Commissioner McDonald did

not cast a vote.

Attest:

)J~tt!~'?4(j ~i. w. £..on. Secre~ary of the COBai••ion

Received in the Secretariat: Wed., July 13, 1994

Circulated to the Commission: Thur. , July 14, 1994

Deadline for vote: Tues., July 19, 1994

melt

4:15 P.M.

11:00 A.M.

4:00 P.M ..
J

July 25, 1994

Lyn Utrecht

Oldaker, Ryan' Leonard

818 Connecticut Ave., H.W.

suite 1100

washington, D.C. 20006

Dear Ms. Utrecht:

The Commission has considered the response filed on behalf , of Americans for Harkin, Inc. ("the Committee-) to the

Commission's initial repayment determination contained in the

Report of the Audit Division on the Committee issued on

March 15, 1994. On July 19. 1994. the Commission .ade a final

determination that the Committee must repay $2,283 to the United

-st-a--t-e-s- Tre-asu-ry. The-- Commi-ssion -al_so__canceled th~_~ommittee' S

oral presentation scheduled for August 3, 1994.

Enclosed is the Statement of Reasons in support of the

Commission's final repayment determination. 11 C.F.R.

S 9038.2(c){4}. Judicial review of the Commission's

determination is available pursuant to 26 U.S.C. S 9041, if the

petition is filed with the United States Court of Appeals for

the District of Columbia Circuit within thirty (30) days from

July 19, 1994, the date of the Commission's final determinationo

Under 11 C.F.R. S 9038.2(d)(2), repayment must be made ~ithin thirty (30) days froa the date of service of this notice.

We note that the Committee submitted a check for the repayment

amount on May 2S, 1994, payable to the United States Treasury.

Please contact me at (202) 219-3690, if you have any questions.

~;l~oW, (J4JtW;~ Kim Bright-coleman

Associate General Counsel

Enclosure

Statement of Reasons

cc: Larry Hawkins, Treasurer
BEFORE THE FEDERAL ELECTION CO""ISSION

In the Matter of )

)

Americans for Harkin, Inc. }

Final Repayment Determination )

STATEMENT OP REASONS

On July 19, 1994, the Commission made a final

deteraination that Aaericans for Harkin, Inc. ("the Coaaittee W )

must repay $2,283 to the United States Treasury. The repayaent

amou-n-t--collst~_~_utes an amount owed for stale-dated Committee

checks. The Committee submitted the repayment on May 25, 1994.

This Statement sets forth the bases for the Commission's

determination. 11 C.F.R. S 9038.2(c)(4).

" I. BAC~GROUND

Americans for Harkin, Inc. is the principal campaign

committee of Tom Harkin, a candidate for the 1992 Democratic

presidential nomination. The Committee received $2,103,362 in

federal matching funds under 26 u.s.c. S 9034(a). Pursuant to

26 u.s.c. S 9038(a}, the Commission conducted an audit and

examination of Committee qualified campaign expenses. The

issues relevant to the Cornmlssio~'s final determinaticn first

arose in the Interim Audit Report which was approved by the

Commission on June 17, 1993. Attachment 1. The Committee

responded to the Interim Audit Report on September 7, 1993.

Attachment 2. The Commission approved a Final Audit Report on
-2-

"'arch 15, 1994. Attachment 3. The .Final Audit Report included

the Commission's initial determination that the Committee repay

526.818 to the United States Treasury. The initial r.payaent

determination represents $24,595 in matchinq funds received in

excess of the Committee's entitlement and $2,283 in stale-dated

Committee checks.l/ The Committee submitted a written response

on May 23, 1994 disputing the Coasi••lon'. initial detera1natlon

that the Committee received aatchinq funds in excess of its

entitlement.~/ Attachaent 4. On May 25, 1994, the Coamittee

made a $2,283 repayment for the stale-dated check •.

Attachment 5.

The Commission has reviewed the Committee's written

response to the initial repayment determination. The Co..ission

concludes that the Committee did not receive public funds in

excess of its entitleaent. The Coaaittee did not dispute the

Commission's finding that the Committee maintained stale-dated

:hecks. Therefore, the Commission has made a final

determination that the Committee must repay $2,283 to the United

States Treasury.

1/ The Final Audit Report also recommended that the Committee

pay the United States Treasury $33,033 which represents

contributions received from prohibited sources or in excess of the

contribution limits of 2 u.s.c. S 441a(a). The Committee made a

payment for the excessive and prohibited contributions on May 25,

1994. Attachment S.

2/ As part of its response, the Committee requested an oral

presentation, which the Commission granted on June 20, 1994, and

scheduled for August 3, 1994. The oral presentation was canceled

because the Committee'S written response supported the

Commission's conclusion that the public funds were not received in

excess of entitlement. . . .
-3-

II. RECEIPT or FUNDS IN EXCESS OF ENTITLEMENT

During the candidate's period of ellgibility, the

candidate is e~titled to receive public funds to the extent that

~he candidate receives matchable contributions. 11 C.F.R.

S 9034.1(a). After the candidate's date of ineligibility, the

candidate is entitled to receive additional matching payaenta

for aatchable contributions received and deposited on or before

December 31 of the Presidential election year provided that on

the date of payment there are remaining debts reflected in the

Statement of Net Outstanding Campaign Obligations ("NOCO

Statement"). 11 C.F.R. S 9034.1(b). Any portion of the

payaents made to a candidate from the matching payment account

in excess of the aggregate amount of payments to which the

candidate was entitled to under section 9034, shall ~e repai~ tothe Secretary of the Treasury. 26 u.s.c. S 9038(b)(1). The

Commission may seek a repayment of public funds received in

excess of the candidate's entitlement to the extent that

payments made after the candidate's date of ineligibility are

greater than the debts reflected on the NOCO Stateaent. 11

C.F.R. S 9038.2(b)(1)(i).

The candidate's date of ineligibility was March 9, 1992.

The Final Audit Report stated that the Committee received

$388,659 in public and private funds from the candidate's date

of ineligibility until February 1, 1993. On February 2, 1993,

the Committee received a matching fund payment of $73,603. The

Committee received another matching fund payment of $14,547 on

March 2, 1993. Attachment 3 at 28. Therefore, it appeared that
-4-

the Committee received 5476,809 to cover the Committee's deficit

after the candidate'. date of ineliqibility.

The NOCO Statement included in the Final Audit Report

found that the Committee had net outstanding campai9n

obligations of $4S2,214 at its date of ineligibility, &5

calculated through Auqust 3, 1992. Attachment 3 at 23-24.

Since the Co..ittee had already received $388,659 in public and

private funds by February 1, 1993, a portion of the matching

fund payaent of February 2, 1993, $10,048 [$73,603 - ($452,214 -

$388,659)} and the entire $14,547 matching fund payment of

March 2, 1993 vas received in excess of the candidate'.

entitlement. Therefore, the Commission made an initial

det~rmination that the Com.mittee must repay $24,595 ($10,048 ...

514,547) to the United States Treasury. Attachment 3 at 26.

In a written response to the initial repayment

determination, the Committee contends that it has not received

funds in excess of its entitlement. The Committee ra~ses two

points. First, the Committee argues that the NOCO Statement

does not accurately reflect the Committee's financial status,

because it: (1) understates winding do~n expenses by $22,205.74;

(2) overstates accounts receivable by $1,070; and (3) disallows

a~ acccunt payable of $4,940 for which the Commlttee provided

documentation. Attachment 4 at 3-4. The Committee argues that

t~ese adjustments would increase the Committee's net outstanding

campaign obligations to $480,429.74, so that the Commlttee would

not owe a repayment. Second, the Committee argues that it vas

impossible for it to have received funds in excess of its

..

:·11

i
-5-

entltle~ent ~ecause it incurred no non-qualified campaign

expenses, and after wlnding down, will have no funds ir. lts

acc~unts~ Attach~ent 4 at 4-5. Therefore, the Committe@

cc~:ends that an e:rcr must exist in the NOCO calculation. ih~

Coamittee argues that the Commission is 1n a better pOlition to

review the financial records and discover the reason for the

discrepancy between the Coaaittee's actual financial pOlition

and the NOCO Statement'. calculation.

The Commission has reviewed the Coaaittee'. response and

supporting documentation and concludes that the Noce Stateaent

included in the Final Audit Report: (1) overstates wind down

expenses by $6,887; (2) overstates accounts receivable by

$2#517; and (3) should be revised to allow an account payable of

$4,940 which previously was undocumented. See Attach~ent 6

at 2. By adjusting the NOCC Statement to reflect these chanqes,

the Ccmmlttee's net outstanding campaign obligations are

$452,784. Compare Attachment 3 at 23-24 with Attachment 6

at 3-4.

The Coaaission also reviewed the Committee's public and

private contributions that were applied to the candidate's

deficit. The Commission concludes that the Final Audit Report

overstated these receipts in the peelod from August 4, 1992

through February 28, 1993 by S30,lOS.ll Id. Therefore, the

public and private funds available to be applied ag~inst the

Committee's August 3, 1992 deficit 15 $434,342, as calculated

3 The Commission notes that the Committee did not raise the

issue of an overstatement cf its receipts.
-6-

through February 28, 1993. Id. Since this amount is less than

':......., 1 .

2 .

3

4

5

6 . t •.-...

~he C~mmittee's deficit, the Commission concludes that the

candidate did not receive public funds in excess of his

entitlement. Accordingly, the Commission does not address the

Committee's second point.

III. FINAL REPAYMENT DETERMINATION

Therefore, the Commi.sion hal .ad. a final determination

pursuant to 11 c.r.R. S 9038.2(c){4) that for the foregoinq

reasons Americans for Harkin, Inc .•ust repay $2,283 to the

united States Treasury for maintainin9 stale-dated checks. The

Coaaittee subaitted the repayaent on May 25, 1994.

-Att-achaenta

Interim Audit Report, approved June 17, 1993.

Committee's Response to the Interim Audit Report

(September 1, 1993).

Final Audit Report, approved March 15, 1994.

Committee's Response to the Final Audit Report (May 23,

1994).

~emorandum to the Commission, Re: Payment of $35,316 Received

from Americans for Harkin (June 2, 1994).

"eaorandua to Lawrence M. Noble, Re: Analysis of the

Americans for Barkin, Inc. Response to the Final Audit Report

(July 1, 1994).
.. --

FEDERAL ELECTION CO~1MISS'ON

INTERIM REPORT or THE AUDIT DIVISION

ON

AMER!CANS roa BAAKIN, INC.

I. Background

A. Audit Authority

This report ia based on an audit of-Aaerlcans for

Harkin, Inc. (the Coaaitt.e). The audit il sandated by Section.

9038(a} of Title 26 of the United States Code. That- ••ctloDA

states that Wafter each aatchin9 payment period, the Co..i ••lon

shall conduct a thorough exaaination and audit of the qualified --campa-lgn -e-xpens•• of- --eve-ry----e-aM-ida-t--e- and-" hi. ··author-i-%.4~eoIIiitt..tee_s

who received payments under Section 9037.- Also Sectloa 9019{b)

of the United State. Code and Section 9038.1(8)(2) of tbe . Commission's Requlations state that the Co..i.aion ••y conduct

other examinations and audits from time to ti•• ·•• it de•••-

necessaryIn addition to exaa1nln9 the receipt and use of r.deral

funds, the audit s••ts to deter.ine if the caapa1gft has aateelally

complied with the liaitations, prohibitions and disclosure

requi rements of the rederal Election Caapaign Act of 1971,' .s

amended.

8. Audit Coverage

The audit covered. the period froa the Co.-ittee'l

inceptlon, June 3, 1991 throuqh August 31, 1992. During this

period, the Coaaittee reports reflect an opening cash balance of

$-0-, total receipts of 55,668,467.64, total disbursements of

$5,387,092.07, and a closing cash balance of $144,133.60.1/ In

addition, a limited review of the Committee's transactions was

conducted through September 30, 1992, for purposes of deteralning

the Committee's remai nin9 matching fund entitlement based on its

flnancial position.

.!/ These totals do not cross foot due to various .ath errocs• (See rindlnQ II.C.) I

l".1C1X11t.-.---- p.,. I aC ,lL2;-
c2

Ce Campaign Organization

The Committee registered wlth the Federal Elect~on

Commission on September 23, 1991. The Treasurer of the Coaaittee

during the period covered by the audit was tarry Hawkins. The

current Treasurer is also Larry Hawkins.

Ourlng the period audited, the campai9n established

offices in lS states in addition to its national headquarters

located in Bethesda, Maryland. The campaignts current offices are

1n Washington, D.C.

To manage its financial activity, the caapaign

aaintained nine bank accounts at various ti_es. From the above

accounts, the Committee issued approximately 4,108 check. in

payaent for goods and services. Also, the Committee received

approxi.ately 43,388 contributions froa roughly 34,275 individuals

tota1in9 $2,655,641.43.

In addition to contributions, the c ••pai9ft received

$2,015,212.09 in .atching funds froa the United Stat•• Treasury as

of January 5, 1993. This aaount represents 14.6' of the

$13,810,000 maximum entitlement that any candidate could receive.

The ~cand1date J-'a_~ d~eter.ined f!ligible to rec,iv4! _matching funds on

November 27, 1991. Through December 31, 1992, the campaiqn has

made a total of 13 matching funds requests totaling $2,160,931.

The Commission has certified 93\ of the requested amount. For

matching fund purposes. the Coamission determined that Senator

Harkin's candidacy ended Karch 9, 1992. This determination was

based on a public statement by the Candidate. The Coaaittee has

continued to receive matching fund payments to defray expenses

incurred through "arch 9, 1992 and to help defray the cost of ~indin9 down the campaign.

Attachment 1 to this report is a copy of the

Commission's most recent Report on Financial Activity for this

campaiqn. The amounts shown are as reported to the Comaisslon by

the Committee.

o. Audit Scope and Procedures

In addition to a review of the the Committee's

expenditures to determine the qual~fled and non qualified campaign

expenses incurred by the campaign, the audit covered the follOWing

general categories:

1. The campaign's compliance with statutory li~1tations

with respect to the receipt of contributions or loans

(see Flndings II.B.l. and 2.);

from

or

2 • the campaign's compliance with the statutory

requirements regarding the receipt of contributions

prohibited sources, such as those from corporations

labor organizations (see Findings II.A.l. and 2.); I

lft.lCiiift_---...

p.... !l of eP: 9-
-

3

- ,·---f·· ~.,.... ~.,:

..

3. proper disclosure of contributions fro. individuals,

political coaaittees and other_entities, t~ incLUde the

itemization of contributions when required;.... ....·wt.11 as,

the coapleteness and accuracy of the inforaation

disclosed (s•• rindinq 11.0.1. and E.1.); .

4. proper disclosure of disbursements includlni tbe

itemization of disbursements when required, as well as,

the coapletenes& and accuracy of the infor••tioD

disclosed (see rindinCJs It.0.2. and £.2.); ..'. : ~." ....

s. proper diselosure of caapa1gn debt. and obligationa,

6. the accuracy of total reported receipts, di.bur••••nts

and cash balanc•• as co.pared to campa19ft bank" records

(s•• rinding II.C.),

adequate recordk••ping for ca.pai9~.tran.actlon.,

accuracy of the Statement of Net OUt.tandin~ Caapalgn obligations filed by the ca.paign to dlselo••;ita

financial condition and establish continuing .atchlng fund entitle.ent (see Finding III.A.); .~ ..

. ~. ,.

the campaign's compliance with spending limitations; 'and

So .. 'I

other audit procedures- -th-at were deemed -n~ce••ary in--the

situation. .

In addition, on April 20, 1992, the Audit staff

conducted an inventory of the Committee's records to deter.ine if

they were materially coaplete and in auditable condition.· A

letter dated May 5, 1992, notified the Committee that records

pertaining to several areas of the pending audit were not a.de

available for review. Furthermore, the letter informed the

Committee that if at the conclusion of a 30 day period ending June

8. 1992, the items listed on the letter had not been provided, the

Coaai.sion would issue subpoenas for the production of tho•• records.

At the entrance conference on June 15, 1992, the Audit

staff informed the Committee that a request would be made to the

Office of General Counsel for subpoenas to be issued to its direct

mail vendor for the production of all mailing detail documents.

The subpoena to the Committee's direct mail vendor was

approved by the-Coaaission on July 13, 1992. On August 20, 1992,

in response to the subpoena issued, the Audit staff received

sufficient records from the Committee's direct mail vendor.

Unless specifically discussed below, no material noncompliance was detected. It should be noted that the Commission

may pursue further any of the matters discussed in this report.

lft1co;n__...I _

Pace 3 .22-2-:
4

II. Findings and Recommendations - Non-Repayment Mattera

A. Prohibited Contributions

1. Apparent Corporate Contribution

Section 441b(a) of Title 2 of the United States

Code states, in part, that it is unlawful for any national bank or

any corporation organized by authority of any law of Conqr••• to

make a contribution or expenditure in connection with any election

to any political office or for any corporation whatever, or labor

organization, to .ake a contribution or expenditure 1n connection

with any election to federal office and further stat•• that it 1.

unlawful for any candidate, political co..itt•• or any other

person knowingly to accept or receive any contribution prohibited

by this section.

The Coaai.sion notified the ~o..itte. by letter,;

dated June 2, 1992, that a saap1in9 technlque would b. used to

identify the dollar amount of prohibited contributions r.c.lv.4~y

the Coaaitt... ~b. letter atat••, 1n part, -eo..l ••loft . regulations provide 30 days in which to refund contributions which

appear to be prohibited. (See 11 c.r.R. l03.)(b)(1) and (2»~ The

Coaaission will no longer rec09nize any untiaely refunds aade aore

than 6_0_ days_ f011Q,,_1n9 c8_l'1dic1__ tt!'S _date of ineligibility or

after the date of receipt of this letter, whichever is later.

Contributions resolved by the committees outside these tia.

periods are considered untimely and in violation of the

Commission'S regulations. The Committee received the letter June

6, 1992.

Our sample review of contributions identified tvo

prohibited contributions totaling S500. The identified

exceptions, when used to estimate the total dollar value of

prohibited contributions in the population sa.pled, resulted in a

projection of $7,122.72. As of the conclusion of audit fieldwork,

the Coaaittee had aade no refunds relative to the afore••ntioned

items. In addition, one prohibited contribution of $250 va.

identified in a 100' review of selected contributions. See

Attachment 12.

The Committee did not establish a separate bank

account for making refunds; however, the account balances

maintained in the bank accounts vere greater than the cumulative

total of the prohibited contributlons deposited. (See 11 c.r.R.

Sl03.3(b)(4). )

All prohibited contributions identified during the

reviews were verified by the appropriate Secretaries of State.

At the exit conference, the Committee was provided

schedules and relevant check copies to support the prohibited

contributions identified# Committee personnel had no coaaenta

wi th respect to the i tea. noted above. -- ru rthe r, tne 6Comm i t tee
5

stated that they would respond to our findings-after -rec.ipt c~

the Interim Audit Report. ."

Recommendation .1

The Audit staff recommends that within 30 calendar days of

the service of this report, the Committee:

•

•

deaonstrate that the contributions discussed above are

not prohibited; or

.ake a_payaent to the United Stat•• Treasury in the

a.ount of $7.372.72.

2. u•• of Corporate and Labor Organization Alrctaft

section 114.9(e)(1}(i) of Title 11 of the Code of

rederal Itequlationa- stat•• that a candidate, candidate'l agent, or

person traveling on behalf of a candidate who use. an airplane which is owned or leas.d by a corporation or labor organisation

other than a corporation or labor organization licen••d.to offer

commercial services for travel in connection with a rederaL c .

election must, in advance, reiaburse the corporation oL..labo't-,

organization in the case of travel to a city served by ~e9ularly

scheduled co=mercial service, the first class air fare. .

ourinq the review of the Committee's transactions

relative to payments for air transportation service., ~h. Audit

staff identified Committee disbursements to one corporation and

one labor organization. The name of the corporation val

HealthSouth Rehabilitation Corporation and the labor or9anization

identified was the Machinists and Aerospace Workers International

Association (Machinists Association). These or9anizations do Dot

appear to be licensed to offer commercial services for travel aspart of their normal business operations. The corporate status·of

the fira noted above was confirmed with the appropriate secretary

of state. The Audit staff compared the Coaaitte.'. payaents for

flights which occurred between December 1991 and "arch 1992 to the

lowest non-discounted first class fares charged by commercial

airlines who regularly served the same cities.

Our analysis of the corporate aircraft usage

revealed that the corporation billed the Committee $5,473 and

received a like payment prior to the flights. However, an apparent

underbilling and underpayment of $1,193 exists; this represents

the difference between the amount billed/paid ($5,4i) and the

value ($6,666) calculated by the Audit staff using the lowest

non-discounted first class fare available on the date of the

flight (See Attachment 3).

Based on the analysis of the Machinists

Association's aircraft usage by the Commlttee, it vas noted that

the Machinists Association billed the Committee $35,705 and va.

paid $35,961.40 prior to or en the date of the flight. However,
6

an apparent underbillinq and underpayment of $5,842.60 exists;

this represents the difference between the amount paid.

($35,961.40) and the value ($41,804) calculated by the Au'lt staf:

using the lowest non-discounted first class fare available on the

date of the fliqht (See Attachment 3).

Thus a total of 541,434.40 ($35,961.40 + $5,473)

vas paid for the above flight activity which resulted in a total

underpayment of $7,035.60 ($1,193 + 55,842.60). The Coaaitt.e

was provided copi•• of audit vorkpapers detailinq the

aforementioned aattet.

The Coaaitt•• responded that it used appropriate

firlt class airfare. in calculatin9 the a.ounts patd. ·The

committee noted that their rates were obtained in each ea •• by the

caapalgn scheduler who contacted Carroll Travel Agency for the

first class fare. for each 1 e 9 of the trip .s of the date of

travel.

To support its first class fares, the Comalttee

provided the Audit staff with copies of a atat••ent fro. ita

ca.paign scheduler, the scheduler's notes of conversations with

Carroll Travel, and a stat.aent fro. the owner of Carroll Trave14

The Audit staff's analysis of the infor••tion

provided by theC·olUDittee indicated-that the fi·cst-class-fares·

obtained by the Committee were, in many cases, discounted. In

some instances, Coaaittee trip payments and Audit staff computed

first class fares were identical. Not withstanding the

Committee's efforts, the Audit staff reaffirms its position that

the Committee's corporate and labor organization flight activity

resulted in an underpayment of $7,035.60

~ecommendation 12

The Audit staff recoamends that within 30 calendar days

of service of this report, the Committee provide information

which demonstrates that the aforementioned activity is in

accordance with 11 C.P.R. Sl14.9{e)i or absent such a shovin9,

make a payment to the u.s. Treasury of $7,035.60.

B. Apparent Excessive Contributions

1. Contributions from Individuals

Section 441a(a}ll){A) of Title 2 of the United

States Code states that no person shall make contributions to any

candidate with respect to any election for Federal office WhlCh,

in the aggregate, exceed $1,000.00.

Section 110.1(k) of Title 11 of the Code of Federa:

Regulations states, in part, that any contribution .ade by more

than one person, except for a contribution made by a partnership,

shall include the siqnature of each contributor on the check,

/ jftAClMi" -.oIlz...

PI.P G: 1ft aa:
1

money orde" or other negotiable instrument or in a separate

vrlting. A contribution made cy more than one person that does

not indicat. the amount to be attributed to each contrlbu~r shal:

be attributed equally to each contrlbutor. If a contribu~on to a

candidate on ita face or when a99 reqated with other contributions

from the sam@ contributor exceeds the limitations on

contributions, the treasurer may ask the contributor whether the

contribution was intended to be a joint contribution by more than

one person. A contribution shall be considered to be reattributed

to another contributor if the treasurer of the recipient political

committee asks the contributor whether the contribution i.

intended to be a joint contribution by 80re than one person, and

infor•• the contributor that he or he or she .ay reque.t the

return of the exc••sive portion of the contribution_if it i. not

intended to be a joint contribution; and within sixty days fro.

the date of the treasurer's receipt of the contribution, the

contributors provide the treasurer with a written ,.attribution of

the contribution, which is signed by each contributor, and which

indicates the amount to be attributed to each contributor if equal

attribution is not intended.

Section l03.3(b)(3) of Title 11 of the Code of

Federal Requlations states, in part, that contributions which

exceed the contribution liaitation may be deposited into a

campaign depository. If any such contribution 1s deposited, the ~reasu%er _.ay~~gu~st redesignatlon or reattribution of the

contribution by the -c-ont.ributor in- accordance with__ l1_C.r.R.

SSllO.l(b) and 110.1(k}, as appropriate. If a redesignation or

reattribution is not obtained, the treasurer shall, within 60 days

of the treasurer's receipt of the contribution, refund the

contribution to the contributor.

Section 110.1(1} of Tltle 11 of the Code of Federa:

Regulations states, in part, that If a political committee

receives a written reattribution of a contribution to a different

contributor, the treasurer shall retain the written reattribution

si9ned by each contributor. If a political committee does not

retain the written records concerning reattr1bution as required,

the reattribution shall not be effective, and the original

attribution shall control.

The Commission notifled the Committee by letter

dated June 2, 1992, that a samp:~~g technique would be used to

identify the dollar amount of exceSSlve contributions received by

the Committee. The letter states, l~ part, ·Commission

regulations provide 30 days in WhlCh to re~und contributions ~hic~

appear to be ~rohibited, and 60 days in which to seek

reattribution, redesignation or refund of excessive contributions

(ll C.F.R. l03.3.{b)(1) (2) and (3 i }. The Commission will no

longer reccgnize any untimely refundS I redesignations or

reattributions made more than 60 days following a candidate'S date

of ineligibility or after the date of receipt of this letter,

whichever lS later. Contrib~tlo~S ~esolved by the committees

outside these time periods are considered untiaely and in

lftAClRd-------- Pace Z

"

I

:
8

violation of the Commission's (e9u~ations. The Committee receive:

the letter June 6, 1992. •

O 1 . F 'b' . t ur samp e reVleW 0_ con~rl utlons ldentified thre~

unresolved excessive contrlbutions totallng $1,550. The

identified exceptions, when used to estimate the total dollar

value of unresolved excessive contributions in the population

sampled, resulted in a projection of $5,459.99. To date the

Committee has not prOVided the Audlt staff information relative t:

any refunds of the items noted. In addition, twenty-two

unresolved excessive contributions totaling S16,600 were

identified in a 100\ review of selected contributions. Se.

Attachment 14.

The Committee did not establish a separate bank

account for making refunds; however, the account balance.

maintained in the bank accounts were greater than the euaulattve

total of the aforementioned excessive contributions. (See 11

c.r.R. Sl03.3(b)(4).)

At the exit conference the Coaaittee va. provided

with a schedule of the apparent excessive contributions. The

Committee had no coam.nt. with regard to the excessive

contributions. Further, the Coaaittee stated that they would

respond to our findings after receipt of the Interi. Audit Report.

Recommendation 13

The Audit staff recommends that within 30 calendar days of

service of this report, the Committee either:

o

•

prOVide evidence that the contributions in question are

not excessive: or

make payment to the United States Treasury in the a.ount

of $22,059.99 ($5,459.99 + $16,600).

2. Excessive Contributions From Political Coaaittees

Section 441a(a)(2)(A) of Title 2 of the United

States Code states that no aulticandidate political coaaittee

shall make contributions to any candidate and his authorized

political committees with respect to any election for Federal

office which, in the aggregate, exceed $5,000.00.

The Audit staff performed a review of contributions

received f=cm ~olitical committees and identified three excessive

contributions totaling $3,600 (see Attachment .5). As of the end

of audit fieldwork, no refunds were made.

The Committee did not establish a separate bank

account for making refunds; however, the account balances
9

maintained in the bank accounts were greater than the cumulative

total of the excessive contributions. (See 11 C~r.R.

Sl03.3\b)(4).} ,..'

At the exit conf:rence the Committee vas provided

with a d.tailed schedule, as well as relevant check copies

relatlve to these unresolved excessive contributions. The

Co.-itte. did not prOVide any explanation for the above noted

errors. Further, the Commlttee stated that they would respond to

our findin9s after receipt of the Interim Audit Report.

Recommendation 14

The Audit staff recommends that within 30 calendar days of

service of this report, the Committee either:

•

•

provide evidence that the contributions in question are

not excessivei or

make payment to the United States Treasury in the amount

of $3,600.

........ .....,.

c. Misstatement of Financial ActivitI

Sections 434(b}(1), (2), and (4) of Title 2 of the

United States Code, state in relevant part, that each report shal:

i.ffscl-o-se-the a.ount 'of e-ashon ·hand at-the beqinninq of the.

reporting period, and the total amount of receipts and

disbursements received or made during the reporting period and

calendar year.

The Audit staff performed a reconciliation of the

Committee'S bank account activity to the activity on its

disclosure reports for the period June 3, 1991 through AU9ust 31,

1992. The reconciliation indicated that the reports initially

filed contained material misstatements. The Coaaittee filed

amended reports for the period June 3, 1991 throuqh January 31,

1992. However, the amendaents did not correct the aisstateaents.

For the period June 3, 1991 through December 31, 1991,

the Committee'S disbursements were overstated by a net amount of

$19,511.28. The components of the misstatement are:

Reported Disbursements as Amended

Disbursements Reported ~wice

Disbursements not Reported

Unexplained Difference

Adjusted 1991 Discursements

$2,011,203.17

(65,930.50)

12,560.25

33,858.97

Sl,991,691.89

The reported ending balance at December 31, 1991 was

understated by 523,992.01, resulting prl~arily from the

misstatement detailed above.

/
10

For the period January 1, 1992 through Auqust 31, 1992,

the Committee's disbursements were understated by S194,08S.29.

E~d:ng ~ash for th~ period .as overstated by S~8,404.38, r.sulti~:

prlmarlly from the mlsstatement 10 disbursements. .

According to the Committee's Assistant Treasurer, the

disbursements were not reported due to the following reasons: 1)

For the period 2/1/92 - 2/:9/92, amounts coded to certain expense

codes in the Coaaitt.e's computer syst•• were oaitted fro. the

disclosure report; 2) For the period 3/1/92 - 3/31/92, the

Committe. did not maintain the information required to be reported

for disbur•••ents fro. its field account, however the infor.etlon

was subsequently obtained fro. the Coaaitt••'. ban~

In addition, the Committee did not report $12,744.82 in

disbursements fro. its payroll account or $49,386.71 iD

disbursements .ade during the period 4/1/92 - 8/31/92 •

. - At the exit conference the Committee vas given schedules

which outlined the aisstateaents.

Recommendation .~

The Audit staff recommends that within 30 calendar days of

service of -this report, the C-ollUlittee file amended rep_orts __to

correct the misstatements described above.

D. Itemization of Receipts and Disbursements

1. Receipts

Section 434(b)(3)(Al of Title 2 of the United

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

identification of each person who aakes a contribution to the

reporting coamittee dur in9 the reporting period, whose

contribution or contributions have an aggregate amount or value i~

excess of $200 within the calendar year, or in any lesser a.ount

if the reporting committee should so elect, together with the date

and amount of any such contribution.

The Audit staff conducted a sample review of

contributions, the results of which indicated that a material

amount of contributions were not itemized as required on

disclosure reports initially filed. The identified exceptions,

when used to estimate the total amount of contributions not

itemized resulted in a projected amount of 5136,877. Further, we

identified twenty two additional contributions totaling

$5,950 which were not itemized as reqUired.

Subsequent to the commencement of audit fieldvork,

the Committee filed amended reports which materially corrected

the errors noted above.

~'CIIC·' / .

?aD /v t4 ";"9;
11

Recommendation 16

The Audit staff recommends no further action.

2. Disbursements

Sections 434(b)(4)(A) and (S){A) of Title 2 of the

United States Code state that each report shall disclose

expenditures made to .eet candidate or coaaitt•• operating

expenses: and the name and address of each person to who. an

expenditure in an 499 reqate amount or value in exceaa of $200

within the calendar year 1s aade by the reporting co.-itt•• to

meet a candidate or coaaittee operating expense, together with the

date, amount, and purpose of such operatln9 exp.ndi~ur•.

Section l04.](b)(4)(i) of Titl. 11 of the Code of

Federal Regulation., states in part, that each report shall

disclose the total .aount of all disburs•••nta for the reporting

period and for the calendar year. Each authorized committee shall

report the full name and address of each person to whoa an

expenditure in an 899 reqate amount or value 1n exc••• of $200

within the calendar year is made by the reporting co..itte. to

meet the committee's operating expenses f together with the date,

aaount and purpose of each expenditure.

&. _Regular Accounts

The Audit staff performed a sample revie~ 0:

Committee disbursements made fro. its reqular (excludes field and

payroll accounts) bank accounts for the period of inception

(6/3/91) through June 30, 1992. With respect to iteaization, the

Audit staff identified a mateeial number of disbursement

transactions that were not itemized as required on Committee

disclosure reports filed prior to the beqinning of audit

fieldwork. The Committee's Assistant Treasurer attributed the

itemization problems to the Committee's late start and a failure

to have sufficient systems in place.

On August 26, 1992, the Committee filed

amended disclosure reports for the period fro. inception throu9h

January 31, 1992 which materially corrected the problems noted fo:

that period. Rowever, at the close of fieldwork the Committee hac

not filed amended reports for the peelod subsequent to January 31,

1992. At the exit conference held en November 17, 1992, the

Committee had no further comment on the itemization errors noted

above. Further, the C':~mittee stated that they would respond to

our findings -clfter receipt of the Interim Audit Report.

Recommencation 17

The Audit staff recommends that within 30 calendar days

of servic@ of this report, the Committee file amended

Schedules B-P to correct the ltemlzation errors made subsequent

to January 31, 1992.

.lJ7jClBn I

Pace /(_~~ ------L.Ji&
12

with respect to the itemization of disbursement acrivity

for the period inceptlon through January 31, 1992, th~ Au~t

staff recoamends no f'Jether action. .-

b. Field Account (Drafts)

The Audit staff performed a sample review of

disbursements made from the Commlttee'S field account. Althou9h

this account val opened in 1991, most of the activity occurred

between January 1992 and March 1992. Our review indicated that

nearly.all disbursements made from the field account vere not

iteaized on the Coaaitt••'. disclosure reportl filed prior to the

commence••at of audit fieldwork. Further, for the report covering

March 1992, $27,289.13 in disburse.ent activity vas not even

reported.

aefore this matter vas brought to the

Coaaitt••'. attefttioft, the Coaaitt•• stated that all di.bur••••nt

items vere ite.ized on Schedules S"::p reqardl•••.of-'••ount .......""lfhen

.sked, during the fieldwork~ to explain why the March 1992 draft

activity vas oaltted froa the disclosure reports, the A••latent

Treasurer noted that the Coaaittee had only recently ·(9/t:2.. ~.

obtained Inforaation from the bank relative to the drafts which

cleared the March bank statement. The Assistant Treasurer further

st-ated -that the -F~brua-ry 1992_ di$_clo_s_u_re reports needed to be

amended because Schedules B-P contained only pa-rtial disbu"Cnaent

amounts for soae vendors. ..

On August 26# 1992, the Committee filed

amended disclosure reports for the period fro. inception ~hrou9h

January 31, 1992 which materially corrected the proble•• noted for

that period. Hovever, at the close of fieldwork the Co.-ittee had

not filed amended reports for the period subsequent to January 31,

1992. At the exit conference, the Committee had no additional

comments with reqard to field account activity. Further, the

Committee stated that they would respond to our findin9. after

receipt of the Int.ria Audit Report.

~ecommendation 18

The Audit staff recommends that within 30 calendar days

of service of this report, the Committee file amended schedules

B-P which reflect the required ~temlzation of draft account

disbursements made subsequent to January 31, 1992.

- c. Payroll Ac:cu~~

The Audit staff reviewed, on a haa~~e basis,

disbursements made from the Commlttee'S payroll account for the

period inception throuqh August 31, 1992. This review indicated

that the Committee failed to itemize a material number of payroll

transactions which required itemization. It was also noted that

the Committee did not itemize any p~yroll t~~~s~ctions on its

Arr..lt:lMlft I _

,... 12-; at 2:?-
13

~arch 1992 disclosure report. When Asked durinq fieldwork, to

explain this omission, Committee personnel stated that they had

=erely forgotten to report the March Payroll and would be • filing amend~d dlsclosure reports.

Amended disclosure reports were filed by the

Coaaittee on June 18, 1992 and Auqust 26, 1992, however the

itemization errors discussed above were not materially corrected.

Recommendation .9

The Audit staff r.~Qmmend. that within 30 calendar day. of ••rvice of this report, the Committe. f1le a.ended Schedul•• B-P to correct the it••iaatlon errors noted above.

d. Selected Review of Disburse.ent.

The Audit staff conducted a review of .elected

Co.-itt•• dis6urs•••nts 'for the period inception through June 30,

1992, and noted 38 disburseaents, totaling $265,417.67, that were

not itemized .a required on Committee disclosure report. filed ~~ prior to the coaaenceaent of audit fieldwork. OUr review of

aaendments filed on August 26, 1992 indicated that the Committee

had aaterially corrected the iteaization proble•• noted above.

At the exit conference, th@ Coamittee made no

eODuaeiftswith -r-eqa-r-d- -to- the above o.iss~o_ns_. The Coaaittee statec

that they would respond to our findings after r~c~{~t 6f- the

Interia Audit Report.

Recoamendation 110

The Audit staff recommends no further action.

E. Omission of Disclosure Information

1 . Receipts

Section 434 (b){3)(A) of Title 2 of the United

States Code states, in part, that each political coaaittee shall

disclose the identity of all persons who make a contribution to

the reporting committee during the reportin9 period, whose

contribution or contributions have an aggregate amount or value i~

excess of 5200 within the calendar year. Section 431(13) of this

Title defines "identification" to mean, "in the case of any

individual, the name, mailing address, and the occupation of such

individual, as well as the name of his or her employer, and in the

case of any other person, the full name and address of such

person." In addition, 11 erR 5 l04.3(a)(4' requires that in

addition to the above, the aggregate year-to-date totals for such

contributions be reported.

Section l02.9(d) of Title 11 of the Code of Federa:

Regulations states, in part, that 1n performinq recordkeeping
,;. -

14

duties, the treasurer or his or her authorized agent shall use h:!

or her best efforts to obtain, maintain. and submit the required

information and shall keep a record of such efforts.

Section 104.7 of Title 11 of the Code of Federal

Re9ulations states that if best efforts have been used to obtain#

maintain, and submit the information required by the Act for the

political committee, any report of such cOllllitt•• shall. be

considered in compliance with the Act. With regard to reporting

the identification as defined at 11 erR 100.12 of each person

whose contribution(s) to the committee and its affiliated

committees aggregate in excess of $200 in a calendar year

(pursuant to 11 erR 104.]<&)(4), the tre.surer vill not be deeaed

to have exercised best efforts to obtain the required infor••tton

unless he or she has made at least one effort per solicitation

either by a written request or by an oral request documented in

vritinq to obtain such infor.ation fro. the contributor. ror

purposes of 11 erR l04.7(bl, such effort shall conalat of a clear

request for the infor••tioD (i .e., na••, .ailing addres., '_.'.

occupation, and name of eaployer) which reque.t infor•• th.'

contributor that the reporting of such infor••tion 1s required by

law.

The Audit staff perforaed a review of contributions

fro. individuals and identified a material number of errors

re-lati ve-- to---the i temizati_on _(or lack thereof) of contributors'

occupation and name of employer. The er-rors, whe-n -used -to-e-stimat~-­

the dollar value of all report errors, result in a projection of

5605,313.68, which represents approximately 50\ of the dollar

value of all itemized contributions. In .ost cases, the Co..itte~

had no documentation in the receipts file to show that they

requested the information or that the contributor subaitted the

information. In other cases, the inforaation was provided by the

contributor but the Committee did not report the information.

Our review of response devices found in Coaaittee

receipt records and a review of the Coaaittee database did not

establish that the Coaaittee exercised best efforts to obtain,

.aintain and disclose the required infor••tion. The Coaaittee's

receipts files made available did not contain any other

information (such as copies of letters to the contributors or

phone logs) which could be used to demonstrate -Best Efforts.-

At the exit conference the Committee was informe=

of the aforementioned errors. A Committee representative stated

that the Committee could establish an association between the

receipts on the data base and a fundraising code which could the;.

be related to a solicitation device. The Committee noted that the

relationship of the receipts to the solicitation devices sent out

to the contributors for each fundraising drive would establish

that "Best Efforts· had been demonstrated by the Committee.

Within the 10 day period following the exit

conference, the Committee submitted information i~ an.effort to

,

j
IS

support that it had ex.rcised "Best Efforts.- The information

consisted of the program languAge used to extract the name. from

the database which did not have full occupation and name of

employer information, and a listing of contributors to whoa the Committ~. was in the process of sendinq letters requesting the

required information. In addition t the Committee also subaitted

response devices which, according to the Committe., vec. exaaples

of the response devices "always" included vith solicitations for

contributions. The devices contained requests for the required

information.

The information provided, in our opinion, do•• not

deaonstrate that the Committee exercised -Best Effort•• -

Recoaaendation III

The Audit staff recommends that within 30 calendar day. of

.ervice of this report. the Committee either:

~_o__:c:

,.. ,.

I

j

!

i

I

•

•

deaonstrate that RBest Efforts· were exercised in attempting

to obtain the occupation and nam. of .-ployert or

a.end its Schedules A-P to include the occupation and naae

of employer in the instances where the infor.ation is

oaitted.

2. Disbur~ements

a. Regular Accounts

Section 434(b){4) and (S)(A) of Title 2 of

the United States Code states, in part, that each report shall

disclose for the reporting period and calendar year, the total

amount of all disbursements, the name and address of each person

to whoa an expenditure in an aggregate a.ount or value in excess

of $200 within the calendar year is made by the reportin9

committee to meet a candidate or committee operating expense,

together with the date, amount, and purpose of such operatinq

expenditure.

Section l04.3(b)(4)(i)(A) of Title 11 of the

Code of Federal Regulations states, in relevant part, that each

report filed shall disclose the total amount of all disbursements

for the reportinq period and for the calendar year. Each

authorized committee shall report the full name and address of

each person to whom an expenditure in an aggregate amount or valu!

in excess of $200 within the calendar year is made by the

reporting committee to meet the cca~~ttee's operating expenses,

together with the date, amount and purpose of each expenditure. As

used in 11 C.F.R. l04.3(b)(4), purpose means a brief statement or

description of why the disbursement was made.

The Audi~ s~aff's review of Committee

disbursements made from its regular (excludes payroll and field

accounts' accounts and itemized on the reports for the period of

..n.lCDD!. /

Pap / S r;.:;L
16

lncept10n throuqh June 30, 1992 indicated that a material number

of the it••ized entries were incorrect as to the amount·or th.

p Aye. ' I add r e 8 S ,.,a s miss i n9 . fer e x a t: 1e, the Mar c h 1 992 4.

disclosure report, although prepared manually, had no addte ••es

{street, number, city and state} pos:.ed for those transactions. C:-.

June 18, 1992 and Auqust 26, 1992, the Committee filed ••ended

disclosure reports which did not ma:.e~ially correct the disclosur!

problem. noted above.

Recommendation .12

The Audit staff recommends that within 30 calendar

days of ••[vice of this report, the Committee file amended

Schedul•• B-P to correct the public record.

b. Payroll Account

OUr review of disbursements made fro. the

payroll account for the period of inception through August 31,

1992 and ite.ized on Coaaittee reports revealed that for a

.aterial nuaber of it.aized entries the payee'. address va.

o.ltted. It vas noted that a majority of tho.. errors occurred

during the aonth of July 1992.

On June 18, 1992 and August 26, 1992, the

Coui-ft-e-.--fi-led-- amended disclosure reports_~ however no corrections

were made with respect to the items mentioned above. --The ColDilit~e!

c, was notified of the above noted errors.

Recommendation 113

The Audit staff recommends that within 30 days of service

of this report, the Committee file amended Schedules B-P to

cor.rect the public record.

1_

III. Findings and Recommendations - Repayment Issues

A. Determination of Net Outstanding Campaign Obligations

Section 9034.S(a) of Titl~ 11 of the Code of Federal

Regulations requires that within 15 calendar days after the

candidate's date of ineligibility, the candidate shall submit a

statement of net outstanding campalgn obligations which reflects

the total of all outstanding obl~ga~:o~s for qualified campaign

expenses plus estimated necessary winding down costs.

:n addition, Section 9C34.1{b) of Title 11 of the Code

of Federal Regulations states, ~n part, that if on the date of

ineligibility a candidate has net outstanding campaign obligations

as defined under 11 C. F. R. S9C3~.S, that. candidate may contin'.le

to receive matching payments provided that on the date of payaent

there are remaining net outstanding campaign obligations.

lnlCiJiD~--/-712t----~ .Pa«e / c:;J'-(7
17

Senator Harkin's date of ineli9ibi1ity vas March 9.

1992. The Audit staff reviewed the Committee's financial activit~

through August 31, 1992, analyzed winding down costs, and ~repare=

the Statement of Net Outstandlog Campaign Obligations ("NOCO·) as

of AU9ust 3, 1992, which appears below:

. ,

1

I

I

I

j
.'

S.:

Amerlcans for Harkin, Inc.

Audited Statement of Net Outstanding Campaiqn Obligations (NOCO)

at August 3, 199~

:u r r e nt Ass e t s :

:ash on Hand

'ccounts Receivable

I\atching Funds

(Certified 7/31/92)

fotal Current Assets

Capital As••ts

Total Assets

LI.billti•• Accounts payable for

Qualified Caapalgn

. Expenses through

- "7/11/92

$ 86,684 .. 52 1/

15,625.40

28,497.98

$130,807.90

7,000.00

$368,803 .. 12 .!I

$137,807.90

7,035.60

22,059.99

3,600.00

10,860.17

~~~able to u.s. Treasury:

Prohibited Contributions $ 7,372.12

~~rporate Aircraft

£x~essive Contributions:

Individuals

Political Co.-ittees

t~Stale-Dated Checks

"yable to U.S. Treasury

Estimated winding Oovn Paid

through 3/22/93: $104,244 .. 03 i/

Estimated winding Down

3/22/93 through End

of Audit 85,000.00 ~I

Estimated Winding Down

Total Liabilities

Net Outstandlng Campaign Obl:gations

$ 50,928.48 11

5189,244.03

S608,9"~.63
::..

2/

19

FOOTNOTES TO NOCO

This a~ount does not reflect a reduction for certain

outstanding checks determlned to be stale-dated.

The Audit staff initlally confirmed $332,792.66 at August 3,

1992 in Committee accounts payable. However, subsequent to

Audit !ieldwork, the Commlttee provided a listinq of accounts

payable which reflected an increase in that fiqure by

$36,010.46. No documentation vas provided to support the

increase in Committee accounts payable (see Attachaent 7).

.¥_'~-_. - ~~

I

I

I

i

3/ Consists of .aountl discussed in Findln98:

( a ) II.A.l. $ 7,372.72

(b) II.A.2. 7,035.60

( c ) I1.B.1. 22,059.99

(d ) 11.8.2. 3,600.00 .',-

( e ) III.B. 10,860.17

550,928.48

4/

5/

This -n-iulibt!c [-epre-sent5- the---Coamittee_'s_ record of its actual

winding down expenditures paid for the per-iocf August -3~-1~9:

through "arch 22, 1993.

This represents the Committee's calculation of its winding

down estimates from March 23, 1993 through the end of the

audit. The Committee did not prOVide workpapers identifyi~;

the components of this estiaation.

UUClDlt / .,... If r4.d4=~
20

Therefore, as of August 3, 1992, the candidate'••aximue

remainin9 matchinq fund entitlement was $471,167.73. 'U.i~-th.

Committee" contribution records, bank records and'diaeIolUr.

reports through December 31, 1992, and the Cosaission'••etching

fund records throu9h that date, it was deterained that,the

Committee received 5370,198.07 in combined private and public

funding bet~een July 31 and December 31, 1992.

Based on the NOCO as presented, the candidate had not

received m.tchinq funds 1n exc••• of the aaount to which he va.

entitled. Rowever, as stated in ·Footnotes to NOCO·, the NOCO

reflects adjust.ents presented by the Comaitt•• sub••quent to

audit fieldwork. The Audit .taft condltlonally·.ccepta tbe

adjust.ent. presented by the Coaaitt•• pending the receipt of

supporting doeu••ntation. If doeu••ntation 1. not provided or 1s

deemed inadequate, the Audit staff aay reco...nd a Coaaitt•• repayment pursuant to 26 usc 9038(b)(1) and/or 9038(b)(2).

'-'-;".-'--'-,:.

'S;'

i

1

I

Recommendation 114

•

,.....

-- "

The Audit staff recommends that within 30'calendar-daya of

service of this report, the Co.-ittee provid.'doeuaentatlon,vhich

supports the adjust.ents noted in the above NOCO Stat•••nt.

Documentation shall include but not be lialted·to the following:

Copies of vendor -invoi-ce., s-tate.aents,_ or receipted . bills and any other source document relative· to the

$36,010.46 in expenditures and open accounts payable;

o Workpapers or documents showing the derivation of the

585,000 estimate for winding down costs presented by the

COlDJllittee ..

o

o

B.

Copies of documents which support payments to the IRS

and State taxinq authorities for vithholdin9, interest,

and penalties; includinq IRS notices of intent to levy

and State notices of delinquent ••ployer withholding

status or 8Ises,.ent (see Attachment 8);

Additional recommendations will be aade pendin9 reviev

of the docuaentation.

Stale Dated Committee Checks

Section 9038.6 of Title 11 of the Code of Federal

Requlations states, in part, that if the Committee has checks

outstanding t~ creditors that have not been cashed, the Committee

shall notify the Commlssicn of its efforts to locate the payees,

if such efforts have been necessary, and its efforts to encourage

the payees to cash the outstanding cheCKS. The Committee shall

also submit a check for the total amount of such outstanding

checks, payable to the United States Treasury.
21

Dur1nq the review of Committee disbursement activity,

the Audit Itaff identified nlneteen checks made payable to vendors ~hich had yet to be cashed as of August 31, 1992. Those checks

totaled $11,208.11 and were dated from January 9, 1992 throu9h ~arch 12, 1992.

At the exit conference on Nove.ber 17, 1992, the Audit

staff provided the Committee with a schedule of the stale-dated

checks. When asked whether those vendors had been contacted to

deter.ine the status of the outstanding checks, Coaaitt••

officials replied that they had not seen the outstandinq checks

list before. rurther, the Coaaitte. stated that they would r••pond

to our flndin9s after receipt of the Interi. Audit aeport.

On Deceaber 3, 1992, the Committee provided a me.orandua

to the Audit staff in which ten stale-dated checks ($9,360.55)

were addressed. The Coaaittee stated that the checks vere; (a)

lost (one check for $127), (b) not paid by ita bank (four checks

for $360), (c) apparently voided and replaced or rerated to---

instance. where no obligation now exists due to cancellation of

the event or planned purchase (five checks for $8,873.55).

However, no docuaentation such as the actual voided check,

replace••nt check, or correspondence fro. the naaed payee vas

presented. Not vithstandinq the above, the Audit staff was able to

reduce the amount of outstanding checks by $348. Attachaent 6 is

a ~list o_f ~st_.le-4ated checks which in the opinion of the Audi t

staff re.ain unresolved.

C' Recommendation lIS

The Audit staff recommends that within 30 calendar days ~f service c~ this report the Committee present evidence that:

The checks were not outstanding (i.e., copies of the

front and back of the negotiated checks) or

the outstanding checks vere voided (copies of the voided

checks with evidence that no Committee obligation exists,

or copies of negotiated replacement checks); and

the Committee attempted to locate the payees to encourage

them to cash the outstanding checks.

Absent evidence to the contrary the Audit staff will

recommend that the Commission make an initial determinaticn that

510,860.17 in outstanding checks are payable to the u. S.

Treasury.

IV. ~ecap of Amounts Due t~ t~e United States Treasury

Section 9038.1(c){1}(v) of Title 11 of the Code of

federal Regulations states that preliminary calculations regardinq

future repayments to the U. S. Treasury may be contained within

tte interim audit report. Pursuant to 59038.2(a)(2) of this Title
22

the Commission will notify the candidat~ of any repayment

determinations not later than three years after the end of the

matchinq payment period. The issuance of this interim audit

report to the candidate constitutes notice of any repay.e~

determinations for purposes of the thee. year period.

~eflected beloy are amounts due the United States

Treasury as noted in this report.

Finding

II.A"l.

II.A.2.

II.B.l.

11.8.2.

III.B.

Subject

Apparent prohibited ContributionsIndividuals

Corporate Aircraft

Apparent Excessive ContributionsIndividuals

Apparent Excessive ContributionsPolitical Coaaittees

Stale-dated Checks

Total

•

Amount

$ 7,372.72

7,035.60

22,059.99

3,600.00

10,860.17

550,928.48

UIM7l'I'. I

Pa&- a. ~ct !b9--:
OLOAKER .. RYAN &

S IJ! Tt ' 00

NAS~!""GTON. 0 C iooee

September 7. 1993

Raben J. Costa

Assisu.m Staff Director

for me Audit Division

Federal Election Commission

999 E Street.. N.W .

Washington.. DC 20463

Dear Mr. Costa:

E~c!osed please t:nd the :\mencans for Harkin. Inc. response to the Interim RepOrt -6(-

"..' the ,,4\udit Division.

Sincerely.

Lyn UtreebI

General Counsel

Amencans for Harkin

Eocicsure
.~-~-~~~~-----"",""",""""""'~~-------~~---------------~~"'-

RESPONSE 0' AMBRICANS POR BARKIN

TO TBZ I~IM RlPORT OF TEE AUDIT DIVISION

respc=-:se ~o ~~e

:'5

Ccmmlt~eetf: # the campal.gn comm1.ttee of Senator Tom

Harkin who soughc nomir~c~on in 1992 to the office of President

of the United States. Based on the information see forth below,

the Committee respectfully disagrees with the Audit Division-s

proposed repaym~~t determ:na~ion, and recommends that the Final

Report on the Audit be modified in accordance with the

C~mm~tteefS response to each finding.

I • GENBRAL COMMENTS

The Committee would ::ke to add~ess two matters of general

::':-st., the Ccmmi::ee disagrees

w:t~ :he asser~:cn :~at :~e :~:e:-:~ Report. of the Audit Divis:on

Sec=nd, :::e ==:nm1.c:.ee =e5;ec~ :~:: y subml.ts that the Commisslon

!_r' has no authority t.o require "payment-sIt to the u.s. Treasury which

are neither repayment.s pursuant: to 26 USC. 59038. nor civil

~e~a~ties pursuant to ~sc. §43ig. The Commit~ee also

c~al:enge9 the val:dity c: :~ese ~equescs for "payments· to the

Commi S5 loon to the exter:t. :; ha t. ': :-.ey are based upon stati st leal

pre: ecc :'C:-.5 .

1. Notification of Repa)~ent Oetermination

...

..
: :'.e reasc~s. the

~;:es 3.sse::-::.:~ :::at: the :nter:m Repcr~

-: 2' :"'. S : :. ": ''': : e s

9038.

According :0 11 eFR §9038.1(c) (vl, the Interim Audit Report

provldes R[glrelimlcary calcu'at+ona regarding future repayment.

to che United States Treasury- (emphasis added). Although the

Cc~~~sslon amended the regula::o~s :~ response to challenges from

cc-:;;;t.:.:, :ees :n prlcr elect:..c:: =yc1.es :'0 state that. the interim

:-epcr:. ccnstituces the ~ot.ificatlon (11 eFR

:~e statute and :::e

f:~al resolu:icn of

2. FEe Requeee8 for ·Payment.- eo the O.S. Tre.aury

-~ a depar~ure ::-om pas: ~=ac:.:=e, the Interim Report 0: the

Aud:..:. :Jivision requires a "~aymen:· to the Commission in the

amo~~: cf any ;:-ohibi~ed c:- ~x=ess:~e contributions not refu~ded

by a Ccmmi t tee wi :::::: :iays the candidate's dat.e of

i~e::g:bili~y or a::er :~e ~a:e _& =ece~pt of a letter from the

I""'-.,...._.c:c:.-r-.?'"

\-. ....... ... --_ .............. "-.......... .., r"" ,~;'i............ :;.:)::_

: :-.e ::ew Ccmmissl.o:: pract :.=e

:-espect. to ~,..-~;.... ~iJM' ~~ :;-r. "- "- _ ....... ar:d excessive contrlbutlons.

~c::.::.::at:cr'. c: ::-.:'5 ::ew ::--:'S5:-=:: :;os:.::on was inc:.·...;.ded ..... a

J.TT.lC!KD! _~ _

;} atc£L
.... 1992 let.ter to ..:=~~;.::eeg regardir:q th:..s apparent new

-~t_1 - -

~h~s let~er was recelved by the

=~~m~t~ee ~early ~hree ~c~:~s a!:er Senator Harkln ceased to be a

car:.ci:..::at.e.

a~c~n: cf such payMents.

A.s instructedf upon recel.pt. of this letter, the Committ.ee

ceased refunding exceSSlve or p=ohlbited cont.ribut.ions. However,

the Ccmmlttee respec~fully objec:s t.o the new Commission policies

stated in this :etter for the following reasons.

A. The C01I'.D.i••ion Baa No Authority

in the Audit Proc... to Require -Payment.- of

Prohibited or Exee••ive Contr~tlon.

7~.~ a:..:d:..: r-epor:. s:-:<.es :::e :-e<i~ested remedy fer alleged

:~e :=~~ittee dispu~es :~a~ :.~e

§ sets :==::: :.he

author~:y :hrcugh t~e aud~: ~rcce9s. ~nder this section.

:n pr:.or elect :"0:: cyc:'es, :he comparable sec~icn of tZ':e

:~:er:~ Audic Repo~~ was qF:~d:~gs and Recommendations Related to

7:.~:'e ::" This cycle, ::.~ :"5 "F:.ndings and Recommendations

~c::-Re~ay-r:'ten: ~at:.e:-srt. Wh::'e::o explanation :..s g:..ven for the

cha~ge :n fo~at. :.: appears t~at :he Commlss~on lS not assertl::g

author:..:y under 26 USC. § 9038(b) to requlre repal~ent of

~~~e:~~ded prch:cl:ed and excess:..ve co~tr:butions. However,

ctese amou~ts l~c:ucied :.~ Section IV 0: the Report as

"A:nounts D~e to t~e Unlted States Treasury-. It is unclear

~~e~her :~e :~~~:..ss:~~ :=~s:=e=s :~ese pa~~ents t~ te a ~ar: == the C~~mlssicn's pr~posed re~~!~e~: determ~nation.
,:wo :-easc:".s a:'o~e: when a

e~:.:.:. :'e",,<e~t. ·~6 t:s: .

ar:d when .a :a::.d:.da:.e ~ade :-:c::-~...:a:.:.::ed Ca~palgn

7he

::-.e c:; -.~ s s :. c :'. ar..d exceSS1'V1!

ne~cher of these categories.

To implemene its statu~ory authority to require repayments*

~he Commisslon has adopted regulations. 11 CFR 59038.2. These

regulacions delineate only four "bases" for a Commission

repa)~enc determination: 1) Where a candidate receives public

::.:.r:ds ~::. excess of ent: l to :ement. ; \ 2) where a candidate spends

public: :-..:.~ds on non-qualified campaign expenses; () where a

':~ =eq,;::-e any payment of money :5 found in ~he elY::' ..

ce~altv..

C:v:.l penalt:es may be imposed only

t~e enforcement. process. The payments for

Of .. _~~ """ ...... t:lIxcess .. "re c-~~•• ~-_"_·_~'1!:._"C""•• S :::==n:..c: ... o: ........ _ __ ... v -- - -~ sought :':1 :'h:s aud: are

~=V:=~5:Y ~ct resul~:~g :=~m the enforcement process.

2 :~ add~ticn to :~e re~aJ~e~c regu:atio~s. :here :5 one

--~V~S.C- wh"ch pe~i:s :~e C=mm:ss:c~ to reqJ:~e oa~,en:s :n the

·a~~~~; ;~~~ess- Sec::..on 9038.6 re~llres such pavme~ts where a ............ ,... .......... ...,;'- • ~'-- II

-3-d~~~-e --~~:::ee has c~:s:3~d:~~ uncashed c~ecks payab:e ~~

:_~~~=_:~ _ .. _~~_ ......... ..,.. --7~e c..~avrr.ents l"~'a: :ss<~e ;bv:ous~y do ~ct fall w~:~:n

ch.:s :-e~~:'a::on.

lfUCIIU! :J--.

",. 5 o~ '£7 .;
.... :::e ~ast,

, Q~-l--· ,~ .

I

~! :~e =c~t~:butor co~:d ~c~ be :ocated were such amounts to ee

.:::arlty or -:'reasury.

:-eq.;:.. red to te ref~nded 'Nere prohibit.ed

excess~ve contrlbutlons speclfically documented dur~ng the audit

process. The amoun~s required to be refunded were never based on

a statlstical sampling.

~he Commlssionts letter of June 2, 1992 drastically changed

~as~ practices on an after-the-fact basis. The letter was

discr:..buted after virtually all of the candidates had dropped out

of :~e race. 7he letter certalnly was not prospective in nature

anc :e=~a:.r..:y does r..ot. ~-a::.:y as a validly issued 'rule' or

~c~eover, even :: the C=7~:ssicn could find some sta:uto~f

7~e C=~~:ss:~~·s authority to :ssue

=eg~:a::cns :"5 clearly deli~eaced by statute, which requlr~s

:he:~ sucm~sslon to Congress before they become effective. 2 USC

§9039. F~r~her, 2 USC §43if:c: explic~~:y states thac "any r~~e

of :aw which lS not 9taced In the Ac: .....

....... chapter 9S or chapter 96

of :~::e 26 may be :n~t:a::y prcpcsed by tte Ccmmlssion only as a

438 (d) of :h:s ~i:le." S:nce t~ese payments are neither

s
=·...:.:..e

:aw , . :..5 :=.ea:'_·....

stacute or a regulation. The payment at issue fails to qualify

ei~her as a civil penalty levled for vlolatinq the law or as a

repayment. Therefore, the Cornmlssion is totally without

authority to re~~ire such a payment.

B. The Aucii tora' Method of Sampling

to Project The•• Payment. I. Invalid

:n the =une 2, :992 :e~:~~. :~e ~=mm~ssion f~r~her not~::ed

:.::e

~e~~:ved by :~e Ccmm1t~ee. 7~e=e was ~o opportuni~y provided t~e

:a::..:ed a::y :-egu..:..a::.:::s

gcve:-::..., ng ':.......e '_' se of • - samp: ~::; :echn::..cr..:e. 7~e Commi:~ee :::U5

~0 objects to the use of stat::..s:::..=a: sa~p::ng ~o project the amcunts

; . - d _A excess·· .. e --_ .... _- ·· .. ' ........ 5 c_ t:ro:'.:.c:. e a ..- ... 11 -_ ... _- - ----•••

Fi:-sc, an at:empted ~se s:at:..st.:cal sampl i~g i:: ::-,e

man::er ut::..:ized by the :'5

~=-ac:.:.ce. Secc:-.i, : :--.e

UUQIM,'t __

2 ot:P7
p.- xceSSlV·.... contrlbut len has ceen found.• atl"'!d .6 ,-er· '- ... a lnly does -0'" n ...

a ,....se ....... ,...,' -' " ... - ..... _- ..... foo.,. •• '- Q ......e- ,aJ( •.• t"._cee :::g.

i. ~. Auditor.- Methodology i. Invalid

7~ere are at :eas~ :~o problems wlth the methodology used by

_s:::; samp:~~g ~e~l~~es to project

_..

.. ex=ess;..ve contrl.butlons: the

combination of sampling with selected lOOt review of certain

transact:ons ~s an ~~va:~d ~echodology that may result in

overscated project:ons; and, the rnechodology used by the auditors

achieves a skewed result because it incorrectly assumes a

homogeneous pool. Been problems render the auditors' projections

. " '..4 :..nvaJ.l.....

. ,

==;.--..n :::ec each a samp:~ng tec~~~~~e and

a se:ec~~~e :::% =ev:e~ := ===~ec: an amount that :5, theref==e.

::e =verstated.) :nst:ead of just

::-ely:.::g C~ a sam;:e := ;:=-=: ec~ :~e amount: - - perhaps because of

... -- ..... ,...;~ ... ,' 01°-"'---1 of such a methcd-- t~e

audit.ors cc~,.blned bot.h a sample and a 100\ review to produce

their nurr..ber. -:'his co~j: :":1ed ~ethod is invalid. The auditors

and en t~e basis of :~e ~u~er of proh~bit.ed or excess~ve

co~:r:b~~:~~s found :~ :~e sa~;:ef used a s:at:stlcal est~~ate to

A:t~~~gh t~e Ju~e : :e::e:::- ~as not ve~1 spec:.f:~, ::

lndica~ed t~e aud~:~~s wc~:d ~se cc~~ a ~cn-sample reVleW of

cont:::-:but:ons, as we:: as a samp::ng method. No explanatlon was

g:.v'e:1 as :~ ~.';W :::e :::% =~'''':.e·N 0:"'.= :~.e sa~p:e would bot.h te '...:sed

cc~s:sten~ ~~:h s:a~da== a~=~~~::~g p=ac~:ce,
~ev:.ew ::: ~ert.a~:: ~:ems e~t."'.,er .... - :n :'ue

sa~e ....

....-- a :..den~:.!ied t='cr~:cn of

:~c:~ded :~cse i~ems ~S dd .... Q a it:lo~a:'

prohlblted and exceSSlve amounts t.op of the st.atlstlcal

est:~ate based on the populacion. 7his method clearly results in

an overstated amount. ~o exp:anat~cn :s glven by the auditors as

to how the items were selected for the lOOt review and there is

no explanat.ion in the Inter1.m Report as to how duplication was

avoided when the 100% review was added to the projection based on

:he sample.

. . -:::a:. :'::e sa:"":~

7here :s n~ cas~s !~r :~e

:~ey ~ave become :~l:y staffed and operational as :~ey do In :~e

flrst few months of chelr ex:s:ence. !n fact, the prohibi:ed

cc~:r:.bUClons found by ~~e aud::==s :~ t~:s audi: a~d d:sc~ssed

more ful:y below) suppor~ :~:s c~~c:~s:on. The aud::ors fcund no

F=-:::::.;::..... . "eo" ccn~!"'_·\..._',,;'::c:': -- af-:e:- 2c:~cer cf J.991 :h:-ough elt::er

~oreover, :.s

8

gene ra l:' y used "-.. aua:.:. ::-:g :0

MUClYln

. he- _ <7 ----""!'--!2----7---
change a number on a f:"nanclal statement .• It is used :~

Ccn:.:ary

s~andard A:C?A 9ract~ces. See ac:acned pages from Sectlon 3 of

==X:l~Clt:. R. ThlS lndlCates thac.

.& ~he \.;se ::: :::ese ooo:e:hods sugges~s a ~ateria~

~isstatemenc on the financ:.al statement., the aUditors may

reccmmend that. the uncierlY~:19 :1ufT\..oers be corrected, but not:

c~ange t~em on ~he basis of ~~at sampling. Then, if the sample

:-eveals a certain level of varlation or error, -the reSult.:'!o~:the

sa~ple is used as the basls f=:- expanding the review. The sample

~~oject:ons are not used, ~cwever, ~o alter numbers on the

:~~anc:a: sta:e~e~~. 7~a: :'5 ::::=:e (;:: ... y '..lpcn ident~fi.cati.on c:

~he Comml::ee does ::ct ~ave ~~e :-esour~es to put together a

- .... • ·0 ~.: - G ................... .., _ ... ~ethod or to h:re exper~s

sampling tecr.:l:.ques co pro:ec: prohlblted or exceSSlve

~0 cont=ibut:c~s that may have been rece~ved. ~he problems outlinec

above, however, are suf::c:e~t :0 :::~s:rate why the Commiss:c~.

assuml.::g ....

".. ::as au~::or:.:y, should not. use such a

:.echnJ.q",,;e un:ess :"5 - ..., d f : : =5: ~uo.:. sne or comment ar:c

• £ve~:: :he aud::c=s ~a~e cc=~ec::y u:l:ized the sampl~~g

~ethods lcent:::ed :.n the FE: :~~e 2 :etter, the use of these

sa~cles ~= a::e= ~u~~e~s :s ~~: :..~ a~c~~dance w~th s:a~ciard

acc~unt:~g prccedu=es.
..

-.... - - .,. :~.s:~:

~i. The 0 •• of Tho•• Projection. Aa &

B.ai. for a Payment Alao Circwr~.nt.

The Statutory Enforcament Sch...

penalties in the enforcement process 2 USC. S 4379- In addition

:0 :~e !ac~ ~ha~ ~he Commission has never before used projections

to calculate ·payments· or repayments, the Commisaion baa never

before used projections to escimate the amount of a violation in

the enforcement process. Similarly, the Committee contends that

:::e ::=~.m:SSl.on tttfould have no authorit.y ~o do so, since pursuant:.

the amount. of a permissible civil penalty is

_ .. ~,.. ..._-_ :.::e ac:'.;.a:' a!'nour:: c: :~e vlclar.:cn. -.... ,..., ......... Since the ac~~a:'

a:'rioun': c: :::~ ·,::c_at:..o~ :5 :~~l~~d :0 t~e ac:..~ai prot.ibited ~:-

:.-;cse c.:.·1=': ;e:-:a ... ': :es cased en proJec:ed amount: 5.

:ndeed, appears tha:: ~he treatment of these prOJected

proh~blted and excess~ve con::~~but~ons as ~payments· in the aud~~

process and ~o: as repayments or C1Vll penalc~es could be v~ewed

as an a:~e~~: ~o circ~mvent wha: the statu~e perm~ts :~e

..... ...- 7=--:..1$ , :::e CcmmiSSlcn lS exceed:.ng It.$

I:. RBSPONSE TO SPECIFIC PINDINGS AND RECOMMENDATIONS

:~ assessl~g t~e C~~n:::ee's compliance and repor:l~g,

1tUCDift----

,... 1/ 4z
es~ab::s~:~g :ested cc~p:~ance sys:e~s and t=a~~:~g staff.

":"he :~ter::.~ Report dces con~a ::-. ::

or ,b ,2" ::-epayment recr~est for 'the Cc~mlt~ee.

cn:y =e~~es~ :or pay~e~t based en a regulation is the request for

papent. of stale-dated checks made pursuant to 59038.6. The

Co~ml~tee believes that the stale-dated check payment to the U.S.

~reasu~f should ~e 5450. Excessive or prohibited contributions

whic~ the Committee :~advertenc~y accepted should be refunded to

the =ontributors. 7ne Commltt.ee believes that refunds should

$15,900 to individual

Finding II.A. - Prohibited Contribution.

\:~~e~:m Report p.4)

1. Apparent Corporate Contribution

?or :~e reaso~s set :or~~ :~ Sec~:on : above, :he Comml:~ee

spec::ical:y objec~s :0 the Commissionts demand :c~ payments of

.~ S7,3~2.72 for al:eged apparent corporate contr~butions* The

:=~,~:..:~ee cont.ends that ~he Fi:1a: ~epor~ should ce revlsed to

=equ~re cte Commi:~ee to re:~~d t~ the ccn:ributors the SiSO ~n

A: t~e o~tse: cf :~e ca~~a:gn in Se~te~~e~ 1991, the

11
vere susceptible of the conclus4on thac they were noe corpor&~e

checks" One was from an indivldual physician; one was from -Ear

Nose & Throae Professional Associates· which on it. face does not

indicace its corporate status; and the third included the

des1gnacion "Developmenc Accou~~·.

The tocal amount 0: :he contr~butions was $750, which out of

t:otal ccnt::ibutions of 53.5 is minuscule and

s:.a:.:s:.:..=al.:y :~s:..g::=..::..~an:, anc suggest.s :ha-: theCommit-t.e-e __ :.~

:ac:. d:d an outsca~d:~g :cb .... -.. :den:::y:~g and sc::een~~g

:::e :=~:=:b~:::~s ::s~ed on cne auc::

::eporc at:ach~en:. 2, Schedu':'e O

•

...

:~d:ca:.e thac :~e conc~:but.~c~s ~ere depcs:ted on ~uly 29, :99:,

September 30, 1991, and Occebe:: 10, :991. Two of t::e

contributions are used by :::e audl~ C::'V:,slon to est:..mat.e :::e

:992. a ::C\ :-ev:.ew

se:e~~ed ccntr:but:o~s a~d :~exp:lcably added to the a~C~~t

.

orev:.ouslv. determJ.nea to be

, ... .....

arT'iOu~: of proh:b:.:.ed
contr:..bUClons.

'N" -:h :he ~et:-.odclcqy '_se= :-epor: ~o take

three ~ont.r:.butlons :.o:a::..~g s~so and proJect a repayment of

S t. at.:.. 5 t. 1 C a :. est. :..rna t e , a r: j :. ::en::.. :1C :::- e as e t e e s :. :. ~a e : 0 r t ems

found in a lOOt review. The audit division's logic would allow

for an estimate by sample, :ollowed by a loot reVleW of a certaln

segmen~ of the population ~nown to con~ain errors (such as all

refunds) . This would, of course, lead to an overestimate of

prohibi~ed contributions ;usc as the auditors have done.

seccnd, and ~ore ser:..ous, problem ::"5 that the

~e~~odc:cgy assumes ~~a~ eac~ ::e~ ~~ :~e ~opu:at:.=~ was treated

same "Nay by :::e a

stat.:"c and tcmogeneous ;:ocl. -... assumes that. a ccntribu:::c:i.

!A

t::e same man.ner as a c=r:.t:-:..but ~on received ::..n January of :"992

when t.~e staff was enlarged, bet:er tra~ned and more experienced.

assumot:.cn .... :9 wrc~a a~d :~e inte~:m audl: ~eco~: ~roves :: . .

d· 9 ~o orch~~·-ea· c~~~... ~.~but.~ons a~.. ... ·_~... ear'.y Oc~... ~·cer c·..- ....y :.scover:..n d. .............. _.. - -

:'991..

2. u•• of Corporate and Labor Organization Aircraft

{:~ter:m Repor~ ~. ~:

~::e ::::-easor:s se:. .. ... -.. SectlC:: : above I t::e

,,-.-- ..... .,...,..; ..... c~

. - .. .... ---- ::-:a:.
q,

-J

.. .. .

: ...;. y ::-es;::::-::::ec :, ~:s ;.ssue tc

:=~~~::ee's :etter to the auditors :"5

...... :5 a ~as:e c: t~e C~mmittee's resour=es

a~= ::~e t~ ~ave :0 ~espc~d aga~n to t~:s isaue.

Under 11 eFR. § 114.9\e) \:'i t the COmmltt.ee was required to

re:~burse in advance for the use of corporate or labor aircraft#

l.:l :he case of ::-avel :'0 a c;,.t.y served by regularly scheduled

co~mercial service, in :~e amount. of the first class airfare to

such city. The auditors de not disput.e that the Commictee

re~~.bursed in advance f~:: :::e correct number of people for any

:eg of any t::~p. ::-.s-:.ead. :he auditcrs contend that the

7:-.e ::i~er:.~ ;'epor,: :5 s:' -:~:." ::lccrrect. t:.~ac :!":e fares t.:sed

=y :~e Co~m:.t~ee ~ere ~=:.s==~~:ed~ first c:ass fares. -\..,

...e

A:::~av:.= of St~ar: Car=o:: =~fu~es t~:s ccntentlon. Exh:..b:..t. B.

As Mr. Car::-ol: scates, cc,::: :t:e l'> and F9 cedes on the GSA

sc~edule represent unrest=:.=~ej ::=sc c:ass fares. 7he days when

:~e=e may have ~een a s:~g:e ~a::d ~~restr:c~ed f:rst c:ass ~are

a:: e :.. :::'r:g g c r.e, - ..,;. 5: as:::e :: a y s c f a :-egu : arc a c h : are are gcne .

f:..rs: c:ass fare :s :nc~:=e:::. ::: :~e ccnt::ary, they selected

;J-- ltUCIltUl- -- - .,... /5 f4.z z
~se the same fares on the same day fer the same journeys, and

:= :~e :=mm~::ee ~ere :::st class fares, aval1able to the

7he Commission cannoc possibly expect a Committee to be more

SC~~?u:cus :~ l~S effor~ :0 c~mply wlth this regulation than was

the Harkin Committee. 7::e Committee scheduler kept detailed

notes of her calls to the =~avel agent; she used the same-travel

agent in each instance; and the t~avel agent quoted the Committee

:.r.e :owest. val:..d un:es~=:~:ed ::'::-s:. ~lass fare for each date.

~o-:es the Commit:e~

sc::eduler ,~xh:bi.:' C~, ar:= =y :.::e records of an independen:.

::::.s :-es~c::se. ~x:::.=:.: _.. every lns:.a~ce

:c;:'tr:"::':' ':ee ;a:d :.n adva::ce

peo~~e.

for the correc~ number of

ca~~a:gns use t~e ~:..ghes: ava::ab:e first class fare as publlshed

:n fac~, the Commlss:c~ls regulat:c~s de not state that a

co~~:.::ee MUS: use a ~c~-d:.sc=~~:ed f~rs: =:ass fare. If such a

fare were aval:ab:e on the day and at the t:~e a Cornml::ee used a

corporate cr :abor plane t~ere :5 nothing i~ the regulatlons that

.~. '- ::: p :-:: :-. :. ::: :.: :. :-.e ::,: :. : : e ...... - - '_ s : :",.; :~. a : : are :. r e :. u r S 1 g

:::e cc=.-pora::'=:l.
,..,,-

"--

_

"''''''_-_a'_'se ~\....•e a!-1.~_· ..__......... $ ...·:.sr--_·.,..e ....... ·_.-_· a e~ --··e ..--e ..... - - -- - - ~-., .... ..- pr:..::: .. out..

~~e~~ :5 s~mpl~.· ~= bas:..s ~~~ :~e re~~es: ""!. :..n :~e .......~"~er·-- ,,' :".epor:.

.... ~~-

~·rw":=~C..., ::e:"atl::g ·...:se c:

Finding II.B. - Apparent Exe•••ive Contribution.

(Incerim Repore p. 61

1. Contribution. from Individual.

For the reasons sec ~or~h in Section I above and below, the

Commit:.ee objects to t~e demand in the Interim Report that: the

Commictee pay $22,059.99 to the u.s. Treasury.

At t::e outset of ,:!':e campaign, the Commlt.tee est:ablished

sys-:.-ems _

-~.- " ,..., ... ........ .--. ..., .... -- . :.nsure no

~x=ess:·.,"e co~::-:b',J: :'0::5 '..were rece:. ',led. cr t.::a: exceSSlves 'Nere

Due ':.0 t::e :"~experience and

·...c=!<:cad ~f C::mr:'\:..::ee s:a::. some exceSSlve contr:butions were

vas: ~a:cr::y :::ese ~xcessl.ves

·vIlle::-e :-ece:.ved :n ~991. ~oreover, even 1£ t:::e auditors t.otal

:::.;:':".ber of $22, C59 . 99 ~s va 1:.:1, hat. represent.s a very small

~e:'::en~age of ~o::-e S3 -nlllion in i:-.dividual

As : ~;'-,::. s s :. c , s :e~:e:- =: ::.:.::e ...

.. , :992,

Cc~mlt tee d:' d any cont~:.cutic~s not ref'.lnded by

~:-:a: da:e, a::::::'..:g:--. as s:a:ed accve, t::e C:.~.~:.::ee objects

16
Through thelr sample :he auditors ldenclfied excesslve

- ·:i~_~_··::.i ~'': r..

j

:n add:::.cn. In a ~:.:\

:ev:ew of seiec:ed cc~:=:=~::c~s chosen en an unspeclfied basls.

:~e aud:tcrs :den~lf:ed a~ addl~lonal amount of 516.600 .

In

-~.•.e Ccmalt:ee 15 W1.l:.ng to

:e:~~d the excess:ve c=~:~:=~t:c~s spec:f:cally :denclfied by the

auditors, as it would have done absent the Commission's specific

~une instruction not refund them. $2,250 of these

excessives had already been ::-efunded by the Committee prior to

receipt of the Commission's June notification .. ' Thus, although

~nt~~elyt :hese ccntributio~s have already been refunded and were

~e:~~ded F~~c~ to :~e ::~e :~e Cc~mlsslon advlsed the Committee

7hus t the Comm~::ee

:=~~ends ~~at :: stouli ~e:~~= := ccnt~ibutors a total arnoun: cf

5:5#9~C.

2. Excessive Contribution. Prom Political Co~ttee.

For the ~easons set :~r~~ i~ Section I above, the Commi~:ee

==Jects to the demand in t~e :~ter~m Report to pay $),600 to the

u.s. Treasury for excessive contributions inadvertently received

:==~ political comrnic:ees. 7~e C~mrnit:ee contends that because

:~e :=mmissic~ ~as ~c =as:s ==r ~equiring payment of these

a~cun:s ~o the U.S. 7~eas~ry, ~hese contributlons should be

, Thus, even :: ~~e C~mm:sslC~ ~ad the authorlty to requlre

"Fayment Uof exceSSlve ccn:~:butlons to the Treasury, this $2,250

s~=~:d n=~ te :~c:~de= :~ ~~a: a~c~~: Slnce :: was =efu~ded pr:=r

co rece:.p:. ot.......... --""'5 -·-e ..... e ...... e.,. t... ••e rt.... ............ " .. .
but

,._ ... _. _ .... _ .. 1 I

of a total of S492,000. The auditors arrived ac this number by a

::o\' :-eview of Commlttee PAC cont.ribut.ions. In light of thi.s

reVlew. this small amount of excess~ve contributions is testimony

to the outstanding efforts of the Committee to review and refund

excessive contributions.

Since these concr~but~ons had not been refunded as of June

1992, the Commlttee did ~ot refund these amounts per

:~scruc~:on of the C=~mlss:cn en :hat dace.

Pinding II.C.

:nter:m Report

Mi••tatement of Pinancial Activity

p. 9

has :::ed amended report.s material:y

:=~~ec~i~g :~e ~ist.a~es :~at ~esu::ed pr:~ar:~y frc~ :~adver:en:

errors in reporting disbursements. As noted in the Int.erlm

~eport~ and as expla~ned by the Committee'S Assistant 7reasurer

at the ex:~ conference, these e=rors were primarily as a resu:t

c: :~e fol:owing: data e~:~ e~=ors; mis~akes :n the sys~em ~n

7~e aggregat:cn prcc.ems f=r these PAC contributlcns are

a::r:cutable to the dif:eren: ways the data entry staf~ e~tered

::-:ese ccn,::-ibt.;.~:ons :.nto t~e system. The r.ames of these lacer

oo~~tlca: comm~ttees can be ccnfus1ng particularly 1f an

~~ex=e~:e~ced pe~scn is e~:er:~g t~e data. The Commit~ee had :~

~e:y· en temporary pe~sc~ne~ :cr da~a entry, so It was ext~eme~y

d::::c~:t to train a~d mo~:tcr :he:r perfo~ance.

:9

1ftACIH"I :L> ~~_

hie /:7 ~227:
:hac. cert.aln codes , ..... ... :he ccmpu~er system were omitted when

repcr:.:.ng of some

=:..sourse:":"tents:

account chat Nas ~ot ava11able untl: after certaln reports were

s~af: d.:.srup::ons due -..... -- :he "::::mml t: :.ee· s move to a new of flee.

These mistakes were due primarily to staff shortages and the

:..~experience of those staff in :he accouncing department.

Amendment.s filed by the Commit.tee in August 1992 and on

Auquse 31, 1993 have materially corrected these errors.

Pinding II.D. Itemization of Receipt. and Di.bur....nt.

(Interim Report p. 9)

1. Receipt. (Interim Repor~ p. :0)

a~e~ded ~epc=~s mater~a::y ==rrecc~~g itemlzaClon of receipts

However, :~e :=mM::tee would :ike ~o br~ng

:.~ ::'.e :=':'nm:.ssion·s at:te:;~lon ::-.a:. :he audit=:-s a;;ear -:0 ha~.te

~sed boch a sample and a selec~ed loot review :n determining the

a~cu~: of uni~emized cont=~but:ons. For the reasons explai~ed in

Sec~ion I above, this method of sampling a population and maki~g

a prc:ec~:on on that bas:.s, and then, in addltion, l.ncluding a

:~C% review :'5 guaranteed to proc'.Jce lncorrect and overstat.ed

::esc:tS.

2. Di8bur8em.n~. \:~~e~~~ Repor: p. ::i

As noted i~ the :n~eri~ Repor~. the i~emizaticn e~~~rs we~e
:~e a~d

~~end~ents fi:ed on Au~~st 31,

:393 have mater~al:y cc~~ec:ed t~e err~rs in the itemization of

-e,..,..·· _ a .::J.\-,-~,-".-", ~--,...··n~ s 1;,;1... 2"""1d t~e ::?'"... a~~-- 3cccunt sUbsequenc to January 31,

:992. and :~r the ;ayrc:: ac=~unt :~r al: ~eievant reports. thus

satisfying the recommendat~ons of the Inter1m Report.

'inding II••• • ami••ion of D1.eloeur. InformatiOD

(Interlm Repor~ p. 1)

1. Receipt. (Interim Report p. 13)

~he Committee strongly disagrees with ="the auditors'

contention that it. has not. demonstrat.ed best efforts to obtain

contr~butor occupation a~d employer information.

As se~ -for-:h ::":1 :::e a::ached af:idavit. of Betsy Schwengel,'

the Commit.:.ee's Fi::a~ce ::..rec':or, cop:es of contribut.or cards

were :ncluded with evert so:~~:~ac:on sent out by the Committee.

af~:.dav::..

Copies 0: :.::ese two cards are attached to the

ac:.~ cards ~=~:a:~ a c:ear request and convey :hat

the ~nformac~on ~s requ·-Ad, :.hus satisfying the requirements of

11 eFR. § 104 . 7 (b) .'

• The Committee· s ccntributor cards state that the

information is "requ:red ty t~e FEe· or ~needed for FEe

pu=?cses". 7he Co~rn:.ss:=~ se~: a :e::er to presidential

campaigns stat:ng :~a~ f~= ou~;cses of determlnlng -best

ef:or~s" I the c~~::,ibut.c= ca:.-d :::- sol:..citation state ':.hac:.

the ~n:ormation is "~equired =y :aw". Unfortunately, that letter

was sent. a.f~~r t:-.e ca!'!'.~a:..g:-. -""'as :.~ :'..111 :.:: swing. Give~ t~e

tim1ng of that not:.::cat:.c~ ::. wouid be unfair for the Commlss~on

:.= ~o:d c=~~i':.:ees to :~a: spec:::= :a~guage in order to sat:sfy

the besc efforts reqJ:=e~e~:, when ~n :ac~ a clear wri::en

recr-lest was made stating ":r:a: the informatlcn was required for

20

..&ft*C!YDf-----
In addi~ion, the Ccmmlttee advlsed the auditors at the Exit

CCr'~:erence that the ccntrlbut.ors who had falled t.o produce the

co~~r~butor info~atlon had been sen~ an additional letter

.....

1

re~~estln9 the lnformatlon. 7hat :etter was sent to 2,607

respc~ses ,-"ere rece~ved crom 998 lndivlduals.

Al: contr~butor ~nfcrmation received In response to this

addi~ional lecter has been included on amended report. filed by

the Comm1.ttee. The list of contributors who received letters is

attached, as are copies of the responses. Exhibits F and G.

2. Di8bur."eDt. (Interim Report p. 15)

The Committee filed amendments on August 31, 1993 materially

correc~in9 the omitted itemizat~cn ~nformation on disbursements.

Tr.e C:mm:..::tee exercised every ef:crt ~o obt.ain and report. full

~~:~~at~c~ on disbursements, ~o~wl~hstandin9 the fact. t.hat the

comm~ttee had seve~ely lim~ted resources and inexperienced staff.

Finding III.A. - Determination of Net OUtstanding Campaign

Obligaeion8 (:~terlm Repc~~ p. :6)

7~.e Committ.ee has at:.ached as Exhibit H, copies of

docur:-.entacion pertaining ~o the $36,010.46 in expenditures and

.- open accounts payable; work papers showing the estimate for

add:tional winding down costs: and copies of documents supporting

pa~.ents to the IRS. Exhibi~s: and J.

Wh:..:e it is not present:y an :..ssue in this audit, the

C.:::-.~:..:~ee ::otes that i disputes t :-.e audi ':ors f ~ethodology for
de termi n i n<; w he the raea ~d d a : e ::as :--= e :. OJ e d : '''; d s :. :1 exc e s s :;

~~S cr ~e~ entltleme~:.

audltorS create a :-JOC~ statement modified wlth

an arbitral]' date- - In thlS case August 3, ~992. :n fact, the

auditors' NOCO does noe provloe an accurate financla: picture of

the committee either as of the date of ineligibility or at any

lat.er date. The Comm.l.t.~ee believes that its NOCO statement.s

filed periodically as required by the regulation present the most

accurate snap shot of the CommltteelS financial status as of each

particular date.

The Committee thus obj ects :0 :he use of the auditors'

:-ev::.sed ~oc:) -as of August: 3, : 992-- as :::e bas-,:.s :or decerrrn.n:.ng

'.Jhe-... _; ...... ,·.pas .-.c .__--•• ::::~_.,..._ ..:ll> __"\ ._.-=._.__ ._~_ -- -c.r-e"·"e ada"'; "'~o" .. .. ~~« ... - ..., - - - - <I • _... na rna t.=~:.::g

!unds.

Pinding IlleS. - Stale Dated Commdttee Check.

The Commi:tee respo~ded to t~e auditors' proposed finding C~

~~ this issue in December :992 and be:~eve that the auditors should

have accepted that response as suf~icient. Exhibit K. Hcwever,

si~ce the auditors were ~~~:~.:~g ~o accept ~he lnfo~at:=~

.. .... p rev:. oec cy '- e a: : :-.a:. ::~e, \... . ••eCK

nUr!'..bers replacerr.en: c::ecks. ·...e are :-esFCndl.::g c~ce aga:":1 :'0

this.

22

""'COlI!__J-- _

,...023 ~J:2
1. ChecK .1641 to 900 ASSOciates for the amoune of $350.

~hl9 check was wrlt:en for rent for a Pennsylvania campalgn

·.~,:_,...-~ ---

-I

i

1

of~:'ce. co ascertain the statu. of th• 1S

check. E::or~s to ccntact 900 Associates have proved futile.

A::~ough :~e C~mm~:~ee tas recelved no invo~es from thlS vendor

a~d believes that ~o outstand~ng balance is due to 900

Associates, in accordance with the FEe regulationa. the Commdttee

dces not dispute payment to the Treasury of this amount.

2. Check #1805 to Trover Books for the amount of $127.

- -- This check was written for the intended purcha•• of book.

for the campaign. However, before any purchase was made, the

committee declded not to buy the books. The check was

subsequently voided and dest==yed. Please refer to the attached

affidavic of David Jones for confirmation of this. Exhibit L.

,-., 3. Check #1866 to t.he U.S. Postmaster for the amoune of $1,660.

This check was wr~~~en for pos~age for a fundraising event

Flcrida. 7~e c~ec~ was :os~ a~d =eplaced with Committee che~K

#1874 for the full amoun~ due. The Postmaster does not provide

postage wJ..thout advance payment. No remaining debt is owed by

c' the Committee as a result of t~i5 transaceion.

4. Check #2077 to WMMJ-FM/WOL-AM for the amount of $1,457.75.

This check was wr:::en fc~ 24 radio spots which were to alr

between Feb~~ary 29 and ~arch 3, :993. However, these spots were

canceled before they ~ere a:~ed, and the Co~~ittee was not

cha:::-ged :he deslgnated a~c'..::".:. :-~e Commi t ~ee thus incurred :10

23
r3:"".sac:. :.~n. Please :-efer ~o ~he at~ached a!fidav1.t of Jack

~a::cy :cr confirmation of ~his. Exhlbit M.

:~L:'S .:::eck ..,.ras wr:.t:~en for a ~undralset'- to be held at the

Chicago Hilton Towers. Howeverf Senator Harkin dropped out of

the campaign before this time. The Committee has no financial

obligacion to Chicago Hilton Towers. Please refer to the

affidavi~ of Elsie Blair for confirmation of this. Exhibit N. .. "''t

6. Check 110007 to Manatt, Phelps, & Phillips for the amount of

55,407.80.

7~e Ccmmit~ee incurred $5,407.80 in legal expenses for

ser"l::.ces ::-endered by Manact., Phelps, - " Phillips from December :.

~o :ecember 31, 1991. Check #10007 was replaced by the Commit:ee

W~~~ c~eck #10038 to pay t~e ful: amount owed to the firm by c~e

Comm~:~ee. :~e~e is no cutstanding monetary obligation owed :0

the f:'~ as a result. of this transaccion. Please refer to t.:-.e

l~ at:ac~ed affidavit of Karen van Allen and a copy of check #10038

for confirmation of this. Exhibit O.

7 . Check #20190, 120191, #20192, '21094, #20232, #20233 I and

:;2023'; :0 Sational School Bus Serv:ce, Inc. for the aggrega:e

a~cu:".:, cf S885.

7~ese checks were writ~en to ~ay fer transportation servlces

prov:.ded to the campaign by the National School Bus Services,

::1C. T~ese checks bounced and were subsequenr.ly replaced =y

24
cl:eck .10800 for the amount of S1080, which covered the amount

=wed from ~he bcu::ced checks. as well as add:.tional expenses

:~curred by the Ccmrnlttee for subsequent servlces. All debts

=wed tc Natlcnal Scheol Bus Serv~ce, Inc. by the Committee

:-esuir.lng from ~::e above :ransacc::..cns have" been pald 1n full.

P:ease refer ~o the attached a:fidavl: of Linda Foley and a copy

of check 110800 for confirmation of this. Exhibit P.

8. Check # 20237 to PIP Printing for the amount of $100.

This check was written to pay for printing of blueprints in

New Hampshire. The check did not clear the bank. The Committee

is unable to ascertain the result of this transaction. Although

the C:)mmittee has received no invoices from PIP Printing and

bel:eves that no debt is owed this vendor, :n accordance with the

FEe reg'Jlaticns, the Committee does not dispute payment to the

Treasury of this amoun~.

9. Check #20429 and #20430 to W:::iam Mont!ort fer the aggregate

a~cur::. of 52 C.

7hese checks were written ~o reimburse Mr4 Montfort for gas

and phone expenses which he incurred whl.le he coordinated the

Committee'S petition efforts in the northeastern New York

counties. Mr. ~ontfort has subsequently released the COmmlttee

fr=m these financ:.al obligat:lons and hag agreed to the above

being repor~ed as an in-kind c~nt~:bution ~o the Committee. The

C~mm~t~ee has no cutstandi~g ~onetaI]' ob:igations to Mr.

?lease the a::ached aff:"davit
~ont!crt fer confirmation of thlS. Exhiblt 0*

lC. ChecK .20382 to Jo~~ 7hc~sen for the amount of $12.62.

ChecK 11929 to Mike Bermln for the amount of $600.

C~eck 120382 was writt~n to relmCurse Mr. Thorsen for travel

expenses WhlCh he incurred whlle campalqning' for Senator Harkin

in New Hampshire. The check bounced. Upon efforts to pay Mr.

Thorsen the amoune owed him, the Committee was unable to locate

him, despite best efforts made.

Check #1929 was written to cover expenses incurred by Mr.

Bermin while campaigning for Senator Harkin in New Hampshire.

Upon efforts to pay Mr. Bermin the amount owed him, the Committee

was unable to locate him, despite besc efforts made.

Since these amoun~s -were-- for expense-- -reimbursements, -- theyca~ be ~~ea:ed ei~her as exempt travel expenditures under 11 CFR

or as in-k~nd contribu~ions. The Committee proposes this

resolution of these two i:ems.

In sum~ary as to stale-daced checks, the Committee does no~

dispute paymenc of $450.

For the reasons set forth above, the Committee respectfully

request.s that the COmml.SSlor. modify the Final Audit Report in

accordance wlth the comnents set forth above.

Re~ec~~~ted:­

~}~ Utrech~. General Cc~nsel

26
REPORT or THE AUDIT OIVISION

:S

AMERICANS FOR HARKIN, INC.

1. Background

A. Audit Authority

This report .i._ based on an audit of AII.rican. foc_

Harlin, Inc. (the Committee). The audit 11 sandated' by 'Section

9038{a) of Title 26 of the United States Code. That section

states that -after each matching payment period, the Coaaission

shall conduct a thorough examination and audit of the qualified

campaign expenses of every candidate and his authorized coaaittees

who received payments under Section 9037.- Also Section 9039(b)

of Title 26 of the United States Code and Section 9038.1ta)(2} c: ~h'e Coaaission's Regulat..ions s.ta.te .~t'1~.t... th~...ColDJlission lIay conduc:

other examinations and audits fro. time to time as it deems . ' .. necessary ..

In addition to examining the receipt and use of Federa:

funds, the audit seeks to determlne if the caapai9n has .aterial:~

complied with the limitations, prohibitions and disclosure . requirements of the Federal Elec~lcn Campaign Act of 1971, as

amended ..

B. Audit Coverage

The audit covered the period fro. the Coaaitt••'s

;,., inception, June 3, 1991 through Auqust 31, 1992. Ourin9 this

period, the Committee reports reflect an opening cash balance of

$-0-, total receipts of SS,E6B,~68. ~ctal disbursements of

55,387,092, and a closing ~!S~ e!:~~~~ ~f S144.134.1/ In a~di~:~~.

a limlted review of the C~~ml::~~'S ::~~sa~:17~S ~ai c~n1uc:~~

through "arch 22. 1993, f-:r ~·.::-=cses c~ -j'!ter!'nlning the

Commlt:ee's remaln:ng ~a::~~~; ~~~j ~n:l::~~~n: bas~d on i~s

financial position.

These totals do

Finding

dollar.

not

,

r" ••

!oct d~e to various math errors. (See ~:~~:es a~o rounded ~: t~e nearest

3 Aftlcn,ft ..........

,... ,I 'It c2V
s,

2

~h@ ~~mmit~ee ~eg~stere~ d~~h the red@ral election

:::nmlSS:'C:'1 C:i Septemcer :3, :99~. 7he Treasurer of the COlUnl::e!

durlnq the period covered by the audlt was tarry Hawkins. Th@ :~rrent ::easurer lS also tarry Hawkins.

Dur.ng the ~erlcd audlted, the ca~palgn tstabllshed

offices 1n 15 states in addition to its national headquarters

:==ateo l~ Bethesda, ~aryland. 7he campalgn's current c!!lces

in washlnqton, D.C.

To manage its financial activity, the caapa19n

malntained nine bank accounts at various times. Froa the above

accounts, the Coaaittee issued approximately 4,108 checks in

payment for 900ds and services. Also, the Coaaitt•• received

approximately 43,388 contributions fro. 34,275 individuals

totaling $2,655,641 and 193 contributions fro. political

committees totaling S325,025.

In addition to contributions, the caapa19ft received

$2,103,362 in aatchinq funds fro. the United State. Treasury.

This amount represents 15' of the $13,810,000 aaxiaua entitl•••nt

that any candidate could receive. The candidate vas det.rained

eliqlble to' r,e-ceive matching t~nd,s on Novellber 27, 1991. Throu9~.

February, 1993, the campai9n made a total of'15 ilatchin9 tunds-

:equests totaling $2,253,220. The Commission certified 93\ of ~~!

requested aaount. For aatchinq fund purposes, the Comaislion

determined that Senator Harkin's candidacy ended March 9, 1992.

This determination was based on a public stateaent by the

Candidate. The Coamitte. has continued to receive aatchinq f~nd

payments to defray expenses .ncurred throuqh "arch 9, 1992 and t:

help defray the cost of winding down the campai9n.

Attachment 1 to thlS report is a copy of the

Commission's most recent Report on Financial Activity for this

campai9n. The amounts shown are as reported to the Coaaission by

the COlUlittee.

o. Audit Scope and Pr~cedures

I n add i t ion to a : ~'/ c!.. :-! t ! e C') mrn itt e e ' 5

expenditures to determlne t~~ ~~all!ied and n~n-qualifled ca~~~::­

exp~nses incurred by the :a~~3:;~, ~~e auolt ~~vered the fol:~.:~;

general categocles:

1

.... 7~e campalgn's :~~~::3~:e Wl~~ s:at~tory ll~l:at~cns

wlth respect t~ :~~ :~:!:~~ ~~ ~~n~~lbuti0ns ~~ :cans

,see r~r.d:..~gs ::,=.~ ~:::i:.
2.

3

the ca~pai9n's complianc~ with t~e statutory

requl:ements regardlng the recelpt of ccntributlons !:::

p:ohl:lted sour=es, such as these from corporat~ons c=

:abor organlzat~~ns (see F~ndln9S II.A.l. and 2.);

°1

i

i

1

1

3. proper disclosure of contrlbutions from indivlduals,

pclitical commlttees and other entities, to lnclud. ~~e

:te~lzation ot contr:~ut~ons when requlred, as well as,

the completeness and accuracy of the inforaation

disclosed (see Finding II.~.l. and E.l.);

the campaign's compliance with spendinq limitations; a~:

o the, a ud i t proc e du res t hat '.e redt eme d ne c e s sa:" y •. . ":

situation.

adequate recordkeeplog for caapaign transactions;

accuracy of the Statement of Net Outstanding Campalqn - Obl-i9a-tions filed by the caapaiqn -to- d-i-sclose itsfinancial condition and establish continuing mat=~~~;

fund entitlement (see Findings III.A. and III.B.);

4~ proper disclosure of disbur:o:cnt; includln9 the

iteaization of disburse.ents when required, .s well as,

the completeness and accuracy ot the inforaation

disclosed (see Findings 1I.D.2. and £.2.);

proper disclosure of campaign debts and obliqations; __ ' - s - ... '

the accuracy of total reported receipts, dlsburseaents

and cash balances as co.pared to ca.p.i~ft bank records

(see Finding II.C.);

5.

6 ..

'"

7 ..

e..

......

"- -"

9 .

10 ..

In addition, on April 20, 1992, the Audit staff

conducted an inventory of the Committeefs records to determlne 1~

they were materially coaplete and in an auditable condition. A

letter, dated "ay S, 1992. notified the Coaaitt•• that records

pertaininq to several areas of the pending audit vere not made

available for review. Furthermore, the letter informed the

Committee that if at the conclusion of a 30 day period ending J~~!

8, 1992, the items listed ~n ~~e :etter ~!1 n~t been provi=ed. :-~

Commission would issue subpoenas !cr tn~ production of those

records. Records prOVided i~ ~~spcnse t~ ~ur May 5, 1992 r~~~~s~

were deemed sufficient to :~~~~~:e f:el~~~rk.

At the Entrance Cc~:~cence en J~~~ :S, 1992, the Audl:

staff infor~ed the Commit~~~ t~at a r~~u~~~ would be made to ~~~

Off~ce of General Counsel f=~ 5~~9cenas t: t! issued to l~S :.:~::

mail vendor for the productlon of all docu~ents which detalled :~!

amount and destination of direct ~ail distributed by the

commlttee.

u-r6C11A*
4

The subpoena to the Commltt~efs direct mall ~end~r ~as

3;;F r :: .~. e': 'c y he Co mm 1 S S 1 0 n en':'J :. y : 3. : 99 Z. 0 n Aug \; 5 ': 2:, :;;:_

:n response to the subpoena lss~ed, ~~e Audit staff ,.c@lved

S~f~lc~ent :ecocds !rom the C~mml'::eefs dl:ec~ ~all ~endcr.

~~less speclfically dlS:~ss@d below, no mateclal nc~­

:ompliance vas detected. It should b@ noted that the Commlssi:n ~ay p~:s~e !~rther any of t~e matters discussed In thlS :!~C:~

an enforc•••nt action.

!!. findings and Recommendat~ons - sen-Repayment Mat:ers

Introduction to Findings

In light of an October 22, 1993 decision by the Court of

Appeals for the D.C. Circuit in FEe v. NRA Political Victory Fund

et a1., the Commission reconsidered the interi. audit report and

voted itl approval on Noveaber 9, 1993. As a result of this

action, the Committee was afforded an additional 30 days to

supplement its earlier response received on Sept.aber 7, 1993_ On

Nove_ber 22, 1993, Couns.l to the Co.-ittee indicated that no

supplemental response would be made.

A. Prohibited Contributions

1. Apparent" -Cor-porat@ Contri-butions

Section 441b(a) of ~itle 2 of the United Stat@s

Code states, in part, that it is unlawful for any national bank =:

any corporation organized by authority of any law of Con9ress ~o

make a contribution or expenditure 1n connection with any elect~:~

t~ any polltical office or for any corporation whatever, or labo:

orqanizatlon, to make a contributlon or expenditure in conneC~lC~

with any election to federal office and further states that It lS

unlawful for any candidate, political committe. or any other

person knowin91y to accept or ~ecelve any contribution prohicltec

by this section.

The Commission notified the Committe. by letter

dated June 2, 1992, that a samplinq technique would be used to

identify the dollar amount of prohibited contributions received ty

the Co DUllittee • The 1 e t t e r s tat es. l:i ? art. til Co mm iss ion

requlatlons provide 30 days l~ .~:~~ t~ ~~!~~1 c~ntrib~tic~s .~::­

appear to be prohibited. fSe4! :1 C.:.R. :03.3(bl(1> and {2]). :--c:

Commlssion will no longer :~::?~::~ a~y ~~:l~~ly refunds made ~::~

than 60 cays followlnq a cand:~3t~/s =a~~ cf lneliglbl:lty c:

after the date of receipt ~f ~~:s :e~:!:, ~hl~h~ver is la~!r.

Contributlons resolved by the c:mml:~~~S :'.:tsl1e these tltDe

perlods a:e considered unt:~~:! a~~ :~ ::~:~~l~n cf ~h~

Com.m 1 s S 1 en' s regu 1. at). 0 n 5 • l' :-: '? :: : : : : : '? l .~ edt e : e : : e r : :..i '?

6, 1992.

Our sample rev:ew =f ::~~:i~~tions identified a

material dollar amoun~ of proh~bl~ed c~~t::butlons. ~he samp:e ~:cJected that the total dollar val~e of ;:ohibited contributions
:-".,.,~. --.~~---.~~-~.~.-~-------",,---~----------------...~-..-

5

~n t~~ pcpulatlon ~as S7,l:3. As of t~e concluslon of audlt

fieldwork, the Committee had made no r.funds relative to th. a~c(e~e~t~cn!d l~~ms. :~ addltlon, one ~=ohlblted contrlbu~~:n _.

s::~ ~as ldentlfied In a :00\ reVlew of selected ccntclbutlons.

!~~ Committee did nct establish a separate bank ac=ou~: !:~ ~~e deposlt of potentlal prohlblted contrlbutions; ho~evert ~he account balances maintained in the Coamlttee'S

=eQu:a= ac:=u~tS were greater than the cumulatlve total of ~he

prohlblted contributions deposlted. (See 11 c.y.Ft. Sl03.3tb)\4} .

All prohlbited contrlbutions identified durlnq t~e

reviews were verified by the appropriate Secretaries of State.

At the Exit Conference, the Coaaitte. was provided

schedules and relevant check copies to support the prohibited

contributions identified. Committ•• personnel had no comments

with respect to the itea. noted above. Further, the Committee

stated that they would r•• pon~_ to__ our _.fi~di'!i!-after receipt of

the i nte r ia audi t report.' '. ... -

In the interim audit report, the Audit Staff

recommended that the Coaaittee demonstrate that the contributions

discussed above are not prohibited or make a pay••nt to the Unitec

Stated Treasury in the a.ount of $7,373.

In response -to the inte.rim ~ep_ort, Counsel for the

c:mm~~:ee objected to the Commlssion's demand for payments of

57,37) for alleged apparent corporate contributions. The

ob;ection is based on arquments that the Coaaission has no aU~hority in the audit process to require payments of prohibitec

cr excessive contributions and that the auditors' method of

sa3pling to project these payments is invalid.

Counsel states correctly that the rederal Electicn

Campalgn Act requires publicly funded presidential

candidates/committees to make repayments to the United States

Treasury under very specific circumstances (26 u.s.c. 59038 (b)(:

and (2») and that the payments requested for prohibited and

excessive contributions fit neither of the cate90ries. Further,

counsel notes that the only other authority granted the Commissl:~

to require any payment of money is found in the civil penalty

provisions at 2 u.s.c. S43i~g).

Rowever, th~ payments at issu~ are not repaymen~s

c: civll penaltles. These ~ay~e~~s are in acc~rdance wlth t~~

~oli=Y adopted by the CommlSSl~~ f~r use l~ 1~9: Tlt:e Z5 aud:~5.~:

This sampli~? t~chnlq~e 15 :h~ same ~~chnlque used

.. tr:e C::.-J:nissicn since :?3~ :.: =~:e::r.:r:~ :~~ .:alue :: !!\at:~a~:~ -:

2/ ~he Commission approved this policy cn May 5, 1992.

CommltteeS ~e[. informed by letter dated June 2, 1992.

lftj"'P'UI__:3..-."II-'!!'-.

,.,.. £; aI~_
6

c~~~ributicns contai~ed in a sucmlsslon made by a presldentla: pr;~ary :a~d~date.l/

Cou~sel f~r the C=~mlt:ee contends that ~th~

comblnati~n of sampllnq wlth selec~ed 100\ reVlew cf c~rtaln

transactions is an lnvalid aethodoloqy that may result In

overstated projections." Counsel states,

-The auditors sampled a population

lcontribu::ons received by the Coamittee) and

on the baS1S of the number of prohiblted or

exce.sive contributions found in the ' ••pl. used • statistical est1••te to project an ' a.aunt baled on the total population. In

addition to the estiaate based on the sample,

the auditors conducted an additional selected

100' review of certain it.a. either in the

sa.. 0 ulation or in a discretel id.ntified

ortlon 0 t e overa 0 u at on, an

inc u. those ltems as a itional prohibited and exceslive aaounts on top of the

statistical estiaate based on the population.

This .ethod clearly results in an overstated

amount.- (Emphasis not in oriqinal]

Counsel further states,

"The audit division's logic would allow for an

esti.ate by sample, followed by a 100' review

of a certain segment of the population known

to contain errors (such as all refunds). This

would, of course, lead to an overestiaate of

prohibited contributions just as the auditors

have done."

Contrary to the contention apparently being made t~

Counsel to the Coaaittee, it should be noted that the Audit staf:

performed two separate and distinct reviewi. Certain

contributions were tested on a sample basis while other

contributions were tested on a 100\ basis. Contributions r~view!:

on a 100\ basis were not included in the population from which t~~

sample was select~d. ~ather, as explained below, the 100\ re~le~

ltems were a separate group cf ~~~~~:~~t~~~s.

On June 30, 1992, ~~~ :~~mltt~!'S ASslstant

Treasurer was informed that =~~:~~~~:=r i~for~ati~n for :0

deposits into the Committe!'s can~ a:=~unt was not entec~d ~~::

the Commlttee's receipts database. :~~ :?mmlttee ~e~uested t~e

This technique was recommenced cy the fir~ of Ernst' ~hinney (now Ernst & Young} i~ a 1979 ~eport to the

Commission entitled Report cn Study of Selected Samplln;

Procedure.
-f

Zi---- ~'- - -~__~-~I!!f"'l'-"-.---~AJi!!!~4i-~_-.--.~.~--~~_IIIIl'I'.""-" __ *j

~ 1I

lnformatlon from the bank. It was rec@lvtd on Auqust 26, 1992

subsequent to the Audit staff's sample reVleW of contributions' ~~ntal~ed C~ t~e :ecelpts datacase.

So overstatement occurs when the amount result~nc

from the separate and dlstlnct 100' reVlew 15 added to the 4

proJected amount based on the sampie. Ccunsel's arguments on

methodology used are flawed at best.

Counsel also states that the flnal audit report

should be cevlsed to r~qulre the Commlttee to refund to the

contrlbutors the $750 tSSOO in corporatlon contrlbutlons

identified in the sample and $250 identified in the 100' reviev)

in actual corporate contributions inadvertently accepted.

The Committee has not co.plied with the

recoamendation contained in the interia audit report. Argu••nts

submitted questioninq the Commission's authority to requirt a

pay••nt or the methodology employed by the Audit staff are not

persuasive!/; therefore a payment ($7,313) to the United States

Treasury is warranted. Further, the Audit staff has recognized

this a.ount as a qualified campaign expens., and .s such, included

this a.ount on the NOCO statement (S.e Findin9 III. A.)

Recoaaendation .1

Tn-. -Audit staff -r-e-commends. that the COlDJlitte_e_ be required t:

make a payment to the United States Treasury in the amourit ~f

~, $7,373, representing the value of unresolved corporate

contributions.

'.... '

~/

2. Use of Coroorate and tabor Organization Aircraft

Section ::4.9fe)(1)' i} of Title 11 of the Code o!

Federal Regulations states that a candidate, candidate's agent, c:

person traveling on behalf of a candidate who uses an airplane

which is owned or leased by a corporation or labor or9ani~ation

other than a corporation or labor or9anization licensed to offer

co.-.reial ••rvices for travel in connection with. rederal

election .ust, in advance, reimburse the corporation or labor

organization in the case of travel to a city served by regularly

scheduled commercial service, the !lrst class air fare.

During t~e :-~'::'':'J -:! ~~e ':~!Uml':tee's transaC:'lC~S

relative to payments for alC ~:3nsportatl~n S':CVlces, the Audlt

staff identlfied Committee d:s=~:s~~ents ~~ ~ne corporation and

one labor c~qanization. Th~ ~~~e :! the :~rc0ration was HealthSou~h Rehabl:~~atlcn :::~~~a~:=~ a~~ ~~~ labor organlzat::~

Please refer to attached ~~ga: analysls :pages 2-5), dated

1/19/94, for a discuSSlon of selected court cases which supp:rt

both the Commission's au~~o~:~y to requlce payment and the

methodology employed.
8

id@ntified was the Machinlsts and Aerospace Workers International ASSOclat~cn I~achinls~s Assc:~atlOr.·. These orqani~atlons do n:: a~pear to be licensed to cf!er commerclal services for travel as ~act of thel: normal bUSlness =~era~~ons. ihe corporate stat~s ::

the flrm noted above vas conflr~ed wlth the approprlAte Secretary ~! State. The Audit staff compared the Committee's payments foc

!llqhts which occurred between Dece.ber 1991 and March 1992 to the

:::west ~O~-dlscounted f::st class fares charged by ccmmercial

alrlines which re9ularly served the same cities.

Our analysts of the corporate aircraft usage

revealed that the c~rporation billed the Coaaitt•• $5,473 and

received a like pay.ent prior to th. fl19htl. Bowever, an

apparent underbillinq and underpayaent of $1,193 existli this

represents the difference between the amount billed/paid ($5,4731

and the value ($6,666) calculated by the Audit staff uling the

lowest non-discounted first class fare available on the date of

the flight.

Based on the analysis of the Machinists

Association'. aircraft usaq. by the Co..itt••, it va. noted that

the Machinists Association bllled the Coaaitt•• $35,705 and vas

paid 535,961 prior to or on the date of the fliqht. Hovever, an

apparent underbillinq and underpayaent of SS,843 existl; this

r.pres-ents the dj _f ~ert!~_ce be tween the amount paid ($35,961) and

the value (541,804) calculated -by t-he Audi t staf-f- u-s-in<j- the lowes:

non-discounted first class fare avallable on the date of the

flight.

Thus a total ~f $41,434 ($35,961 + $5,473) was pai:

for the above flight activity WhlCh resulted in a total

underpayment of $7,036 (Sl,:93 • S5,843). The Committee was

prOVided copies of audit worKpapers detailing the aforementloned

matter.

'- The Committee responded that it used appropriate

first class airfares in calculatlnq the amounts paid. The

Committee noted that their rates were obtained in each case by :~~

campaign scheduler who contacted Carroll Travel for the first

class fares for each 1.9 of the trlp as of the date of travel.

To support l~S flrst class fares, the Committee

prOVided the Audit staff .~:~ ::~:~s ~! ! stat~m~nt !r=m lts

campaign scheduler, the scn~~~l~r's not~s ~f ~onversatlons ~l:~

Car roll T r ave 1, and a s a '! e ~: f 0 :t) t:. ht! ·.n'! ( 0 f Car r 0 1 1 T : ! .: e .

The Audlt s:3:f's analysls ~f t~e lnformation

prOVided by the Committee l~dlca~ed that th~ flrst class fares

obtained by the Commlttee ~!~!. :~ ~a~y :!s'!s, discounted .•-

some instances, first class :3~~S used ~t ~h~ Commlttee ~ere

identical to those identlf:ed by the Audit staff. Not

wlthstanding the Coomlttee'S e!f:rts, th~ Audit staff mainta:~s

lts posltlon that the Co~~::ee's use of corporate and labor

organization aircraft resulted i~ an underpayment of $1,036.

3
The interi~ audlt repor~ recommended that th.

::~~l~:ee ~=cvide lnf=~~a~~:;. .h~~h cemcnstra~es that the

af~rementioned actlvlty ~s ~~ a:~ordance with :1 C.F.R. Sl:~.9-!

or acse~t such a showlng, make a payment of $7,036 to the Unl~ed

States -:'reasury.

· -' . "

I

1

!

.t,

Counsel for the C~mmittee raised the same object~:~

~= thlS reccmmendatlon as ~as ~alsed ~n Sectlon : above. F:r :~~

reasons stated in Section 1 above, Counsel's arquments questlonlr.:

the Commisslon's authority to require payments to the Unlted ' States Treasury ~r. not persuaslve.

In addition, Counsel states that nothln9 in the

:egulations requires that the Committee reiaburse in the amount c~

the high••t first class airfare available on any particular date.

The Committee submitted an affidavit of Mr. Stuar~

Carroll, owner of Carroll Travel, the agency which regularly

provided travel-related services to the Coaaitteeo The atfidavi~

states, in part:

WThe rEC's Interim Audit findinql indicate

that the Harkin Campaign Coaaitt•• did not use

fares that represented a non-discounted first

class airfare. 7he term in dispute here 15

'-non--d i scounted ~. I fi rml ysta-t. tha-t- -I

provided the Harkin Campaign Comaittee in

every instance, to the best of 8y ability, a

valid, industry standard, non-discounted first

class air fare. ~he campalgn committee has

obtained a listing of the various first class

airfares available f~r use on the dates in

question. As you can see, ~here are a nusber

of categories: 'r', 'F9', 'FN', and "28' ..

The 'F' and 'r9' categories represent

non-discounted, unrestricted fares. In every

instance, my agency quoted the caapaiqn an

'19' or other applicable non-discounted first

class cate90ry fare.-

According to air~are :~fcrmation provided by

~eneral Services Adminls~=3~:~~ !rans~~~~!~l~~ Audit OiV1S10~.

first class airfares are ::s:~~ !~: ~n=!strl~~~1 (code F), :7r

~:ght travel (code FN) and f~= ~ther s~~vi~~ (~odes F9 and r:s'.

The rates shown for code f f:~s~ =lass a:~cmm~datlons are hlJne:

than the other first c:ass :3~~S. ~~~~~~lly ~hlS lS eecauseconditions accompany the :=we: ~3:~S, S~:~ ~s: the tickets mus:

t:e purchased wlthin a cer~~~~ '::~~, ~= ':':"~-:~l 15 restrlcted t":

:er:aln days or tlmes.

The requlatlon at 11 C.F.R. S114.9(e) requires t~a:

::rst class airfare be used as a caSlS t~ de~ermine the a~o~r.~

reimbursed, apparently in an attempt to equate a non-scheduled
corporate aircraft trip to that of a scheduled com••rcial tli9h t

~lth the same orlgin and deStlnatlon points and of an equivalent :~vel of secvice.S/ In the Audit staff's opinion, travel

encumbered wlth conditions such as those stated above does not

equate with the unrestricted use of a corporate or labor

orqanlzatlon 41rcraft, therefore, reimbursellent for 1••• than I

non-discounted first class rate wlth no conditions att.ched is ~ontrary :~ the lntent of the the requlation.

However, because of the specific facta present.d i~

this report and the inherent difficulty presented to coaaltt••s l~

deteraln1n9 lirlt cIa•• rat•• in the context of 11 c.r.a. S

114.9(.)'. pr.par-.Dt require••nt, the Co..ltt••', appro.ch is

reasonable .nd further action do•• not •••• varranted ••

B. Apparent Excessive Contribution.

1. Contribution. fro. Individual.

Section 441a(a)(1)(A) of Title 2 of the United

Stat•• Code stat•• that no person shall .ake contributions to any candidate with respect to any election for rederal office which,

in the &99regae., exce.d $1,000.00.

Section 110.1{k) of Title 11 of the Code of rederal

Requlat ions statis,in part,- that -any -cont-r-ibution Jlld. bY_JI 9 r e

than one person, except for a contribution aade by a partnershlp,

shall include the siqnature of each contributor on the check,

money order, or other ne90tiable instru••nt or in a ••parate

writinq. A contribution made by aore than one person that does

not indicate the ••ount to b. attributed to each contributor shal:

be attrlbuted equally to each contributor. If a contribution to a

candidate on ita face or when a99re9ated witb other contributions

from the same contributor exceeds the liaitationa on

contributions, the tre••ure, 8.y ask the contributor vhether the

contribution val intended to b. a joint contribution by aore than

one person. A contribution shall b. considered to be r.attributed

to another contributor if the tre••urer of the recipient political

committe••sks the contributor vhether the contribution il

intended to be a joint contribution by aore than on. person, and

informs the contributor that he or she may reque.t the return of

the exce ••ive portion of the contribution if it is not intended t~

be a joint contribution; and wlthin sixty days froa the date of

the treasurer'. receipt of the contribution, the contributors

provide the treasurer with a written reattribution of the

contributlOn, which is signed by each contributor, and which

indicates the amount to be attributed to each contributor if equa:

attributlon is not intended.

~/ When the regulations were adopted in 1976, prior to the

deregulation of the airline industry, there was generally,

little price variation between carrier. for a 91ven trip.
, ,.. ,·~,,-.,,"'""'v __=~~~~_ -~II!!Il'JI!!'II-,~.. '."-'.~""I""-~~!!!IJ,Il!II,.•" ,lIIJ.!!IIIl!!IIIIIIftI!II\!III!!II!I!!'l~III!IgIIll!J"""'lIJIlII!l!I!!!![!!I)"'"!'!!!"_:.;S •.J4

'--i:-';<'~:

S~ctlon 103.3 bl(]l of Title 11 of the Cod. o~

~ederal Regulations stat~s, _in part, that contrlbutl0ns which

~x:~e~ ~~e =~n~r:but:~~ _:~l~a~:~n may ~e d~pcs:~~d i~:~ a

~ampa~g~ deposltory_ :~ any s~c~ CO~::~butlon ~s depOslted, :~e

:~eas~:er may request redeslgna~lon or r~a:::~butlon of t~@

contcibutlon by ~he contributor ~n accordance wlth 11 C.F.R.

SS~~~.:{b· and :lO.l{K), as appr~priate. :! a redesi9nation or

reattrlbutlCn 15 not obtalned, the treasurer shall, ~lthin 60 days =~ :~e t~@asur@r's re=el;t o! the contributlon, refund th@

contrlbutlon to the contributor.

Sectlon 110.1~1) of Title 11 of the Code of rede:a.

Re9ulat1ons state., in part. that it • political co••itt••

receives a written ,.attribution of .;contribut1on to a different

contributor, the treasurer shall retain the written reattributlon

slgned by each contributor. If a political committee does not

retain the written records concerning r.~t~ribution as required,

the reattribution shall not be effective, and the original

attribution shall control. ~". • . • '1 a 0 t\ ':. . . C& _ . _ f.... ;;. _ :..:... (,."

The Commisslon notified the Committee by letter

dated June 2, 1992. that a saap1in9 technique would be used to

identify the dollar a.ount of excessive contributions received by

the committee. The letter states, in part, "Commission

requlations prOVide 30 days in which to refund contributions which

appear to be prohibited, and 60 days in which to seek

reat:t.:ib-ut·ion, redesic;nation .or ,refund of excessive contributions

! 11 c. F . R. 1 0 3 . 3 • ( b ) ( 1) (2) and (3}) • The ColUIi s's'1 on wirr no

::nger recognize any untimely refunds, redesignations or ~eattributions made more than 60 days following a candidate's cate

of ineligibility or after the date of receipt of this letter,

whichever lS later. Contributlons resolved by the committees

cutside these time periods are considered untimely and in

-Jlolatlon of the Commission' 5 regulatlons. The COBlmittee rece:..·:e=

the letter June 6, 1992.

Our sample revie~ of contributions identified a

material dollar a.ount of unresolved excessive contributions.

The sample projected that the total dollar value of unresolved

excessive contributions in the population was $5,460. To date the

Committee has not prOVided the Audit staff information relatl~e ~A

any refunds of the items noted. In additi~n, twenty-two u~resolved excessive contr~~~~i~ns, t=t~~:~~ Sl~.600, ~ere

:dentified in a 100\ reVle~ ~: selec~~1 ~~nt~~~~tions.

The Commlt~~~ ~:= not es~ablish a separate car.k

ac~ount for making refunds: ~~~~verl the a:c~unt balances ~alntalned in the tank acc~~~:s ~ere ;~!3:~~ ~~an t~e ~umulat:~~

tot a 1 0 f the a for eme n tic n e -j '= '( ': e s s i ve ': ":' ': r: : t"J t len s. l 5 e '! 11

:.F.R. S:~3.3(b)(4\\.

At the Exit Conference the Committee vas prOVided

~ith a schedule of the apparent excessive contributions. The

Ccmmlttee had no comments wlth ~e9ard to the excessive

-
...

·'"

contr:butions. Further, the ~=mmittee stated that they would

respond to our findinqs aft~r cecelpt of the interlm audit r.p==:

The :nterlm aud:t repor~ :e=~m~end.d that the

Comm~:~ee either prcv~de eVldence that the contrlbutlons in

quest:on are not exceSSlve or ~ake a payment to the United Sta~es

Treas~ry in the amount of S~:,060.

Counsel for t~e Ccmmlttee ralsed the same

objections to thlS recommendation as were raised in response to

the recommendation In Finding II.A.l. above. Further, Counse:

contends that $2,250 had already been refunded by the Coaaittee

prior to the June notification and should not b. included 1n the

paraent amount to the Treasury.

However, the Audit staff notes that only $1,500 in

refund cheeks written prior to the June notification letter .re

included in the excessive a.aunt. Those checks had not cleared

the coaaitt••'s bank as of November 1992 and are, therefor.,

considered unresolved.

The argu••nts submitted que.tionin9 the

Coaaission's authority to require a payment or the aethodology ••ployed by the Audit staff are not persuasive; therefore.

pay.ent ($22,060l is warranted. The Audit staff has reco9nized

this amount as a-qualified- -campaign expen~_e, and as such, in:l,.;ce:

the a:Dount on the NOCO statement (see Findinq III.A.)

Recommendation .2

~he Audit staff recommends that the Committee be required .~

make a payment to the United States Treasury in the amount of

522,060 representinq the value of unresolved excessive

contr.butions received from individuals.

2. Excessive Contributions From Political Commit~@es

Section 441a(a}{2)(A) of Title 2 of the United

States Code states that no .ulticandidate political coaaitt•• shall make contributions to any candidate and his authorized

political committees with respect to any election for Federal

office which, in the aq9rega~~. exceed S5,OOO.

The Audit sta!! ;~rform~d [~~l~W of contribut::~s

received from polltical ~~mm:~~~~s and l~~~tlfl~d three

contributors whose contrl~ut:~~s ~xceede1 ~he limit tv 53,600. '$

of th~ end cf audit fiel~.=~~. -~ :~!~nds ~e~~ ~ade4 •

The Commlt~~~ ~:~ ~=~ ~s~~~~is~ s~9arate cank

acc=.,;nt f~r maKlng refunds; ~:"... ~':~:'. :o;'? -?:::.~~: ca:an:es

maintalned in the bank acccun~s were g=ea~~r than the cumulatlve

total of the excessive contribut~cns. ~See 11 C.F.R.

Sl03.3(b) (4)).
At the [Xl: ::n!erence the Committee was ~:~~~~@d

~ith a detailed schedule, as vell as relevant check Coples :e:a:~ve :~ t~ese unresc:~ej ~x:ess~ve ccn:rl~u~l=ns. ~~e

::~~~t:te d~d not provlde a~y explanation f=r the above notf~

errors. furth@r, the Commlt:!e st~ted that they would respond

our flndinqs after recelpt of the lnterlm audit report.

The interim audit report recommended that tht :~~~:ttee e~ther provlde ev~~ence that t~e contribut:c~s In

questl0n are not exceSSlve or make a pay.ent to the Unlted States

Treasury In the amount of 53,600.

counsel for the Committee raised the sa•• objections to this recommendation .s vec. raised in r••pona. to

the recommendation in Findinq II.A.l. above.

The ar9uments lubaitted que.tioning the

Commission's authority to require & pay••nt or the methodology

employed by the Audit staff ate not persuasive; therefore a

payment ($3,600) is warranted. The Audit staff haa recognized

this amount as a qualified campaign expens., and •• such, included

the amount on the NOCO statement. (See Flndln9 III.A.,

Recommendation 13

~he Audit staff recommends that the Committee be r@quir@d t~

make a payaentto the United States Treasury in the amount of

S 3, 600 representing the amount of unres-olvedexce-ssive

contributions received from political committees.

c. Misstatement of Financial Activity

, ........

Sections 434{b'(1~, (2), and (4) of Title 2 of the

Unlted States Code, state i~ relevant part, that each report s~a::

disclose the amount of cash on hand at the beqinnln9 of the

reporting perlod, and the total amount of receipts and

disbursements received or made during the reporting period and

calendar year.

The Audit staff performed a reconciliation of the

Committee'S bank account activity to the activity on its

disclosure reports for t~e peelod June 3, 1991 through August 3:.

1992. The reconciliation ~~-j:-:3t~d th-!t: ":h~ t"~ooet5 initial:"

filed contained materlal m:SS:3~e~ents. ?rlcr to the concl~s~~~

of audlt fieldwork the Ccmm~~:~~ filed am~nded reports f~r th~

peelod June 3, 1991 throug~ :-3:1'Jary 3:, ~992. However. ~he

amendments did not correc~ ~~! ~lsstat~~en~s.

For the perlod J''';~~ 3. :991 -:~!:':"';-;~ 04!ce~ber 31, :3~l,

::- e c r ted d 1 S bur 5 e men t s we -: :: ." :- s ':. a :. e t 'J a :rt='...: :": .-. &

519,511.28. The components :: :~e ~lssta~~~ent a:e:
Repcrted Oisbu~sements as Amended

Oisbursements ?-.ported T~ice

~isbursemen~s ~c~ Re~:rted

Unexplained Ol!!erence

$2,011,203

65.931>

12,560

33.859

51·991.592

The reported ending balance at December 31, 1991 va. ~~derstated by 523,992, :esulting prlmarily from the mlsstat@~e~:

detai.led above.

ror the period January 1, 1992 throuqh AU9ult 31, 1992,

reported disbursements were understated by $194,085. Endinq cash

for the period was overstated by $78,404, resulting primarily from

the misstatement 1n disbursements.

According to the Coaaitt••'. Assistant Trealurer, the

disbursements were not reported due to the following reasons: 1)

For the perlod 2/1/92 - 2/29/92, a.ounts coded to certain expense

codes in the Committe.'s computer 5yste. were oaitted fro. the

disclosure report; 2) For the period 3/1/92 - 3/31/92, the

Committee did not a.intain the inforaation required to be reported

for disbursements from its field account, howeve, the information

was subse-quently obtained from the ~9~ittee's bank.

In addition, ~~e Committee did not report S12,745 i~

disbursements fro. its payroll account or $49,387 in disbursemen:s

made during the period 4/1/92 - 8/31/92.

At the Exit Conference the Committee was given schedul~~

which outlined the misstatements.

The interia audit report recommended that the Comaittee ~ile amended reports to correct the misstatements noted.

In response to the interim audit report, the Coamittee

stated that a.ended reports had been filed which .aterially

corrected aistakes that :esulted fro. inadvertent errors in

reporting disbursements. The Committee noted that the a1stakes

were due primarily to staf~ sh~,~ag@s and the in@xperience of

those staff in the acccu~t:~? ~~pa~~~e~~.

The Commit~ee !:~~~ 3~~~ded r~~~rts ~n August 31, :9?:. whi~~ materially correc~ec ~~~ ~:ss~atem~nts.

D. Itemlzati::1 c! ?~:~::::s <!!"ld ::'13':'·.':'s~"!\en':.s

,

.. .

Secticn 434rb)( 3){A) of Title 2 of the United

States Code states, :~ Far':., :~a: eac~ report shall disclose t~~

identification of each person who makes a contribution to the
:s

:!pcrt~ng committee dur~~g :~e reportinq period, whose

:~ntribution or contributlons have an &99reqate amount or value :- ~x:ess c~ S2C: ~~:~~~ t~e ca:~~=a: year, or In any lesser am~~~:

~: ~~e :eportlng c=~mlt~ee shcu:d so elect, together ~lth the =a:~

a0C amount of a~y sucn co~~~::~t~on.

The Audit staf~ conducted a sample review of

contrlbutlons, the results of ~hlCh indicated that. material amc~~: =f c=ntrlbu~~cns ~ere ~ot it~mized as required on

clsclosure reports lnltially filed. The identified exceptions,

.hen Jsed to estimate the total amount of contributions not ~temlzed resulted in a proJec:ed amount of 5136,877. Further,.e

identified twenty-two additional contributions totaling $5,950 which were not itemized .s required. .

Subsequent to the commencement of audit fi.ld~ork,

the Committee filed amended reports which aaterially corrected

the errors noted above.

2. Disbursements

Sections 434(b)(4){A) and (S)(A) of Title 2 of the

Uni~ed States Code state that each report shall disclose

expenditures made to meet candidate or committ•• operating

expenses; and the name and address of .ach persolf'''to whoa an

expenditure in an aggregate aaount or value in excess of S200

-'--fthin the- calendar yea!" is-_tD_ade _by_~he _r~por_tin9 coaaittee to

meet a candidate or committ.ee operatinq expense-,--tociether wfth ---::--:'i da~e, amount, and purpose cf such operating expenditure.

Section l04.3fb){4}(i} of Title 11 of the Code c:

Federal Regulations, states In part, that each report shall

disclose the total amount of all disburseaents for the reportl~g

period and for the calendar year. Each authorized co.-ittee s~a:.

report the full name and address of each person to whoa an

expenditure in an aggregate amount or value in excess of 5200 ~lthin the calendar year is made by the reportin9 committe. to

meet the committee'S operatinq expenses, t0gether with the date,

amount and purpose of each expenditure.

a . Reaular Accounts t

The Au~i~ s~af! ~erf~r~ed samFl~ r~vi~w _&

Ccmmittee disbursements ma~~ !=~~ lts r~~ular (~xcludes fle:~ ~-:

payroll accounts) bank acc~unts for th~ p~rl~d of inception ~,6/3/91) through June 30, :99:. ~ith respect to itemizatl~n. : .. Audit staff ldentlfied a mater~al number ~f disbursement

transactions that ~ere no: ::!~l=ed as r~1uir~1 on Committee

clsclosure reports filed P~l~~ :~ th~ ~~~l~nlng of audlt ::e:d~o=~. ~he C=~~lt:ee's ~~~:s~an: ~~~~su(~r attrlbuted ~~e

~:e~lzatlon problems to the ::~~l::ee's la~e start and a fal1~:~

to have sufficient systems in place.
16

--,.

On August 26, 1992, t.he Committee filed a~end.d dlsc~osure reportS for the perlod from inception t~rouq~

~a~~a~y 3:. :992 Whl=~ ma~~rlally corrected the prcbl.ms noted ~::

:hat ~erlcd. Hc~ever, at the close of fleldwork the Ccmmlttee ~a=

net flled amended reports for the period subsequent to January ~:.

:992. At the exit conference held on November 17, 1992, the :~mmittee had no further comment on the ite.ization errors noted

above. Fuether, the CO~ltte. sta~.d t~at th!y would respond t=

our findings after reeelpt of the lntecla audlt report.

In the interia audit Teport, the Audit staff

recommended that the Coaaitt•• f~l••••nded Schedul••· 1-' to

correct the ite.ization error. aade sub••quent to January 31,

1992. On Auqust 31, 1993, the Coaaitt•• filed a.ended disclosure

reports which materially corrected the it••ization errors.

b. Field Account (Drafts)

The Audit staff performed a sa.ple review of

disbursements made fro. the Coaaitt••'. flo1d account. Altbough this account vas opened in 1991, -oat of the activity occurred

between January 1992 and March 1992. Our review indicated that

very few disburse••nts _ad. fro. the field account vete it••lzed

on the Committee'S disclosure reports filed prior to the

--COfurenceme-nc o-f- audit fieldYQrk_.. r_urth_er, for the report cover :.~;

March 1992, 527,289 in disbursement activity-- vas-no-t-itn:lu-ded --;:1

:eported totals (See Findinq II.C.).

Before this matter was brought to the

Committee's attention, the Committee stated that all disburs.me~t

l~ems were itemlzed on Schedules B-P reqardless of amount. Whe~

asked, during the fieldwork, to explain why the March 1992 dra!:

activity was omitted from the disclosure reports, the Assistant

Treasurer noted that the Committe. had only recently (9/92)

cbtained information from the bank relative to the drafts which

cleared the March bank statement. The Assistant Treasurer fur~~e:

stated that the February 1992 disclosure reportl needed to be

amended because Schedules B-P contained only partial disburs••ent

amounts for some vendors.

On August :6, 1992. th4! "::mmittee filed a~ended disclosure repor~s !~= ~~4! ~~~l~1 ~~~~ l~=~pti~n th~~~~­

January 31, 1992 which mat~~:3::t ~ocr~~:~~ ~:~ pr~bl~ms n~t~~ --. t~at peelod. However,!-:' ':~~ -:l=sl! of !l~l-:'J':'':i( the Ccmmit~'!e "'3:

net filed amended reports f=: :~~ p~rlc1 3u~S~luent to Januar1

1992. A: the eXlt con!er~~:~, :~~ C~~ml~~~~ ~~j no add:tic~a:

commen t S 0J:- t h reg a r d t: ::. '! :: ~: ': ': U n t. 3 -: ": : .. 1. : ? . Fur to her, the

C=mmlttee stated that they ''"'':''~~1 r'!s~:-r:j f:.~:iings after

:e:el~t cf :~e ~nter:~ aud:: :~~~r~.

The interi~ audit report recommended that

the Commlt':ee fi:e amended Sc~ed~:es B-P to reflect the requlred

itemization of draft account disbursements made subsequent to
17

January 31. 1992. The amendments filed on Auqust 31, 1993 ty :~e

Committee materially corrected the it••it.tion errors.

c. Payr:l: Account

~he Audit staff reviewed, on a sample basls,

dlsbursements made from the Commlttee's payroll account for the

period inception throuqh August 31, 1992. This reVlev indicated

that the comm.t~ee fa~l~d to.lte~lz•. a materlal number of paycol:

transactions VhlCh requlred lteml;atlon. It was also noted that

the Committee did not itemize any payroll transactions on it.

March 1992 disclosure report. When asked durinq fieldwork, to

explain thli omission, Committe. personnel stated that they had

merely forgotten to report the March 'ayroll and would be

filinq amended disclosure reports.

Amended disclolure reportl wete filed by the

Committe. on June 18, 1992 and Auqult 26, 1992, hovever the

it••isatioft.errora discuss.d.~b~y. were ~ot .at.ri.~ly corrected. ":. ..

In the interim audit report, the Audit staff

recommended that the Committe. file Aaended Schedules 8-' within

30 calendar days to correct the above it.aization errors.

In response to the reeo...ndation 1n th.

interim audit report, the Committee filed amended disclosur@

re-ports on--Auqust -31, 1993- which m.te_r~ally correct.ed the

itemization errors relative to its payroll activity.

d. Selected Review of Disbursements

· -( X -~~,i

-~=..:

-j

The Audit staff conducted a review of select@:

Committee disbursements for the period inception through June 30,

1992, and noted 38 disbursements, totaling $265,418, that were

not iteaized as required on Committee disclosure re?orts filed

prior to the commencement of audit fieldwork. Our review of

amendments filed on Auqust 26, 1992 indicated that the Co..ittee

had materially corrected these it.aization proble••.

£. Omission of Oisclosure Information

1. Receipts

Section 43~ - 3): Al cf -:-:.':~~ ;: cf th~ Unlt~d

States Code states, in par~. ~~3~ ~ach ~~ll':::!l ~ommltt~e sha::

disclose the identlty of ~:: ~~~s:~s wh~ T.aK~ ~ont::~~~i:n ~:

the reporting committee d~=:~? :~~ rep~r~:~ ~~cl~d, whose

contributl0n or contrlbutlo~S ~3~~ an a??r~ ~':~ a~~unt 0C va:~~ :~

excess of 5200 within the ~31~~1ar year. :::~n 431(13} of t~:s

T l 1e de f :.. e s It ide n t f : a :. -: ~. '::' :t\e a::, ". '" ':. : 3 S ol? c fany
18

lndividual, the name, malllng address, and the occupation of su:~

~~d~vldual, as ~el: as ~h~ name ~! h~s =r her e=ployer, and In :~!

=ase of any o:her Fe:son, the fU11 name and address ot such ~e[son.rt !n addl:~cn. :: erR S~04.3,a}\~~ requ~res ~hat in

add.tlon to t~e above. :~e 3qg:e9at e year-to-ca:e totals for SUC~

~~ntrlbutlons be reported.

Sec~i~n :02.9~d~ ~f ~it:e ~l of ~he Code of rede~!:

Re9ulations states, 1n part, that 1n performlng recordkeeping

duties, the treasurer or his or her authorized agent shall us. his

or her best efforts t~ octaln, malntain, and submit the required

lnformation and shall keep a record of such effoets.

Section 104.7 of Title 11 of the Cod. of Federal

Regulations stat•• that 1£ best efforts have been used to obtain,

maintain, and sub.it the information required by the Act for the

politieal co..ittee~ any report of such coaaitt•• shall be

considered in coapliance with the Act. With re9ard to reportinq

the identification as defined at 11 CPR 100.12 of each person

whose contribution(s) to the committee and its affiliated

coaaitt••• 4q9 reqate in exce.s of $200 in a calendar year

(pursuant to 11 erR 104.3(a)(4), the treasurer will not be deeaed

to have exercised best efforts to obtain the required information

unless he or she has sade at least one effort per solicitation

either by a written request or by an oral request documented in

writinq to obtain 5u-ch- -i-nformation from the contr_ibutor.ro_r__ purposes of 11 erR l04.7(b), such effort shall consist of a c~ea=

request for the information (i.e., name, 8a11in9 address,

occupation, and name of employer) which request informs the

contributor that the reportin9 of such information is required =y

law.

The Audit staff performed a review of contribut~:~s

from individuals and identlfied a material number of errors

relative to the iteaization (or lack thereof) of contributors'

occupation and name of employer. The errors, when used to

estimate the dollar value of all report errorl, result in a

projection of $605,314, which represents approxi.ately SO, of the

dollar value of all iteaized contributions. In .ost cases, the

Commlttee had no documentation in t~e receipts file to show that

the information had been reques~ed or that the contributor had

submitted the informat~on. :~ ot~er cases, the infor~ation had

been provided by the c~n~~~~~~:~ ~~~ ~~~ ~~~~~~~!~ d~~ not ~~~~~~

the information.

Our rev~e~ ~: :~s~:~se ~~~l:~S !=und l~ Comml::~~

receipt records and a :ev~~w :f :~e C=m~~:~!! ~atabase dld ~~~

establish that the Commlt:~~ ~x~~:lsed =~s~ ~f:~rts to obtal~,

malntain and disc~cse t~e :!~~::!d i~f7~~~~:~~. ~he ~cmmlt~!~'S

recelpts f1le made aval:ac:! ~:: ~c~ c:-:~:~ ~~1 ~t~er infcrma:.:-

(such as copies of letters t= the contrlcutors or phone logs)

WhlCh could be used to demonstrate WBest E!!~rts.·

-'- '>~-~~

-, -':~~
19

At the exit conference the Commlttee vas lnformed

:f ~he af~rementioned er:ors. A C=~ml::ee rep:ese~:3:~v~ s:a:e~

:~at the Committee could esta=:lsn an asSOCiatlon be:ween ~he

recelpts on the database and a funcralslnq code Whl~~ could then

be related to a soliCltation devlce. The Committee noted that :~!

relatlonship of the recelpts to the solicltatlcn dev:ces sent C~:

:0 the contributors for each fundraisinq drive would establish :~a: "Best Efforts" had bee~ ~ade by the Committ.e.

Within the 10 day period followinq the exit

conference, the Committee submitted information in an effort t~

demonstrate that it had exerc1s~d -S.at Effort•• - The information

consisted of the proqraa language us.d to extract fro. the

database the contributor records vhich did not contain full

occupation and name of employer information, and a listioq of

contributors to whoa the Coaaitt•• va. in the proce•• of sendinq letters requesting the required infor_.tlon. In addition, the

Co..! tte., ,a1.50. IUb~l~t.~. re.p0!11e ",devices wbicb, according to the

Co..i ttee t were ex.aplea of tbe' responseo d.vl~. -.lvay.- included

with solicitations for contributions. The devices contained

requests for the required infor.a~lon.

Although the Committee stated that an association

betwe.n the receipts database and a tundra1'... cod. could be

established, the information submitted does not address this.

~e-qardi.-n9-the pt-o-9ra_m langua9~ submitted, the COllAittee did not

provide .'/idence of its use durinq -the caafpaiqn -period. In the

Audit staff's opinion, the information provided does not

demonstrate that the Coaaittee exercised "Best Efforts."

The interim audit report recommended that the

Committee demonstrate that "Best Efforts· were exerCised in

attempting to obtain the occupation and name of .aployer; cr a~e~:

its Schedules A-P to include the occupation and na•• of employer

in the instances where the information was omitted.

~~ In response to the interia audit report, the

Committe. provided an affidavit from its Finance Director. The

(- affidavit stated, in part, that:

"all solicitations f~r !undraisinq events

which were sent ~u: ~y t~~ C~~mi~t~~ al~ays

included one of ~.~ s~a~da:d r~~ly ~!rds. as

attached. If th~ ~!=1 was not fully fllled

out, someone on :~~ f~~~:aisin1 staff pla:e~

at least one cal: :~ :he 1onor t~ t~y t~

c b t a ina 11 to e :; : S 5 a r y ':) n t. t"J t: ':' :-

informatlon."

Counsel for the Commlt~ee s:3:~1 t~at,

UlJC"Hi

If
zo

"Both cards c~~~aln a c:ear :e~~est and :~~Vty

that lnformatl0n 15 requlred, ~hus satlsfYlng

the requiremen~s of 11 erR S:04.~.bj.~

The Audit staff is ~nc:ear of the Committee'S

meanlng, when It states, ~all sollcitatlons for fundralslng eVen:i -h~c~ .ere sent ~ut by ~~e Commlt:ee." The Audit staff questlc~S

whether "standard reply cards" were sent out wlth all

solicitations for contributions, such as with direct mail

solicltations or only 10 ccnnectlon wlth specific events <e.g .. "November 21st Reception- or ·cocktail reception") such as those

described on the copies of the ·standard reply card.- subaitted

with the Coaaitt••'. r••ponse.

The Committee also provided the Audit staff caples

of response letters and a listin9 of contributors who received

follow-up letters cequestin9 the required infor••t1on. The

Committee'S response stated that the request for contributor

information was sent to 2,607 individuals and responses were

received fro. 988 individuals; and the contributor information

received vas included on amended reports filed by the Coaaittee.

The Committee also noted that the auditors vere advised at the

Exit Conference that the contributors who had failed to produce

the contributor information had been sent an additional letter

re-qui 5 tiog the~ i nfot'~mation.

The Audit staff revieved the Committee's amended

reports and the material provided by the Coaaitt... With respec:

to the "standard reply cards·, the Audit staff acknowledges that

languaqe in compliance wlth the regulations is included. However,

the "standard reply cards~ submitted relate to specific

fundralsino events and do not demonst:ate that the Committee

exerclsed ~best efforts~ during the entire campaign period. ~he

Committee did not sub.it a telephone log in support of its effor~s

to obtain inforaation by telephone.

The Audit staff notes that the letters sent to

contributors request1nq additional information are dated Noveaber

li, 1992, - the date of the Exit Conference. In addition, our

review of the listin9 prOVided, :epresentinq contributors who

received follow-up letters identlfied 118 instances .here no

address is recorded fer t~~ ~~nt::b~~=~"

Not'Ji thsta~di~? ~~~ a=::":C!, t:~~ ('~mt!\: ~ee, basl!~ - ..

its act i ens sub s e qu en t t: So'/ =:'\ t; r 1 '7, : ? :, , as de 0 n s t r a : l! d

"best eff~r:s" t~ obtaln, ~a~~:a~n a~~ ~:S::7S~ t~e :~~~es:e~

informatlon.

Aft'CIlIIft_-3- ...... "'" a Q aC 1iL:
~1

2. Dlsburseme~~s

a. Reaular A:::~~:S

• • A "k.....·1

I

I

Section 434 l bJ ' 4) and (S}{AI of Tltle 2 of ~~.!

Unlted States Code states, In ~art, that each report shall

1lsclcse :=: the reporting peeled and calendar year, the total

amount of all disbursements, the name and address of each person

to whom an @xpenditure in an aggregate amount or value in excess

of $200 within the calendar year 15 made by the reportinq

coaaitt•• to meet a candidate or committ•• operating expens.,

together vlth·th.~dat., a.cunt, and purpose of such operatlnq

expenditure.

Section l04.3(b)(4)(i)(A) of Title 11 of the

Code of Federal Regulations states, in relevant part, that each

report filed shall disclose the total aaount of all disburs••ents

for the repottlng-periOd-and for the calendar year. laeh~~

authorized coaaittee shall report the full name and address of

each person to whoa an expenditure in-an a99re9ate ••ount or value

in excess of $200 within the calendar year is aade by the

reportinq coaaitt•• to a.et the coaaitt••'. operatin9 expenses, together with the date, amount and purpose of each expenditure. As

used--in- 11_Crlt lQ_4. 3 (b) (4), purpose means a brief state.ant or

description of why the- disbursement vas made.

The Audit staff's review of Committee

disbursements made fro. its reqular (exclude. payroll and field

accounts) accounts and itemized on the reports for the period fr::

inception throuqh June 30, 1992 indicated that a material number

of the itemized entries were incorrect as to the amount or the

payee's address was missing. For example, the March 1992

disclosure report, although prepared manually, contained no

addresses (street, number, city and state) for those transactions,

On June 18, 1992 and Auqust 26, 1992, the Committee filed amended

disclosure reports which did not materially correct the disclosu:!

problems noted above.

The recommendation in the interim audit repo::

required the COllUBittee to file a:nended Schedules B-P to correct

the public record. In its res~onse. C=unsel to the Commlttee

stated that, "The Commit~~~ ~~~:::s~~ ~~~:y ~ff~rt t~ ~btal~ a~~

report full informatl0n c:': ~:S::'.l~s~men-:s. '1~~·.Jlthstand~ng t~~ :a::

that the Committee had se~~r~:i ::~lte~ ~~sc~c:~s and

i n e xper i e nee d s t a £ f . It Cn A'J ? '''; s: 3:, :? ? 3. :; C m1 t e e !:.: '? -::

amended Schedules B-P ~hl:~ ~a~~::3::Y :~=:e~:~1 t~~ ~~bll:

record.

b. Payre:: .;:::'';;'~

Our revie~ cf disbursements made from the

payroll account for the perlcd ~r:~ :~:eptlcn through August 3:.

1992 and itemized on Commlttee reports revealed that for a
At -. $22@,.~

22

material number of itemlzed entrlfS the payee's address was

omitted. It was noted that a maJorlty of those omlSSlons lnvolv~~

entrles dated ;u:y 1992.

en :~ne 18, 1992 and Auqust 26, 1992, the

Committe. filed amended dlsclosure reports, however no corr.ctlo~S

~ere made wlth respect to the ltems mentioned above. !he

Commlttee was notlfled of the above noted errors.

The interim Audit report recommended that ~~e

Coaaitt•• fil•••ended Schedule. 1-' to correct the errOts. The

Coaaitt••'S?r'.pon•• stated that •••nd••ntl vete filed vblch

materially corrected the omitted it••ization inforaatlon. On

Auqust 31, 1993, the Committee filed amended disclosure reports,

however the errors noted in the interia audit r.poc~ vete not

corrected. - .

III. Finding. afta~·a.co...ndatlon.,.--It.pa,...ftt~I••u•• -

A. Deter.in.tic" of-Net OUtstandlD9·C.apalgD Obligations

Seetion 9034.5(&) of Title 11 of the Code of r.deral

aequiationa require. that within 15 calendar days after the

candidate'S date of ineliqibility, the candidat.·shall sub.it a

statement of net outstanding campaign obligations which reflects ~the~~ total '-of~ all ~outstandinq obl i9a~~ ions . fo~t~ qualified campaiqn

expen 5 e s p1uses t i lila ted nec@ s sa ry windin9 down cost s. .

In addition, Section 9034.1(b) of Title 11 of the Code

of rederal Requlations states, in part, that if on the date of

ineliqibility a candidate has net outstanding caapai9n obliqations

as defined under 11 erR 59034.5, that candidate .&y continue to

receive .atchin9 payaents prOVided that on the date of pay••nt the~e are reaaininq net outstanding campaign obliqations.

Senator Harkin's date of ineliqibility vas "arch 9, tr~ 1992. The Audit staff reviewed the Coaaitt••'. financial activit1

throu9h August 31, 1992, analyzed vindin9 down costs, and prepared

the Statesent of Net Outstanding Campaiqn Obli9ations (-NOCO A ) as

of August 3, 1992, which appears below:

_. "......
23

Americans for Harkin, Inc.

Audited Statement of Net Outstanding Campaign Obliqations (NOCC

at August 3, 1992

(Oetermlned as of 1:;5/92)

~ssets

Current Assets;

Cash on Hand

Accounts Receivable

"atehing Funds

(Certified 1/31/92)

Total Current Assets

Capital Assets

Total Assets

Liabilities

_"'_c~ounts payable for

Qual-i f i .-"r -Caapa i qn

Expenses throuqh

c::', 7/31/92

S 86,685 !/

15,625

28,498

$130,808

7,000

5366,520 ~/

$137,808

$103,186 ~/

~.ount payable to u.s. Treasury:

~Esti.ated Winding Down Costs

paid through 3/22/93:

Estlmated Windinq Down Costs

3/22/93 through 1996

85,000 !,/

-Total Winding Down \...

~otal Liabilities

S 35,316 ~/

$188,186

S590,C:2

Net Outstanding Campaign Obligations '~eficit) !S4S2.;:j'
a.

....

-

c/

r~C~~O~ES TO NOCO

~his a~ount does not :eflec~ a reductlon for cert~ln

=utstandlng checks determlned to be stale-dated.

7he Aud~t staff ~~l::al:y ~er~!ied accounts payable :!

$332,793 as of August ), 1992. However, subsequent to Audit

fieldwork, the Commlttee provided a listinq of accounts

payable totaling $368,803 which reflected an increase in that

figure by $36,010. At that ti••, no docu••ntatlon v.. -- provided to $upport this increas.. In re.ponse to th.·~~'

interim audit report, the Committee provided docuaentation t~

support 533,728 of the $36,010.

Consists of amounts discuss.d in Findings:

II.A.I. - Prohibited Contributions

II.B.l. - Excessive Contributions

Individuals

II.B.2. - Excessive Contributions

Political Commit~ees

I I I . C • - S ta 1 e-dat-ed Che-ck.s

S 7,373

22,060

3,600

2,2-81

d/ This figure represents actual windin9 down costs paid for t~e

period August 3, :992 through Match 22, 1993. Not included

is approximately S1,000 in tax penalties and/or

insufficiently documented payments to taxing authorities.

This represents the Committee's calculation of its windin9

down estimates from ~arch 23, 1993 throuqn 1996. The Audit

staff vill review reports and records as nee••lary to compare

actual expenses to these estimates.
25

In response to the inter~m audit report, Counsel

Committee stated the following wlth respect to the NOtO:

f "",. ...

~the Committ.e notes that it dispute. the

auditors' methodoloqy for determininq whether

a candidate has received funds in excell of

his or her @ntitlement. In order to .ake this

deteraination, the auditors create a fictional

NOCO statement modified vith hindsi9ht but purport~dly creatin9 a picture of a coaaitte.

as of an arbitrary date- - in thia ca•• Augult

3, 1992. In tact, the auditors' NOCO do•• not

provide an accurate financial picture of the

coaaitt•• either as of the date of

ineligibility or at any later date. The

Coaa1tt•• believ.s that it.· NOCO stat•••nts

filed periodically al required by the

re9ulation pr•••nt- the aoat accurate 811ap sbot·, l ':-:

of the Coaaittee's financial status .a of .ach

pa rtic:ular date. - = - - .;.. - • - - '4 . _ . ~'('

~h. Coaaitt•• thus objects to the us. of

the auditors' revised NOCO as of AU9USt 1,

1992 as.. th.e b~sis for deterllinin9 when it vas

no lonqer eli9ib1e to ·receive additional

matching funds.-

The Coaaitt••'. position is neither perSUAsive nor on point~ While it is true that matchinq fund payaents after the

candidate's date of ineliqibility are based on the repre.entations

made by the Coamittee in its NOCO state.ents, these stat••ents art

not audited at the ti•• of payment. One of the purpos•• of the

pos:-primary audit is to determine if the candidate received

matchinq funds to which he val not entitled (s•• 26 u.s.c.

$9038(a) and (b). Such deteraination is baa.d OD an ex••ination,

after the fact, of the varioul coaponents of the NOCO state.ent(s:

on which such payaentl are based, as vell .s the i.pact on

remaininq entitle.ent of private contribution. received by the

Committe. after the candidate', date of ineligibility.

8. Matching Funds Received in Excess of Entitl@ment

Section 9038(b)(1> of Title 26 of the United States C==!

states if the Commission determines that any portion of the pay~ents made to a candidate from the matching payaent account ~as

in excess of the ag9regate amount of payments to which such

candidate was entitled under section 9034, it shall notify the

candidate, and the candidate shall pay to the Secretary an amoun~

equal to the amount of excess payments.

Section 9034.1fb) of Title 11 of the Code of red~ral

Regu~ations states it on the date of ineliqibility a candidat@ has
,..........

26

net outstandinq campaign obligations as defined und.r 11 erR

9034.5, that candidate may continue to r.C.1Ve aatchin9 pay.ents !~r matchable contrlbutlons ,.calved and deposited on or before

Oecemb.r 31 of the Presldentlal electlon year provlded that on th.

oate of payment there are remalnlng net outstanding caapa1 9n

obllgations, i.e., the sua of the contributions received on or

a!ter the date of ineligibility plus matchinq fundi r.c.iv.d on cr

after the date of ~neli91bllity .5 less than the candidate'. net

outstandinq eampaiqn obliqations. This entitle••nt vl11 be equal t~ the less., of: (1) the amount of contributions subaitted for ••tchin9; Ot (2)~th. remaining n~t out.t.ndln9_c!~pai9n

obligation•• _~"V ,... 1:"1. -t:.': ,~

As of Auqust 3, 1992, th~ Candidate's r•••in1ng aatehinq

fund entitlement val $452,214. USlng the Coaaitt'.'1 contribution

recordl, bank record. and dlselolure report., it v•• deterained

that as of 'ebruary 1, 1993 the Co..it~.~ received coabintd

private and public.fundiftg of $3J8.fJ'. nO~},.~rV~ry 1, 1993, the

Committee received a aatchin9 fund payaent 1n t~••aount of

$73,603. This payaent exce.ded th.~&~UP~i~9i.~~cb the Candidate

was entitled by $10,041. On March 2, 1991, tn. eoaaitt•• received

its final matchinq fund payaent of $14,547, brin9ing the total

amount of ••tchin9 funds received which exceeds the Candidate'.

entitlement to $24,595.

The Audit Division recommends that the Commission make an

initial determination that the Candidate val not entitl&d to

524,5956/ in matchin9 funds and therefore, the Committe. repay

S24,S9S-to the United States Treasury pursuant to 26 u.s.c.

S9038(b}(1).

c. Stale-dated Committee Checks

Seetion 9038.6 of Title 11 of the Code of 'ederal

Regulations stat••, in part, that if the Coaaitte. hal checks

outstandinq to creditor. that have not b••n cashed, the Co..itte.

shall notify the Coaai••ion of its effortl to locate the pay••s,

if such efforts have been necessary~ and itl efforts to encouraqe

the payees to cash the outstanding checks. The Co.-itte. shall

1

I

~/ S~n:e an estimate ($85,000' for windin9 down costs through

:996 was a component of ~~e NOCO statement presented on ~age

Z3, the Audit staff wlll reVle~ Committe. records and reports

dfter receipt of its response to this report. Any revision t~ the amount consldered repayable will be contained in the

Comaislion'. final determlnation.

3
27

also submit a check for the total amount of such outstan:l~g

:~ecks, payable to the Unlted States Treasury.

Ourinq the review of Committee disbursement aetlvity,

the Audit staff identified nlneteen checks made payable :0 ver.=o~s

which had yet to be cashed as of Auqust 31, 1992. Those checks

:ctaled S11,208 and were dated from January 9, 1992 throu9h March

12, 1992.

~t th. EXlt Conference on ~ov••b.r 17, 1992, t~e Audit

staff provlded the Coaaitt•• with a schedUle of the stal.-dated

checks. When asked whether those vendors had been contacted to

deterain. the status of the outstanding checks, Coaaitt•• offieial. replied that they had not •••n the outstandlD9 check

li.t before. Further. the Coaaitt•• atated that they would

r.spond to our findi n9s after receipt of the interia audit report.

On December 3, 1992, the Co..ltt•• provided a •••orandua

to the Audit staff in which ten stale-dated checks ($9,361)

v.c••ddr••••4~ t~~.C~..it~•••t~~~~ that the checks vere: (a) lost (one cheCk for $121), (bl no~ paid bY-l~. bank (fduc cheeks

for $360l, te) apparently voided and replaced or related to

instances where no obliqatlon nov .sllt. due to cancellation of

the event or planned purchase (five checks for $8,874). Bovevet,

no documentation such as the actual voIded check, replace••nt ehe<:-k~ or cor__r~_spondence fro. the na••d pay•• vas presented. Not

withstandinq the above, the -Audit staff was able to reduee the

amount of stale-dated checks by $348.

In the interia audit report, it vas recommended that t~e

Coaaittee present evidence that:

The checks were not outstandin9 (i.e., caples of

the front and back of the ne90tiated checks) or

the outstandin9 checks vere voided (copies of the

voided checks with evidence that no Committee

obli9ation exists; or copies of ne90tiated

replaceaent checks); and

the Comaittee attempted to locate the payees

to encourage them to cash the outstandin9 checks.

In response to ~~~ :~~~::~ a~d~~ ~~~~rt, the :~mml::e~

provided evidence to demons::3~~ :hat ~h~~~s ~~talinq S8.5~a

either have been replaced a~d :3she1 cr l~vcl~~ instances ~ner! ~~

Committee obli9ation eXls:~d. ;::~rdi~?lYf ~~~ Audlt s:~f: ~as

reduced the amount of stal~-~3:~: :~e:~s :; ~:.~83.

Rec~mmendation tS

The Audit staff recommencs that the C~mmlttee be requlted ~~

make a payment to the United S:ates Treasury in the aaount of

$2,283 representlng the amoun: of stale-dated Committee checks.
•

IV. Recap of Amounts Due to the United State. Treasurx

Section 9038.1{c)(1)(v} of Tltle 11 of the Code of r~deral

Regulations statts that prelimlnary calculations reqardinq future re~ayments t~ the U.S. Treasury may be contained within the

inteclm audit report. Pursuant to S9038.2<a)(2) of this Title the :=mm~ssi~n ~l:l nctlty the candidate of any repayment d.~ermlnatlons "ot :atet than three years after the end of the

matchinq payment period. The issuance of the int.ria audit r.poct

to the candidate (date of service June 18, 1992) constituted

notice for purpos.~ qf ~~ thr•• year ~.riod.

f.. ., e>.:, . - ... _.. aeflected below are a.ounts due the United Stat•• Treasury as

noted in this report.

Stale-dated Committee Checks

Total

Apparent Excessive ContributionsPolitical Committees

Amount

l'l e.' -

$ 7,373

22,060

3,600

24,595

2,283

559,911.

'S..... . - I ..... -........

Matching Funds Received in Excess

of Entitlellent

Apparent Excessive ContributionsIndividuals

• L •

Subject

.Appar;nt pt~~lbil.d·contr16utloft.­ Individuals....... ~~ -..

III.C.

II.B.2.

III.S

11.8 .. 1.

Findinq

II.A.l.
"-

OLDAKER, RYAN Or LEONARO

.'''0.''«•••., \.AW .r~EIV(O 'If.sE'''t ! E' ;;.

8 '. C 0"-1 N £ C TIC V T A V t ,.. u (. N ""W'" '" I ~: .""

S \.11 .,. t t, CO 'J"'N:; ~.

WASM, ... .,j'rO .... , ~:. lOOO$

~,13 5 05 PH t9~

'-C<'''''~'F'"'''''''!!<~~ __I1!N__iI!I!ft'I!I'''''''''''''''''''''''''~-~~'''IlIlI!!J!!lII'~,.J''''_ ,~"'I'[Il,,~,t~'-"""'''''"''''''l!IlI!/!I!!IIIlllllJ1;'', !II!I!!I,","III\R_IIIIlII",,<,""',U.,~%.~:~~i~

-~ ~-~

=-~

~tay 23.. 1994

Ms Kim Bright-Colen1an, Esq..

.~ssociate General Counsel

FederaJ EJection Commission

999 E Stree~ N.W.

Wash-ington, DC 20463

Dear ~1s. Bright-Coleman:

Enclosed is the response of Americans for Harkin.. Inc. to the Commission's Initial

Repayment Detennination.

- Since'rely. -

~.~

Lyn Utrecht

,r

Ut+CBMIMl 'I _

,... ,/ DC gJ/
OLO~4K£R. RYAN & LEONARD

.'. co .... ""£C",q:u,. AVENut. w

SUITt, '00

n., l3 5 05 PH IS~

u5

This response is flied Oft behalf of Americans for Ha.rJC.h~ Inc... ("tbe COmlil.ittee-) to-'lhe

initial determination by the Federal Election Commission that Americans for Harkin should

repay S24t S9S to the United States Treasury. This determination is based OD the necommeodation

of the Audit Division that these funds were received in excess of the Candidate's entitlement.

Since the Interim Audit Repon submitted to the Committee for response on June 18~ 1993~ did

," not include any repayment determination~ this is the Committee's first opportunity to address this

issue,l

~iay 23. 1993

RESPONSE OF AMERICANS FOR HARKIN, INC.

TO TIrE IN1TIAL REPAYMENT OETERMlNAnON OF THE

FEDERAL ELECTION COMMISSION

In response to this initial determination. the Comminee is prOViding additional

d<Xumentation that demonstrates that the Statement of 'Set Outstanding Campaign Obligations

C'IOCO) upon \\il.ich the Audit Di~;sion bases this rt'ComrnendatioD is incorrect. This

documentation is summarized in Section I of this response. On the basis of this infonnation. no

repa~ment is o","ed. In addition. for the reasons set forth in Section n of this response. the

Comminee believes that the Auditors method for determining entitlement is t1a~·ed. as is

demonstrated by the Comminee's current fmancial siruation.

1. The .~uditor's ~OCO Understates the Committee's liabilities and Overstates the Committee's

Assets

It is "ery difficult for committees to respond to the findings and recommendations of the

Audit Division regarding pa)ments in excess of entitlement. l~n1ike other audit fmdings that are

supported by one specific analysis or schedule that the Committee can re\"ie~' and venfy or

dispute. an incorrect recommendation that the Committee has received funds in excess of

entitlement could be the result of errors underhiru1 anv nurnber on the ~OCO as revised bv the . ..... . "

auditors. Thus. in the absence of a complete re\ ie~' of the S0UTce docwnents underl~ing each

I .-\t a folIo\), ~up mten.rn audit conference on ~1arch 9. 1993. the auditors Indicated to tbe

Committee that they thought the Committee rrught have re~ived funds in excess of

entitlement. In response. the Comminee provided additional information to the auditors on

~arch 23. 1993, There \i., as no repayment proposed in the Interun Audit Report.

lft..lCAllift _It_' _

-nrC; of AI
\~ hich amounts "irtually to a tepcat of the audit process·· it is \.ery di fficuh to det~rm !ne \\ here

the errors are.

£ , . L

-1-' "

I

I

j

In March 1993, \\ith '~ry limited staff available. the Comminee made an etTon to provide

~he aud~tors \\ith information disputing various numbers on the sacO. \Jy#ithout the resources to

go back to the original source documentation at that time. the Comminee simply provided the

,~udit D1\ iShJn \\ilh some pnntoo.{)uts from the CommIttee's computer system. On that basIS. the

auditors adjusted those particuLar numbers on the NOCO, After pro\'iding that information.. the

Comrrunee did not believe that there ""as an)' entitlemer.t issue remaining and did not perform

any more in-depth review. Since the Final Audit Report now recommends a repayment. the

Comminee has attempted to go back to the original source docwnentation. This process is

extremely time-conswnina and the Committee does not have adequate resources or time to

review every underlying source document for every number on the NOCO to determine where

Llle errors are. We have, hOVievert reviewed in detaii the ~inding down costs and the accounts

receivable. In addition. the Committee was able to review selected accounts payable. W~.. /4-' l ~,. - ..._

\\'inding Down Costs -- On the basis of this re\-;ew, the Committee believes that the

Estimated Winding Down Costs paid through 3122'93 are underestimated by at least S22~OS.74.

The correct nwnber. fully supported by the attached documentation. is SI25,391.74, and DOt the

S103.186 on the NOCO. 2 See Attachment L and the supporting documentation. and Affidavit of

Jacki Bennett.)

.~"', .-\ccounts Receivable - The accounts recei\ able number is overstated in the amount of

Sl ..OiO. \\hich represents the amounts o\\-'ed by press entities as reimbursements that have never

been collected and are at t}js point uncollectible. These amounts are being "linen off bv the

Committee and should not be included in the accounts receivable figure as there i~ no

expectation of receipt. See ..~nachment 2.

Accounts Payable - Of the accounts receivable provided by the auditors by the

Commit1ee~ the auditors incorrectly d!saIlo~'ed certain Comminee obligations. One such account

'..'as payable to Berger. Poppe~ Jaruec &. Mackasek. The auditors disallowed $4.940 paid to the

2 In addition.. the Comminee has attached a print-out by check number. sho\\ing additionaJ

v.inding do~n costs paid since 3/22/93. in the amount of S61.044.77. Based on this. the

Committee believes its estimate from 3'22'93 to tenninatlon to be reasonable.

3 Payment to one vendor \Jtas originally included in the accounts payable numbers provlded

bv the Committee. but \\·as dis.a~lov.ed by the auditors because it \\-as incurred post-date of

i~elig~bllit)' This payment \.\as in fact for \\-'inding dO\\TI costs. The payment ofS4.515.60 to

American TechJ101ogy Exchange (check #10835) \\a5 for rental of the compute~ leased by the

Cornm~r:ee a;;j used for the C0lT.JT1jtteets \At-inding d0V,11 activities. This should iave been

included in L1e \\'lndlng dO,"TI nu."Tlber.

1!!'CDI'f_'i......... _ Pace.;? t1 r*I
Firm. As noted in the attached documentation, this $4,940 \\'as properly bilied to the Committee

for work perfonned related to the delegate selection process. This represented a legitimate

qualified campaign expense and should not have been deleted from the Committee's accounts

payable list. See Attachment 3,

As a result of these modifications alone. there is no pa~ment in excess of entitlement.

The -Total Assets" number on the NOCO \A'ouid be S136.738. and the "Total Liabilities" number

would be $617.I67,74. The Committee's NOCO deficit "'ould be $480,429.74, and the

Committee's remaining entitlement at this time would be $3.621.40,·

The Committee has pro\ided a schedule listing aU ....inding dO\\ll costs, \\;th back-up

documentation consisting of canceled checks and invoices for those from 8!3:'92 through 3/2::"93;

a schedule listing ";nding do\\n costs paid from 3122193 through 4130/94 (back·up

documentation available u}X\n request)~ a schedule and supponing Affidavit stating that S1.070

in accounts receivable have not been collected and are uncoJlectible: back-up documentation that

the additional amount of SJ.940 to the la~' finn of Berger. Poppe was a fully documented

qualified campaign expen~ a..'id should have been included in the Committee's Winding Do~n

-'C' number.

On the basis of this documentation. the Commission should reject the i\udit Division

recommendation that matching funds ""ere recei\ed in excess of the candidate's entitlement.

u. This Method of Determining Remaining Entidement is Inaccurate and Is Difficult for

Committees to Challenge

11le Harkin Comminee audit provides a good example of how the auditors' method for

deIerminina remaining entitlement is problematit. In the Harkin audit, the auditors found no

oon-qualified campaign expenses~ This means that there were only very minor adjustments made

by the auditors to the Comminee's obligations.

Ye~ as the Committee met v.ith the auditors in April to discuss, based OD the auditors'

DUlDbers in the Final Audit Report, the Committee would DOt have bad sufficient cash on band

remaining to pay its remaining debts, make the payments requested by the Commissio~ pay

remainina wiDdina down costs.lDd have leftover funds to make a repayment of$24,000. In the

absence of significant adjustments for non-qualified campaign expenses, this should not occur.

The Committee should have sufficient funds to pay all legitimate remaining campaign

obIiptions. ~~. ,."

"'ll . ; .,

, Should the auditors find yet another basiS for requesting a repaymen~ the Comminee

beJie\'es that there are l:kely JdditloflJl errors underlying the SOCO Ho""e\er. gl\en the

amount oftime and the Comnllnec's lack of resources. the Comrrunee has been unable to re-audit

all of the NOCO numbers
g s-,

Even the auditors at our meeting on April 6. conceded that. since there \\ert not

J~;ustments for nonqualified campatgn ex~nses. the Committee should have sufficient f~ds

rt'maining to meet the obligations identified by the auditors. The auditors' conclusion "'as that

t.t.us must mean that there are errors somewhere. The auditors could not tell the Comnunee

'-.4 here. but rather. place the burden on the Comminee to demonstrate \\here those errors lie. Yet

other than repeating the steps taken by the auditors and fevle\lling I()()O~ of the underlying source

jocumentatton there is no \\ ay to demonstrate the err0rs

In light of the difficulties ~'1d costs of \-eri(\ing e\ cry audit step taken by the audnors, the

Commission shouJd pennit a Comminee to demonstrate by another reasonable method thai the

auditon' numbers must be wrong and shift the burden to the auditors to defend their resu.lt1 The

Comminee can clearly demonstrate that it has insufficient funds remaining to pay the outstanding

obligatlons identified by the auditors. This can be demonstrated by "torking backwards from the

Fresent~ working with KIUal real numbers kno\\n now~ as opposed to numbers on a fietionaJ

~OCO (prepared with hindsight as of A~gust 3~ 1992 as determi~ as of 11/5/92 - as the

auditors' NOCO was prepared).' -

..-\5 of 4/30/94 the Comminee has:

TOTAL ASSETS

\7endor debts of ••

Payments o\...ed Tre3.Sury ••

(per Final Audit Report)

Remaining 'Ainding do\\n .•

TOT.-\L A.."tOL~TS Ov"t:D --

CO\l'-*lITfEE SHORTFALL ••

SI 88~263.6O

l..J~.OOO.OO

35.316.00

~~.ooo.oo

These vendor debts are all amounts stdl o\\ed that \\ere audIted by t..'1e Commission and

Theoretically if the numbers on the auditors' ~OCO are correcL one should get the same

result as one gets looking at real numbers at the vel')" end of the campaign. L~nfortunately. that

does not "ork and the numbers are cleariy different. That difference must be attributable to

mistakes underlying the ~OCO. but. as descnbed above. shon of recreating the audit. that is

difficult to determine.

6 In fact. this means that there is a discrepancy of S39.647.~O t'et\.\een the Auditors' ~OCO

numbers and the reality of the Committee's financial positIon. Since the Committee is actually

short S15.052.40 in cash and the auditors contend that a $24.595 repa~ ment is due. the total

~:5crepa.l1c~ r.ef\\een the auditors n'~'11bers a"1d reality is nearl~ $40.000.

ArtACDlvt L/ _

Pap 5 ~et/
R g_

· t:'.

not have sufficient funds 10 pay all of its remaining obligations ..... none of "iUc:h are contested as

legitimate. Thus, it is clear that the Committee could not have received funds in excess of

entitlement and that no repayment should be required.'

COSCLlfSION

F", the reasons set forth above. the Comminee respectfully requests that the Commission

issue a Statement of Reasons that no repa)ment is due from Americans for H~ Inc. As noted

an my Ie-ner of .~pril 7. 1994. the Committee requests an opportunity to appear at a hearina on

these jssues~ unless the Commission fmds a hearina. beca~ no ,repayment is _.:....... • • J • .JaT',fG. , _ _ ~. .""_ ....

l~u.u~ .I~.

Respectfully submitted..

~:l;;~ _.' ',::9' '-

General Counsel

A.mericans for HftiD. Inc.

.. F00tnote "e" to the !'iOeO contained in the Final t\udit report further notes that the auditors

111 continue to review the Committee's expenditures.. leaving the implication that the auditors

may seek an additional repayment. Ho\\'e"'er from the foregoing analysis, it is clear that the

CO~lttee does not have sufficient cash to pay all of its remaining obligations. It \J.·ould be

absurd if this cash shonfall itself resulted in an additional repayment.

5
,AT'rACHHENT 1

-J_ ~. __$-

SCHEDULE or WINDING DOWN COSTS PAID 8/2/92 - 3/22/93

CHECK. PAYEE £X.PENSE 'AMOUNT

Mat "93 I i I

313 )JacAt SenNett payroll I 1243 20

10110 ;Claude Mceo.~k2 acd I S401 .•

1086g C,..,tl' BaM .fed 1120 POI tax•• I 11.794.00

10861 ,StaDfes !ofIce sUOOhel I 1211.71

Fef)'g3

)11 'JaCklBenneft payTOl I $2.2.72 --~---

312 < Jadu Bennett payroCl I 1243.20

10eGe Postmaster I stamPs SIlO.00

., 0fSM .Manalt Pheip$ off up (12.-'92) S401.58

10864 VA Dept of Tu tVA_ S1Q.24

10181 IRS lid .... - - -. '.-aa..

,oaeo IA Dept of Revenue IAwIh S51.1l

10158 DC Treasurw :OC WItt $141"

10151 Dept of Empby SeN --&-. tax "54..20

10857 iCornp of TreaNY 41\ Ouatter 1992 $1.325..

1085S C1aude McOonIkt 8CCl SZ50GO

Jan 1J3 ~~. . ....

305 !Betsy ,. . .payroI $1.104.10

308 Jac:ki 8enneCt !payroI -- .. ....... G42.73

301 'JacXi Bennett 'paytUI S460.5O

308 'Jacki Bennett !payrol S24.12

309 Betsy- payTOI $2.701.33

310---seuy -- -<payroI j 52.-101.33

10855 'Paul DiNino Fec~suI , $1.35482

108S3 Charles TOdd Fee coosutt $36.00

10852 :Claude McOonaid acet . 1145.00

1cas1 'Manatt Phelps oftic:e exp C9-11J921 I $2,,475.»

"0850 Manatt Phelps Iega! fees ! $2.250.00

1oa.-9 Manart P~e!ps legal fees (' ., 192} \ $3.196,81

1C8A1 JA Dept of F"tnanC8 IA .#11 i $15.58

~08A8 Dept of Tax VAWIH ! 3695

1C8A2 Chudt Todd FEe consult $36.00

10840 MaryL~ Bowren Fee consuft I $1.0.00

: 1992 I

i I

Dee "92 I i

i

295 :Crestar Bank ,fed WIH $1.428.13

296 :Betsy Sd'!wenge4 payroll S1.804.g()

291 IOenlse Rathman .PaYrOI i S8OO.7I

298 I Jack! Bennett lpayTOll i $205.55

299 Bruce Kieloch payroll i S253S2

300 Oenms Conway payrol $301.40

30' VA Cept of taxanon VAWIH : '11081

302 Denr'ls Conway payrolt ; $159.96

303 'JacXl Bennetl payroft $242.73

304 Betsy Scnwe"9ej payrol $1.804.90

·C837 ~anat1 Pt'le1os of' eXI) $2.037.12

,CS3S Arner TeCh E..t~.ange comP\lter reota4 i $4,515.60

10836 Manan Phelps ;legal fees (9-'M2) I $4.118.11

1C-825 Chua Todd FEe consult ! $12.00

,CS25 ChUCk Todd FEe consult ; s.-2.00

.- . - _.

.~ - ._--

P~1 UlAmrepi

..... Z
CHECK. 'PAYEE E.'(PENSE AMOUNT

10822 :Postmaster buslnns teoly aod I S75000

10805 iThe unNersdy Club fR i $122.95

10798 ;Mindy's Catennv ,FR I 1150.10

10787 ·man~tt Phe;os off~ S3.895.51

'0798 !UaNU Phetpa ........ (8-9;92) I ......

10195 ,Peter mamacos transpOC1,ation SS.OO

10191 1Latty Hayes accl i 13.420.00

10780 !Latry hayes -=cl 15.163.17

Nov "92 I

288 [Betsy - ... ---~- tPIIYGI - .-. S1.1CM'"

281 8Nce I<JeIodl !ptIyni --- Im.'1

290 ,Dennis Conway :~ S273.•

291 'DeniM Rathman .. j $~OI

292 CtestarBri "Id¥IH- --- , -S1._."

293 IA Oep( of Revttnue :IAVWH I $141.82

294 DCGcWt ....--- -lOC".' · .,.. i .. ---;;-MAl

10719 Postmaster -- :statnpa ! $170.00

10778 Jeffs.- .- COftIUI QJOGO

10777 ,Chuck Todd Fee c:et\$UI .1.00

10776 ;C1aude McOoNId ~8CCI 1 $180.00

10775 Con'vn Strategte. 'direct rn8II (FR) 1 $8.382.80

10n4 .Postmas1ef ~bOK"" S3t.00

10n3 Oenr:tS C()nway tramoortabOn $10.00

10768 manan ~etps ·rent (1 t192). $1.000.00

10787 scas .heaIh insurance (11.m) I 12.....

10766 ·8CSS heath ...(9.1~ ,

I $622..15

Oct "92 I

210 Kietocn <~ $780.11

211 .OeNse Rathman ~~. j

sm.01

272 Crestat' fedWIH : $1.5$4."

273 &ttsy r- :PerrOI $1.*~1O

214 Oe~ Conway 'payrol I $oW9.13

275 .Cres" 'fedWH ! $1.53IS..2I

276 1&tsy - :PaYt'OI \ S1.8()l.1O

2n iOencse Rathman ! $778.01

278 .StVCe KieIoeh !~ I S7IO.'1

279 ·Oennts Conway l~ ! S33tl71

280 ICrestil FedW'H I $1.543.07

281 I Betsy Schwe_~ !~ i $1.8CM.1O

282 DenIse rathrnaa.., lpa~ Sn6.08

283 Bruce KieIoeh ~~ $710.11

284 ;Oe~n.s Corway pa'f"OI $352.71

285 VA Dept of taxatJon VAWlH $73.90

286 iCompt of Treas MOWM $~SS

10765 DC Ooes ;ume~ta.x S82ti 03

107&4 PcSL"'I"ta ster posta~ (FR) $190 00

10762 .JacJu Bennett FEe consul 5200.00

10761 'Chanes Todd Fee c:cnIUI I $90.00

~0160 S~ac'es offsuooies SJ6 57

10756 'Oentse Rathman !trIt\SpOt1ation ! $2Q.CO

~O7'8 La~ ~av~s acd $100000

't--

0 ..... .,

ift1CD11t_tt..._--

Pe.e- 5L at4/ ==
-

, ll'J¥>tl!- k. JIQiiJtS§f:;* -- '~"""']".~IZk!l!'lJl4~,,4~' --~--II!lIIlII\!.i

i1j1

CHECK'

.PAYEE EXPENSe AMOUNT

10696 :Man.att P1'\elOS

.rent ('(W2)

! $100000

0682.Charles TOdd FEe eonsuft

i, $9900

1068'!Jadti Sennett FEe eonsuft $250 00

Sept '92

i

I

24! Chuck Todd 'payrol $9000

246 Crlstar Fed WIH S~.5S715

247 Setsy Schw~! ;paytOI S1 ~90

248 lOentS. Ra~man p.ayroI snsos

249 If)ennd Conway ~paytOI

! S34S81

2sa' --

- 155.31

25'· IVA Dept of TAx VAWIH SIl.2I

25r tVA Oept 01 Ta rvAWH

.-

"01.... 2~ 'T....surer State oflA ... IAYWH S9S~"

254· ITr..surw State of IA IAWlH

I $131.07

255

9 lTntasuntr State of IA itA w,"H $41.47

2S8ICompt of Treasury iMO\W S1..217.•

251IBNce KeiIocft ~payroI 1710.81

25r

IDiItrtd 01 CcUftbiI DCYttH $339.42

259;amy Schwef9lt 'payrol S1.804.go

280fDeniSe Rd'mett IPftn'I S71I.OI ..."

.. 261

:Crestar Bank ;Fe<tWIH $1.539.11

2e2 0enniS Conway 'payrol ~5.2I

2&4 !OC Treasurer DC 'NIH

I $31.71

267 :VA DePt of TaX VA y.,4fH' $1tO.•

-

- 268!OC Tresurer ·OCWIH $191.74

.~~ Comm of Revenue ~tu 53701

'0679 Claude mcOonaKS ac:cf $165.00

- 10618 ·acss health insur (8192) 313.2t

.- 106

n Jeff Senter ccmMer consuft $18750

10675 Oennts Conway tr'an$O()t'r3tton '2000

10613 Claude tneOon.aid acet $16500 10672 Jeff Senter corncuter consult S11750 , 0670 'Stapfes otf~ So'909 , 0669 Chuck T0d<1 FEe consul S630Q "'~ /' 106458 1us Postal SeMCe .bu$1t\eU res:>lY fee $250.00 - 10663 UPS ,.,." TTO $731

10&42jmanatl Phelps ntnI (9t92)

\ $1.000.00

10&41!JadU bennett ;FeCC~ 5200 00

1()6A() Dennis Conway

Ttransooration

I 522 00

Aug '92

1

244 Bruce Keilocf'\ payroi 5780 61

243 Dennl$ Conway payrol ~7825

242 iChucX Todd payrol $351 00

2~1 DaVld Blank I»yrcd $88.66

240 ,Cordeha Persen ~yrod S368 93

239 Denise Rathman payro&t $17609

238 Betsy Schwer-.get ~yroii $1 SQ.6 90

231 Bruce Ketk><::tt payroU $780 61

, 0637 Postmaster postage (F R) $81000

10636 ;Vanety Club FR S7'500

, 10633 'l'/ast"ungton's Caterer FR $.4180
- -* .

CHECK' PAYEE EXPENse AMOUNT

10632 'JadU Sennett IFEe conSUl $200-<)0

~0629 BCeS .health ,"Sut (5192) $.59202

0621 :Creatat fed wlti $1.695.9

1 I

rOTAlS (8192·3193) t $125.391.7. , AMOUNT

• Cancelled checks vere requested by the Committee and received

fro. Crestar."Bank via fax machln••-... Due -to the inclarity

of the fax,pl••se-reter to the attached bank state••Dt.

Ch.~k • 250 did not transmit and viii be delivered when

when received by the Committee •

.--,. t J _

n

4
CUSTOMER SERVICE-OPERATIONS CE~TER

P 0 lOX 26150, RICHMOND. VA 23260

1.19 1

C 1 C51 21

CRES~AR 8~~X HD CORPORATE CH£CKISG

ACCOv~T ~~~B£R 209056770

~~ERIC~~S FOR ~~IN ISC ~~ArT & PHELPS

1200 NEW ~'1PSHIJlE AVENlJE N'W 1220

~ASHINGTON DC 20036-6801

PAGE

0'1'31;92 13571.&10 ' ..... OICeoaMa

21 ~e.e.:-:

12000.00

~ClI~... ~~

l 21 12«121.88

~~.1.aHara s~ :'''''-;'

7931.01 HOKE

"*"* n..a Per'oI

.,.,..."'" ~: :.....

N/A N/A,

o...or......s".. _ :s: ., 1"')Ir- .~ -".............. 09/30/92- - f3;56.52

A QUESTION? CALL 800 752-2515

DEBITS CREDITS. DAn . -. ai..~CE

CHECKS 2qa 776.09 '. 12802.31

",,41.16 1551.15 242 35t.OO D9 :»1 108'CI .16 CHECKS 2 .. 7 180Q.90 9089.26 , ;2&19 385.67 b9 )3 8703.59

CHECKS 252 106.48 8597.11 _~$~1 99.28 2~~O. 55.• 36 . ~ P9 ~- .

84q2:~7

CHECKS 256 1217.86

~: )1 122C1.61

CHECKS 258 339.42 6885.' 9 ..jl.qs 90.00 10 6795.19

CHECKS 254 131.07 69 6664.12 .-.s3 96.2Q 255 41.q7 • 1 6526.£11

~. 6000.0 0l

g

12525.41 ,", CHECKS 257 780.61 117l1S.80

~60 776.09 261 1539.88 .5 9Q29.83

CHECKS 259 1804.90 bg 762~. 93 , ~"62 345.28 ~7 7279.65

CHECKS 267 110.85 bg 7168.80 ~5 12.28 a9 1156.52 It 6000.00D9 BO 13156.52 ,

20S

~q2z

leas·

~q6

t47

t4a

49

SO

S1

c'"'

I

25S

256

257

258

259

260

261

,62

267·

CHECK StJl1MA:Ry

• INDICATES SKIP IN CHECK N1LrHBERS

I

I.

)!UCDcn-/{'--.-----

- / I _.. _" I
SCHEDULE OF WINDING DOWN COSTS PAID 3/23/93 - Pr•••nt

CrECK. PAYEe EXPENSE AMOUNT

1994 ; \

i

AonI-g..& I

333 ;JadU Bennett 'payrol $&8050

1094iORL. legal fHl $1.435.13

1(SIt7 .DC Tr••surer COt'P ftIing fH : S25,00

.... 1M I ! I

3J2 :Jadu BenMft -- payrotl S460.50

1014e Dept 01 Taxation :VA. VVIH I set.a -- 10SM5 Comp of Trus. efT1PlOY tax S21."

101iM4 Claude McDonald 'aces S7S.CD

• 10143 VA DeDCoiT. VA_ S1Q.01

105iM2 eresw·... 1993 tax 11.011.34

109-t1 DeptofTa ~VA wIh IJ 11'.31

10940 C...... tFedwA\ t $1...11

Feb"'- f I . -

331 Jadd8ennel ~.payroI I S46O.5O

'~- YADeloITix • IVA_-- - -- - ... J

-S1UI

10938 Crestar ban« 'FedwA\ . S'~7'

10937 OR&.. !IegIII fees I" - S1.11U1

10938 Pat rJOri :JegaI fees i S4OO.oo

"""94 I f

330 IJadd Bennea iPayroi i S46O.5O

10935 !Crest8t bank UI••lDIoy tax I S71St

_1~_,ORL legal fees $9&4.17

10933 !Cept of E",,*,,'Serv 'empioyta $.55..10,

10932 Dept of Tax VAwJh $11.31

10931 'Oeot of Tax ,VA Wft\ $1'.31

10929 :latTY Hayes 8Cd ! S8.325JJO

Dec '93 I I

329 .Jac:ki Bennett payroll $660~50

Nov "93 ; 1

328 :JIdd bemd payroll : $480.50

10928 !Dept of Tax -VA A

Ities) I

10921 .Dept of Employ Serv ~tax $31.20

10926 IClaude McOcnakS acd I $75.00

10925 ORL :~fees ! $801.43

10922 fClaude MeOonatd aee:s I S7'5.oo

OCt "93 I !

327 lJadti Bennett payrcl $480.!0

10921 !Oept of TAx 'VAwJh , $19.

10920 'Crestat Bana fe-d wh\ $16602

10919 :ORL ~al fHs (9193) I $1.95$.51

~pt '93 I

325 Jadu bennett ~yrol $460 50

326 Jado 8ennen p.ayroU $46O!O

10918 Arner Tech Excrange computer rer~l $1 505 20

10917 IRS tax 75 '3

10916 iUS Postal ServIce b\Js.neS$ repty $26000

10915 10RL legal fees (8193) $8.231.25

10914 Dept of Tax VA Wt1'1 S~9 38

10913 'C,"tar ban« IFed~ I $181,02
CHECK. PAYEE ExPENse AMOUNT

Ave; '"93 j

324 Jackl et!rH'~en P~y~ S460 so

10912 DC Does unemote)' tar $99 7g

10910 QRL regal fees (7193) $1.378 SO

10908 'Claude mcDonald ac:d $7500

July '93

10901 Dept of Tax VA." $19,31

10907 Crestar Bana fed wJ1'\ $166 02

10904 IDept of Treast.ttY ;4ltl quarter tax , $3.757.33

10903 'Oeot of Treasury tax S2.88600

June .., t i

3221Jadd berll'" T~ i 1243..20

323 Jadd Bennd l~ J S4e0.5O

10902 MaNdl PhefDI ·office expenses (4193) I S181."

10901 'Campt of Treasury ;employ tax (4-~) 571.30

1()89g tDept of TAx tVA """ 54.a

10898 tDept of Tax ;VAwJh : $9.28

108871etnt. bank '\ ,Fed whl 1 S57$.02

"0896 Jeff Sent.. Comovter consutt $1.000.00

10n5 .American Home Produc:Ia . I S411.12

- 10894 Amer. Teeh Exchange computer rentat $2.257.80 ....

10893 ORL legal fees (~3) $1.031.25 . ,

i~'93

320 .Ja<::lU Sennett payrol,.. $24320

321 Denise Rattvnan payrol $118 &&

, 0892 Betsy Sc"':'wengef retmc ltaxes) 5903.63 "'"'

....

'0890 Claude McOoNid ao:t $165.00

- 10889 ORL legal sertJCeS (4193) 51.800,00

0888 Manan Pheios off expenses (3193) 5&480

::-. AortI "93

-, 3'" JacktBennen payl'Oit 524320

3' 5 OenJs4! ratf'rtman pay1'Ofl $412.12

... 3'6 Oenase Raftlrnan payroa 5285.74

317 Jadu Bennett payrod $24320 t

318 Jadu Sennett payroI 1243.20 ~~ ,

C'

319 Oen.seRathman payroI $702.21

10887 Oept of Tax :VAwlh $32.71

10886 DC EmC)ioy SeN Dew'" $6500

10885 ICrestar Bana :fed wl1'\ $522.79

10884 Jeff Senter c.orncuterconsun $35000

10883 State of Me MOw", $15,00

10880 Staples o~ st.:ocf1es $3122

10879 Jeff Senter computer COfI sull $400.00

10878 Man3tt P"'e1Os off exp (1-2/93) 5236 20

10sn \1anatt Fa'''e1Cs ~e-;al_f~s \1·2.193' $04.625.'3

10874- ORL I~al fe~s <3.'93) $1.950 00

10873 larry Hayes aCd $2.020.00

1C872 C:a\.ide \,4cCcna:d acx:: $' 5750

10871 DC Tresuref DC corp filing fee $25,00

TOTALS ;4,~3-0resent) $61.044 n

~ft'~Ill_' - .,... / td .o?t
r

~···~··~··_'-~---·~· __···~_.~""~···c "~~!IJI!IlII!'JI!!!ll'IIIIIlI!IIIll!I!II!II!!II!~. 1!IlII!JI".4'1 •.>~;

;:~

1

AFFIDAVlT OF JACKJ BE~~TT

1. I am cWTently keeping the records and books for Americans for Harkin, Inc. (the

··Comrnineert).

2. \\'hen the campaign ended~ the Comminee began renting computer equipment from

,-\.rneric3.n Technology Exchange. The total cost per month to the Committee totaled

$752.60. The Committee continued renting the equipment on a monthly basis through

June of 1993. These computers ~'ere used only for wind.<Jown purposes.

''t .__ _ - - .. _ _ __. ._

1._,.,.,........t<...... '..-,. -- - •.. .,.,.,->.,. ......., . .1_ _.

r_" ............ -,r~_ l~......... ~._tit hereby swear or affirm. under penalty of perjury. thai,"to the best oemy 1c.nowledge and

belief, the above statements are true and correct.
ST:\TEME~T OF J.4.CKJ 8E~~Err

1 I am currently k~eping t.~e records and books for Americans for Harlun. jnc (the

'·Committee").

2. The attached schedule shov-'s several items \\'hich the auditors have listed as accounts

reCe1\ able. As of thIS date. the Committee has not collected these amounts, totaling

S1.070. and has no prospect of collecting these debts in the futu.re.

3. The Comminee no longer considers these items as accouJ1ts receivable and has written

them off.

I hereby swear or affirm~ under penalty of perjury. that to the best of my knowledge and

belief, the above statements are true and correct

L/

AftACDU!-,---..... _ __ /t< "., #_
Anachmenl2

Debts Owed to Committee 'N'hich Have Been Written Off

Boston Globe

Chicago Tribune

~e\\'sday

TOTAL

:'1.

'\t. \ ,

$210~OO

190.00

610.00

1,070.00
A~~ACKHENT 3 Accounts Payable

BERGER. POPPE. ·JASIEC Be ~l6.C""'SEK

CO\.."'!'rS&1..LDIIlS AT ..

3$0 "n" VL""t.-c. " 1'1.00.

'" E"W' yO ~~w YO •• IOUe

Kf-"a,. 8£.01:.

.JOL~,J .;...."'l&C·

RC••'" A "C.4C LA..st a . ....,l..%...:..I.JC 'If POpp~·

·....,....•• o. ".,. 'llt"D If .I .

"tf"".£. OP ,. ,. '0 ft .

...·rw "'.".T On'1C'&

SC'rTI .-00

O~t alUDOt flt..r.k

"OaT Lca. "'••••1' 0"0••

·aou ....00.1

..tu:.x .).S' OM

March 3, 1992

.,..

Lynn Utrecht, Esq.

Manatt , Phelps, Phillips' Kantor

1200 New Haapshira Avenue, M. W.

Suite 200

Washinqton, O. c. 20036

Re: Americans for Harkin

... ;.

Dear Lynn:

Enclosed is a statement for my services together with a ~, statement ot my leqal ti~e since December. As you can see from

comparinq the stateaent with the ti•• records, I have adjusted my

bill to come closer to the ~umber I previously talked about in my

discussions 'With the caapa1.qn. Please let me know if my bill

presents any probleJlS. Also, if you need any more or different

paperwork, let me know.

Very truly yours~

Henry T.

"

Berqer

HTB/me

lftjClllCft~II*,- •

Pap L7 tCc2I \
'BERGER. POPPE. ·JA~·lEC Be ~C1lASEB.

J:>o "rTft ."L'6\.'"'E. , ...- FLOC.

'rw YC"" _ SEw yoa& loUe

H L'Va., T a£aota -JO.~,J J ....~t&C·

ao.e., ... ~CLLSE'"

W'll..LI..tJC III. P06'.&·

...... &...1:. 0"" ,. .."" ", ,J a.....a

'C ••a •• 0"" Y ,c "to ......

\ala, eoa . l~t a "I:'W ." ••••., O".,ea tUtTt __

OJ'. • an,.. Jt\..to3lA

PORT ~Il& ...rw .,••••., o?oe#J

~ou ".-oo...t TtL&X: IM-...

March 3, 1992

Lynn Utrecht, Esq. Mana~t, Phelps, Phillips , ~antor

1200 New Hampshire Avenue, Ns W.

Suite 200

Washinqton, o. c. 20036

Re: Americans for Harkin

For Professional Services Rendered:

Leqal services rendered pursuant to

retainer aqreement dated Dece.cer 5, 1991

as set forth in annexed tim. records in

connection with obtaininq ballot position

for Sen. Toa Harkin and Deleqat. and

Alternate slates in support of his

candidacy in Nev York State

Previously paid

BALANCE DUE

$12,940.00

4,OQQ,UQ

8,940.00

--,-~- ~!
. --,§J)'~'-';;!I

;~ ~<: <~

BERGER, POPPE, ~ANIEC , MACKASEK

350 Fifth Avenue New Yorx. N.Y. 10118

Telephone 212-695-1515

Election Law

.~~~~~~~~~~~~~-~~~--~~-~~-~--~~~~~~--~~~-~~~~~~~~~--~~~--~~-~-~~_.~-~~~-~~~~~

Oate Attorney Description Hours

bl00010 Election Law - Harkin

Correspondence with Marino - Delegate 1.80

list changes; Review petitions:

Preparation of Delegate Slates; Petition 3.00

training;

2/02/91 htD

2/03/91 htb

2/10/91 htb

2/13/91 htb

2/31/91 htb

1/02/92 htb

--"'03/92 htb

"

-.

U-07/92 ht}:)

1/08/92 htb

1/09/92 htb

~J'

1)110/92 htb

1/11/92 htb

1/12/92 htb

1/13/92 htb

1/14/92 htb

Review Documents re: NYS Deleqate

selection rules:

Office Conterence with Socarid••; ~:-

Out of Office Conference with are.-

coordinators:

Review Documents re: letters to

deleqates:

Out of Office Conference with Socarides

re: petitions and instructions:

Drafting Documents re: Instructions for

petitioners; TC - RS, State Board:

Review Documents re: 'instructions tor

petitioners, TC - RS:

out of Office Conference with

coordinators - delegate slatinq;

Oraftinq Documents re: designation of

representative: TC - RS:

Out of Office Conference with RS re:

slatinq, affirmative action:

Preparation of Delegate slates:

Preparation of Deleqate slates;

Preparation ot Delegate slates;

1.10

2.00

1.20

.20

1.00

.80

.80"

2.00

.. 50

4.00

4.00

5.00

1.00

lftJCIMiltLf .~ Pale l'i~
Election Lav

- 3"~<~~iii;~:=~~"'I'!ll-~;-~lIIII!I'J!V-I-~""'~l'fl!!l!i!r!!i'lll!l'!:~"~~·· ~~'7!lli11\11J~IJl!f!~-LS~*""""~"""""1""""1~'~~-~--'--'-'''''--~_:''-''''''*''''''''''''''''''----}!!;'''''''''''' ..,-;;---.--~---1

Telephone 212-695-1515 j

1

Date Attorney Description Hours

bl00010 tlection Law - Harkin

11/23/92

11/27/92

.1/28/92

11/29/92

~1/30/92

12/03/92

12-/04/92-

i2!,05/92

2/06/92

f2/07/92

1

2/08/92

htb

htb

htb

htb

htb

htb

htb

htl)

htb

htb

htb

Preparation ot Affirmative Action

Compliance;

out ot Office Conference with RS and

coordinators re: petit.lon ~t.U.'

Drafting Documents re: cover sheet:

Out of Oftice Conference with regional coordinators:

Telephone Conference with Wocten,- .~.

Asotsky, Socarides: Prepare cover sheet;

Review petitions:

Review Documents re: petitions;

Review_ Oocum~nt~ re: petitions:

Review Documents re: cover sheet:

Revise; Review petitions:

Review Documents re: petitions:

Review Documents re: petitions;

Review Documents re: petitions:

1.20

3.20

2.80

1.70

2.20

1.50

3.00

2.20

3.40

2.80

8.00

aro9/92 htb Review Documents re: petitions: 12.00

'2910/92

2/11/92

2/12/92

2/13/92

htb

htb

htb

htb

Review Documents re: petitions:

Review Documents re: petitions:

Review Documents re: petitions: Bind

petitions:

Complete binding: File petitions - Westchester and Albany: Review other

petitions:

14.00

12.50

14.00

10.00

••
D&:if.G£R, POPPE, ';~IEC , MAClCASEK

)50 Fifth Avenue New YorK, N.Y. 10118

Telephone 212-695-1515

Election Law

._--------------------------------------------------------------------------- Date Attorney Description Hours

._----------------------------------------------------------------------------

b800010 Election Law - Harkin

htb Telephone Conference with State Board,

RS: .50

129.40 $25,880.00
FEDERAl ELEeT'0" CO,\,"-11 S5I0

June 2, 1994

KEKOR.ANOUM

THE

~C- ASSISTANT~~rr DIRECTOR

AUDIT OIVI ON

PAYMENT 0 $35,316 RECEIVED rRO" AftERICANS FOR HARlIN

JOHN c. S

STAFF DIRE

FROM:

SUBJECT:

TO:

THROUGH:

This informational aeaorandua is to advise you of a

$35,316 payment received from Americans For Harkin {the -- Committeel_. The payment is a partial payaent received in

response to the- $S9~911 -initial- tffpaymem dete-raina-ti-on

contained in the final audit report and represents stale dated

checks ($2,283), receipt of prohibited contributions ($7.373)

and receipt of contributions in excess of contributor'S

limitations ($25,660). The Committee has not repaid $24,595

which represents matchin9 funds received in excess of

entitlement. The Audit staff is currently reviewing the

Committee's response to the aatchinq fund entitle.ent finding.

Attached is a copy of the check, the letter which

accompanied the payment, and the receipt showing delivery to the

Department of Treasury.

Should you have any questions reqarding the payment please

contact Ray Lisi at 219-3720.

Attachments as stated
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May 25. 1994

Kim 8riaht-Coleman.

Associate GenemI.coun.I

Federal Election Commission

999EStreet.N.W.. "'v .-.-. \10 .-'t

WashinatOft. D.C. 20463 \...

Dear Ms. Bright-Co~ 4J'~- ~:,2iiN !.~-::~.~ -

Enclosed is a check in th: ~t·.;(smi6"'=:'~~ti~t:t~ Treasury, as

requested by the Federa1 Election Commission ia its letter of MardI 22, 1994. As the Committee

set forth in its Response to the Interim Audit Report. the Commia.ee believes Ibete are sipifica.nt

legal issues underlying the Commissioa"s request that this amouat be pdcIto the Treasury.

Ho~e"·er. the Comminee bas decided to make the payment. and brina these issues to the

Com.nilSsion's anentiorfas reasons why the-Commission-should taboo furtber action-\\lth-respecl--

to these maners..

For the reasons set forth below, the Committee respectfully requesu that the COllUDission

accept this payment as final resolution of the excessive and prohibited refund issues and take no

further action with respect to them.

1. t\S the Committee noted in its response to the Interim Audit Report. there are

significant problems and unc::ertainties y,ith the application of samplina and the projection of the

amounts of \;olations. These problems are summarized below.

c 1. The Commissioo's authority to request paymentS to the Treasury based on

projections is uncertain- This is a departUre from past practice and was implemented. not through

regulations as \V3.S the Commission s policy regarding staJe-dated checks. but through the issuance

of a policy statement without any opportunity for commenl. Thus, there are two legal issues ••

the authority of the Commission to r~uire payment to the Treasury instead of refunds to the

contributors. and the lega1i~' of the use ofstatistical sampling to project the amount of\iolations.

.A..s to the payment to the Treasury, this is a major deparnue from the

Cornm~sslon' s past practice, and the Comrninee believes that such a policy should be

implemented" if at all. through regulation~ as the Commission did with stale-dated checks. The

Committee 'believes that the requirement to pay these amounts to the treasury is a new rule oflaw

Lhat the CommIssion is required to establish through regulations. 2 USC §437f(b). ~1oreover,

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because this policy ~·as not published for comment th~re are several issues that "'e believe the

Commission may not have full)' considcred. For example. if exccssi,,'c contributions are not

refunded to the contributor. \~,.hat ~,II the effect be on a contributor ,,'ho may have exceeded his

or her 52S,000 annual limit? Ordinarily. such contributors seek to mitigate their violation bv

requesting refunds. : et~. under ~e CommIssion' S PQlicy the Commattee "'ould either be required

to refund such contnbuuons t'W1ce •• once to the Treasury and once to the contributor •• or to

leave a contributor "ithO'-1t the abilit), to mitigate.

Thus~ in order to fully consider the impact of this polic)' ~e believe that the

Commission should implement this DOlley only after an opportunity for public comment.

As to the use of statistical sampliDc for projectina the amount of violalioas. it is

unclear whether the Commission has the authority to use samplial to establish the amouot of

violations.. 'The cases cited by the Commission are in the dramatically different context of

Medicare and Medicaid !faud, where the courts DOted that there was no practical way &0 audit

each and every transaCtion. In fac~ in the case of publi~Jy rmauced candidates, the auditors do

revie~_ ~~~l!~?!1. c~k. ~j.ssi~ .=~~ c:'iffic:ulty inf::~illl the courts that this lStl\e same type of Slt'UatJon as the M tcare fraud cases Ie eel upon.

Moreover, medicare fraud is unlike regulation of c.ampaip activity ill which there are core First

Amendment issues at stake.

2. In addition to the legal uncertainties underlying this policy, there are several

additional reasons why the Commission should implement st.lCh a policy, jf ~t a1l._onJy_ through

regulations. Fi~ the auditors have stated that this method has been ftapproved" as valid.. -yet.

the approved use of the sampling technique "'"35 for a very different purpose - the review of

matching fund submissions. In (act, that is a very different use and it operated very differently

from the use of sampling to project ,iolations. In revi~g matching fund submissio~ the

sampling was done on a rolling basis. Thus.. as the Committee" s expertise in revlewing

contributions and preparing submissions increaseci the hold back percentage could decrease. The

auditor" 5 current use of sampling to project violations does not take such changes o\'er time into

accounL'

Second. the auditors' selection of some portions of the population to perform a 100-/.

review may skew the results. 11le auditors admit that they selected some subsets of contributions

to perfonn a 100-11 review precisely because they believed those ponions of the contribution

population would include more problems, It is unknown what is the effect of such a method of

I The apparent corporate contributions found by the auditors illustrate the possibility that the

auditors' method does not accurately reflect the Comminee's changing ability to 5Crttn for

prohibiteds and cxcessives. The auditors found orJy 3 prohibited contributions. totaling S750.

All three were received on or before October 10. 1991. The Committee registered on September

::3, 1991. The fact that the auditors found no latcr prohibited contributions suggests strongl) that

the Committee staff simply became more sophisticated at finding them and rejecting and

that there were QQ prohibited contributions received after October 10, 199 t. instead of $1,000 in

pronibiteds after that date.
combined sampling with 100-1. review, Thus. it is incorrect for the audilOn to imply that this

method has somehow been approved or found valid as the auditors are usina it to project the

amounts of violations. This is an adJitional reason ,,'hy the use of the sampling and the specific

mcthodoloiY uS(d shouId be put out for comment so that the Commission can obtain expert

advice on its validity,

The Comrnin~ believes that the amounts of the projected excessive and prohibited

contributions .m likely to be o"'erstated based on the auditors' methodology. As a result.. the

Commission should not in addition seek any penalties from the Commiuee since the payment

made to the Treasury is likely to be more than the actual amounts of such unresolved

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.. - 11. The amounts of unresolved excessive and proIu'"'bited CODtributioftS identifted by the

auditors. even if the projected numbers are accepted, .e statiSIicaJJJ insignificant. The

Committee received contnOutions ofover 3.soo,000. The total amo..mi'ofpiohibiteds (ouod was

to•.J7~~,;~~~!~2%~~W·rr"~~~~.~.flI!.. totaI

re"" --.moum VI COD I. wu ;,u; me plOjeCted amount was

522.,060 (0.70.4 of total individual contnDutionsl .• The total amount of excessive PAC

contributions \l/U s3~600··(<r¥%\~t~econ~iNtfOriSj~c ~ue.-:-~~~.,.l

Although the audit repon notes that these amounts are deemed material~ it is hard to

imagine what materiality threshold would find 0.2%.. 0.7% and 0.1% to be material. Certainly.

these are extremely small percentages ofComrninee receiptS and su8acst that the Committee did

~- excell-ent job- -in -reviewing --arKr-processing~ its-contributions. - -Witb- over S3~S million in

contribution receipts. the Committee was bound to make some mistakes. These percentages of

etTors are very small. For this reason.. the Commission should take DO funher action with respect

to these issues..:

Ill. As noted in the Committee's response to the Initial Repayment Detenninatio~ the

Committee has insufficient funds left to pay its outstanding obligations and winding down costs.

Thus, the Committee has no funds to pay any civil penalties. The Committee would like to

disburse its remaining funds and terminate as quickly as possible. For this reason. the Committee

decided to pay the amount requested by the Commission in the beliefthat the Commission should

accept this payment as fmal settlement of these maften. Tbe Committee WJe5 the Commission

to consider the Committee's fmancial situation in resolving this maner.

CONCLVSION

For the reasons outlined above, the Comminee respectfully requests that the Commission

The Commission should also take into account that the Committee followed the

Commission's instruction in the June 2. 1992 lener. It is the Comminee's belief that all

presidential campaigns were not treated the same with respect to this refund issue, and the

Committee should certainly not be penalized for fol1o"'i.ng the Commission's direction and

holding onto these excessives and prohibiteds instead of refunding them.

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accept this pa)'ment and take no funher action \'with respect to the Comminee's unresoh ed

excessive and prohibited contributions. To the best of the Comminee·s kno\\-Iedge. the

Commission has found no other "lolations of any provisions of the Act or regulations "ith

respect to the Committee. This is unusual for a presidential campaian and demonstrates that the

Comminee made significant good faith efTons to comply with the requirements of the Act and

the regulations and was successful in so doing. Under these circumstances. no further action IS

v.·arranted.

RespectfuUy submitted.

Lyn

+~UtreebI

General Counsel

AmeriC&DS fot HarkiD, IDe.
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Jun@ 1, 1994

RECEIPT FROM THE

UNITED STATES DEPARTMENT or TREASURY

FOIt A

PAYMENT TO THE GENERAL FUND OF THE U. S. TREASURY

Received on June 1, 1994, fro. the rederal Election Coaaission

(by hand delivery), a check dravn_~~ Cr••tar _~a~~~1~h.ck.'109S1)

in the amount of $35,316. The check represents a payaent froa

Americans For Harkin for stale dated checks ($2,283), receipt of

prohibited contributions ($7,373) and receipt of contributions

in excess of contributor's li.itation ($25,660).

__The _paymt!~t should be deposited into the General Fund of the

u. s. Treasur-y.

Americans for Harkin

A80unt of Payment: $35,316

Presented by:

Federal

Recelved by:

~~~~-~ for the

Un ted States Treasury
FEDERAL ElECTIO~ C01~1t"\lSSIO~

BJOOS896

July 5, 1994

MEMORANDUM

SUBJECT: AMERICANS FOR BARKIN, INC. - AUDIT ANALYSIS or

RESPONSE TO THE FINAL AUDIT REPORT

Th~ followinq is a summary of the Audit Division's analysis

of the COlUlittee's respo-nse to- the Final-Audit Rtport.

On Kay 23, 1994, the Committee responded to the

Commission's initial r@payaent deteraination contained in the

Final Audit Report that the candidate was not entitled to

$24,595 in matching funds received and should repay that a.ount

to the U.S. Treasury pursuant to 26 u.s.c. S9038(b)(1).

Analysis of Information Submitted

.~ In its response the Committee provided copies of paid

Committee checks, vendor statements and invoices in an att••pt . l, to demonstrate that the Statement of Net Outstandin9 C.apaigD

Obligations (NOCO) was incorrect, as presented in the final

report. Further, the Committee provided a schedule of vindin9

down costs paid for the periods August 2, 1992 through March 22,

1993 and from March 23, :993 to April 30, 1994. The windin9

down costs presented on the schedule totaled $186,437.1/ It was

noted that 51:5,392 was paid between August 1992 and March 1993

while S61,045 was pald between April 1993 and April 30, 1994.

The Commlttee also anticlpated its remalning winding down costs

at April 30, 1994 to be 524,000. A copy of the Committee's

Sep:embe: :992 ~a~K s~a~ement ~as also provided.

1/ Al: a~ounts have been :~unded to the nearest dollar.

! TT!CD:ZllT _(_1) _

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The Audit staff reviewed the Committe.'s paid windinq down

costs and reduced the Coaaittee*s total (S186,43i) by $29,138 to

$157,299. These reductions were the result of:

(1) amounts already considered for NOCO purposes as an

account payable ($28,784), and

(2) payments to taxinq authorities representing penalti•• or payments wlthout adequate supporting documentation

and a re-issued vendor check listed twice ($354).

With respect to accounts receivable, the response advise.

that account. receivable is overstated in the ••ount of $1,070.

The Co..itt•• noted that certain a.ount. owed by pr••• entitl••, have never b.en collected, and are uncollectible. Ba••d upon our

analysis of the Coaaittee's accounts receivable, the Audit staff

concurs with this treat••nt. FUtther, the Audit ataff'."" . analysis revealed additional accounts receivable that appear to

be uncollectible. Relative to the treatment of the above

amount, the Aual~ ~taft has also written off an additional

$1,447.

The Committee provided documentation to support a

previously disallowed a.aunt ($4,940) as an account payable.

Baaed on a review of the documentation provided, the Audit staff

-concurs and has-- increase.d -the acco1,jnts _pay_~bl. fiqure

accordingly. Based on the above, the deficit at 8/3/-92 -haa- been

revised to $452,784.

Finally, the Comaittee's receipt activity post 8/3/92 was

re-examined. Based on this review, the total amount of matching

funds and privat~ contributions received durin9 the period

8/4/92 through 2/28/93 to be applied aqainst the 8/3/92 deficit :5 now calculated at S434,342.~/

On March 2, 1993, the Committee received its final matching f'~ fund payment of $14,547. At that time, based on the above

analysis, the Candidate's remaining entitlement vas $18,442;

. therefore, the Candidate did not receive any matching funds in

excess of his entitlement. Accordingly, no repayment pursuant

to 26 u.s.c. S9038(b)(1) is required.

If you have any questions regarding this matter, please

contact Lorenzo David or Wanda Thomas at 219-3720~

The amount calculated and applied in the final report was

overstated by approxlmately 530,000.

/

.1::!:-::':::'::1I _u:_"_/__ Page _~ of3_:__
Americans for Harkin, Inc.

Audited Stat.m~nt of Net Outstandinq Campai9n Obligations (NOCO)

at Auqust 3, 199~

(Oetermined as of 11/S/92)

REVISED 6/22/94

A•••ta

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Cucrerif;Asi.e.t a9 -- t

Cash on Hand

Accounts Receivable

Matching Funds

(Certified 1/31/92)

....... 4'" -.

Total curr.n~l.;.ti -.

. ~'pital Assets

Total Assets

--Lfabi liti-es

~ccount. Payable for ~'Oualified Caapai 9n _ Expenses through

7/31/92

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7,000

$135,291

$371,460

Aaount Payable to u.s. Treasury:

-Winding Down Costs

paid throu9h 4/30/94: $157,299 £/ !~.ti.ated winding Down Costs

post 4/30/94 24,000 ~/

$ 35,316 ~/

Total Winding Down $181,299

Total Liabilities $S88,O~:

Net Outstanding Campaign Obligations (Deficit) {S452.794)

(, A11ACEll!.~': --=--~t/-:---

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consists of amounts discussed in Final Report, Findings:

FOOTNOTES TO NOCO

(Revised 6/22/94)

This amount does not reflect a (eductic~ fer certain

outstanding checks determined to be stale-dated.

$ 7,173

11.8.1. - Excessive Contributions 22,060

Individuals

II.A.1. - Prohibited Contributions

11.8.2. - Exce ••ive Contributions

Political Committees

3,600

III.C. - Stale-dated Checks 2,283

~/

535.316

This -fi9-ure - r-epre-sents- actual -windin<l_dovn _~_osts paid for the

period August 3, 1992 through April 30, 1994. --Not -i-nelud.d---

is apprOXimately $1,000 in tax penalties and/or

insufficiently documented payments to taxing authorities.

This represents the Committee'S estimate of its remaining

winding down costs. The Audit staff vill review reports and

records as necessary to compare actual expenses to these

estimates.

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