3501 North 24*- Street, Phoenix, Arizona 85016 j (602) 957-7770 j www.AZGOP.org 

December A, 2012 

Tom Hintermister 

Assistant Staff Director/ Audit. Division 

Federal Elections Commission 

Washington, DC 20463 

REL Response of the Arizona Republican Party tp Preliminary FEC Audit Findings 

Dear Mr. Hintermister: 

This correspondence constitutes the response ofthe Arizona Republican Party (the "Party^) to 

the Interim audit report ofthe Fiederal Election ConrVmissibh (the ^FEC") concerning the Party's 

federal activities over the period January 1,2009 to December 31,2010. 

The Party accepts the FEC audit staff s recommendations regarding Finding 1 arid 3. Wie look 

forward to receiving additionai, specific recommendations regarding which reports and the 

necessary correcting entries the Party Is to make to bring our reports into full compliance. 

Regarding Finding 1, we note that during the period of this audit the Party contracted with a 

recognized accounting firm, that held itself out as qualified to assist the Party with its FEC 

obligations, to facilitate timely and accurate reporting. In the first quarter of 2012 the 

accounting firm notified the Party that the sole individual the firm employed to undertake FEC 

work was no longer with the firm and had not been for some time. That accounting firm 

subsequently terminated any work it was doing regarding FEC activities. We understand the 

Party is responsible for the integrity of ail of its reports, at the same time the Party was relying 

on the professional advice of a recognized expert to address the specifics of issues such as is 

addressed in Finding 1. The Party's reliance on the quality and integrity ofthe advice it recieived 

from the firm was obviously misplaced. We have since engaged the services of another firm to 

provide us with this assistance and we believe that this new service provider Is technically 

competent and appropriately meeting our needs. 

Finding 3 is largely focused on the timeliness ofthe Party's reporting of its financial obligations 

to third parties. The Party Is confident that it did timely report accounts received and payable 

more than 30 days. In reporting Its third party obligations the Party can only report the 

information it has in Its possession and when a vendor fails to subnriit their bills weeks or 
months after the services are rendered there Is not much we.can do. about the matter. It was. 

our experience with the debts in question that when the invoice did ultimately arrive the 

vendor would accurately report the date $ervlc6s: were rendered v/hile the Invoice might not 

have come Into the Part/s possession for sieveral weeks after the fact. We also note that: nearly 

every debt the audit determined was not timely reported was also a debt the Party disputed 

with the vendor. We acknowledge that the FEC's regulations require that the claimed debt be 

reported regardless of whether a payment dispute exists or not. We also note that this rule has 

the effect of overstating the Party's true debts as these accounts are subsequently 

compromised to a much lower payment amount. 

The Party has prievlously provided your onsite audit staff with all of the evidence ih its 

possession to substantiate our classification of various expenses as noh-allocable contributions, 

as discussed in Finding 2. The preliminary finding apparently concludes; that the evidence 

already supplied is insufficient. Therefore, tlie Party hjas asked each ofthe identified candidates 

and their consultants to provide whatever additional Information they have in their possession 

to further support the hon-allocable. cbntribution classification. Copies of the letters requesting 

the candidate committee'is assistance are attached for yoyr reference. As these, committees 

provide the Party with information we will promptly forward it.oii.to the FEC. In our 

communications with the candidate committees we have ali-e'ady indicated that iri the absence 

of any additional information the Party will be requesting reimbursement for excessive 

contributions. We will keep our FEC Audit Division contacts Inforrned of the progress of our 

dialogue with the candidate committees. 

The Party accepts Findings 1 and 3. We will promptly make the correcting entries as soOn as the 

FEC provides specific direction regarding whjch reports and what entries are appropriate. We 

have asked the relevant candidate committees for their assistance in addressing Finding 2 

concerning excessive contributions. We will promptly provide the FEC with any additional 

information we receive. 

Sincerely, 

Andrew A. Stevens 

Arizona Republican Party Treasurer 

Enclosures 

cc: T. Morrisisey 

T. Verschoor 

L Miller 

.»itm'.iMi..jLaMliUi'i 
3501 North 24*^ Street, Phoenix, Arizona 85016 i (602) 957-7770 | vtrivw.AZGOP.brg 

December 3,2012 

Joyce Schweikert Blue Point, LLC 

Treasurer 8707 E. Vista Bonita #240 

Schweikert for Cbngress Scottsdale, AZ 85255.-3214 

15749 E. El Lago Blvd. 

Fountain Hills, AZ 8526i8 

Via Certified Mall, Return Receipt Requested 

RE: Information Request for FEC Audit of the Arizona Republican Party 

Ladies and Gentlemen: 

The Federal Elections Cpmmission (the "FEC") has undertaken an audit of the activities of the Arizona 

Republican Party (the "Part/') forthe peribd January 1,: 2009 through December 31, 2010. The FEC has 

issued a preliminary audit report and among their findings they believe the Party has provided 

insufficient docurnentation to establish that various direct mail activities the Party engaged in with 

Schweikert for Congress are "non-allocable contributions." 

The Party has provided the FEC with any and all documentation regarding these activities in its 

possession. We request that you forward to me any documentation ybu may have among your books 

and records of the 2010 election cycle to supplement what we have provided the FEC. Specifically, 

Federal law requires that there be "significant vblunteer involvement" with any activities designated as 

non-allocable. The significant volunteer involvement is customarily documented with volunteer sign in 

sheets and pictures of volunteers handling the materials and delivering them to the. Post Office, We 

hope that with the additional documentation your campaign might provide we can Satisfy the FEC that 

the activities in question are non-allocable contributions. To that end, we are also providing a copy of 

this request to the consulting firm we believe was primarily responsible for these activities on behalf of 

your campaign. Please do your best to consider any source that may have retained the infbrmation 

required by the FEC. 
In the event that we are unable to satisfy the FEC that the activities were non-allbcable the result Would 

be an excessive In-kihd contribution from the Party to the Schweikert Campaign. The FEC preliminary 

finding is that the excessive in-kind contribution would be $16d>532. Aside from any penalties which 

may be assessed for the giving and receipt of an exipessive in-kind cbrif ribution. Federal jaw also, requires. 

the Party to use Its best efforts tb bbtain a refund ofthe contribution amouni over the legal maximum. 

If you have anyquestjons; .comments;.or concerns about thjs request please contact me at 480.440.1467 

or the Party's general counsel, Lee Miller at 602.300.5829. We appreciate your prompt attention to this, 

request. 

Sincerely, 

Andrew A. 3tevens 

Treasurer 

Arizona Repiibijcah Party 

cc: T. Verscboor 

L. Miller 
3501 North 24^ Street, Phoenix, Arizona 85016 | (602) 957-7770 | www.AZGOP.org 

December 3,2012 

Kristen Smith 

Treasurer 

Kelly for Congress 

9325 N. Centipede Ave. 

Tucson, AZ 85742 

Lincoln Strategy Group . 

80 E. Rio Salado Parkway #817 

Tempe, AZ 85281 

Via Certified Mail, Return Receipt Requested 

RE: Information Request for FEC Audit of the Arizona Republican Party 

Ladies and Gentlemen: 

The Federal Elections Commission (the "FEC") has undertaken an audit of the activities of the Arizona 

Republican Party (the "Party") for the period January 1, 2009 through December 31, 2010. The FEC has 

issued a preliminary audit report and among their findings they believe the Party has provided 

insufficient documentation to establish that various direct mall activities the Party engaged In with Kelly 

for Congress are "non-allocable contributions." 

The Party has provided the FEC with any and all documentation regarding these activities in its 

possession. We request that you forward to nfie any documentation ybu may have among your books 

ahd records of the 2010 election cycle to supplement what we have provided the FEC. Specifically, 

Federal law requires that there be "significant volunteer involvement'' with any activities designated as 

non-allocable. The significant volunteer involvement is customarily documented with volunteer sign in 

sheets and pictures of volunteers handling the materials and delivering them to the Post Office. We 

hope that with the additional documentation your campaign might provide we can satisfy the FEC that 

the activities in question are non-allocable contributions. To that end, we are also providing a copy of 

this request to the consulting firm we believe was primarily responsible for these activities on behalf of 

your campaign. Please do your best to consider any source that may have retained the information 

required by the FEC. 
in the event that we are unable to satisfy the FEC that the activities were non-allocable the result would 

be an excessive ih-kihd cbntribution from the Party to the Kelly Campaign. The FEC preliminary finding is 

that the excessive in-kind contribution would be $214,457. Aside from any penalties which may be 

assessed for the giving and receipt of an excessive ihrkind contribution, Federal law also requires the 

Party to use its best efforts to obtain a refund of the contribution amount over the legal maximum. 

If you have any questions, comments or concerns about this request please contact me at 480.440.1467 

or the Party's general counsel, Lee Miller at 602.300.5829. We appreciate your prompt attention to this 

request. 

Sincerely, 

Andrew A. Stevens 

Treasurer 

Arizona Republican Party 

cc: T. Verschoor 

L. Miller 
3501 North 24*** Street, Phoenix, Arizona 85016 | (602) 957-7770 j www.AZGOP.org 

December 3,2012 

Dr. Brian Dowley Coleman Dahm 8i Associates 

Treasurer 4715 North 32d Street 

Gosar for Congress Phoenix, AZ 85018 

PO BOX 2991 

Florence, AZ 85132 

Via Certified Mail, Return Receipt Requested 

RE: Ihformation Request for FEC Audit of the Arizona Republican Party 

Ladies and Gentlemen: 

The Federal Elections Commission (the "FEC") has undertaken an audit of the activities Of the Arizona 

Republican Party (the "Party") for the period January 1, 2009 through December 31, .2010. The FEC has 

issued a preliminary audit report and aniong their findings they believe the Party has provided 

insufficient documentation to establish that various direct mail activities the Party engaged in with 

Gosar for Congress are "non-allocable contributions." 

The Party has provided the FEC with any and all documentation; regarding these activities in its 

possession. We request that you forward to me any documentation you may have among your bOoks 

and records of the 2010 election cycle to supplement what we have provided the FEC. Specifically, 

Federal law requires that there be "significant volunteer involvement" with any activities designatied as 

non-allocable. The significant volunteer involvement is customarily documented with volunteer sign in 

sheets and pictures of volunteers handling the rnaterials and delivering them to the Post Qffice. We 

hope that with the additional documentation your campaign might provide we cap satisfy the FEC that 

the activities in question are non-allocable contributions. To that end, we are also providing a copy of 

this request to the consulting firm we beljeve was primarily responsible for these activities on behalf of 

your campaign. Please do your best to consider any source that may have retained, the information 

required by the FEC. 
In the event.that we are unable to satisfy the FEC that the activities were nori-allocab|e the result wOuid 

be an excessive inrlclnd contribution from the Party to the Gosar Campaign. The FEC preliminary finding 

Is that the excessive, invklhd coritribution would be .$8,iB73'. Aside from any penalties which may be 

assessed for the givilig and receipt of an excessive .in-kind contribution, Federa.l law also requires the 

Partytouse its best efforts to obtain a.refund of the contribution amount over the legal maximum. 

If ybu have.any questibns, comments or concerns .about this, i^equest please contact hie at 480,440.146.7 

or the Party's general counsel, Lee Millef .at 602.300.5829. We appreciate your prompt attention to this 

request. 

Sincerely, 

Andrew A. Stevens 

.Tt'easurer 

Arizona Republican Party 

cc: T. Verschoor 

L. Miller 
3501 North 24^ Street> Phoenix, Arizona $5016 | (602) 957-7770 | www.AZGOPiOrg 

Mr Hache: 1/1.8/13 

In our previous communication regarding Finding 2 of the interim Audit Report of the Arizona: 

Republican Party ("AzG.OP") we described the expenditures that are the subject of that Finding as nonallocable contributions. The AzGOP believes that these expenditures meet the statutory and regulatory 

definition of "volurtte.er exempt activity" as that exemption is described at 2 USC §431(8)(B)(ix) arid. 

431(9)(B)(viii). 

The AzGOP understands:that the exemption does not apply to "direct mail." We acknowledge that all of 

the expenditures that are the subject of Finding 2 were for communications distributed via the United 

State Postal Service: Nonetheless, we do not believe that any of expenditures constitute "direct mail" as 

the Federal Elections Commission ('FEC") has defined the term. "Direct majl" "meansany majling(s.) by a 

commercial vendor or any mailing(s) made from commercial lists." 11 CF.R. § 100.87(a). Inthe context 

of a "volunteer mail program," this means that mailed materials must be "distributed by volunteers and 

not by commercial or for-profit operations." 11 C.F.R. § 100.87(d). Mailers must .also be distributed to 

the state or local party's own existing mailing list, as opposed to a list purchased or rented from :a 

vendor. All of the Finding 2 mail expenditures were distributed using lists.: of addressees owned and 

maintained by the AzGOP.AII ofthe Finding 2 mail expenditures had a significant volunteer component. 

Counsel has advised us that there is no .explicit, unequivbcal statutory or regulatory guidance as to the 

minimum requirements for acceptable volunteer participation. The.legal guidance we have on this, issue 

draws heavily on a review of various FEC Matters Under Review on this topic. For example, it is our 

understanding that rnail printed by a cbmmercial printer does not disqualify the expenditure from fitting 

into the rubric of volunteer exempt activity. Factual and Legal Ahalysis of MUR 5841 (Arizona 

Democratic Party). 

For each ofthe expenditures ih question the AzGOP supplied a commercial printer with an address list 

drawn from the Party's own comprehensive list of registered Arizona Republicans as well as a graphical 

design for the mail item. The printer^s equipment manufactured the mail pieces, including printing the 

AzGOP's bulk rate permit number on each piece, and addressed them. The printer's equipment sorts 

groups of the mail piece according to USPS zip codes. AzGOP volunteers were responsible for binding 

groupings of any particular mail piece, placing them into USPS bags or trays ih accordance with USPS 
regulations and delivering the sorted mail to the relevant USPS facility. It is our viiew thiat the level of 

AzGOP volunteer involvement matches, or exceeds the level of volunteer involvement discussed in MURs 

5598 (Utah Republican Party) and 5841 (Arizona Derhocratic Party).. Qur volunteer involvement genei^aMy 

matches with the requirements of the Proposed Interim Enforcement Policy on Volunteer Activities 

issued by the FEC on March 11,2010. 

In preparing this response the AzGOP has .two challenges. The first is the liack of clear.direction;from the 

FEC as to the minimum level of participation, required to establish adequate volunteer involvement in a 

mail program. Our undeirstanding of the mihirnuhi criteria is setout above and the AzG.QP believes it has 

already provided the FEC with sufficient evidence of volunteer involvement regarding all expenditures jn 

support of Congressman Schweikert to establish that those expenditures should not be trieated as 

contributions by the AzGOP to the Schweikert 2010 campaign. 

In addition to the Schweikert expenditures Finding 2 also covers expenditures ih support of the Gosar 

2010 and Kelly 2010 campaigns. As we discussed while you were conducting youir field work and in our 

last written response, the AzGOP experienced a complete change In its leadership and staffing in 

January of 2011. Our second challenge is that, during this transition, records of previous campaign 

activities were discarded. This includes the documentary evidence of volunteer involvement in the 

Gosar and Kelly expenditures. We have contacted the principals in those two committees and requested 

that they provide us with any documentation .they may have retained regarding these ^activities. They 

have none. We have now requested that those individuals who, in 2010, were responsible for these 

expenditures provide us with affidavits attesting to their understanding of the requirements to meet the 

vblunteer exemption to the contribution rules, that the expenditures did in fact meet these 

requirements, that they contemporaneously collected evidence ofthe volunteer participation and that 

this evidence was on file at the AzGOP during the 2010 election cycle. We acknowledge this record 

keeping deficiency but we aire confident that none pf the expenditures discussed in Finding 2 constitute 

contributions, let alone excessive contributions, to the committee cited there. 

You have also asked why this volunteer exempt activity was reported on Schedule F rather than 

Schedule B. During the time period of this audit the AzGOP relied on personnel from the Salt Lake City 

office of a nationally recognized accounting firm to prepare and file all of o.ur FEC reports. Here in the 

AzGOP office we maintained our financial records using standard small business accounting software. 

On a regular basis we would provide our data and reports to our accountants in Salt Lake City and they 

would use the information to. prepare the appropriate FEC reports. Our accounting staff and the 

accounting firm's personnel were ih constarit communication but we reliied entirely on the accounting 

firm's individuals, who held themselves out as experts In FEC reporting matters, to create, and transmit 

all ofthe information that was reported to you. As we previously discussed, it has subsequently become 

apparent that the accounting firm vyas experiencing significant internal challenges in this portion Of its 
priactice. Thbse issues were never brought to our attention and vie trusted the firin to bie,filihg the right 

reports at the right time. If you will advise us which amendrnents are necessary to properly report these 

volunteer-exenript experiditures we will promptly filje the ahfiendnients. 

A concern was raised whether the AzGOP transferred some or all of the amount.it is permitted to. 

expend as a coordinated cOntribu.tibn tip the Natibnail .Riepiibiican Congi'essional Committee ("NRCC"). 

We have spoken with the individuals who served as the Party's chairnian and treasurer during the 2010 

election cycle and they have no recollection of signing any documents making such a transfer to the 

NRCC. To the extent such a transfer may have occurred the documentation memorializing it wpuld have 

been kept with the documentation of the volunteer participation in the expenditures. As noted above, 

those documents were discarded in early 2011. 

Please let us. know of any report amendments that may be necessary to properly account for the 

volunteer-exempt expenditures that are the subject of Finding 2. 

Respectfully,.