Final Audit Report of the 

Commission on Freedom's 

Defense Fund 

January 1, 2007 - December 31, 2008 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(tiie Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial compliance 

with the Act.' TTie audit 

determines whether the 

committee complied with 

the limitetions, 

prohibitions and 

disclosure requirements 

of the Act. 

Ahout the Committee (p. 2) 

Freedom's Defense Fund is a non-connected and multi-candidate 

committee headquartered in Washington, DC. For more 

information, see the chart on Committee Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Offsets to Operating 

Expenditures 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Contributions to Federal 

Candidate Conunittees and 

Other Political Committees 

o Independent Expenditures 

o Refimd of Contributions 

o Other Disbursements 

Total Disburseinents 

Commission Finding (p. 3) 

• Disclosure of Independent Expenditures 

$2,215,319 

7,056 

$ 2,222,375 

$ 2,079,920 

62,894 

62,499 

2,600 

24,000 

$ 2,231,913 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to the matter 

discussed in this report. 

2 u.S.C. §438(b). 
Final Audit Report of the 

Commission on 

Freedom's Defense Fund 

January 1, 2007 - December 31, 2008 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Audit Hearing 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summary 

Commission Finding 3 

Part IV. Commission Finding 

Disclosure of Independent Expenditures 4 
Part I 

Background 

Authority for Audit 

This report is based on an audit of Freedom's Defense Fund (FDF), undertaken by the 

Audit Division of the Federal Election Commission (the Commission) in accordance with 

the Federal Election Campaign Act of 1971, as amended (the Act). The Audit Division 

conducted the audit pursuant to 2 U.S.C. §438(b), which permits the Commission to 

conduct audits and field investigations of any political committee that is required to file a 

report under 2 U.S.C. §434. Prior to conducting any audit under this subsection, the 

Commission must perform an intemal review of reports filed by selected committees to 

determine if the reports filed by a particular committee meet the threshold requirements 

for substantial compliance with the Act. 2 U.S.C. §438(b). 

Scope of Audit 

Following Commission approved procedures, the Audit steff evaluated various risk 

factors and, as a result, this audit examined: 

1. The consistency between reported figures and bank records; 

2. The disclosure of individual contributors' occupation/name of employer; 

3. The disclosure of disbursements; and, 

4. Other committee operations necessary to the review. 

Audit Hearing 

FDF declined the opportunity for a hearing. 
Part II 

Overview of Committee 

Coinmittee Organization 

Important Dates 

• Date of Registration June 7,2004 

• Audit Coverage January 1,2007 - December 31,2008 

Headquarters Washington, DC 

Bank Information 

• Bank Depositories Three 

• Bank Accounts Four Checking Accounts 

Treasurer 

• Treasurer When Audit Was Conducted Scott B. Mackenzie 

• Treasurer During Period Covered by Audit Scott B. Mackenzie 

Management Information 

• Attended FEC Campaign Finance Seminar Yes 

• Who Handled Accounting and Recordkeeping Tasks Paid Steff 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand ® January 1,2007 $ 22,538 

Receipts 

o Contributions from Individuals $2,215,319 

o Offsets to Operating Expenditures 7,056 

Total Receipts $ 2,222,375 

Disbursements 

o Operating Expenditures $ 2,079,920 

o Contributions to Federal Candidate Committees and 

Other Political Committees 62,894 

o Independent Expenditures 62,499' 

o Refund of Contributions 2,600 

o Other Disbursements 24,000 

Total Disbursements $ 2,231,913 

Cash on hand @ December 31,2008 $ 13,000 

^ As a result of the FDF's response to the interim audit report, this amount, as well as the amount for operating 

expenditures, has been revised. See page 4. 
Part III 

Summary 

Commission Finding 

Disclosure of Independent E«xpenditures 

During audit fieldwork, the Audit staff reviewed FDF's disbursements for media buys 

and questioned $97,896 of the disbursements. Of tiiis amount, FDF had reported $19,001 

as independent expenditures and $78,895 as operating expenditures. In response to the 

Interim Audit Report, FDF provided documentation demonstrating that the costs ofthe 

independent expenditures were $62,499. FDF also amended its reports to correctly 

disclose all but $11,869 of tiiis amount as independent expenditures. Appropriate 24/48-

hour notices were not filed for independent expenditures totaling as much as $43,498. 

The Commission approved this finding. 

(For more detail, see p. 4) 
Part IV 

Commission Finding 

Disclosure of Independent E#xpenditures 

Summary 

During audit fieldwork, the Audit staff reviewed FDF's disbursements for media buys 

and questioned $97,896 of the disbursements. Of this amount, FDF had reported $19,001 

as independent expenditures and $78,895 as operating expenditures. In response to the 

Interim Audit Report, FDF provided documentetion demonstrating that the costs of the 

independent expenditures were $62,499. FDF also amended its reports to correctly 

disclose all but $11,869 ofthis amount as independent expenditures. Appropriate 24/48-

hour notices were not filed for independent expenditures totaling as much as $43,498. 

The Commission approved this finding. 

Legal Standard 

A. Independent Expenditures. An independent expenditure is an expenditure made for 

a communication expressly advocating the election or defeat of a clearly identified 

candidate that is not made in cooperation, consultetion, or concert with, or at the request 

or suggestion of, a candidate, a candidate's authorized committee, or their agents, or a 

political party or its agents. 

A clearly identified candidate is one whose name, nickname, photograph or drawing 

appears, or whose identity is apparent through unambiguous reference, such as "your 

Congressman," or through an unambiguous reference to his or her status as a candidate, 

such as "the Democratic presidential nominee" or "Republican candidate for Senate in 

tills stete." 

Expressly advocating means any communication that: 

• Uses phrases such as "vote for the Presidenf or "re-elect your Congressman" or 

communications of campaign slogan(s) or individual word(s), which in context 

can have no other reasonable meaning than to urge election or defeat of one or 

more clearly identified candidates; or 

• When taken as a whole and with limited references to extemal events, such as 

proximity to the election, could be interpreted by a reasonable person only as 

advocating the election or defeat of one or more clearly identified candidates. 11 

CFR §§100.16(a), 100.17 and 100.22. 

B. Reporting Independent Expenditures. When independent expenditures to the same 

person exceed $200 in a calendar year, the committee must report on Schedule E 

(Itemized Independent Expenditures): 

• Amount; 

• Date when the expenditures were made; 
• Name and address of the payee; 

• Purpose (a brief description of why the disbursement was made); 

• A statement indicating whether the independent expenditure was in support of, or 

in opposition to, a particular candidate, as well as the name of the candidate and 

the office sought (including Stete and Congressional district, when applicable); 

and, 

• A certification, under penalty of perjury, as to whether the independent 

expenditure was made in cooperation, consultation or concert with, or at the 

request or suggestion of, any candidate or authorized committee or agent of such 

committee. 2 U.S.C. §434(b)(6)(B)(iii) and 11 CFR §104.3(b)(3)(vii). 

C. 24/48-Hour Reporting Notices for Independent Expenditures. Political 

committees and others making independent expenditures at any time during the calendar 

year—^up to and including the 20th day before an election—^must disclose this activity 

within 48 hours of the date on which the public communication is disseminated each time 

that the expenditures aggregate $10,000 or more. In addition, independent expenditures 

that aggregate $1,000 or more during the last 20 days—^up to 24 hours—^before an 

election require disclosure within 24 hours following the dissemination date. 2 U.S.C. 

§434(d) and (g); 11 CFR § 104.4(b). 

D. Requirements for Maintaining Records. Reporting committees are required to 

maintain records that provide, in sufficient detail, tiie information from which the filed 

reports may be verified. 11 CFR §104.14(b)(1). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reviewed disbursements made by FDF for media^. 

FDF disbursed $97,896 for certain media buys, reporting $19,001 as Independent 

Expenditures on Schedule E and in 24/48-hour notices, and $78,895 as operating 

expenditures. 

1. Documented Media Buys 

An ad, titled "What Murtha Says, Out of Touch" (Murtha ad), was aired in 

Pennsylvania fi-om 09/22/2008 to 11/03/2008, at a cost of $60,397. Of tiiis amount, FDF 

reported $19,001 as independent expenditures and the remaining $41,396 as operating 

expenditures. The ad clearly identified Rep. John Murtha and then-Presidential candidate 

Barack Obama, and expressly advocated their defeat. The ad also clearly identified thenPresidential candidate John McCain and Vice Presidential candidate Sarah Palin, and 

^ Pursuant to Commission Directive 69, Legal Guidance to the Office of Compliance, the Office of 

Compliance and the Office of General Counsel submitted a memorandum to die Commission seeking 

guidance as to whether certain advertisements broadcast by FDF contained express advocacy and the costs 

were therefore independent expenditures. The Commission was unable to consider the issue within 60 days 

of that memorandum; therefore, pursuant to Directive 69, the audit report was prepared consistent with the 

staff analysis. Commission Directive 69 is Available at http://www.fec.gov/directives/directive_69.pdf 
advocated their election. The Audit staff concluded that the Murtha ad was an 

independent expenditure and FDF should have reported it as such and filed the 

appropriate 24/48-hour notices. 

The Murtha ad begins with a narrator's declaration that "Barack Obama and Jack 

Murtha have little respect for the people of Westem Pennsylvania." It then contains 

audio clips of Obama and Murtha making negative statements about Westem 

Pennsylvanians. Murtha is heard saying: "There's no question that Westem 

Pennsylvania is a racist area," and Obama is heard saying that Pennsylvanians "get bitter 

and cling to guns and religion." Next, the text on the screen reads "MURTHA AND 

OBAMA DON'T REPRESENT OUR VALUES," as tiie narrator says: "On election day, 

tell Jack Murtha and Barack Obama what we think of them." The narrator ends with the 

stetement "Vote Republican" while a picture of McCain and Palin appears and the text on 

tiie screen reads "VOTE REPUBLICAN TUESDAY, NOVEMBER 4TH." ^ The ad concluded 

with an appropriate disclaimer for an independent expenditure. 

Oftiie $60,397 FDF reported spending on tiie Murtiia ad, FDF provided 

dissemination information for costs totaling $34,028. These ads ran firom October 21 

tiirough November 3,2008. Notices filed for reported independent expenditures of 

$19,001 disclosed a communication date of October 29,2008, indicating that these 

notices are related to ads for which dissemination dates were made available. However, 

the Audit staff was unable to associate the dissemination date and amounts on the 24/48-

hour notices with dates and amounts on the supporting documentation. The Audit staffs 

review of the available information indicated that FDF should have disclosed $41,396 

($60,307 - $19,001) as independent expenditures rather than operating expenditures, and 

tiiat FDF failed to file 24-hour notices for Murtha ad costs totaling $15,027 ($34,028 -

$19,001). 

Dissemination information was not provided for the remaining $26,369 ($60,397-

$34,028), which limited the Audit staff evaluation of the 24/48-hour notice requirements. 

Appropriate 24/48-notices appear to be required and were not filed. 

2. Undocumented Media Buys 

The Audit staff noted that media expenditures reported as operating expenditures, 

toteling $37,499 ($97,896 - $60,397), lacked documentetion and could not be associated 

with a specific ad or dissemination date. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit steff addressed these expenditures at the exit conference and provided the FDF 

representetive with a schedule detailing these expenditures. The FDF representative 

stated he would review the expenditures and contact the media vendor to request deteiled 

* "[I]t provides in effect a specific directive: vote for these pictured candidates. The fact that this message 

is marginally less direct than 'Vote for Smith' does not change its essential nature." FEC v. Massachusetts 

Citizens for Life Inc. ("MCFL ") 479 U.S. 238,239 (1986); 11 C.F.R. § 100.22(a). 
analysis of the media buys. Subsequent to the exit conference, FDF provided some 

additional documentation, which was considered in the above analysis. 

In the Interim Audit Report, the Audit staff recommended that FDF take the following 

action: 

• Provide any other documentary evidence that would demonstrate that these 

disbursements were not independent expenditures; or 

• Provide documentation that details dissemination dates for those media buys that 

lack such information and, for those expenditures ($37,499) for which no 

documentetion has been made available; 

• Provide documentetion that associates these costs with specific media ads and, if 

the costs are related to the Murtha ad or communications that contain express 

advocacy, deteils dissemination dates; 

• Submit and implement revised procedures for reporting independent expenditures 

and for tracking dissemination dates for such expenditures to allow for timely 

filing of 24/48-hour reporting notices, as required; and 

• Amend its reports to correct the reporting of independent expenditures, as noted 

above. 

C. Committee Response to the Interim Audit Report 

With respect to the $37,499 in expenditures lacking documentation to determine the 

nature of the expense, FDF provided information associating some of these costs with the 

Murtha ad ($2,102) and demonstrating tiiat the others ($35,397) were not independent 

expenditures. 

FDF submitted written procedures for reporting independent expenditures and for 

tracking dissemination dates for such expenditures to allow for timely filing of 24/48-

hour notices, and indicated its intent to implement these procedures immediately. 

FDF also amended its reports to disclose additional independent expenditures totaling 

$31,629. 

FDF's independent expenditures related to tiie Murtha ad totaled $62,499 ($60,397 + 

$2,102). FDF disclosed independent expenditures of $50,630 for tiie Murtha ad ($19,001 

+ $31,629). FDF did not correctly disclose as independent expenditures the remaining 

$11,869 ($62,499 - $50,630). Audit staff advised FDF's representative ofthe difference 

but received no further explanation. 

In connection with the $62,499 in independent expenditures for the Murtiia ad, it 

appeared that FDF did not file appropriate 24/48-hour notices for independent 

expenditures totaling $43,498 ($62,499 - $19,001). Oftiie $62,499 in independent 

expenditures for the Murtha ad, FDF was unable to provide dissemination dates for 

disbursements totaling $28,471. 
D. Draft Final Audit Report 

In the Draft Final Audit Report, the Audit Staff acknowledged that amendments were 

filed, though incomplete; and, that written procedures to be implemented for reporting 

independent expenditures and tracking dissemination dates were submitted by FDF. 

Commission Conclusion 

On May 5,2011, the Commission considered the Audit Division Recommendation 

Memorandum, in which, the Audit Division recommended that the Commission adopt a 

finding that FDF did not disclose all independent expenditures, and did not file all 

required notices for independent expenditures made. 

The Commission approved the Audit Staff recommendation.