Draft Final Audit Report of the 

Audit Division on the Illinois 

Republican Party 

(January 1, 2011 - December 31, 2012) 

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 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met . 

the threshold 

requirements for 

substantial compliance • 

with the Act.' The audit 

determines, whether the 

committee complied with 

the limii^tipns, v' • 

prohibitioti^rtrnd 

disclosure r^uii^ents 

of the Act. 

. ' 

Future Action, t 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Committee .(p. 2) 

The Illinois Republican Party is a state'party committee 

headquartered in Chicago, Ulihois.. For more information, see 

the chart on the Committee-Orgaiiization. p.2. 

Financial Activitsr^ (p. 2) 

• Receipts • t. 

o Contributions fix>m individuals 

o Contributions friom Political 

Committees 

o transfers from Affilidted and Other 

PqlitMd-Committees 

o T^^feta froniNon-fedbial Account 

o Oth^ Receipfe-"-' . ^ 

Total Receipts 

: Disbursements 

o Operating Expenditures 

o F^eral Election Activity 

^ o Contributions to Federal Candidates 

."•Q Other Disbursements 

Total Disbursements 

$ 1,129,720 

1,201,954 

1,576,813 

395,959 

344,928 

S 4,649,374 

$ 1,295,631 

3,122,532 

5,500 

163,600 

S 4,587,263 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Reporting of Apparent Independent Expenditures 

(Finding 2) 

• Recordkeeping for Communications (Finding 3) 

• Receipt of Apparent Prohibited In-Kind Contributions 

(Finding 4) 

• Reporting of Debts and Obligations (Finding 5) 

• Recordkeeping for Employees (Finding 6) 

' 52 U.S.C. §30111(b). 

^ IRP had a Levin account that began the audit period with a balance of SO, made no expenditures for 

Levin activity, and an ending balance of S4S9. 
Draft Final Audit Report of the 

Audit Division on the 

Illinois Republican Party 

(Januaiy 1, 2011 - December 31, 2012) 

s" 

J 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit I 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Findings and Recommendations 3 

Part IV. Findings and Recommen^tians 

Finding 1. Misstatement of Financial Activity . 6 

Finding 2. Reporting of Apparent Independent ^j^nditures 8 

Findings. Recordkeeping for Communications 14 

Finding 4. Receipt of Apparent Prohibited In-Kind Contributions 16 

Findings. Reporting of Debts and Obligations 18 

Finding 6. Recordkeeping for Employees 19 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Illinois Republican Party (IRP), 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 Aiidit Division 

conducted the audit pursuant to 52 U.S.C. §30111(b), which permits the Commission to 

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

report under 52 U.S.C. §30104. Prior to conducting any audit wder this subsection, the 

Commission must perform an internal review pf reports file^-b^ selected committees to 

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

for substantial compliance with the Act. 52 U.S.C. §301 n(b). 

Scope of Audit 

Following Commission-approved procedures, the Aiidit stalf evaluated various risk 

factors and as a result, this audit examined: 

1. the disclosure of individual contributors' occupation and name of employer; 

2. the disclosure of disbursements, debts and obligations; 

3. the disclosure of expenses allocated between federal and pOn-federal accounts; 

4. the consistency between reported figures and bank records;. 

5. the completeness of records; 

6. the disclosure of independent expenditures; and 

7. other committee operations necessary to the review. 

Commission Ghii^nce. 

Request for Early'^ommissibn^Consideration of a Legal Question 

Pursiumt to the Commission's "Policy {Statement Establishing a Program for Requesting 

Consideration of Legal Questions by the Commission," several state party committees 

unaffiliated with IRP requested early consideration of a legal question raised during 

audits covering die 2010 election cycle. Specifically, the Commission addressed whether 

monthly time logs under 11 CFR § 106.7(d)(1) were required for employees paid with 100 

percent federal fiihds: 

A 

The Commission concluded, by a vote of 5-1, that 11 CFR § 106.7(d)(1) does require 

committees to keep a monthly log for employees paid exclusively widi federal funds. 

Exercising its prosecutorial discretion, however, the Commission decided it will not 

pursue recordkeeping violations for the failure to keep time logs or to provide affidavits 

to account for employee salaries paid with 100 percent federal funds and reported as 

such. The Audit staff informed IRP representatives of the payroll log requirement and of 

the Commission's decision not to pursue recordkeeping violations for failure to keep 

payroll logs for salaries paid and correctly reported as 100 percent federal. This audit 

report does not include any findings or recommendations with respect to IRP employees 

paid with 100 percent federal funds and reported as such. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates . 

• Date of Registration July 10,1976 

• Audit Coverage January 1,2011 - December 31,2012 

Headquarters Chicago, Illinois. • 

Bank Information 

• Bank Depositories One 

• Bank Accounts Four Federal and Twb.;Non-federal 

Treasurer 

• Treasurer When Audit Was Conducted Judy Diekelman - May 20,2Q14 - Present 

Dave Syverson - through May 19.2014 

• Treasurer During Period Covered by Audit Dave Syverson 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

No 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid and Volun^r Staff 

Overview of Fiiianciai Activity 

(Audited Ad&ounts) 

Cash-on-hand ® Januia^ 1,2011 S 24,000 

Receipts . 

o Contributions from Individuals 1,129,720 

o Contribution^ from Political Committees 1,201,954 

o Transfers from Affiliated and Other Political 

Committees 

1,576,813 

o Transfers from Non-federal Account 395,959 

o Other Receipts 344,928 

Total Receipts $ 4,649,374 

Disbursements 

o Operating Expenditures 1,295,631 

o Federal Election Activity 3,122,532 

o Contributions to Federal Candidates 5,500 

o Other Disbursements 163.600 

Total Disbursements S 4,587,263 

Cash-on-hand @ December 31,2012 $86,111 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwoiic, a comparison of IRP's reported financial activity with bank records 

revealed a misstatement of receipts, disbursements and ending cash fbf 2011 and a misstatement 

of receipts and disbursements for 2012. In 2011, IRP overstated it? receipts by $36,327, its 

disbursements by $46,370 and understated its ending cash by $13,?17. In 2012, IRP 

understated its receipts by $254,S28 and its disbursements by $295,5^;, 

In response to the Interim Audit Report recommendation, IRP amended ita disclosure reports to 

materially correct the misstatements for both 2011 and 2012. ..(For more detail,''see .p. 6.) 

Finding 2. Reporting of Apparent Independent Expenditures 

During audit fieldwork, the Audit staff reviewed disbursement? totaling $273,126 that IRP 

disclosed on Schedule B, Line 30(b), (Federal Election Activi^ Paid Entirely with Federal 

Funds), that appeared to be mailers or media-relat^ independent expenditures that should have 

been disclosed on Schedule E, Line 24, (Independent Expenditures). •% 

Additionally, IRP did not provide sufficient documentation pertaining to dissemination dates to 

verify whether 24/48-hour repoits.were required .to be filed for the apparent independent 

expenditures totaling $2731,126. IRP .also did not provide invoices associated with 27 mailers 

that contained express advocacy as defined under 11 CFR 100.22 (a). 

In response tQ.the Interim Audit Report recomiAendation, IRP stated ".. .that these 27 direct 

mail communications were tion-allocable, candidate-specific volunteer mass mailings." IRP 

supplied a^iiid affidavit fiorntRP's fbmer Deputy Executive Director who stated that during 

the 2012 cycl^; IRP supported its federal candidates through the use of non-allocable mail 

processed by vbWteers. 

The Audit staff reexki^ned the documentation provided by IRP related to the volunteer 

materials exemption for Specific communications totaling $33,972 and determined the 

disbursements were not independent expenditures. For the remaining communications 

consisting of $239,154 ($273,126 - $33,972) and the 27 mailers with no invoices that IRP 

claims the volunteer materials exemption is applicable, the Audit staff again recommends that 

the IRP provide further evidence to support the application of volunteer materials exemption to 

the specific communications involved. Absent fiiither evidence that these communications 

qualify for the volunteer materials exemption, the Audit staff considers these conununications 

to be independent expenditures. (For more detail, see p. 8.) 
Finding 3. Recordkeeping for Communications 

During audit fieldwork, the Audit staff reviewed disbursements to verify the accuracy of the 

information and proper classification of transactions disclosed on reports. IRP reported 19 

expenditures totding $357,613,^ on Schedule B, Line 30(b) and Schedule H4 (Disbursements 

for Allocated Federal/Non-federal Activity) with the purposes of FEA Volunteer Mail, 

Advocacy calls for Federal candidates. Direct Mail Services, equipment and phone minutes for 

Federal candidates and Auto-Dialer for Federal candidates. Documentation that was provided 

by IRP was insufficient to make a determination pertaining to the purpose for these 

disbursements and verification as Federal Election Activity or Allocated Federal/Non-federal 

Activity. 

In response to the Interim Audit Report recommendation, I^ stated that it has searched its 

records and was unable to locate additional documents to substantiate these disclosures. Absent 

the provision of the records, the Audit staff considers the rhiatter a violation of the recordkeeping 

requirements at 11 CFR §104.14(b)(1). (For more detail, see p. 14.) 

Finding 4. Receipt of Apparent Prbklbited In-Kind 

Contributions 

During audit fieldwork, the Audit staff identified apparent prohibited in-kind contributions 

totaling $72,880 to the benefit of IRP. The apparent prohibiteif-inwkind contributions consisted 

of postage for campaign mailers invoiced to but appvently paid by an unknown source. In 

response to the Interim Audit Report recommendation, ERP. did n6t specifically address the 

amounts for postage apparently paid on its behalf.' IRP has-not complied with the 

recommendation to identify the sdnrce of payment for the postage. Absent such a 

demonstration, the $72^880.in postage costs are cqqsidered a prohibited contribution to IRP. 

(For more detail, see p. l6..) ;.. : ^ 

Finding 5. Reporting df Debts Snd Obligations 

During audit fieldwork, the Audit staff noted that IRP failed to report debts and obligations to 

14 vendors totding $294,117^ on Schedule D (Debts and Obligations). In response to the 

Interim Audit j^eport recomifiendation, IRP amended its disclosure reports to materially correct 

the disclosure of.debts and obligations to these vendors. (For more detail, see p. 18.) 

Finding 6. Recordkeeping for Employees 

During audit fieldwork, the Audit staff determined that IRP did not maintain any monthly 

payroll logs, as required', to document the percentage of time each employee spent in connection 

with a federal election. For 2011 and 2012, the Audit staff identified payments to IRP 

employees totaling $558,089 for which IRP did not maintain monthly payroll logs. This 

consisted of $542,812 for which payroll was allocated with federal and non-federal funds, and 

$15,277 for which payroll was exclusively non-federal. In response to the Interim Audit Report 

recommendation, IRP acknowledged that it does not possess any monthly payroll logs for 

^ Two disbursements totaling $52,304 were not reported, but are included in the S3S7.6I3. 

* This amount will be updated to $257,396 based on additional information reviewed in response to IRP's response 

to the Interim Audit Report. 
employees for the 2011 - 2012 time period. IRP stated that it did maintain these logs during the 

2014 election cycle and going forward, they will continue to maintain monthly payroll logs. As 

such, IRP has complied with the Interim Audit Report recommendation by providing details of 

its plan to maintain monthly payroll logs in the future. (For more detail, see p. 19.) 

•S. 
Part IV 

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity 

Summary 

During audit fteldwork, a comparison of IRP's reported financial activity with bank records 

revealed a misstatement of receipts, disbursements and ending casbfof 2011 and a misstatement 

of receipts and disbursements for 2012. In 2011, IRP overstated i& receipts by $36,327, its 

disbursements by $46,370 and understated its ending cash by $!13,717; In 2012, IRP 

understated its receipts by $254,528 and its disbursements by $295,544.. 

In response to the Interim Audit Report recommendation, IRR amended its'disclosure reports to 

materially correct the misstatements for both 2011 -and 2012. 

Legal Standard 

Contents of Reports. Each report must disclose; 

• the amount of cash-on-hand at the beginning and end of the reporting period; 

• the total amount of receipts for the reporting period and for the calendar year; 

• the total amount of disbursements for the reporting period and for the calendar year; and 

certain transactions that require iteniizatidh on Schedule A-(Itemized Receipts) or Schedule 

B (Itemized Disbursements). 52 U.S.C. §30104(b)(1), (2), (3), (4) and (5). '• . 

Facts and Analysis 

A. Facts 

As part of audit fieldwgrlc, Ae Audit staff reconciled IRP's reported financial activity with its. 

bank records for 2011 and 20.12. The reconciliation determined that for 2011, IRP misstated 

receiptSi disbursements and ending cash-and for 2012, misstated receipts and disbursements. 

The following charts outline the^discrepancies between IRP's disclosure reports and its bank 

records. 

.201 LI Reported Activity to Bank Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1.2011 

$20,326 $24,000 $3,674 

Understated 

Receipts $776,115 $739,788 $36,327 

Overstated 

Disbursements $749,945 $703,575 $46,370 

Overstated 

Ending Cash Balance @ 

December 31,2011 

$46,496 $60,213 $13,717 

Understated 
The beginning cash balance was understated by $3,674 and is unexplained, but likely resulted 

from prior-period discrepancies. 

The overstatement of receipts resulted from the following: 

•. Transfers from the non-federal account, reported in error 

• Unexplained differences 

Overstatement of Receipts 

The overstatement of disbursements resulted irom the following: 

• The net over reporting of disbursements 

• Unexplained differences 

Net Overstatement of Disbursements 

- $32,070 

- 4.257 

- ^36-327 

- $46,612 

•± m 

-mm 

The Audit staff identified 29 disbursements totaling $52,262 that were reported in January 

2011, but not found on bank statements provided. IRP Changed depositories prior to the audit 

cycle. The Audit staff requested the bank statements of the prior depository for the month of 

January 2011. These statement(s) were not provided to the Audit staff. IRP stated'they 

requested the bank statements but were not able to obtain dieni> The $ 13,717 uhderstatement of 

the ending cash balance resulted from the misstatements-described above. 

2012 Reported Actlvit f tQ Bank Activity 

Reported - = Bank Records ' Discrepancy 

Beginning Cash Balance 

@ January 1,2012 

$45,72 P? ^ $60,213 $14,492 

Understated 

Receipts • S3,655.057 $3,909,585 $254,528 

Understated 

Disbursements $3^588,143 $3,883,687 $295,544 

Understated 

Ending CasK Balance 

^ December 31,2012 

$113,410 $86,111 $27,299 

Overstated 

The understatement of receipts resulted from the following: 

• Transfers-from Political Committees 

• In-kind contnbutions form Political Committees 

• Transfers froini:;die nqn-federal account 

• Settlement Accounting Fees, not reported 

• In-kind postage paid by other than IRP^ 

• Unexplained differences 

Understatement of Receipts 

+ 

+ 

+ 

+ 

+ 

+ 

$50,000 

33,973 

36,453 

22,126 

72,880 

39.096 

+1254.528 

' IRP filed an amended report that reduced its beginning cash by a total of $775 from the reported 2011 ending 

cash. 

' The source of the payments has not been identified by IRP to the Audit staff. See Finding 4. 
The understatement of disbursements resulted fh)m the following: 

• Under-reporting of disbursements +$168,321 

• In-kind postage paid by other than IRP + 72,880 

• Underreporting of in-kinds from Political Committees + 33,973 

• Settlement of Accounting Fees, not reported + 22,126 

• Unexplained differences - 1.756 

Net Understatement of Disbursements +$295.544 

The $27,299 overstatement of ending cash balance resulted from the misstatements described 

above. 

B. Interim Audit Report & Audit Division Recommendation ' V 

At the exit conference, the Audit staff provided work papers and diseusSed the reporting errors 

that caused the misstatements with IRP representatives.^ they asked ques^ns about several 

items and stated that they would file the amendmeiit-s to ensure that the IRi^fe][>orts were 

accurate. 

V... 

The Interim Audit recommended that IRP amend its disclosure reports to correct the 

misstatements for 2011 and 2012. 

C. Committee Response to Interim AudiiReport . 

In response to the Interim Audit Report recorhmendation, IRP amended its disclosure reports to 

materially correct the misstaternents for both 2^1 l.ahd 2012 reports. 

Finding 2. Reporjfcing of Apparent Independent Expenditures | 

^ p 

Summary - During audit fieldwork, the Audit st^reviewed disbursements totaling $273,126 that IRP 

disclosed on Schedule B, Line 30(b), (Federal Election Activity Paid Entirely with Federal 

Funds), that appeared to be m^ers or media-related independent expenditures that should have 

been disclosed on Schedule E,' Line 24, (Independent Expenditures). 

s • < " • . 

Additionally, IRP did'fiot pidVide sufficient documentation pertaining to dissemination dates to 

verify whedier 24/48-hoiir.reports were required to be filed for the apparent independent 

expenditures totaling $273,126. IRP also did not provide invoices associated with 27 mailers 

that contained express advocacy as defined under 11 CFR 100.22 (a). 

In response to the Interim Audit Report recommendation, IRP stated "...that these 27 direct 

mail communications were non-allocable, candidate-specific volunteer mass mailings." IRP 

supplied a third affidavit from IRP's former Deputy Executive Director who stated that during 

the 2012 cycle, IRP supported its federal candidates through the use of non-allocable mail 

processed by volunteers. 
The Audit staff reexamined the documentation provided by IRP related to the volunteer 

materials exemption for specific communications totaling S33,972 and determined the 

disbursements were not independent expenditures. For the remaining communications 

consisting of $239,154 ($273,126 - $33,972) and the 27 mailers with no invoices that IRP 

claims the volunteer materials exemption is applicable, the Audit staff again recommends that 

the IRP provide further evidence to support the application of volunteer materials exemption to 

the specific communications involved. Absent fiii^er evidence that these communications 

qualify for the volunteer materials exemption, the Audit staff considers these communications 

to be independent expenditures. 

A 

Legal Standard 

A. Definition of Independent Expenditures. The term "independent expenditure" means an 

expenditure by a person for a communication expressly advocating die election or defeat of a 

clearly identified candidate that is not made in coordination with any cwdidate or authorized 

committee or agent of a candidate. No expenditure shall be considered independent if the 

person making the expenditure allows a candidate, a candidate's authorized committee or their 

agents, or a political party committee or its agents to become materially involved in decisions 

regarding the communication as described in 11 CFR .109.21(d)(2), or shares fi.nancial 

responsibility for the cost of production or dissemination with'any isuch person. 11 CFR 

§100.16(a)&(c). 

B. Expressly Advocating. Expressly advocatiiig means any cbmmtinication that - (a) Uses 

phrases such as "vote for the president," "re-elect your Congressman," "support the Democratic 

nominee," "cast your ballot for the Republicah-ch^lenger for the Republican challenger for U.S. 

Senate in Georgia," accompanied by a picture of one or more candi(late(s), or communications of 

campaign slogan(s) or individual word(s), which in context can have no other reasonable 

meaning than to, urge, the election qr defeat of one or more clearly identified candidate(s). 

(b) When taken as a whole aiicl-with iimited reference to external events, such as the proximity to 

the election, could'only be interpreted by a rea^nable person as containing advocacy of the 

election or dqfSat of bhe br more olearly identified candidate(s). 11 CFR § 100.22. 

C. Disclosure.. Requirements 7 Genera! Guidelines. An independent expenditure shall be 

reported on Schedule E (Itemiz^ Independent Expenditures) if, when added to other 

independent expenditures made to the same payee during the same calendar year, it exceeds 

$200. Independent expenditures made (i.e., publicly disseminated) prior to payment should be 

disclosed as memo entries on Schedule E and as a debt on Schedule D. Independent 

expenditures of $200 or less need not be itemized, though the committee must report the total of 

those expenditures on line (b) on Schedule E. 11 CFR §§ 104.3(b)(3)(vii), 104.4(a) and 104.11. 

D. Last-Minute Independent Expenditure Reports (24-Hour Reports). Any independent 

expenditures aggregating $1,000 or more, with respect to any given election, and made after the 

20"^ day but more than 24 hours before the day of an election, must be reported and the report 

must be received by the Commission within 24 hours after the expenditure is made. A 24-hour 

report is required each time additional independent expenditures aggregate $1,000 or more. The 

date that a communication is publicly disseminated serves as the date that the conunittee must 

use to determine whether the total amount of independent expenditures has, in the aggregate. 
10 

) reached or exceeded the threshold reporting amount of $ 1,000. 11 CFR § § 104.4(f) and 

104.5(g)(2). 

E. Independent Expenditure Reports (48-Hour Reports). Any independent expenditures 

aggregating $10,000 or more with respect to any given election, at any time during a calendar 

year, up to and including the 20th day before an election, must be disclosed within 48 hours 

each time the expenditures aggregate $ 10,000 or more. The reports must be received by the 

Commission within 48 hours after the expenditure is made. The date that a communication is 

publicly disseminated serves as the date that the committee must use to determine whether the 

total amount of independent expenditures has, in the aggregate, reached or exceeded the 

threshold reporting amount of $10,000. 11 CFR §§104.4(f) and ip4;.S(g)(l). 

. F. Formal Requirements Regarding Reports and Statements. Each political committee 

I shall maintain records with respect to the matters required to be repdited- which shall provide in 

sufficient detail the necessary information and data ^m which the filed- reports may be 

verified, explained, clarified, and checked for accuracy and completeness. 11 CFR 

§104.14(b)(l). 

G. Volunteer Activity. The payment by a state comiiiittee of a political party of the costs of 

campaign materials (such as pins, bumper stickers, handbins,'hrochures, posters, party tabloids 

or newsletters, and yard signs) used by suchtxirnmittee in coiuiieCtion with volunteer activities 

on behalf of any nominee(s) of such party is;Yiot.a:.coiitribution,^'pravided that the conditions 

below are met. " 

1. Such payment is not for costs incurred-in CQiinTOtioiit^th any broadcasting, newspaper, 

I magazine, bill bo^jd, diisSt piail, or sirntlar type of general public communication or 

I political advertising. The tei^ direct mail means any mailing(s) by a commercial 

, vendor or any rnailihg(s) madie fiom commercial lists. 

2. The portion of the cost of such materials allocable to Federal candidates must be paid 

from contributions subject to the limitations and prohibitions of the Act. 

3. Such payment isjipt maide fiom contributions designated by the donor to be spent on 

behalf of a particular, candidate for-federal office. 

4. Such in.aterials are di^ibuted by volunteers and not by commercial or for-profit 

operations. -

5. If made by a political (mmmittec, such payments shall be reported by the political 

committee asia disbursement in accordance with 11 CFR § 104.3 but need not be 

allocated to specific candidates in committee reports. 

6. The exemption is hot applicable to campaign materials purchased by the national party 

committees. 11 CFR §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR §100.147 (a), (b), 

(c).(d),(e)and(g). 
11 

Facts and Analysis 

A. Reporting of Apparent Independent Expenditures 

1. Facts 

During audit fieldwork, the Audit staff reviewed disbursements to ensure proper reporting. 

The Audit staff notes that IRP did not disclose any independent expenditures on Schedule E, 

however it made apparent media-related expenditures totaling $273,126 and disclosed them 

as Federal Election Activity (PEA). These communications, as well as 27 other mailers that 

are not associated with invoices, were identified as possible ind^endent expenditures. To 

document the use of volunteers, IRP provided four volunteer ai^ in sheets, two sworn 

affidavits for which the authors attest to the use of volunteers in-all the mailers and 24 

photographs of volunteer involvement in seven of the mailers.^ on the documentation 

provided, the Audit staff was only able to match four niail^rs and two sign in sheets to 

photographs for which an invoice was provided,.^totaling $33,972, see below. Two 

additional sign in sheets were provided, howeye^,:-they coiild not be associated with invoices 

for mailers, see (b.) below. Of the two sign in sheets-that could not be associated with 

invoices, only one could be associated with a mailer. 

A breakdown analysis of these expenditures is as follows: 

a. Apparent Independent Expenditures Reported as-FEA Volunteer Mail 

(Associated Invoice Provided) 

IRP made 16 apparrat independent ^'penditures totaling $273,126 for which it 

provided a copy of the mailer with artassociated invoice. Mailers totaling $33,972 

for which IRP provided two sign in sh^taand photographs are included in the 

$273,126 total. According:to the Audit staff, each of these mailers contained 

language expressly s^Vocatingthe eliection or defeat of a clearly identified 

pandidafb as defined under 11 CFR § 100.22(a), or when taken as a whole and with 

...limited reference to external events could only be interpreted by a reasonable 

person as containing advocacy of the election or defeat of one or more clearly 

idt^tified candidate(s) as defined under 11 CFR § 100.22(b). 

b. Apparent Independent Expenditures Reported as FEA Volunteer Mail (No 

Invoices Associated) 

IRP provided' 27 different mailers that contained language expressly advocating the 

election or defeat of clearly identified candidates, as defined under 11 CFR 

100.22(a). 

IRP did not provide sufficient information to allow each of the 27 communications 

to be associated with an invoice. Without this additional information, the Audit 

staff is unable to calculate the disbursement amount for the 27 mailers. 

7 This documentation was provided both during fleldwork and in response to the exit conference. There were 10 

additional photographs provided by IRP that appear to contain similar individuals at the same fecility, however, 

the Audit staff was not able to associate them with any of the mailers or sign in sheets provided by IRP. 
12 

c. Volunteer Material Exemption 

In response to the Audit's staffs request during fieldwork for documentation to 

support the volunteer materials exemption that the committee reported, IRP provided 

24 pictures of individuals sorting, bundling and placing the mailers into mail bags. 

IRP supplied three volunteer sign in sheets, for three different mailers. Seven 

different mailers can be seen in the pictures provided. Each of the volunteer sign in 

sheets contained two names. Two of the sign in sheets were dated September 13, 

2012 and each had the name of a Republican congressional candidate. 

The Conunission has addressed the applicability of the . volunteer materials 

exemption in the Final Audit Reports of the Arizona Republican Party, the 

Democratic Executive Committee of Florida, andithe Tennessee RepuMican Party. 

In these reports, the Commission recognized a Idcl^ of clarity regarding the 

application of the volunteer materials exemption. The Commission had attempted to 

formulate a consensus policy regarding what constitutes substantial.volunteer 

involvement for the purpose of applying the exemption,' but this was never 

achieved. Since a lack of clarity exists concerning the application of the volunteer 

materials exemption, it follows that the type^d iamount of documentation needed to 

support volunteer involvement is also unclear. 

In view of the uncertainty regarding the amount of volunteer involvement needed to 

qualify for the volunteer materials exemption^ as well as the amount of 

documentation required to support such ah exemption, the Audit staff recommended 

that, IRP provide more detailed information and documentation for any volunteer 

involvement associated with each matl^r. 

% 

2. Interim Audit Repoiri.& Audit Division Recommendation 

This issue was presented at the exit conference. The Audit staff provided a schedule 

detailing these expenditures to IRP representatives. IRP representatives stated that the 

expenditures were not independent expenditures but were non-allocable mailers. IRP 

officials stated that the direct mail expenditures were for candidate specific mass mailings 

for which volunteers were udlized; 

In response to the exit conference, IRP provided one additional sign in sheet that was dated 

September 20,2012^ to-document the use of volunteers in their mail program. They also 

provided two swom affidavits from individuals. In one sworn affidavit, an individual 

explained that he oversaw the volunteer component of IRP's mail program and that for 

every mail piece that IRP sent on behalf of federal candidates, volunteers processed those 

mail pieces in accordance with FEC guidelines. Further, the individual described the 

process performed by the volunteers as follows; the volunteers unpacked mail pieces; sorted 

by address; banded together mail pieces, placed them in bags and loaded them for transport. 

In the second swum affidavit another individual stated he would go on to become the 

volunteer coordinator and that as a regular volunteer- for IRP, he spent a great deal of time 

9 

Proposed Interim Enforcement Policy, Agenda document No. 10-16. 

IRP provided three sign in sheets during field work. 
13 

processing volunteer mail for IRP on behalf of Republican congressional candidates. He 

described the same basic process as the first individual about the involvement of the 

volunteers IRP used for Republican candidates for Congress. 

The Interim Audit Report reconunended that IRP provide: 

• Additional invoices and/or information for the 27 mailers containing express advocacy; 

and 

• Documentation and evidence that apparent independent expenditures totaling $273,126 

and the 27 mailers containing express advocacy did not require reporting as independent 

expenditures. 

In addition the Interim Audit Report reconunended absent such;evidence, IRP amend its 

reports to disclose these disbursements as independent expenditi^s on Schedule E and 

submit revised procedures for reporting independent expenditure's. - \ . 

3. Committee Response to Interim Audit Report 

In response to the Interim Audit Report lecotnmendation, IRP stated "...that thCse 27 direct 

mail communications were non-alloeable, candidafe;specifie\plunteer mass mailings." IRP 

referred to two sworn affidavits it previously provided to the Audit staff from two 

committee individuals who were involved in its mail pro^am that were responsible for the 

volunteer component of the volunteer inail. Both sworn affidavits described the process by 

which IRP volunteers regularly processed all pf IRP's non-allocable mail. IRP supplied a 

third sworn affidavit from IRP's former Deputy Executive Director who stated that in the 

2012 cycle, IRP supported its federal candidate through the use of non-allocable mail 

processed by volunteer. 

With respect to the four mailers-totaling $33,9"1^.fer which IRP provided two sign in sheets 

and photographs, the Audit-stafflielieves the documentation provided in support of the 

volunteer materials exem^ipH-is consistent with such evidence provided in past audits. As 

a result, these disbursements are no longer being considered independent expenditures. For 

the remaining 12 mailers totaling $23.9;-lS4 ($273,126 - $33,972) and the 27 mailers without 

invoices that IRP claims the.volun^r materials exemption is applicable, the Audit staff 

again recommends that IRP provide further evidence to support the application of the 

volunteer materials exemption to the specific communications involved. Such evidence will 

assist the Commission in determining if the volunteer materials exemption is applicable to 

these communications. . -

B. Failure to File 24/4lB-Hour Reports for Independent Expenditures 

1. Facts 

In addition to not reporting any independent expenditures during the audit period, IRP also 

did not file 24 or 48-hour reports for any independent expenditures. Therefore, the apparent 

independent expenditures identified above by the Audit staff may also have required such 

filings. 
14 

2. Interim Audit Report & Audit Division Recommendation 

This issue was presented at the exit conference. The Audit staff provided a schedule 

detailing these expenditures to IRP representatives. IRP representatives stated that the 

expenditures were not independent expenditures but were non-allocable mailers that used 

volunteers. 

The Interim Audit Report recommended that IRP provide documentation to support the date 

of public dissemination for each of the 16 apparent independent expenditures totaling 

$273,126 and the 27 mailers to determine whether a 24 or 48 hour report was required. 

3. Committee Response to the Interim Audit Report io. 

In response to the Interim Audit Report recommendation, IRP stated that all direct mail at 

issue was intended to be processed as non-allocable iitail,..end not independent 

expenditures. With respect to the four mailers totaling $33 j972 for which IRP provided two 

sign in sheets and photographs, the Audit staff believes the documentation provided in 

support of the volunteer materials exemption is consistent ;ydth such evidence provided in 

past audits. As a result, these disbursements are no longer being considered.independent 

expenditures. Absent further evidence that the remainirig communications totaling 

$239,154 ($273,126 - $33,972) qualify for the volunteer materials exemption, the Audit staff 

considers the 39 (27+12) apparent ind^endent expenditures above to be independent 

expenditures that also required either 24 or 4jB hour reports. . 

I Finding 3. RecordkieSfeping for Cbimmunications 

Summary 

During audit fieldwqrk, the Audit stSff reviewed disbursements to verify the accuracy of the 

information and prop^classific^n of transactions disclosed on reports. IRP reported 19 

expenditures totaling ^57^613,'^'on Schedule B, Line 30(b) and Schedule H4 (Disbursements 

for Allocat^ Federal/Non-federal Abtiyily) with the purposes of FEA Volunteer Mail, 

Advocacy cafls for Federal candidates. Direct Mail Services, equipment and phone minutes for 

Federal candidates and Auto-Dialer for Federal candidates. Documentation that was provided 

by IRP was insufficient to make'a determination pertaining to the purpose for these 

disbursements and veufication as Federal Election Activity or Allocated Federal/Non-federal 

Activity. 

In response to the Interim Audit Report recommendation, IRP stated that it has searched its 

records and was unable to locate additional documents to substantiate these disclosures. Absent 

the provision of the records, the Audit staff considers the matter a violation of the recordkeeping 

requirements at 11 CFR §104.14(b)(l). 

"* Two disbursements totaling SS2,S04 were not reported, but are included in the $357,613. 
15 

Legal Standard 

A. Formal Requirements Regarding Reports and Statements. Each political committee 

shall maintain records with respect to the matters required to be reported which shall 

provide in sufficient detail the necessary information and data from which the filed reports 

may be verified, explained, clarified, and checked for accuracy and completeness. 11 CFR 

§104.14(b)(l). 

B. Preserving Records and Copies of Reports. The treasurer of a political committee must 

preserve all records and copies of reports for 3 years after the report is filed. 52 U.S.C. 

§30102(d). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reviewed disbursements to verify the accuracy of the 

information and proper classification of transactions disclosed on reports. 'IRP reported 19 

expenditures totting $357,613 for which documentation was insufficient to m^e a' 

determination pertaining to whether these disbursements.were correctly reported on Schedule B, 

Line 30(b) or Schedule H4. 

The Audit staff s analysis resulted in the fojlDwjng: 

i. Disbursements- No Invoices or Cob'ics of Cdmmunications Provided t$280.2771 

Disbursements totaling $280,277 were pai^to fowmeiii vendors and three phone bank 

veiidors, and were diwloKd on Scheduh^^ and Sch^ule H4, with purposes of FEA 

Volunteer Mail, Advocacy calls for Fedei^ candidates. Direct Mail Services, equipment 

and phone minuteisYor Fed^ candidates and.Auto-Dialer for Federal candidates. 

Without sufficient detads, the Audit staff is Unable to verify IRP's reporting of these 

amounts as Federal Election Activifyior Allocated Federal/Non-federal Activity. The 

Audit staff request^ copies of the invoices for the associated mail pieces and phone 

bank scripts for .each.phone disbursement. To date, these invoices or other information 

tio as^ciate the payments to a particular communication have not been provided. 

ii. Disbursements- Invoices Provided - Not Able to Associate with Copies of 

Communications (S77336) 

IRP reported paying disbursements totaling $77,336" to two mail vendors. IRP 

disclosed three disbursements on Schedule B, Line 30(b) with purposes of "FEA 

Volunteer Mail - Walsh". For these disbursements, IRP provided invoices but did not 

provide information about the related mail communications. Without sufficient details, 

the Audit staff is unable to verify IRP's reporting of these amounts as FEA Volunteer 

Mail. The Audit staff requested information that would allow an association between 

the invoice and the communication, however, to date IRP has not provided this 

information. 

The amount of invoices associated for these mailers is SI 29,490. This is part of Finding 4. 
16 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff presented IRP schedules of the disbursements for which 

further records were necessary to verify the accuracy of reporting. At that time the Audit staff 

again requested that IRP provide invoices, copies of communications and scripts that would 

associate each invoice to the corresponding communication to the committee disclosure reports. 

The Interim Audit Report recommended that IRP provide the invoices, scripts and associated 

mail communications for the disbursements totaling $357,613. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, IRP stated that it searched its records 

and was not able to locate additional documents to substantiate these disclosures. Absent the 

provision of the records, the Audit staff considers the matter a violation of the recordkeeping 

requirements at 11 CFR § 104.14(b)(1). 

Finding 4. Receipt of Apparent Prohibited In-Kind 

Contributions 

Summary 

During audit fieldwork, the Audit staff identified apparent prohibited in-kind contributions 

totaling $72,880 to the benefit of IRP. The apparent prohibited in-kind contributions consisted 

of postage for campaign mailers invoiced to..l^ but apparently paid by an unknown source. In 

response to the Interim Audit Report recomm^ation, IRP did not specifically address the 

amounts for postage apparently paid on its beh^f.' IRP has not complied with the 

recommendation to identify the source of payment for the postage. Absent such a 

demonstration, the $72,880 in postage costs are considered a prohibited contribution to IRP. 

Legal Standard 

A. Receipt of PFohibited Contnbutions - General Prohibition. Candidates and committees 

may iiotaccept contributions (in ithe form of money, in-kind contributions or loans); 

1. In the name of another;.or 

2. Frorh the treasury flinrdb of therfollowing prohibited sources: 

• Corpo^tions (this ipeans any incorporated organization, including a non-stock 

corporation, an incorporated membership organization, and an incorporated 

cooperative);. 

• Labor Organi^ions; or 

• National Banks; 

3. Federal Government Contractors (including partnerships, individuals, and sole 

proprietors who have contracts with the federal government); and 

4. Foreign Nationals (including individuals who are not U.S. citizens and not lawfully 

admitted for permanent residence; foreign governments and foreign political parties; and 

groups organized under the laws of a foreign country or groups whose principal place of 

business is in a foreign country, as defined in 22 U.S.C. §611 (b)). 52 U.S.C. §§30119 

and 30121. 
17 

B. Contribution. A gift, subscription, loan (except a loan made in accordance with 11 CFR 

100.72 and 100.73), advance, or deposit of money or anything of value made by any person 

for the purpose of influencing any election for federal office is a contribution. The term 

anything of value includes all in-kind contributions, of any goods or services without charge 

or at a charge that is less than the usual and normal charge for such goods or services. 11 

CFR §100.52. 

Facts and Analysis 

A. Facts 

During audit fleldwork, the Audit staff identified apparent prohibited in<-ldnd contributions 

totaling S72,880. The apparent prohibited in-kind contributions consisted of payments for 

postage paid directly to a mail vendor used by IRP for at least 14 mailers that IRP sent out.'^ 

This amount was identified fram invoices IRP provided that Were for.^o Congressional 

candidates, Joe Walsh for Congress Committee and Pluminer fbr Congress.'^ Contained on 

each of the 14 invoices was an amount for postage tl^t read, "Postage - P'aicf Directly to Mail 

House". IRP bank statements, both federal and non-federal, do not show theSe amounts being 

paid. The amount paid for postage that could not be traced to ERP bank statements is $72,880. 

However, the Audit staff notes that other mailings associated with Candidates that IRP sent out 

appeared to involve postage paid for by the Candidates' authorized committees. For example, 

the Randy Hultgren for Congress committee, transferred $71,37^ to IRP and reported the 

transfers as, "Direct Mail Production." IRP reported spending $70,622 for three mailers in 

which the purpose was, FEA Volunteer MairHultgren.for Congress. 

V 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, Ae Audit provided the supporting documentation and work papers 

for the apparent prohibite.i$in-kind cbntributions. ThexIRP representative stated that the 

amounts were for one of the i^publican-.Congressional candidates. 

The Interim. Audit Report recommended that lEtP provide evidence demonstrating that the inkind contributions in.question were made with permissible funds or refund such contributions. 

In addition,, the Interim Audit Report fecomme^ed that if funds are not available to make the 

necessary refunds or disgorgement, IRP should disclose the contributions requiring refunds on 

Schedule D (Debts and Obligations) until funds become available to make such refunds. 

C. Committee Respoi|se to Interim Audit Report 

In response to the Interim Audit Report recommendation, IRP did not specifically address the 

amounts for postage apparently paid on its behalf. IRP has not complied with the 

recommendation to identify the source of payment for the postage. Absent such a 

demonstration, the $72,880 in postage costs are considered a profiibited contribution to IRP. 

A complete .set of invoices was not supplied. The amount of the possible prohibited contributions may be 

higher. 

" IRP reported receiving $ 112,000 from the Joe Walsh for Congress Committee along with SSO.OOO from the 

Plummer fbr Congress Committee. 
18 

I Finding 5. Reporting of Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff noted that IRP failed to report debts and obligations to 

14 vendors totaling $294,117"^ on Schedule D (Debts and Obligations). In response to the 

Interim Audit Report recommendation, IRP amended its disclosure reports to materially correct 

the disclosure of debts and obligations to these vendors. 

Legal Standard 

A. Continuous Reporting Required. A political committee must disclose the amount and 

nature of outstanding debts and obligations until those debts are extinguished. 52 U.S.C. 

§30104(b)(8) and 11 CFR §§104.3(d) and 104.11(a). 

B. Separate Schedules. A political committee must file separate schedule^ for debts owed by 

and to the committee with a statement explaining the circums^nces and conditions under which 

each debt and obligation was incurred or extinguished, 11 CFR § 104.11 (a). 

C. Itemizing Debts and Obligations. 

• A debt of SSOO or less must be reported as of the time payment is made or not later 60 days 

after such obligation is incurred, whichever comes first. 

• A debt exceeding $500 must be disclose in^^theireport that covers the date on which the 

debt was incurred. 11 CFR § 104.11 (b). '• > 

, 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reviewed IRP disbursement records and disclosure 

reports for proper reporting of debts and obligations.The review identified debts and 

obligations tp 14 vendors totaling $294,117'^ not reported on Schedule D (Debts and 

Obligations). Of these debts, $173,348'^ was incurred during the audit period and $120,769 

was incurred prior to the audit period and remained outstanding as of the beginning of the audit 

period. Based on the records, Aese vendors provided mainly legal services, accounting 

services, telemarketing and mail services. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the reporting of debts and obligations with IRP's representatives at 

the exit conference and provided work papers detailing the unreported debts. Representatives 

said they would research this matter and provide additional documentation. IRP representatives 

stated that they would amend their reports. 

Additional records were requested at the exit conference relating to possible debt amounts that IRP disclosed on 

a separate Tiling prior to fieldwork. Those records were not provid^ to the Audit staff. This amount is update 

to $257,396. 

IRP provided the Audit staff with 177 invoices for 724 disbursements. 

" Each debt in this amount was counted once even if it requires disclosure over multiple periods. This amount has 

been updated to $257,396. 

" This amount has been updated to $136,627. 
19 

The Interim Audit Report recommended that IRP amend its disclosure reports to disclose these 

debts. 

C. Committee Response to Interim Audit Response 

In response to the Interim Audit Report recommendation, IRP amended its disclosure reports to 

materially correct the disclosure of debts and obligations to these vendors. In addition, IRP 

acknowledged that the items identified in the Interim Audit Report".. .arguably should have 

been reported as debt on Schedule D during the relevant reporting period." 

I Finding 6. Recordkeeping for Employees 

Summary 

During audit fiddwork, the Audit staff determined thatIRP''did not maintain any monthly 

payroll logs, as requii^, to document the percentage of time each employee spent in connection 

with a federal election. For 2011 and 2012, the Audit staff identified payments to- IRP 

employees totaling $558,089" for which IRP did not maintain monthly payroll Togs. This 

consisted of $542,812 for which payroll was allocated with federal and. non-federal funds, and 

$ 15,277 for which payroll was exclusively non-federal. In response to the Interim Audit Report 

recommendation, IRP acknowledged that it does not possess any monthly payroll logs for 

employees for the 2011 - 2012 time period.^ IRP stated that it did maintain these logs during the 

2014 election cycle and going forward, they '^ll continue to maitftain monthly payroll logs. As 

such, IRP has complied with .the Interim Audit Repbrt recofppiendation by providing details of 

its plan to maintain monMy payroll logs in the ^ture. 

Legal Standard 

Maintenance of Monthly Logs. Party committees must keep a monthly log of the percentage 

of time each employee spends in connection with a federal election. Allocations of salaries, 

wages, and ^nge benefits to be undertaken as follows: ' 

• employees who spehd' 25 percent or less of their compensated time in a given month on 

feder-ali.election activities must-be paid either from the federal account or be allocated as 

administrative costs; V -

• employeeis who spend more than 25 percent of their compensated time in a given month 

on federal eledibn activities must be paid only from a federal account; and, 

• employees who spend none of their compensated time in a given month on federal 

election activities may be paid entirely with funds that comply with state law. 11 CFR 

§ 106.7(d)(1). 

Facts and Analysis 

A. Facts 

Prior to audit fieldwork, the Audit staff was informed by IRP that it did not maintain any 

monthly payroll logs, as required, to document the percentage of time each employee spent in 

" IRP did not have emplc^ees paid with a mixture of federal and non-federal funds and exclusively non-federal 

funds during the same month. 
20 

connection with a federal election. These logs are required to document the proper allocation of 

federal and non-federal funds used to pay employee salaries and wages. For 2011 and 2012, 

IRP did not maintain monthly logs for $558,089'^ in payroll disbursements. This amount 

includes payroll paid as follows to IRP employees. 

• Employees reported on Schedule H4 and paid with federal and non-federal funds during 

the same month (totaling $542,812) and; 

• Employees paid exclusively with non-federal funds in a given month (totaling $ 15,277). 

B. Interim Audit Report & Audit Division Recommendation 

Prior to audit fieldwork and at the exit conference, the Audit staff discussed the payroll 

recordkeeping matter with IRP's representative and counsel. IRP tounsel noted that IRP did 

not maintain payrolls during the 2011-2012 election cycle, howeviBr> quiiently does maintain the 

payroll logs. 

' •• 

The Interim Audit Report recommended that IRP provide evidence that it m^tained monthly 

time logs to document the percentage of time an employee spent in connection Wi^ federal 

election; or implement a plan to maintain monthly payroll logs imOie future. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, IRP acknowledged that it did not 

possess any monthly payroll logs for employees for the 2011 - 2Q,t2 time period. IRP stated 

that it maintained these logs during the 2014:electi^n and-going forward, IRP will require all of 

its employees who are paid by both federal and;non-'fedei:al:fih)ds to maintain monthly logs of 

the time each spends on fed^l .|qd pon-federar;abtivities. .As such, IRP has complied with the 

Interim Audit ^port recbmmendktiipn by providmg details of its plan to maintain monthly 

payroll logs in the future-.. . • 

" This total does not include payroll for employees paid with 100 percent federal funds and reported as such (see 

Part I, Background, Commission Guidance, Request for Early Commission Consideration of a Legal Question, 

Page 1). Payroll amounts are stated net of taxes and fringe benefits.