Final Audit Report of the 

Commission on Friends of Erik 

Paulsen 

(January 1, 2015 - December 31, 2016) 

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.1 The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to the matter 

discussed in this report.

About the Campaign (p. 2)

Friends of Erik Paulsen is the principal campaign committee for 

Erik Paulsen, Republican candidate for the United States House 

of Representatives from the state of Minnesota, 3rd District, and 

is headquartered in Eden Prairie, Minnesota. For more 

information, see the Campaign Organization Chart, p. 2. 

Financial Activity (p. 2)

 Receipts

o Contributions from Individuals 

o Contributions from Other 

Political Committees 

o Other Receipts 

Total Receipts

$ 2,505,856 

2,431,879 

16,698 

$ 4,954,433 

 Disbursements

o Operating Expenditures 

o Transfers to Other Authorized 

Committees 

o Refunds of Contributions 

Total Disbursements

$ 5,713,973 

48,102 

14,150 

$ 5,776,225 

Additional Issue (p. 3) 

 Receipt of Contributions in Excess of the Limit 

 

1

 52 U.S.C. §30111(b). 
Final Audit Report of the 

Commission on Friends of Erik 

Paulsen 

(January 1, 2015 - December 31, 2016) 
Table of Contents 

 Page

Part I. Background 

 Authority for Audit 1 

 Scope of Audit 1 

 Audit Hearing 1 

Part II. Overview of Campaign 

Campaign Organization 2 

 Overview of Financial Activity 2 

Part III. Summary 3 

Additional Issue 3 

Part IV. Additional Issue 

Receipt of Contributions in Excess of the Limit 4
 1

 

Part I 

Background 

Authority for Audit 

This report is based on an audit of the Friends of Erik Paulsen (FEP), 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 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 under this subsection, the 

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

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

for substantial compliance with the Act. 52 U.S.C. §30111(b). 

Scope of Audit 

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

1. the receipt of excessive contributions; 

2. the receipt of contributions from prohibited sources; 

3. the disclosure of contributions received; 

4. the disclosure of individual contributors’ occupation and name of employer; 

5. the consistency between reported figures and bank records; 

6. the completeness of records; and 

7. other committee operations necessary to the review. 

Audit Hearing 

FEP declined the opportunity for a hearing before the Commission on the issue presented 

in this report. 
 2 

Part II 

Overview of Campaign 

Campaign Organization 

Overview of Financial Activity 

(Audited Amounts) 

 

Cash-on-hand @ January 1, 2015 $ 1,194,961 

Receipts 

o Contributions from Individuals 2,505,856 

o Contributions from Other Political 

Committees 

2,431,879 

o Other Receipts 16,698 

Total Receipts $ 4,954,433 

Disbursements 

o Operating Expenditures 5,713,973 

o Transfers to Other Authorized Committees 48,102 

o Refunds of Contributions 14,150 

Total Disbursements $ 5,776,225

Cash-on-hand @ December 31, 2016 $ 373,169 

Important Dates 

 Date of Registration October 15, 2007 

 Audit Coverage January 1, 2015 - December 31, 2016 

Headquarters Eden Prairie, Minnesota 

Bank Information 

 Bank Depositories Three 

 Bank Accounts 2 checking; 1 savings; 3 investment 

Treasurer 

 Treasurer When Audit Was Conducted David Asp (12/28/2016 – Present) 

 Treasurer During Period Covered by Audit Reid LeBeau (10/15/2007 – 12/27/2016) 

David Asp (12/28/2016 – Present) 

Management Information 

 Attended FEC Campaign Finance Seminar Yes 

 Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 
 3

 

Part III 

Summary 

Additional Issue 

Receipt of Contributions in Excess of the Limit

During audit fieldwork, the Audit staff reviewed contributions from individuals to 

determine if any exceeded the contribution limit. This review indicated that FEP 

received apparent excessive contributions totaling $185,386. These errors occurred as a 

result of FEP not resolving the excessive portions of contributions by forwarding 

presumptive redesignation or reattribution letters to its contributors or issuing a refund of 

the excessive portion of contributions in a timely manner. In response to the exit 

conference, FEP untimely resolved excessive contributions from individuals totaling 

$50,600. 

In response to the Interim Audit Report recommendation, FEP stated that, at most, it had 

a “technical record-retention issue.” FEP also presented 156 presumptive letters dated 

January 4, 2018, to untimely resolve the excessive contribution issue. In response to the 

Draft Final Audit Report, FEP stated it resolved all excessive contributions and reiterated 

that the evidence it provided resolved the auditors’ concerns regarding the errors in the 

sample items. 

The Commission did not approve by the required four votes the Audit staff’s 

recommended finding that FEP received excessive contributions totaling $185,386. 

Pursuant to Commission Directive 70,2

 this matter is presented in the “Additional Issue” 

section of this report. (For more detail, see p. 4.) 

 

2

 Available at https://www.fec.gov/resources/cms-content/documents/directive_70.pdf. 
 4

 

Part IV

Additional Issue

Receipt of Contributions in Excess of the Limit 

Summary 

During audit fieldwork, the Audit staff reviewed contributions from individuals to 

determine if any exceeded the contribution limit. This review indicated that FEP 

received apparent excessive contributions totaling $185,386. These errors occurred as a 

result of FEP not resolving the excessive portions of contributions by forwarding 

presumptive redesignation or reattribution letters to its contributors or issuing a refund of 

the excessive portion of contributions in a timely manner. In response to the exit 

conference, FEP untimely resolved excessive contributions from individuals totaling 

$50,600. 

In response to the Interim Audit Report recommendation, FEP stated that, at most, it had 

a “technical record-retention issue.” FEP also presented 156 presumptive letters dated 

January 4, 2018, to untimely resolve the excessive contribution issue. In response to the 

Draft Final Audit Report, FEP stated it resolved all excessive contributions and reiterated 

that the evidence it provided resolved the auditors’ concerns regarding the errors in the 

sample items. 

The Commission did not approve by the required four votes the Audit staff’s 

recommended finding that FEP received excessive contributions totaling $185,386. 

Pursuant to Commission Directive 70,3

 this matter is presented in the “Additional Issue” 

section of this report. 

 

Legal Standard 

A. Authorized Committee Limits. An authorized committee may not receive more 

than a total of $2,700 per election from any one person or $5,000 per election from a 

multicandidate political committee. 52 U.S.C. §§30116; 11 CFR §§110.1(a) and (b) 

and 110.9. 

B. Handling Contributions That Appear Excessive. If a committee receives a 

contribution that appears to be excessive, the committee must either: 

 Return the questionable check to the donor; or 

 Deposit the check into its federal account and: 

 Keep enough money in the account to cover all potential refunds or establish a 

separate account in a campaign depository for such contributions; 

 Keep a written record explaining why the contribution may be illegal; 

 Include this explanation on Schedule A if the contribution has to be itemized 

before its legality is established; 

 

3

 Available at https://www.fec.gov/resources/cms-content/documents/directive_70.pdf. 
 5

 

 Seek a reattribution or a redesignation of the excessive portion, following the 

instructions provided in the Commission regulations (see below for 

explanations of reattribution and redesignation); and 

 If the committee does not receive a proper reattribution or redesignation 

within 60 days after receiving the excessive contribution, refund the excessive 

portion to the donor. 11 CFR §§103.3(b)(3), (4) and (5) and 

110.1(k)(3)(ii)(B). 

C. Joint Contributions. Any contribution made by more than one person, except for a 

contribution made by a partnership, must include the signature of each contributor on 

the check, money order, or other negotiable instrument or in a separate writing. A 

joint contribution is attributed equally to each donor unless a statement indicates that 

the funds should be divided differently. 11 CFR §110.1(k)(1) and (2). 

D. Reattribution of Excessive Contributions. The Commission regulations permit 

committees to ask donors of excessive contributions (or contributions that exceed the 

committee’s net debts outstanding) whether they had intended their contribution to be 

a joint contribution from more than one person and whether they would like to 

reattribute the excess amount to the other contributor. The committee must inform 

the contributor that: 

 The reattribution must be signed by both contributors; 

 The reattribution must be received by the committee within 60 days after the 

committee received the original contribution; and 

 The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.1(k)(3). 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper reattribution or refund the excessive portion to the donor. 11 CFR 

§§103.3(b)(3) and 110.1(k)(3)(ii)(B). Further, a political committee must retain 

written records concerning the reattribution in order for it to be effective. 11 CFR 

§110.1(l)(5). 

Notwithstanding the above, any excessive contribution that was made on a written 

instrument that is imprinted with the names of more than one individual may be 

attributed among the individuals listed unless instructed otherwise by the 

contributor(s). The committee must inform each contributor: 

 How the contribution was attributed; and 

 The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.1(k)(3)(ii)(B). 

E. Redesignation of Excessive Contributions. When an authorized candidate 

committee receives an excessive contribution (or a contribution that exceeds the 

committee’s net debts outstanding), the committee may ask the contributor to 

redesignate the excess portion of the contribution for use in another election. The 

committee must inform the contributor that: 

 The redesignation must be signed by the contributor; 
 6

 

 The redesignation must be received by the committee within 60 days after the 

committee received the original contribution; and 

 The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.1(b)(5). 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper redesignation or refund the excessive portion to the donor. 11 CFR 

§§103.3(b)(3) and 110.1(b)(5)(ii)(A). Further, a political committee must retain 

written records concerning the redesignation in order for it to be effective. 11 CFR 

§110.1(l)(5). 

When an individual makes an excessive contribution to a candidate’s authorized 

committee, the campaign may presumptively redesignate the excessive portion to the 

general election if the contribution: 

 Is made before that candidate’s primary election; 

 Is not designated in writing for a particular election; 

 Would be excessive if treated as a primary election contribution; and 

 As redesignated, does not cause the contributor to exceed any other contribution 

limit. 11 CFR §110.1(b)(5)(ii)(B)(1)-(4). 

The committee is required to notify the contributor of the redesignation within 60 

days of the treasurer’s receipt of the contribution, and must offer the contributor the 

option to receive a refund instead. 11 CFR §110.1(b)(5)(ii)(B)(5) and (6). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff utilized sample testing and a review of other 

contributions not included in the sample population to identify apparent excessive 

contributions from individuals. 

Excessive Contributions-Testing Method 

Sample Projection Amount4 $153,586

High Dollar Contribution Error Amount $31,800

Total Amount of Excessive Contributions $185,386

Reasons for Excessive Contributions 

Contributions not resolved via presumptive letter 

or refund $182,686

 

4

 The sample error amount ($153,586) was projected using a Monetary Unit Sample with a 95 percent 

confidence level. The sample estimate could be as low as $88,215 or as high as $247,564. 
 7

 

Contributions resolved-Untimely $2,7005

Total Amount of Excessive Contributions $185,386

B. Additional Information

FEP did not maintain a separate account for questionable contributions. However, based 

on its cash-on-hand balance at the end of the cycle ($373,169), it appears that FEP 

maintained sufficient funds to make refunds of the apparent excessive contributions. 

C. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with the FEP Treasurer (Treasurer) at the exit 

conference and provided schedules of the apparent excessive contributions along with 

descriptions of actions necessary to resolve each. In response to the exit conference, the 

Treasurer submitted presumptive reattribution and redesignation letters that were sent to 

all the contributors identified by the Audit staff.6 Many timely presumptive letters were 

also submitted in response to the exit conference. The excessive contributions resolved 

by these letters are not included in the amounts presented in this report. The Treasurer 

stated he would review contribution records to identify other contributions requiring 

presumptive letters along with descriptions of actions necessary to resolve each. 

The Treasurer also expressed FEP’s commitment to resolving the issue of apparent 

excessive contributions and stated that during the campaign “contributors received 

solicitations with language informing them that their contributions could be reattributed” 

or “redesignated to comply with the federal limits.” The Treasurer provided a signed 

letter from a former committee employee stating that she was the person responsible for 

“sending reallocation and redesignation letters on behalf of the Committee” during the 

cycle. The former employee stated that, consistent with her practice at the time, she sent 

presumptive letters to all individuals she determined to have given an excessive 

contribution, including those identified by the Audit staff. She believes that the reason 

copies of these letters are not available is because they were among letters she 

“inadvertently saved over when drafting new letters to be sent to other contributors.” 

 

5

 The Audit staff was able to trace this refund to FEP’s disbursement database. However, FEP has not 

provided evidence that this refund check has actually been negotiated. 6

 FEP sent untimely presumptive letters to individuals who donated contributions in excess of the limit. 

These individuals were identified by the Audit staff in the high dollar review ($31,800) and the sample 

review ($18,800). 
 8

 

In response to the exit conference, FEP submitted the following documentation: 

Corrective Action Taken by Committee 

Presumptive Letters Sent-Untimely $50,600 

Amount of Excessive Contributions –Not Resolved $134,786 

The Interim Audit Report recommended that FEP provide evidence that demonstrated 

that the contributions totaling $134,786 were not excessive or that they were timely 

resolved. Absent such evidence, FEP should have resolved these excessive contributions 

by (1) sending notices for those contributions that were eligible for presumptive 

redesignation/reattribution letters, informing contributors about how the excessive 

portions of their contributions were resolved and offering refunds, (2) refunding the 

excessive portion of each contribution that was not eligible for a presumptive 

redesignation/reattribution letter or making a payment to a governmental entity or to a 

qualified charitable organization and providing documentation, or (3) disclosing the 

contributions requiring refunds on Schedule D (Debts and Obligations) if funds were not 

available to make the necessary refunds. 

D. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, FEP stated it did not receive 

excessive contributions and that the projections from the statistical sampling were 

improper. FEP stated that it “...provided the auditors with evidence demonstrating that 

none of the sample items involved excessive contributions – and the auditors agreed that 

all concerns regarding the sample items have been resolved.” By providing the letter 

from its former employee, FEP believes it has demonstrated that every donor requiring a 

presumptive letter for the 2016 cycle has received a letter. FEP stated that the Audit staff 

should report no finding, or revise its finding to match the evidence submitted by FEP 

which demonstrates that it did not receive excessive contributions. Finally, FEP 

suggested it had a “technical record-retention issue” due to its maintenance of 

redesignation/reattribution letters. 

The Audit staff noted that all errors identified in the sample represented excessive 

contributions. FEP did not provide presumptive letters sent to the contributors during the 

2016 cycle. However, FEP sent follow-up letters to its contributors during audit 

fieldwork and untimely resolved the identified sample errors. 

As for the remaining excessive errors in the population of contributions, the Audit staff 

acknowledged that FEP submitted a letter from a former employee attesting that 

presumptive letters were sent timely. This letter was helpful in that it provided 

information about FEP’s procedures when it received the excessive contributions, 

however, it did not provide sufficient information or proof which would enable the Audit 
 9

 

staff to independently verify that the presumptive letters were indeed timely sent to FEP’s 

contributors. The Audit staff noted that FEP’s situation was not a “technical recordretention issue;” the regulations state that a political committee must retain the written 

records concerning redesignation or reattribution for either to be effective. 

Notwithstanding the letter from the former employee, FEP also reviewed its contributor 

records and presented 156 additional presumptive reattribution/redesignation letters dated 

January 4, 2018, for contributions totaling $217,3297

 which FEP sent to its contributors. 

The Audit staff reviewed the letters and concluded that FEP resolved all excessive 

contributions which could have been remedied with a presumptive reattribution and/or 

redesignation letter, albeit untimely. 

E. Draft Final Audit Report 

The Draft Final Audit Report acknowledged FEP’s disagreement with the Audit staff’s 

conclusion that it received excessive contributions. It reiterated that all errors identified 

in the sample represented excessive contributions for which FEP did not provide 

presumptive letters sent to the contributors during the 2016 cycle. FEP sent follow-up 

letters to its contributors during the audit fieldwork and untimely resolved the identified 

sample errors. The Draft Final Audit Report pointed out that FEP searched its 

contributor records and provided untimely presumptive letters for additional excessive 

contributions over the amount identified by the Audit staff. The dollar amounts of these 

letters were applied to the amount identified by the Audit staff as requiring presumptive 

letters. As such, the Draft Final Audit Report concluded that FEP resolved, albeit 

untimely, all of the excessive contributions identified by the Audit staff totaling 

$185,386. 

F. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, FEP reiterated that the final audit report 

wrongly called certain contributions “excessive” even though FEP has demonstrated that 

every donor received a reattribution or redesignation letter when warranted during the 

2016 cycle. FEP stated that the evidence it provided resolved the auditors’ concerns 

regarding the alleged errors in the sample items. FEP stated that because those concerns 

were resolved, as a matter of regulation, the Audit Division cannot use the sample items 

as the basis for statistical projections. 

Commission Conclusion 

During the November 15, 2018 Open Meeting, the Commission considered the Audit 

Division Recommendation Memorandum in which the Audit staff recommended that the 

Commission find that FEP received excessive contributions totaling $185,386. 

The Commission did not approve, by the required four votes, the Audit staff’s 

recommendation. The Commission could not agree as to whether a letter from an 

employee explaining FEP’s process for handling excessive contributions was sufficient, 

 

7

 The Draft Final Audit Report stated that FEP submitted 224 letters totaling $391,950. The Audit staff 

performed the subsequent review of the letters and revised the figures to account only for those letters 

that accurately resolved the excessive contributions. 
 10

 

in lieu of maintaining copies of presumptive letters, to document that FEP met the 

regulatory requirement for resolving excessive contributions. 

Some Commissioners believed the above mentioned letter from the FEP employee, along 

with copies of some timely presumptive letters, satisfactorily indicated that FEP had sent 

presumptive letters for all excessive contributions. As such, these Commissioners voted 

not to approve the Audit Division’s recommendation that FEP received excessive 

contributions. 

One Commissioner noted that FEP did not present the documentation needed to establish 

that the excessive contributions discussed in the audit report were timely resolved. In 

addition, it was also stated that a sworn affidavit might have been more persuasive than a 

letter from an employee as evidence that timely presumptive letters were sent. As such, 

some Commissioners voted to approve the Audit Division’s recommendation that FEP 

received excessive contributions. 

Pursuant to Commission Directive 70, this matter is presented as an “Additional Issue.”