financial activity through September 30, 2001; analyzed winding down costs, and
determined that the revised NOCE numbers submitted by the DNCC materially agree
with our calculations.

2000 Democratic National Convention Committee, Inc.

Statement of Net Outstanding Convention Expenses
As of October 1, 2000, as determined at January 23, 2002

Assets
Cash on Hand $986,889
Capital Assets $25,230
Accounts Receivable $75,637
Total Assets $1,087,756
Obligations
Qualified Convention Expenses ($1,030,297) (a)
Amount Payable to DNC (Democratic ($32,812) (b)
National Committee)
Total Obligations $1,063,109
Net Outstanding Convention Expenses $24,647
Less Interim Repayment of July 2, 2001 ($19,896)
Less Interim Repayment of December 26, 2001 $4,751
Amount Repayable to United States Treasury $0

FOOTNOTES TO NOCE
(a) As of May 31, 2001, the DNCC does not expect any further winding down costs.

(b) The DNCC did not return to the vendor a quantity of leased computer equipment. The vendor suec
both the DNCC and the DNC seeking payment for the equipment, rent for the period after the
equipment was due to be returned, interest, and legal fees. The reimbursement for the equipment
and the rent was listed at $81,785. A settlement was reached for $75,000 less a credit for returned
equipment leaving a balance of $72,812. This amount was paid by the DNC to the vendor.
Subsequently the DNC received $40,000 from an insurance claim filed by the DNCC and the
remaining $32,812 is due to the DNC. Under 11 CFR 9008.3(a)(2) and (3), the DNC should have
transferred the funds to the DNCC so that the convention expense could have been made from the
DNCC account and then DNC should have been reimbursed by the DNCC for the entire amount.

Page 6 of 11
Approved January 31, 2002


REPORT OF THE AUDIT DIVISION
ON THE

2000 DEMOCRATIC NATIONAL
CONVENTION COMMITTEE, INC.

Approved January 31, 2002

FEDERAL ELECTION COMMISSION
999 E STREET, N.W.
WASHINGTON, D.C.



Page 10 of 11
Approved January 31, 2002



Page 2 of 11
Approved January 31, 2002


TABLE OF CONTENTS

2000 DEMOCRATIC NATIONAL CONVENTION COMMITTEE, INC.

Page

Executive Summary 1
Final Audit Report 3
Background 3
Findings 5
Transmittal to Committee 9

Chronology 11





CHRONOLOGY

2000 DEMOCRATIC NATIONAL CONVENTION COMMITTEE, INC.

Audit Fieldwork
Preliminary Audit Report
To Committee

Response Received to the
Preliminary Audit Report

Final Audit Report Approved

Page 11 of 11

December 4, 2000 -
February 9, 2001

October 29, 2001

December 26, 2001

January 31, 2002

Approved January 31, 2002


FEDERAL ELECTION COMMISSION

WASHINGTON, D.C 20463

REPORT OF THE AUDIT DIVISION
ON THE
2000 DEMOCRATIC NATIONAL CONVENTION COMMITTEE, INC.

EXECUTIVE SUMMARY

The 2000 Democratic National Convention Committee, Inc. (DNCC) registered
with the Federal Election Commission on July 30, 1998, as a national convention
committee of the Democratic Party. The Treasurers for the period audited were Carol
Pensky from inception to March 26, 1999, at which time Andrew Tobias became
Treasurer and continues to serve in that capacity. During the audit period, the DNCC
maintained offices in Washington, D.C. and Los Angeles, CA. The DNCC records are
maintained in Washington, D.C. The audit was conducted pursuant to Section 9008(g) of
Title 26 of the United States Code, which directs the Commission to conduct an
examination and audit of the payments for presidential nominating conventions no later
than December 31 of the calendar year in which the presidential nominating convention is
held. The two audit findings summarized below were presented to the DNCC at an exit
conference held on March 29, 2001 and later in the preliminary audit report. DNCC’s
response to the findings is contained in the audit report.

DETERMINATION OF NET OUTSTANDING CONVENTION EXPENSES AND
AMOUNTS SUBJECT TO THE SPENDING LIMITATION — 26 U.S.C. §9008(b); 11 CFR
§§9008.8(a)(1), 9008.10(g) and 9008.12(b)(5) & (c). The NOCE as calculated by the
Audit staff in the preliminary audit report showed unspent funds, or an amount spent that
was less then the limitation, of $22,969. The unexpended amount was slightly higher
than DNCC’s calculation of $19,896 that had been repaid on July 2, 2001. In response to
the preliminary audit report, the DNCC provided a revised NOCE indicating that an
additional $4,751 in unspent funds was due to the United States Treasury and made a
repayment in the that amount.

STALE-DATED CHECKS — 11 CFR §9008.16. The audit identified 11 stale-dated
checks, totaling $11,688. In its response to the preliminary audit report, the DNCC stated
that five checks had been voided and were included in the unspent funds calculation. The
DNCC submitted a payment to the United States Treasury of $7,820 representing the
amount due for the stale-dated checks.

Page 1 of 11
Approved January 31, 2002



FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

February 11, 2002

MEMORANDUM

TO: RON M. HARRIS
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ
ASSISTANT STAFF TOR

SUBJECT: | PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON
THE 2000 DEMOCRATIC NATIONAL CONVENTION COMMITTEE,
INC.

Attached please find a copy of the final audit report and related documents on the
2000 Democratic National Convention Committee, Inc. that was approved by the
Commission on January 31, 2002.

Informational copies of the report have been received by all parties involved and
the report may be released to the public on February 11, 2002.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library


The DNCC used six bank accounts to handle its financial activity. From
these accounts it made approximately 4,700 disbursements. The DNCC received
$13,512,000 in federal funds which represents the full entitlement established at
26 U.S.C. §9008(b).

D. AUDIT SCOPE AND PROCEDURES

The audit of the DNCC covered the following general categories as

appropriate:
1. the receipt of contributions from prohibited sources;
2. the receipt of contributions or loans in excess of the statutory limitations;
3. proper disclosure of receipts including the itemization of receipts when
required, as well as, the completeness and accuracy of the information
disclosed;
4. proper disclosure of disbursements including the itemization of

disbursements when required, as well as, the completeness and accuracy of
the information disclosed;

5. proper disclosure of DNCC debts and obligations;

6. the accuracy of total reported receipts, disbursements and cash balances as
compared to DNCC bank records;

7. adequate recordkeeping for DNCC transactions;

8. accuracy of the Statement of Net Outstanding Convention Expenses filed
by DNCC to disclose its financial condition (Finding II.A.);

9. compliance with requirements concerning expenditures for convention
expenses (Finding II.B.);

10. the DNCC’s compliance with spending limitations; and,
11. other audit procedures that were deemed necessary in the situation.
As part of the Commission’s standard audit process, an inventory of the
DNCC’s records was conducted prior to the audit fieldwork. This inventory is conducted

to determine if the records are materially complete and in an auditable state. Based on the
review of records presented, fieldwork began immediately.

Page 4 of 11
Approved January 31, 2002


FEDERAL ELECTION COMMISSION

WASHINGTON, DC. 20463

REPORT OF THE AUDIT DIVISION
ON THE
2000 DEMOCRATIC NATIONAL CONVENTION COMMITTEE, INC.

IL BACKGROUND
A. AUDIT AUTHORITY

This report is based on an audit of the 2000 Democratic National
Convention Committee, Inc. (DNCC), to determine whether there has been compliance
with the provisions of the Federal Election Campaign Act of 1971, as amended (the Act).
The audit was conducted pursuant to Section 9008(g) of Title 26 of the United States
Code which directs the Commission to conduct an examination and audit of the payments
for presidential nominating conventions no later than December 31 of the calendar year in
which the presidential nominating convention is held.

In addition to examining the receipt and use of Federal funds, the audit
seeks to determine if the DNCC has materially complied with the limitations, prohibitions
and disclosure requirements of the Act.

B. AUDIT COVERAGE

The audit covered the period from July 16, 1998, the date of the first
financial transaction in DNCC’s bank accounts, through December 31, 2000. In addition,
certain financial activity was reviewed through September 30, 2001 to determine any
amounts due to the United States Treasury. The DNCC reported an opening cash balance
of $-0-, total receipts of $13,888,484, total disbursements of $12,897,133, and a closing
cash balance on December 31, 2000 of $991,351.

Cc. COMMITTEE ORGANIZATION

The DNCC registered with the Federal Election Commission on July 30,
1998, as a national (convention) committee of the Democratic Party. The Treasurers for
the period audited were Carol Pensky from inception to March 26, 1999, at which time
Andrew Tobias became Treasurer and continues to serve in that capacity. During the
audit period, the DNCC maintained offices in Washington, D.C. and Los Angeles, CA.
The DNCC records are maintained in Washington, D.C..

Page 3 of 11
Approved January 31, 2002







The NOCE as calculated by the Audit staff in the preliminary audit report
showed a surplus, or an amount spent under the limitation, of $22,969 which was slightly
higher than DNCC’s calculation, revised as of May 31, 2001, showing unspent funds of
$19,896. On July 2, 2001, the DNCC made a repayment to the United States Treasury in
the amount of $19,896.

In the preliminary audit report, the Audit staff recommended that the
DNCC provide evidence to demonstrate that either no additional repayment of unspent
funds was due or a repayment of a lesser amount was due. Absent such a demonstration,
the Audit staff would recommend that the Commission determine that an additional
$3,073 ($22,969 - $19,896) is repayable to the United States Treasury, pursuant to 11
CFR §9008.12.

As previously stated, in its response to the preliminary audit report, the
DNCC provided a revised NOCE indicating that an additional $4,751 in unspent funds
was due to the United States Treasury. The additional unspent funds resulted from the
inclusion of five voided checks that were removed from the stale-dated check finding
(See Finding II.B.), the inclusion of one additional payment of a convention expenditure
and other minor adjustments. On December 26, 2001, the DNCC made a payment to the
United States Treasury in the amount of $12,571, of which $4,751 represented the
additional unspent funds as calculated by the DNCC.

B. STALE-DATED CHECKS

Section 9008.16 of Title 11 of the Code of Federal Regulations states that
if the committee has checks outstanding that have not been cashed, the committee shall
notify the Commission of its efforts to locate the payees, if such efforts are necessary, and
its efforts to encourage the payees to cash the outstanding checks. The committee shall
also submit a check for the total amount of such outstanding checks, payable to the
United States Treasury.

The Audit staff reconciled the bank activity through May 31, 2001 and
identified 11 stale-dated checks, totaling $11,688.

At a conference held at the end of fieldwork, the Audit staff provided
representatives of the DNCC with a schedule of the stale-dated checks. The DNCC
representatives agreed to review their records and provide the Audit staff with additional
information that may resolve the items.

The preliminary audit report recommended that the DNCC provide
evidence that either the checks were not outstanding by providing copies of the front and
back of the negotiated checks along with bank statements, or that the stale-dated checks
were void by providing either copies of the voided checks with evidence that no
obligation exists, or copies of negotiated replacement checks. Absent such information,

Page 7 of 11
Approved January 31, 2002



FEDERAL ELECTION COMMISSION

WASHINGTON. DC 20463

February 5, 2002

Mr. Andrew Tobias, Treasurer

2000 Democratic National Convention Committee, Inc.
430 South Capitol St., S.E.

Washington, DC 20003

Dear Mr. Tobias:

Attached please find the Final Audit Report on the 2000 Democratic National
Convention Committee, Inc. The Commission approved the report on January 31, 2002.

Should the Committee wish to dispute the Commission’s determinations, Commission
regulations at 11 CFR §9008.12(c) provide the Committee with an opportunity to submit in
writing, within 60 calendar days after service of the Commission’s notice (March 11, 2002),
legal and factual materials to demonstrate that no repayment, or a lesser repayment, is required.
In addition to the submission of written materials the Committee may request an opportunity to
address the Commission in open session. The request for an oral hearing should identify the
repayment matters that will be addressed and the Committee’s presentation must be based on the
legal and factual materials submitted.

The Commission will consider any written legal and factual materials submitted within
the 60 day period when deciding whether to revise the repayment determination. Such materials
may be submitted by counsel. If the Committee decides to file a response to the repayment
determination, please contact Gregory R. Baker of the Office of General Counsel at (202) 694-
1650 or toll free at (800) 424-9530. If the Committee does not dispute this determination within
the 60 day period provided, it will be considered final.

The Commission approved Final Audit Report will be placed on the public record on
February 11, 2002. Should you have any questions regarding the public release of the report,
please contact the Commission’s Press Office at (202) 694-1220. Any questions you have
related to matters covered during the audit or in the report should be directed to Bill Antosz or
Alex Boniewicz of the Audit Division at (202) 694-1200 or toll free at (800) 424-9530.

Sincerely,
4)

cul
Ad F, Stoltz ~~
"; Assistant Staff Director
‘/ Audit Division

Attachment as Stated

Page 9 of 11
Approved January 31, 2002







Unless specifically discussed below, no material non-compliance was
detected. It should be noted that the Commission may pursue further any of the matters
discussed in this report in an enforcement action.

Il. AUDIT FINDINGS AND RECOMMENDATIONS - AMOUNTS DUE TO
THE U.S. TREASURY

A. DETERMINATION OF NET OUTSTANDING CONVENTION EXPENSES AND
AMOUNTS SUBJECT TO THE SPENDING LIMITATION

Section 9008(b) of Title 26 of the United States Code states that the
national committee of a major party shall be entitled to payments under paragraph (3),
with respect to any presidential nominating convention, in amounts that, in the aggregate,
shall not exceed $4,000,000 as adjusted by the consumer price index. The DNCC’s
entitlement for the 2000 nominating convention was $13,512,000.

Section 9008.8(a)(1) of Title 11 of the Code of Federal Regulations states,
in part, the national committee of a major party may not incur convention expenses with
respect to a Presidential nominating convention which, in the aggregate, exceed the
amount to which such committee is entitled under 11 CFR 9008.4 and 9008.5.

Section 9008.10(g) of Title 11 of the Code of Federal Regulations states,
in part, that a convention committee shall file, no later than sixty days after the last day of
the convention, a statement of that committee’s net outstanding convention expenses.

Section 9008.12(b)(5) of Title 11 of the Code of Federal Regulations states
that if any portion of the payment under 11 CFR 9008.4 remains unspent after all
convention expenses have been paid, that portion shall be returned to the Secretary of the
Treasury. The national committee or convention committee shall make an interim
repayment of unspent funds based on the financial position of the committee as of the end
of the ninth month following the last day of the convention, allowing for a reasonable
amount as determined by the Commission to be withheld for unanticipated contingencies.
The interim repayment shall be made no later than 30 calendar days after the end of the
ninth month following the last day of the convention.

Section 9008.12(c) of Title 11 of the Code of Federal Regulations states
the Commission will follow the same repayment determination procedures, and the
committee has the same rights and obligations as are provided for repayment
determinations involving publicly funded candidates under 11 CFR 9007.2(c) through

(h).

The 2000 Democratic National Convention ended on August 17, 2000.
The DNCC filed a Statement of Net Outstanding Convention Expenses (NOCE), as of
October 1, 2000. In response to the preliminary audit report, the DNCC filed a revised
NOCE, as determined at January 23, 2002, shown below. The Audit staff reviewed

Page 5 of 11
Approved January 31, 2002



the Audit staff would recommend that the Commission determine that stale-dated checks
totaling $11,688 were payable to the United States Treasury.

In its response to the preliminary audit report, the DNCC stated that five
checks totaling $3,914 had been voided. These checks were removed from the stale-
dated check total and were included in the unspent funds calculation above in Finding
IL.A.. The remaining stale-dated checks totaled $7,774. On December 26, 2001, the
DNCC made a payment to the United States Treasury in the amount of $12,571, of which
$7,820 | represented the amount due for the stale-dated checks.

' DNCC’s check to the United States Treasury included one additional stale-dated check in the
amount of $47 which was not included in the Audit staff's stale-dated check list.

Page 8 of 11
Approved January 31, 2002