• FEDERAL ELECTIOi'J CO;\"i\lISSION

'vV:\SHINGTO~. DC ':i)4b),

June 30, 1994

BJ005897

MEMORANDUM

Attached please find a copy of the final audit report on

David Duke for U.S. Senate which was approved by the Commission on •

June 22, 1994.

TO:

FROM:

SUBJECT:

RONALD M. HARRIS

CHIEF, PRESS OFFICE

ROBERT J. COSTA ~11 fJ-;tASSISTANT STAFF DIRECTOR

AUDIT DIVISION

PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

DAVID DUKE FOR U.S. SENATE

•

Informational copies of the report have been received by all

parties involved and the report may be released to the public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Report Analysis Division

FEC Library
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FED ERAL ELEeTION COj\11'v1! SSION

'vVASHINCTON. 0 C 204b3

REPORT OF THE AUDIT DIVISION

ON

DAVID DUKE FOR U.S. SENATE

BJ004533

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I. Background

A. Overview

This report is based on an audit of the David Duke for

u.s. Senate Committee ("the Committee"), undertaken by the Audit

Division of the Federal Election Commission in accordance with

the provisions of the Federal Election Campaign Act of 1971, as

amended ("the Act"). The audit was conducted pursuant to

2 U.S.C. § 438(b) which states, in part, that the Commission may

conduct audits and field investigations of any political

committee required to file a report under Section 434 of this

title. Prior to conducting any audit under this section, the

Commission shall 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.

The Committee registered with the Secretary of the

Senate on January 2, 1990, and maintains its headquarters in

Metairie, Louisiana. The audit cov~red the period from November

1, 1989 (the earliest transaction recorded on the bank

statements), through December 31, 1990 (close of audit period).

Certain contribution records dated after December 31, 1990, but

relating to the 1990 Primary election, were reviewed in

conjunction with the contributions review. The Committee

reported a beginning cash balance of $-0-; total receipts of

$2,657,331.00; total disbursements of $2,602,287.00, and a cash

balance on December 31, 1990 of $55,044.00.

This audit report is based on documents and workpapers

which support each of its factual statements. They form part of

the record upon which the Commission based its decisions on the

matters in the report and were available to the Commissioners

and appropriate staff for review.
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• B. Key Personnel

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The Treasurer of the Committee during the period

covered by the audit was James A. Mcpherson and the Assistant

Treasurer was Paul Allen.

C. Scope

The audit included such tests as verification of total

reported receipts and disbursements and individual transactions;

review of required supporting documentation; analysis of

Committee debts and obligations; and such other audit procedures

as deemed necessary under the circumstances.

II. Audit Findings and Recommendations

A. Misstatement of Financial Activity

Section 434(b)(1), (2), and (4) of Title 2 of the

United States Code requires a Committee to disclose the amount

of cash on hand at the beginning of each reporting period and

the total amount of all receipts and disbursements by reporting

period and calendar year.

Our reconciliation of the Committee's 1990 reported

activity to its 1990 bank activity revealed the following

misstatements.

The Committee's reported 1990 receipts were overstated

by $60,282.34 and 1990 disbursements were overstated by

$7,658.59. This resulted in an overstatement of the 1990 Ending

Cash-On-Hand balance in the amount of $53,938.96: [$60,282.34 +

$1,315.21 (1990 Beginning Cash-On-Hand overstatement) - $7,658.59].

The components of the receipts misstatement are as

follows:

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1990 Receipts as Reported

NSF Contributor checks

never adjusted out of

reported receipts

Reversing entries for

NSF Committee checks

returned by the bank and

Bank errors

InteraccQunt transfers

erroneously included in

reported receipts

$2,519,268.00

6,319.14)

(76,951.92)

(48,163.45)
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Receipts from eight additional

campaign accounts not included

in reported totals

(see Finding II.D.)

Under reporting of receipts

Unexplained Difference

Subtotal

Adjusted 1990 Receipts

46,548.33

25,280.00

676.16)

60,282.34)

$2.458.985.66

The components of the disbursements misstatement are as

follows:

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1990 Disbursements as Reported

Reported NSF Contributor

check reversals included in

reported disbursements

Reversing entries for

NSF Committee checks

returned by the bank and

Bank errors

Unreported 1990 disbursements:

$2,489,311.00

6,319.14)

(76,951.92)

(1) 1990 checks outstanding as 26,294.51

of 12/31/90

(2) Disbursements clearing bank 24,764.52

account 12/26-12/31/90

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(3) Disbursements from eight

additional campaign

accounts not included in

reported totals

(see Finding II.D.)

(4) Net total of incorrect

disbursements reporting

Unexplained Difference

Subtotal

Adjusted 1990 Disbursements

22,375.41

575.16

1,602.87

(7,658.59)

52.481.652.41
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Generally, the Committee's reported totals, with minor

adjustments, were based upon bank statement figures. For the

period from the Committee's inception through August 1990, this

resulted in disbursements being reported when the checks cleared

the bank, as opposed to the check date. For the month of

September 1990, the Committee reported disbursements as of the

date of the checks.

For the period October 1, 1990 through December 31,

1990, the Committee determined its reported ending cash-on-hand

balance by adding to its December 25, 1990 bank statement balance

all deposits for the period December 26, 1990 through December 31,

1990. Reported receipts were the total of bank statement deposits

through December 31, 1990. Reported disbursements was derived

from these two totals and reported beginning cash-on-hand. These

calculations resulted in an overstatement of ending cash-on-hand

and an understatement of disbursements.

Also, the Committee's reported totals for the entire

audit period included only headquarters activity from the Greater

New Orleans Homestead account. The receipts and disbursements

activity from eight additional campaign accounts was not included

in reported totals.

At the Exit Conference, the Committee was provided with

copies of schedules detailing the differences between reported

activity and correct reportable activity for the entire audit

period. The Committee did not provide any explanations for these

misstatements.

In the Interim Audit Report the Audit staff recommended

that the Committee file a comprehensive amendment for 1990

correcting its reported activity.

The Committee filed a comprehensive amendment showing

adjusted year-to-dateamounts for calendar year 1990 on November

16, 1992 materially correcting the misstatement of financial

activity. No further. explanation was provided.

Recommendation #1

The Audit staff recommends no further action on this matter.

B. Itemization of Refunds and Rebates

Section 434(b)(2)(I) of Title 2 of the United States

Code states, in relevant part, that each report shall disclose for

the reporting period and the calendar year, the total amount of

all rebates, refunds, and other offsets to operating expenditures . In addition, 2 U.S.C. §434(b)(3)(F) requires that each report

include the identification of each person who provides a rebate,

refund, or other offset to operating expenditures to the reporting

committee in an aggregate amount or value in excess of $200 within
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the calendar year, together with the date and amount of such

receipt. Section 431(13) of Title 2 of the united States Code

defines, in part, the term "identification" to be the full name

and address of such person.

Section 104.3(a)(4)(v) of Title 11 of the Code of

Federal Regulations states, in relevant part, that the

identification and the aggregate year-to-date total shall be

reported for each person who provides a rebate, refund, or other

offset to operating expenditures to the reporting committee in an

aggregate amount or value in excess of $200 within the calendar

year, together with the date and amount of such receipt.

The Committee's receipt records were reviewed by the

Audit staff and traced to the Committee's Schedule A's to

determine whether all refunds and rebates requiring itemization

were itemized properly. We identified 28 refunds and rebates,

totaling $7,550.28, which were received by the Committee. Of

these 28 items, 14, totaling $6,349.92, were required to be

itemized. The Committee did not itemize any refunds and rebates.

At the Exit Conference, the Committee was provided with

a schedule of the itemizable refunds and rebates and they were

requested to file amended Schedule A's. No explanation was

provided by Committee officials for these omissions.

In the Interim Audit Report, the Audit staff recommended

that the Committee file amended Schedule A's itemizing the

aforementioned refunds and rebates.

The Committee filed a comprehensive amendment on

November 16, 1992, which materially corrected the failure to

itemize refunds and rebates.

Recommendation #2

The Audit staff recommends no further action on this matter.

C. Reporting of Debts and Obligations

Section 434(b)(8) of Title 2 of the united States Code

states that each report shall disclose the amount and nature of

outstanding debts and obligations owed by or to such political

committee; and where such debts and obligations are settled for

less than their reported amount or value, a statement as to the

circumstances and conditions under which such debts or obligations

were extinguished and the consideration therefor.

Section 104.11 of Title 11 of the Code of Federal

Regulations states, in part, that debts and obligations owed by or

to a political committee which remain outstanding shall be

continuously reported until extinguished. In addition, a debt,

obligation, or other promise to make an expenditure, the amount of

which is $500 or less, shall be reported as of the time payment is
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made or no later than 60 days after such obligation is incurred,

whichever comes first. Any loan, debt or obligation, the amount

of which is over $500, shall be reported as of the time of the

transaction.

A review of reports filed by the Committee indicated

that no debts were disclosed on Schedule D (Debts and Obligations

Owed by a Committee). However, our review of Committee invoices

and related payments revealed outstanding debts and obligations at

the close of the Committee's last three reporting periods for 1990

which were required to be disclosed on Schedule D. For the

pre-primary report, 2 debts and obligations, totaling $6,089.57,

were identified as outstanding. For the Third Quarter 1990 report

9 debts, totaling $17,840.35, were identified as outstanding and

18 debts, totaling $47,031.59, were identified as outstanding for

the 1990 Year-end report. Debts required to be disclosed for

these three reporting periods total $70,961.51 (29 items).

At the Exit Conference, the Committee was provided

schedules detailing these identified debts and obligations.

Committee officials provided no explanation for these omissions.

In the Interim Audit Report, the Audit staff recommended

that the Committee file amended Schedule D's disclosing the

aforementioned debts and obligations.

The Committee filed amendments on November 16, 1992,

which materially corrected the failure to file Schedule D's to

disclose all debts and obligations.

Recommendation #3

The Audit staff recommends no further action on this matter.

D. Failure to Amend Statement of Organization

for Additional Banks or Other Depositories

Section 433(b)(6) of Title 2 of the United States Code

states that the Statement of Organization of a political committee

shall include a listing of all banks, safety deposit boxes, or

other depositories used by the Committee.

Section 102.2(a)(vi)(2) of Title 11 of the Code of

Federal Regulations states, in relevant part, that the Statement

of Organization shall include a listing of all banks, safe deposit

boxes, or other depositories used by the Committee. Any change or

correction in the information previously filed in the Statement of

Organization shall be reported no later than 10 days following the

date of the change or correction by filing an amended Statement of

Organization or by filing a letter noting the changes. The

amendment need list only the name of such committee and the change

or correction.
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On its statement of Organization, the Committee

identified Greater New Orleans Homestead Bank as its only campaign

depository. No amendments were filed relative to any additional

campaign depositories.

However, during 1990 the Committee opened an additional

eight campaign accounts at depositories located throughout the

state of Louisiana. None of the activity from these accounts was

reported by the Committee. (See 1990 Receipts Misstatement at

Finding II.A.) The additional campaign accounts were opened at

the following depositories:

Bank Name/Location Date Account Opened

Central Bank/Monroe, LA 3/20/90

Hibernia National/Baton Rouge, LA 9/28/90

Hibernia National/Lafayette, LA 5/29/90

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Investors Bank & Trust Co./Gretna, LA

Peoples Bank & Trust Co./Chalmette, LA

whitney National/New Orleans, LA

Cameron State/Cameron, LA

First American/Shreveport, LA

8/27/90

6/01/90

7/16/90

5/21/90

3/16/90

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The Committee agreed that these eight campaign accounts

were Committee accounts and that no amendments to the Statement of

Organization were ever filed.

In the Interim Audit Report the Audit staff recommended

that the Committee file an amended Statement of Organization

disclosing the additional banks discussed above.

The Committee filed an amended statement of Organization

which disclosed the bank accounts noted above. The response also

states that "back in 1990, volunteers sprung up allover

Louisiana. Ones who did well wanted to open bank accounts to

handle campaign business in their area. They got permission from

one of the three campaign managers we went thru in quick

succession." The assistant treasurer goes on to explain that

n[tlhe first time I found out about the accounts was when the bank

statements were mailed to me, some after the campaign was over."

Recommendation #4

The Audit staff recommends no further action on this matter.
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E. Matters Referred to the Office of General Counsel

Other matters noted during the audit have been referred

to the Commission's Office of General Counsel.