Interim 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 

investigatibns 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 limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

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, Illinois. For more information, see 

the chart on the Committee Organization, p.2. 

Financial Activity^ (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Political 

Committees 

o Transfers from Affiliated and Other 

Political Committees 

o Transfers from Non-federal Account 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Federal Election Activity 

• o Contributions to Federal Candidates 

o Other Disbursements 

Total Disbursements 

$ 1,129,720 

1,201,954 

1,576,813 

395,959 

344,928 

$ 4,649,374 

$ 1,295,631 

3,122,532 

5,500 

163,600 

$ 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) 

' 52U.S.C. §30111(b). 

^ IRP had a Levin account that had Fcceived S4S9 in March 2011 and maintained that balance throughout 

the audit period. 
Interim Audit Report of the Audit 

Division on the 

Illinois Republican Party 

(Januaty 1, 2011 - December 31, 2012) 
Table of Cdntents 

Page 

Part I. Backg];ound 

Authority for Audit 

Scope of Audit 

Part II. Overvjlew of Committee 

Committee Organization. 

Overview of Financial Activity 

i 

I 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Recommendations 

Finding 1. Missta^tement of Financial Activity 

Finding 2. Reporting of Apparent Independent Expenditures 

Finding 3. Recordkeeping for Communications 

Finding 4. Receipt of Apparent Prohibited In-Kind Contributions 

Finding S. Reporiing of Debts and Obligations 

Finding 6. Recoiiikeeping for Employees 

• 1 

1 

2 

2 

5 

7 

12 

14 

15 

16 
Part I 

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 Audit Division 

conducted the audit pursuant to S2 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 S2 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 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 non-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 Guidance 

Request for Early Commission Consideration of a Legal Question 

Pursuant 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 the 2010 election cycle. Specifically, the Commission addressed whether 

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

percent federal funds. 

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

committees to keep a monthly log for employees paid exclusively with 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 Two Non-federal 

Treasurer 

• Treasurer When Audit Was Conducted Judy Diekelman - May 20,2014 - 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 Volunteer Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand ® January 1,2011 S 24,000 

Receiptso Contributions from Individuals 1.129,720 

o Contributions from Political Committees 1,201,954 

o Transfers from Affiliated and Other Political 1,576,813 

Coimnittees 

o Transfers from Non-federal Account 395,959 

o Other Receipts 344.928 

Total Receipts S 4,649374 

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 S 86,111 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

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

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

of receipts and disbursements for 2012. In 2011, IRP overstated its 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. The Audit staff 

recommends that IRP amend its disclosure reports to correct the misstatements. (For more 

detail, see p. 5.) 

Finding 2. Reporting of Apparent Independent Expenditures 

During audit fieldwork, the Audit staff 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 direct mail or media-related 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 wheOier 24/48-hour reports were required to be filed for the apparent independent 

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

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

If IRP believes that the apparent independent expenditures, including the $273,126 and the 27 

direct mail commuiiications above, were not required to be disclosed as independent 

expenditures, the Audit staff recommends that IRP provide evidence to support its conclusion. 

Absent such evidence, the Audit staff recommends that IRP amend its reports to disclose these 

disbursements as independent expenditures on Schedule E and submit revised procedures for 

reporting independent expenditures. Lastly, the Audit staff recommends that IRP provide 

documentation to support the date of public dissemination for each communication to determine 

whether a filing of a 24/48 hour report was required. (For more detail, see p. 7.) 

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 totaling $357,613, on Schedule.B, Line 30(b) and Schedule H4 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. The Audit staff recommends that IRP provide, in sufficient 
detail, the necessary information from which the reported expenditures totaling $357,613 may 

be verified or explained. Such records should include copies of invoices and identification of 

the associated communication, and, if the communication has already been provided, 

information associating each communication with an invoice(s). (For more detail, see p. 12.) 

Finding 4. Receipt of Apparent Prohibited In-Kind 

Contributions 

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

totaling $72,880 accepted by IRP. The apparent prohibited in-kind contributions consisted of 

postage paid for campaign mailers. The Audit staff recommends that TRP demonstrate that the 

contributions received were from a permissible source or refund the amount. (For more detail, 

see p. 14.) 

Finding 5. Reporting of Debts and Obligations 

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). The Audit staff 

recommends that, absent documentation demonstrating that these expenditures did not require 

reporting on Schedule D, IRP amend its disclosure reports to disclose these debts. (For more 

detail, seep. 15.) 

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 coimection 

with a federal electioii. 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. For IRP employees paid with an 

allocation of federal and non-federal funds or exclusively non-federal frinds, the Audit staff 

recommends that IRP provide monthly payroll logs that indicate the time spent in connection 

with a federal election. Absent the provision of monthly payroll logs, the Audit staff 

recommends that IRP implement a plan to maintain such monthly payroll logs in the future. 

(For more detail, see p. 16.) 
Part IV 

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity 

Summary 

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

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

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

disbursements by $46,370 and junderstated its ending cash by $ 13,717. In 2012, IRP 

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

recommends that IRJP amend its disclosure reports to correct the misstatements. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• the amount of cash-on-hand at the begiiming 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 itemization on Schedule A (Itemized Receipts) or Schedule 

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

Facta and Analysis 

A. Facts 

As part of audit fieldwork, the Audit staff reconciled IRP's reported financial activity with its 

bank records for 2011 and 2012. The reconciliation determined that for 2011, IRP misstated 

receipts, 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. 

2011 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 overstatements of disbursements resulted from the following: 

• The net over reporting of disbursements of $52,390 - $5,777 

• Unexplained differences 

Net Overstatement of Disbursements 

- $32,070 

- 4,257 

-mm 

- $46,612 

± 242 

-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 them. The $13,717 understatement of 

the ending cash balance resulted from the misstatements described above. 

2012 Reported Activity / to Bank Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

'^January 1,2012 

$45,721^ $60,213 $14,492 

Understated 

Receipts $3,655,057 $3,909,585 $254,528 

Understated 

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

Understated 

Ending Cash 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 contributions from Political Committees 

• Transfers from the non-federal account 

• Settlement Accounting Fees, not reported 

• In-kind postage paid by other than IRP* 

• Unexplained differences 

Understatement of Receipts 

The understatement of disbursements resulted from the following: 

• Under-reporting of disbursements 

• In-kind postage paid by other than IRP 

• Underreporting of in-kinds firom Political Committees 

+ 

+ 

+ 

+ 

+ 

+ 

$50,000 

33,973 

36,453 

22,126 

72,880 

39,096 

+S25£528 

+$168,321 

+ 72,880 

+ 33,973 

' IRP filed an amended report that reduced its beginning cash by a total of S77S from the reported 2011 ending 

cash. 

* The source of the payments has not been identified by IRP to the Audit staff. See finding 4. 
• Settlement of Accounting Fees, not reported + 22,126 

• Unexplained differences - 1.756 

Net Understatement of Disbursements +S295.544 

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

above. 

B. Interim Audit Report & Audit Division Recommendation 

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

that caused the misstatements with IRF representatives. They asked questions about several 

items and stated that they would file the amendments to ensure that the TRP reports were 

accurate. 

The Audit staff recommends that, within 30 calendar days of service of this report, IRP amend 

its disclosure reports to correct the misstatements for 2011 and 2012 as noted above. 

Finding 2. Reporting of Apparent Independent Expenditures 

Summary 

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

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

Fimds), that appeared to be direct mail or media-related 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 reports were required to be filed for the apparent independent 

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

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

If IRP believes that the apparent independent expenditures, including the $273,126 and the 27 

direct mail communications above, were not required to be disclosed as independent 

expenditures, the Audit staff recommends that IRP provide evidence to support its conclusion. 

Absent such evidence, the Audit staff recommends that IRP amend its reports to disclose these 

disbursements as independent expenditures on Schedule E and submit revised procedures for 

reporting independent expenditures. Lastly, the Audit staff recommends that IRP provide 

documentation to support the date of public dissemination for each communication to determine 

whether a filing of a 24/48 hour report was required. 

Legal Standard 

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

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

clearly identified candidate that is not made in coordination with any candidate 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 financial 

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

§100.16(a)&(c). 

B. Expressly Advocating. Expressly advocating means any communication that - (a) Uses 

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

nominee," "cast your ballot for the Republican challenger for the Republican challenger for U.S. 

Senate in Georgia," accompanied by a picture of one or more candidate(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 or defeat of one or more clearly identified candidate(s). (b) 

When taken as a whole and with limited reference to external events, such as the proximity to the 

election, could only be interpreted by a reasonable person as containing advocacy of the election 

or defeat of one or more clearly identified candidate(s). 11 CFR §100.22. 

C. Disclosure Requirements - General Guidelines. An independent expenditure shall be 

reported on Schedule. E (Itemized 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 §§l04.3(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 committee must 

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

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 widiin 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 104.5(g)(1). 

F. 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 ^m which the filed reports may be 

verified, explained, clarified, and checked for accuracy and completeness. CFR §104.14(b)(1). 
9 

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

campaign materials (such as pins, bumper stickers, handbills, brochures, posters, party tabloids 

or newsletters, and yard signs) used by such committee in connection with volunteer activities 

on behalf of any nominee(s) of such party is not a contribution, provided that the conditions 

below are met. 

1. Such payment is not for costs incurred in connection with any broadcasting, newspaper, 

magazine, bill board, direct mail, or similar type of general public communication or 

political advertising. The term direct mail means any mailing(s) by a commercial 

vendor or any mailing(s) made from 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 is not made from contributions designated by the donor to be spent on 

behalf of a particular candidate for federal office. 

4. Such materials are distributed by volunteers and not by commercial or for-profit 

operations. 

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

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

allocated to specific candidates in committee reports. 

6. The exemption is not 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). 

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 (FEA). These communications, as well as 27 other direct 

mailers that are not associated with invoices, v^re identified as possible independent 

expenditures. To document the use of volunteers, IRP provided four volunteer sign in 

sheets, two affidavits for which the authors attest to the use of volunteers in all the direct 

mailers and 24 photographs of volunteer involvement in seven of the mailers.^ Based on the 

documentation provided, the Audit staff was only able to match four mailers and two sign in 

sheets to photographs for which an invoice was provided, totaling $33,972, see (a.) below. 

Two additional sign in sheets were provided, however, they could 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. 

^ This documentation was provided both during fieldwork and in response to the exit conference. 
10 

A breakdown analysis of these expenditures is as follows: 

a. Apparent Independent Expenditures Reported as FEA Volunteer Mail 

(Associated Invoice Provided) 

IRP made 16 apparent independent expenditures totaling $273,126 for which it 

provided a copy of the direct mailer with an associated invoice. Direct mailers 

totaling $33,972 for which IRP provided two sign in sheets and photographs are 

included in the $273,126 total. According to the Audit staff, each of these direct 

mailers contained language expressly advocating the election or defeat of a clearly 

identified candidate 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 identified candidate(s). 

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

Invoices Associated) 

IRP provided 27 different direct mail communications 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 sufQcient 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 direct mail 

communications. 

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 direct mailers into mail 

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

different direct 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 Commission 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, and the Tennessee Republican Party. In these 

reports, the Commission recognized a lack 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 conceming the application of the volunteer materials exemption, it 

follows that the type and amount of documentation needed to support volunteer 

involvement is also unclear. 

Proposed Interim Enforcement Policy, Agenda document No. 10-16. 
11 

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 an exemption, the Audit staff recommends 

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

involvement associated with each mailer. 

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. IRP officials stated that the 

direct mail expenditures were for candidate specific mass mailings for which volunteers were 

utilized. 

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 affidavits from individuals. In one 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 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 processing volunteer mail for IRP on behalf of Republican 

congressional candidates. He described the same basic process as the first individual described 

about the involvement of the volunteers IRP used for Republican candidates for Congress. 

The Audit staff recommends that, within 30 calendar days of service of this report, IRP provide: 

• Additional invoices and/or information for the 27 direct mail communications 

containing express advocacy; and 

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

and the 27 direct mail communications containing express advocacy did not require 

reporting as independent expenditures. Evidence should include any documentation 

such as volunteer timesheets and photographs to support the involvement of volunteers 

in the processing or distribution of the communications noted above. 

Absent such evidence, the Audit staff recommends that IRP amend its reports to disclose these 

disbursements as independent expenditures on Schedule E and submit revised procedures for 

reporting independent expenditures. 

B. Failure to File 24/48-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 

IRP provided three sign in sheets during field work. 
12 

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

filings. 

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 (RP representatives. IRP representatives stated that the 

expenditures were not Independent Expenditures but were non-allocable mailers that used 

volimteers. 

Absent documentation and evidence that apparent independent expenditures totaling $273,126 

and the 27 direct mailer communications containing express advocacy did not require reporting 

as independent expenditures (per Part A above), the Audit staff recommends that, within 30 

calendar days of service of this report, IRP provide documentation to support the date of public 

dissemination for each communication to determine whether a 24/48-hour report was required. 

Finding 3. Recordkeeping for Communications 

Summary 

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 totaling $357,613,' on Schedule B, Line 30(b) and Schedule H4 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. The Audit staff recommends that IRP provide, in sufficient 

detail, the necessary information from which the reported expenditures totaling $357,613 may 

be verified or explained. Such records should include copies of invoices and identification of 

the associated communication, and, if the communication has already been provided, 

information associating each communication with an invoice(s). 

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). 

' Two disbursements totaling SS2,S04 were not reported, but are included in the S3S7,613. 
I 

13 

Facts and Analysis 

A. Facts 

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

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

expenditures totaling ;$3 57,613 for which documentation was insufficient to make a 

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

Line 30(b) or Schedu e H4. 

The Audit staffs ana ysis resulted in the following: 

j 

i. Dbbursements- No Invoices or Conies of CommunicaHons Provided lS2%{i21'h 

Disbursements totaling $280,277 were paid to four direct mail vendors and three phone 

bank vendors,'and were disclosed on Schedule B and Schedule H4, with 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. Without sufficient details, the Audit staff is unable to verify IRP's reporting 

of these amounts as Federal Election Activity or Allocated Federal/Non-federal Activity. 

The Audit staff requested copies of the invoices for the associated direct mail pieces and 

phone bank sciipts for each phone disbursement. To date, these invoices or odier 

information to associate the payments to a particular communication have not been 

provided. 

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

Communications ($77;i36) 

IRP reported paying disbursements totaling $77,336 to two direct 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 inforrnation about the related mail communications. Without sufficient details, 

the Audit stafl^ 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 an^ the communication, however, to date IRP has not provided this 

information. 

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 r 

requested that IRP pre 

each invoice to the co 

ecessary to verify the accuracy of reporting. The Audit staff again 

vide invoices, copies of communications and scripts that would associate 

Tesponding communication to the committee disclosure reports. The 

Audit staff recommends that, within 30 calendar days of the service of this report, that IRP, 

provide the invoice, scripts and the associated mail communication for disbursements totaling 

$357,613. j 

i 

' The amount of invoices associated for these mailers is $129,490. This is part of Finding 4. 
14 

Finding 4. Receipt of Apparent Prohibited In-Kind 

Contributions ^ 

Summary 

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

totaling $72,880 accepted by IRP. The apparent prohibited in-kind contributions consisted of 

postage paid for campaign mailers. The Audit staff recommends that IRP demonstrate that the 

contributions received were from a permissible source or refund the amount. 

Legal Standard . 

A. Receipt of Prohibited Contributions - General Prohibition. Candidates and committees 

may not accept contributions (in the form of money, in-kind contributions or loans): 

1. In the name of another; or 

2. From the treasury funds of the following prohibited sources: 

• Corporations (this means any incorporated organization, including a non-stock 

corporation, an incorporated membership organization, and an incorporated 

cooperative); 

• Labor Organizations; or 

• National Banks; 

3. Federal Govelmment 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)). S2 U.S.C. §§30119 

and 30121. . 

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 fieidwork, the Audit staff identified apparent prohibited in-kind contributions 

totaling $72,880. 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 from invoices IRP provided that were for two Congressional 

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

higher. 
15 

candidates, Joe Walsh for Congress Committee and Plummer for Congress". Contained on 

each of the 14 invoices was ah amount for postage that read, "Postage - Paid 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 IRP 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 $71,379 to IRP and reported the 

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

which the purpose w^, PEA Volunteer Mail Hultgren for Congress. 

B. Interim Audit Report & Audit Division Recommendation 

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

for the apparent prohibited in-kind contributions. The IRP representative stated that the 

amounts were for one of the Republican Congressional candidates. 

I 

The Audit staff recommends that, within 30 calendar days of service of this report, IRP provide 

evidence demonstrating that the in-kind contributions in question were made with permissible 

funds. 

If IRP does not provide evidence that the funds were permissible, then it should make a refund 

to the contributors or'disgorge these apparent impermissible in-kind contributions to the U.S. 

Treasury. IRP should provide evidence of any refunds by providing the fix)nt and back of the 

negotiated refund chdcks. 

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. 

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). The Audit staff 

recommends that, absent documentation demonstrating that these expenditures did not require 

reporting on Schedule D, IRP amend its disclosure reports to disclose these debts. 

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). 

" IRP reported receiving SI 12,000 from the Joe Walsh ibr Congress Committee along with SS0,000 from the 

Plummer for Congress Committee. 

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

a separate filing prior to fieldwork. Those records were not provided to the Audit staff. 
16 

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

and to the committee with a statement explaining the circumstances 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 $500 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 disclosed in the report 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 to 14 vendors totaling $294,117' not reported on Schedule D (Debts and 

Obligations). Of these debts, $173,348 was incurred during the audit perit^ 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, these vendors provided mainly legal services, accounting 

services, telemarketing and mail services. 

B. Interim Audit Re'port & 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 will research this and provide additional documentation. IRP representatives stated 

that they will amend their reports. 

The Audit staff recommends that, within 30 calendar days of service of this report, absent 

documentation demonstrating that these expenditures did not require reporting on Schedule D, 

IRP amend its disclosure reports to disclose these debts. 

Finding 6. Recordkeeping for Employees 

Summary 

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 pajnoll was exclusively non-federal. For IRP employees paid with ah 

allocation of federal and non-federal funds or exclusively non-federal funds, the Audit staff 

recommends that IRP provide monthly payroll logs that indicate the time spent in connection 

" 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. 

IRP did not have employees paid with a mixture of federal and non-federal funds and exclusively non-federal 

funds during the same month. 
17 

with a federal election. Absent the provision of monthly payroll logs, the Audit staff 

recommends that IRP implement a plan to maintain such monthly payroll logs in the future. 

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 fringe benefits are to be undertaken as follows: 

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

federal election activities must be paid either &om the federal account or be allocated as 

administrative costs; 

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

on federal election 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)(l). 

Facts and Analysis 

A. Facts 

Prior to audit fieldwofk, 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 

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

federal and non-federal funds used to pay emplpvee 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 fieldwork and at the exit conference, the Audit staff discussed the payroll recordkeeping 

matter with IRP's representative and counsel. IRP counsel noted that IRP did not maintain 

payrolls during the 2011-2012 election cycle however, currently does maintain the payroll logs. 

The Audit staff recommends that, within 30 calendar days of service of this report, IRP: 

• provide evidence that it maintained monthly time logs to document the percentage of 

time an employee spent in connection with a federal election; or 

• implement a 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.