FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

July 8,2009 

MEMORANDUM 

To: 

From: 

Judith Ingram 

Press Officer 

Joseph F. Stoltz 'i1J 

Assistant Staff ~;;or Audit Division ' 

Subject: Public Issuance of the Audit Report on Charlie Stuart for Congress 

Attached please find a copy of the audit report on Charlie Stuart for Congress, 

which was approved by the Commission on June 18,2009. 

All parties involved have received informational copies of the report and the report 

may be released to the public on July 8, 2009. 

Attachment as stated 

cc:	 Office of General Counsel 

Office of Public Disclosure 

Reports Analysis Division 

FEC Library 

lTD Web 
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. I 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. 

1 2 U.S.c. §438(b). 

Report of the 

Audit Division on 

Charlie Stuart for Congress 

May 10, 2005 - December 31, 2006 

About the Campaign (p. 2)
 

Charlie Stuart for Congress is the principal campaign committee
 

for Charles Samuel Stuart, Democratic candidate for the U.S.
 

House of Representatives from the state of Florida, 8th District
 

and is headquartered in Orlando, Florida. For more information,
 

see the chart on Campaign Organization, p. 2.
 

Financial Activity (p. 2) 

•	 Receipts 

o	 Contributions from Individuals $ 812,390 

o	 Contributions from Political 168,303 

Committees 

o	 Candidate Loans and 55,155 

Contributions 

. 0 Other Receipts 4,033 

o Total Receipts	 $1,039,881 

•	 Disbursements 

o	 Operating Expenditures and $1,010,009 

Other Disbursements 

o	 Total Disbursements $1,010,009 

Findings and Recommendations (p. 3) 

•	 Receipt of Contributions from LLCs and Corporations 

(Finding 1) 

•	 Receipt of Contributions that Exceed Limits (Finding 2) 
Table of Contents 

Part I. Background 

Authority for Audit 

Scope of Audit 

Part II. Overview of Campaign 

Campaign Organization 

Overview of Financial Acti vity 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Recommendations 

Finding 1. Receipt of Contributions from LLCs and Corporations 

Finding 2. Receipt of Contributions that Exceed Limits 

Page 

1
 

1
 

2
 

2
 

3
 

4
 

6
 
1 

Part I 

Background 

Authority for Audit 

This report is based on an audit of Charlie Stuart for Congress (SFC), 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 2 U.S.c. §438(b), which permits the Commission to 

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

report under 2 U.S.c. §434. 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. 2 U.s.c. §438(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 and loans. 

2. The receipt of contributions from prohibited sources. 

3. The disclosure of contributions received. 

4. The consistency between reported figures and bank records. 

5. The completeness of records. 

6. Other committee operations necessary to the review. 
2 

Part II 

Overview of Campaign 

Campaign Organization 

Important Dates Charlie Stuart for Congress 

• Date of Registration May 13, 2005 

• Audit Coverage May 10, 2005 - December 31,2006 

Headquarters Orlando, Florida 

Bank Information 

• Bank Depositories One 

• Bank Accounts Three 

Treasurer 

• Treasurer When Audit Was Conducted Jeffrey S. Berger 

• Treasurer During Period Covered by Audit Jeffrey S. Berger 

Management Information 

• Attended FEC Campaign Finance Seminar No 

• Used Commonly Available Campaign 

Management Software Package 

Yes 

•	 Who Handled Accounting and Laura Veazey 

Recordkeeping Tasks 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand @ May 10, 2005 $0 

0 Contributions from Individuals $ 812,390 

0 Contributions from Political Committees 168,303 

0 Candidate Loans and Contributions 55,155 

0 Other Receipts 4,033 

Total Receipts $ 1,039,881 

0 Operating Expenditures and Other 

Disbursements 

$ 1,010,009 

Total Disbursements $ 1,010,009 

Cash on hand @ December 31, 2006 $ 29,872 
3 

Part III 

Summaries 

Findings and Recommendations 

Failure to Respond to the Interim Audit Report 

The interim audit report was issued on March 20, 2009, advising SFC of the findings and 

recommendations resulting from the audit. SFC was to respond to the findings contained 

in the interim audit report on or before April 22, 2009. Upon request, SFC was twice 

granted extensions to respond to the interim audit report. The final due date to respond 

was May 18,2009. To date, no response has been received and attempts to contact SFC 

representatives have failed. 

Finding 1. Receipt of Contributions from LLCs and 

Corporations 

SFC received 65 apparent prohibited contributions, totaling $35,950. Seventeen 

contributions ($15,650) were from limited liability companies (LLCs) and 48 

contributions ($20,300) were from apparent corporate entities. The Audit staff 

recommended that SFC provide evidence that the contributions were not from prohibited 

sources. Absent that the prohibited amounts should have been either refunded to the 

contributor or disgorged to the U.S. Treasury. (For more detail, see p. 4) 

Finding 2. Receipt of Contribution that Exceed Limits 

Our review identified contributions from eight individuals, totaling $13,000, which 

exceeded the limitation. Two excessive contributions, totaling $2,300, could be cured by 

sending presumptive redesignation/reattribution notifications. The remaining excessive 

contributions ($10,700) can only be cured by refund or disgorgement to the U.S. 

Treasury. The Audit staff recommended that SFC provide evidence demonstrating that 

the contributions were not excessive or send notices to the contributors that were eligible 

for presumptive redesignation/reattribution. Absent those actions, the excessive amounts 

should have been refunded to the contributor or disgorged to the U.S. Treasury. (For 

more detail, see p. 6) 
4 

Part IV 

Findings and Recommendations 

Failure to Respond to the Interim Audit Report 

The interim audit report was issued on March 20, 2009, advising SFC of the findings and 

recommendations resulting from the audit. SFC was to respond to the findings contained 

in the interim audit report on or before April 22, 2009. Upon request, SFC was twice 

granted extensions to respond to the interim audit report. The final due date to respond 

was May 18, 2009. To date, no response has been received and attempts to contact SFC 

representatives have failed. 

Finding 1. Receipt of Contributions from LLCs and 

Corporations 

Summary 

SFC received 65 apparent prohibited contributions, totaling $35,950. Seventeen 

contributions ($15,650) were from limited liability companies (LLCs) and 48 

contributions ($20,300) were from apparent corporate entities. The Audit staff 

recommended that SFC provide evidence that the contributions were not from prohibited 

sources. Absent that the prohibited amounts should have been either refunded to the 

contributor or disgorged to the U.S. Treasury. 

Legal Standard 

A. Receipt of Prohibited Corporate Contributions. Political campaigns may not 

accept contributions made from the general treasury funds of corporations. This 

prohibition applies to any type of corporation including a non-stock corporation, an 

incorporated membership organization, and an incorporated cooperative. 2 U.S.c. 

§441b. 

B. Definition of Limited Liability Company. A limited liability company (LLC) is a 

business entity recognized as an LLC under the laws of the state in which it was 

established. 11 CFR §110.1(g)(l). 

C. Application of Limits and Prohibitions to LLC Contributions. A contribution 

from an LLC is subject to contribution limits and prohibitions, depending on several 

factors, as explained below. 

•	 LLC as Partnership. The contribution is considered a contribution from a 

partnership if the LLC chooses to be treated as a partnership under Internal Revenue 

Service (IRS) tax rules, or if it makes no choice at all about its tax status. A 

contribution by a partnership is attributed to each partner in direct proportion to his or 

her share of the partnership profits. 11 CPR §§110.1(e)(l) and (g)(2). 
5 

•	 LLC as Corporation. The contribution is considered a corporate contribution-and 

is barred under the Act-if the LLC chooses to be treated as a corporation under IRS 

rules, or if its shares are traded publicly. 11 CFR §11O.I(g)(3). 

•	 LLC with Single Member. The contribution is considered a contribution from a 

single individual if the LLC is a single-member LLC that has not chosen to be treated 

as a corporation under IRS rules. 11 CPR §110.1(g)(4). 

D. Limited Liability Company's Responsibility to Notify Recipient Committee. At 

the time it makes a contribution, an LLC must notify the recipient committee: 

•	 That it is eligible to make the contribution; and 

•	 In the case of an LLC that considers itself a partnership (for tax purposes), how the 

contribution should be attributed among the LLC's members. 11 CFR §110.1(g)(5). 

E. Questionable Contributions. If a committee receives a contribution that appears to 

be prohibited (a questionable contribution), it must follow the procedures below: 

1.	 Within 10 days after the treasurer receives the questionable contribution, the 

committee must either: 

•	 Return the contribution to the contributor without depositing it; or 

•	 Deposit the contribution (and follow the steps below). 11 CFR §103.3(b)(1). 

2.	 If the committee deposits the questionable contribution, it may not spend the 

funds and must be prepared to refund them. It must therefore maintain sufficient 

funds to make the refunds or establish a separate account in a campaign 

depository for possibly illegal contributions. 11 CPR §103.3(b)(4). 

3.	 The committee must keep a written record explaining why the contribution may 

be prohibited and must include this information when reporting the receipt of the 

contribution. 11 CFR §103.3(b)(5). 

4.	 Within 30 days of the treasurer's receipt of the questionable contribution, the 

committee must make at least one written or oral request for evidence that the 

contribution is legal. Evidence of legality includes, for example, a written 

statement from the contributor explaining why the contribution is legal or an oral 

explanation that is recorded by the committee in a memorandum. 11 CFR 

§103.3(b)(I). 

5.	 Within these 30 days, the committee must either: 

•	 Confirm the legality of the contribution; or 

•	 Refund the contribution to the contributor and note the refund on the report 

covering the period in which the refund was made. 11 CPR §103.3(b)( 1). 

F. Refund or Disgorge Questionable Contributions. If the identity of the original 

contributor is known, the committee must either refund the funds to the source of the 

original contribution or pay the funds to the U.S. Treasury. AO 1996-5. 

Facts and Analysis 

Our review of contributions identified 65 apparent prohibited contributions, totaling 

$35,950. Seventeen contributions, totaling $15,650, were from LLCs and 48 

contributions, totaling $20,300, were from apparent corporate entities. SFC's records 
6 

lacked the necessary documentation to determine whether these entities filed taxes as 

partnerships or corporations. With respect to the contributions from apparent corporate 

entities, the Audit staff contacted the appropriate Secretary of State's office and 

confirmed that each entity was incorporated at the time the contributions were made to 

SFC. 

This matter was discussed at the exit conference. An SFC representative inquired about 

the relevant regulations and agreed to review the contributions in question. 

Interim Audit Report Recommendation 

The Audit staff recommended that SFC provide evidence that demonstrates that the 

contributions were not from prohibited sources. 

For contributions from LLCs, such evidence should have included documentation from 

each entity that demonstrated it elected under Internal Revenue Service tax rules not to be 

treated as a corporation. For contributions from apparent corporate entities, such 

evidence should have included documentation that demonstrated the entities were not 

corporations at the time the contribution was made. 

Absent such evidence, it was recommended that SFC refund $35,950 to the contributors 

and provide copies (front and back) of all negotiated refund checks; or disgorge this 

amount to the U.S. Treasury. 

If funds were not available to make the necessary refunds, SFC should have disclosed the 

entities requiring refunds on Schedule D (Debts and Obligations) until funds became 

available to make such refunds. 

IFinding 2. Receipt of Contributions that Exceed Limits 

Summary 

Our review identified contributions from eight individuals, totaling $13,000, which 

exceeded the limitation. Two excessive contributions, totaling $2,300, could be cured by 

sending presumptive redesignation/reattribution notifications. The remaining excessive 

contributions ($10,700) can only be cured by refund or disgorgement to the U.S. 

Treasury. The Audit staff recommended that SFC provide evidence demonstrating that 

the contributions were not excessive or send the notices to the contributors that were 

eligible for presumptive redesignation/reattribution. Absent those actions, the excessive 

amounts have been refunded to the contributor or disgorged to the U.S. Treasury. 

Legal Standard 

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

than a total of $2,100 per election from anyone person. 2 U.S.C. §441a(a)(1)(A) and (f); 

11 CFR §110.1(a) and (b), §110.9(a) and §110.17(b). 

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

contribution that appears to be excessive, the committee must either:
 
7 

•	 Return the questionable check to the donor; or 

•	 Deposit the check into its federal account and: 

o	 Keep enough money in the account to cover all potential refunds; 

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

o	 Include this explanation on schedule A if the contribution has to be itemized 

before its legality is established; 

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

instructions provided in FEC regulations (see below for explanations of 

reattribution and redesignation); and 

o	 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 CPR §§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 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 CPR 

§110.1(k)(l) 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: 

1.	 The reattribution must be signed by both contributors; 

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

committee received the original contribution; and 

3.	 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 CPR 

§§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 CPR §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: 

1.	 How the contribution was attributed; and 

2.	 The contributor may instead request a refund of the excessive amount. 11 CPR 

§11O.1(k)(3)(B). 

E. Redesignation of Excessive Contributions. When an authorized candidate 

committee receives an excessive contribution (or a contribution that exceeds the 
8 

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: 

1.	 The redesignation must be signed by the contributor; 

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

committee received the original contribution; and 

3.	 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(1)(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: 

1.	 Is made before that candidate's primary election; 

2.	 Is not designated in writing for a particular election; 

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

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

limit. 110.I(b)(5)(ii)(B)(I)-(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 

recei ve a refund instead. 

F. Contributions to Retire Debts. If an authorized candidate committee has net debts 

outstanding after an election is over, a campaign may accept contributions after the 

election to retire the debts provided that: 

•	 The contribution is designated for that election (since an undesignated contribution 

made after an election counts toward the limit for the candidate's upcoming election); 

•	 The contribution does not exceed the contributor's limit for the designated election; 

and, 

•	 The campaign has net debts outstanding for the designated election on the day it 

receives the contribution. 11 CFR §11O.1(b)(3)(i) and (iii). 

G. Refund or Disgorge Questionable Contributions. If the identity of the original 

contributor is known, the committee must either refund the funds to the source of the 

original contribution or pay the funds to the U.S. Treasury. AO 1996-5. 

Facts and Analysis 

Our review identified contributions from eight individuals, totaling $13,000, which 

exceeded the limitation. Of this amount, excessive contributions totaling $11 ,100 were 

made to the general election and $1,900 was made to the primary election. 

The primary election excessive contribution ($1,900) can be cured by sending the 

contributor a presumptive redesignation notification. Only $400 of the general election 
9 

excessive contributions can be cured by sending the contributor a presumptive 

reattribution notification. 

The remaining excessive contributions ($10,700) must be refunded to the contributor or 

disgorged to the U.S. Treasury. These contributions were received after the election for 

which they are designated. However, at the time of receipt there were no debts related to 

the relevant election. Based on the contribution records, none were eligible for 

reattribution to another contributor. As a result, excessive contributions, totaling 

$10,700, should be refunded to the contributors or disgorged to the U.S. Treasury. 

This matter was discussed at the exit conference. An SFC representative was provided a 

schedule of the excessive contributions, who agreed to review this matter. 

Interim Audit Report Recommendation 

The Audit staff recommended that SFC provide evidence that the contributions were not 

excessive. Such evidence should include, but not be limited to, documentation that the 

contributions were reattributed or redesignated in a timely manner or that the excessive 

contributions were timely refunded. 

Absent such evidence, SFC should have sent notices to the contributors whose 

contributions were eligible for presumptive redesignation/reattribution ($2,300) to inform 

them how the contributions were attributed and offering each contributor an option of 

receiving a refund. SFC should have provided a copy of the notices and evidence that 

they were sent. Absent a request for a refund by the contributors, the notices obviate the 

need for a refund or payment to the U.S. Treasury; and, 

For the remaining excessive contributions ($10,700), SFC should have refunded the 

excessive portions to the contributors or pay that amount to the U.S. Treasury and 

provided evidence of the refunds or payment to the U.S. Treasury (copies of the front and 

back of negotiated checktsj). 

If funds were not available to make the necessary refunds, SFC should have disclose the 

contributions requiring refund as debts owed on Schedule D until funds become available 

to make such refunds.