14

Although the Audit staff could not confirm JSFP’s total obligations increase, it did verify
additional accounts payable based on invoices, totaling $36,035, additional actual
winding down expenses totaling $123,967, and a reduction in estimated winding down
expenses of $31,525, for a net increase in obligations of $128,477 ($36,035 + 123,967 —
31,525), and updated the NOCO above accordingly.

The updated NOCO reduced the amount of the surplus from $329,333 to $200,856
however, a pro-rata repayment of the surplus was still required. Therefore, the Audit
staff recommends that the Commission make a determination that $40,372 is repayable to
the United States Treasury.

Finding 2. Matching Funds Received in Excess of
Entitlement

Summary

The Audit staff's NOCO statement, as presented in Finding 1, indicated a surplus
position as of August 6, 2016, the Candidate’s DOI. Therefore, JSFP was not entitled to
the matching fund payment of $134,900 it subsequently received on January 18, 2017.
The Preliminary Audit Report recommended that JSFP provide evidence that the
Candidate did not have surplus funds as of her DOI.

In response to the Preliminary Audit Report recommendation, JSFP provided
documentation and an updated NOCO, and stated that it was entitled to all matching fund
payments due to its increased winding down expenses, even if previously disallowed
ballot access and other.expenses were not considered. After the Audit staff incorporated
the expenses that were documented as pertaining to the Primary election into its revised
NOCO, JSFP was still in a surplus position and therefore not entitled to the matching
fund payment it received after the Candidate’s DOJ. Therefore, the Audit staff
recommends that the Commission make a determination that $134,900 is repayable to the
United States Treasury.

Legal Standard

A. Entitlement to Matching Payments after Date of Ineligibility. If, on the date of
ineligibility a candidate has net outstanding campaign obligations as defined under 11
CFR §9034.5, that candidate may continue to receive matching payments for matchable
contributions received and deposited on or before December 31“ of the Presidential
election year, provided that he or she still has net outstanding campaign debts on the day
when the matching payments are made. 11 CFR §9034.1(b).

B. Repayments. The Commission may determine that certain portions of the payments
made to a candidate from the matching payment account were in excess of the aggregate
amount of payments to which such candidate was entitled. Examples of such excessive
payments include, but are not limited to, payments made to the candidate after the
candidate’s date of ineligibility where it is later determined that the candidate had no net
outstanding obligations. 11 CFR §§9034.5 and 9038.2 (b)(1)(i).



B. Date of Ineligibility. The date of ineligibility is whichever of the following dates
occurs first:
¢ The day on which the candidate ceases to be active in more than one state;
© The 30th day following the second consecutive primary in which the candidate
receives less than 10 percent of the popular vote;
© The end of the matching payment period, which is generally the day when the
party nominates its candidate for the general election; or
© Inthe case of a candidate whose party does not make its selection at a national
convention, the last day of the last national convention held by a major party in
the calendar year. 11 CFR §§9032.6 and 9033.5.

C. Qualified Campaign Expense. Each of the following expenses is a qualified
campaign expense.
« Anexpense that is:

o Incurred by or on behalf of the candidate (or his or her campaign) during the
period beginning on the day the individual becomes a candidate and
continuing through the last day of the candidate’s eligibility under 11 CFR
§9033.5;

© Made in connection with the candidate’s campaign for nomination; and

o Not incurred or paid in violation of any federal law or the law of the state
where the expense was incurred or paid. 11 CFR §9032.9.

¢ Anexpense incurred for the purpose of determining whether an individual should
become a candidate, if that individual subsequently becomes a candidate,

regardless of when that expense is paid. 11 CFR §9034.4. i

* Anexpense associated with winding down the campaign and terminating political
activity. 11 CFR §9034.4(a)(3).

D. Value of Capital Assets. The fair market value of capital assets is 60% of the total
original cost of the assets when acquired, except that assets that are received after the date
of ineligibility must be valued at their fair market value on the date received. A
candidate may claim a lower fair market value for a capital asset by listing the asset on i
the NOCO statement separately and demonstrating, through documentation, the lower H
fair market value. 11 CFR §9034.5(c)(1). i

E. Winding Down Costs. A primary election candidate who runs in the general
election must wait until 31 days after the general election before using any matching
funds for winding down costs, regardless of whether the candidate receives matching

funds for the general election.
11 CFR §9034.11(d).



The understatement of disbursements resulted from the following:

© Credit card fees not reported + $451,344
« Disbursements to vendors not reported + 365,676
e Disbursements reported but did not clear the bank - 74,774
¢ Disbursements directly from Paypal receipts, not reported + 35,762
¢ Payments for salaries and wages, not reported + 27,000
¢ In-kind contributions not reported as disbursement + 247
« Unexplained difference - 4,945
Net Understatement of Disbursements $800,310

The $192,527 understatement of the ending cash balance resulted from the misstatements
described above.

B. Preliminary Audit Report & Audit Division Recommendation

The Audit staff presented this matter to the JSFP representative at the exit conference
along with schedules detailing the discrepancies, During the exit conference, the JSFP
representative stated he had no explanation for the discrepancies but would research and
determine if there was a pattern that would explain the cause. In its response to the exit
conference, JSFP made no comment on this finding.

The Preliminary Audit Report recommended that JSFP amend its disclosure reports to
correct the misstatements.

C. Committee Response to Preliminary Audit Report

In response to the Preliminary Audit Report recommendation, JSFP related it was in the
process of making the necessary amendments to correct the misstatements but no reports
were filed.

| Finding 4. Disclosure of Debts and Obligations

Summary

During audit fieldwork, the Audit staff identified debts totaling $17,015 not disclosed on
Schedule D-P (Debts and Obligations), as required. The Preliminary Audit Report
recommended that JSFP amend its reports to disclose the outstanding debt.

In response to the Preliminary Audit Report recommendation, JSFP related it was in the
process of making the necessary amendments to correct the disclosure of debts and
obligations but no reports were filed.

Legal Standard

A. Continuous Reporting Required. An authorized 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).



Draft Final Audit Report of the
Audit Division on
Jill Stein for President

(January 17, 2015 - December 31, 2016)



Facts and Analysis

A. Facts

On January 18, 2017, JSFP received its only post-DOI matching fund payment of
$134,900. The Audit staff's NOCO calculations indicated, however, that JSFP was in a
surplus position as of DOI and was not entitled to receive additional matching funds (see
Finding 1, p. 9). Therefore, JSFP is required to make a dollar for dollar repayment of this
entire matching fund payment to the United States Treasury.

B. Preliminary Audit Report & Audit Division Recommendation

The Audit staff presented this matter to the JSFP representative at the exit conference in
conjunction with the presentation of the audit calculated NOCO discussed in Finding 1
above. JSFP’s response pertaining to receipt of matching funds in excess of entitlement
is also detailed in Finding 1 above.

The Preliminary Audit Report recommended that JSFP provide evidence that it did not
receive matching funds in excess of entitlement. Absent such evidence, the Audit staff
stated it would recommend that the Commission make a determination that $134,900 was
repayable to the United States Treasury.

C. Committee Response to Preliminary Audit Report

In response to the Preliminary Audit Report recommendation, JSFP provided
documentation and an updated NOCO, and stated that even if all ballot access and other
previously disallowed expenses were not considered primary election expenses, JSFP
was still entitled to all matching fund payments it received due to its updated projections
for winding down expenses. The Audit staff disagrees. As discussed in Finding | above,
after the Audit staff incorporated the expenses that could be documented as pertaining to
the Primary election into its revised NOCO, JSFP was still in a surplus position and
therefore not entitled to the matching fund payment it received after the Candidate’s DOI.
The Audit staff recommends that the Commission make a determination that $134,900 is
repayable to the United States Treasury.

| Finding 3. Misstatement of Financial Activity

Summary

During audit fieldwork, a comparison of JSFP’s reported financial activity with its bank
records revealed a misstatement of receipts and disbursements for 2015 and 2016 and a
misstatement of ending cash in 2016. In 2015, JSFP understated its reported receipts and
disbursements by $31,495 and $35,042 respectively; and in 2016, JSFP understated its
reported receipts, disbursements and ending cash by $996,384, $800,310 and $192,527
respectively. The Preliminary Audit Report recommended that JSFP amend its disclosure
reports to correct the misstatements.

In response to the Preliminary Audit Report recommendation, JSFP related it was in the
process of making the necessary amendments to correct the misstatements but no reports
were filed.



The understatement of disbursements resulted from the following:

e Payments for salaries and wages not reported + $45,364
¢ Disbursements reported but did not clear the bank - 14,903
* Credit card fees not reported + 4,455
* Miscellaneous disbursements not reported + 126
Net Understatement of Disbursements + $35,042

The $3,547 overstatement of the ending cash balance resulted from the misstatements
described above.

2016 Reported Activity to Bank Activity?!
Reported Bank Records Discrepancy

Beginning Cash Balance $22,211 $18,664 $3,547

@ January 1, 2016

Receipts $10,951,133 $11,947,517 $996,384
Understated

Disbursements $10,868,212 $11,668,522 $800,31073
Understated

Ending Cash Balance @ $105,132 $297,659 $192,527

December 31, 2016 Understated

The understatement of receipts resulted from the following:

¢ Contributions from individuals not reported + $565,893
¢ Contributions from individuals reported, not supported by

bank deposit - 128,420
¢ Offsets to operating disbursements not reported + 6,328
¢ In-kind contributions not reported as a receipt + 247
* Interest Income underreported + 25
* Unexplained difference + 552,311
Net Understatement of Receipts $996,384

2\ This activity represents primary election, general election and recount activity. See Committee
Structure, p. 1.

22 General election and recount activity represents $815,959, or 82% of the understated receipts totals,

23 General election and recount activity represents $688,355 or 86% of the understated disbursement totals.
TM Due to the volume of contributions and an incomplete receipts database from JSFP, the specific
individual contributors could not be identified; however, it appeared that the majority of this unexplained
difference pertained to deposits in the bank made after the general election,



2. Winding Down Expenses
The Audit staff’s initial calculation of actual winding down expenses
excluded expenses that were not adequately documented by JSFP. As of
the date of the PAR, JSFP had not provided banking and supporting
disbursement documentation for winding down expenses after August 1,
2017. Therefore, the winding down expenses for the months not
documented were initially reflected on the NOCO as $0.'° Estimated
monthly winding down expenses only include future reporting periods.

JSFP’s NOCO also included winding down expenses that were incurred
after DOI but before the end of the expenditure report period, December
9, 2016, totaling $42,727. Since the Candidate participated in the
General election, the Audit staff considered disbursements on or before
December 9, 2016” to be expenses pertaining to the General election, in
accordance with 11 CFR §§9002.12(a) and 9034.11(d), and therefore did
not include them on the NOCO as winding down expenses for the
Primary election.

Both winding down expense adjustments discussed above reduce the
amount of liabilities on the NOCO and therefore reduce the amount of the
matching fund entitlement.

B. Preliminary Audit Report & Audit Division Recommendation

The Audit staff presented a preliminary NOCO statement and related work papers to the
JSFP representative at the exit conference. The JSFP representative stated he would need
to review the work papers to determine why all credit card contributions had not been
included in the cash on hand in the NOCO. He also related he disagreed with how the
ballot access petitioning costs were allocated on the NOCO and stated he based this on
previous audit reports. The representative stated it was his understanding that all ballot
access costs were Primary election expenses regardless of the date they were incurred. In
response to the exit conference, the JSFP representative provided documentation to
support that certain ballot access petitioning costs were incurred prior to DOL.

Subsequent to the exit conference, JSFP requested early consideration of two legal
questions raised during the audit. The first question pertained to whether the
Commission’s original determination of the Candidate’s DOI was proper. The second
question was whether committees should be permitted to incur winding down expenses
and other primary expenses after the DOI if they are clearly incurred to improve
compliance with existing laws and regulations or if they are clearly required in the course
of seeking the qualification for the ballot in various states.'*

16 As of the date of the PAR, the excluded months were August 2017 through July 2018.

7 General election date = November 8, 2016 + 31 days = December 9, 2016.

'§ Although JSFP’s request purported to identify three separate questions for review, two of the questions
raised the same essential issue, which is whether the Commission’s original DOI determination was proper.
Therefore, those two questions were consolidated into a single question.

i
!
|



Overview of Financial Activity

(Audited Amounts)?

Cash-on-hand @ January 17, 2015 $ 0
Receipts

© Contributions from Individuals" 11,010,439
o Matching Funds Received!! 456,035
o Loans Received 40,000
o Offsets to Operating Expenditures 716,735

Total Receipts $ 12,223,209
Disbursements

© Operating Expenditures 11,885,379
co Transfers to Other Authorized Committees 22,300
o Fundraising Disbursements 15,156
o Contribution Refunds 2,465
o_ Other Disbursements 250
Total Disbursements $ 11,925,550
Cash-on-hand @ December 31, 2016 $ 297,659

° These figures contain primary election, general election and recount activity. See Committee Structure on p. 1.
10 JSEP received approximately 50,924 contributions from 42,486 individuals totaling $2,135,681 for primary

election activity,

"" As of the Candidate’s DOL, August 6, 2016, JSEP had received matching funds totaling $456,036. JSFP received

an additional $134,900 on January 18, 2017, for a total of $590,936.



Part I
Background

Authority for Audit

This report is based on an audit of Jill Stein for President (JSFP), undertaken by the Audit
Division of the Federal Election Commission (the Commission) as mandated by Section 9038(a)
of Title 26 of the United States Code. That section states, “After each matching payment period,
the Commission shall conduct a thorough examination and audit of the qualified campaign
expenses of every candidate and his authorized committees who received [matching] payments
under section 9037.” Also, Section 9039(b) of the United States Code and Section 9038.1(a)(2)
of the Commission’s Regulations state that the Commission may conduct other examinations and
audits from time to time as it deems necessary.

Scope of Audit

Unless noted in the Committee Structure section below, this audit examined JSFP’s primary
election activity only. The following areas were covered by this audit:

1, The receipt of excessive contributions and loans.

2. The receipt of contributions from prohibited sources.

3. The receipt of transfers from other authorized committees.

4. The disclosure of contributions and transfers received.

5. The disclosure of disbursements, debts and obligations.

6. The recordkeeping process and completeness of records,

7. The consistency between reported figures and bank records.

8. The accuracy of the Statement of Net Outstanding Campaign Obligations.
9. The campaign’ s compliance with spending limits.

10. Other campaign operations necessary to the review.

Committee Structure

JSFP was the only campaign committee authorized by Jill Stein (the Candidate) for the 2016
Presidential election and conducted primary, general and recount activity for the Candidate.
JSFP opened six bank accounts: one checking and one savings account for each activity. JSFP
deposited contributions received before the Candidate’s nomination into the primary checking
account, and most contributions received after the nomination into the general checking account.
JSFP received matching funds for its primary campaign. This audit covered JSFP’s primary
election activity to determine if the expenses were qualified campaign expenses defrayed in the
connection with the primary election.?

3 Under Title 26, this audit included an examination of JSFP’s Statement of Net Outstanding Campaign Obligations
based solely on JSFP’s primary election activity for the purpose of determining the extent to which the Candidate
was entitled to primary matching funds (Finding 1), Due to the committee’s structure, this audit also covered a Title
52 examination of JSFP’s overall consistency between reported figures and bank activity, which included general
and recount activity. For clarification, the Audit staff has indicated in Finding 3 — Misstatement of Financial
Activity, those transactions that were not related to primary election activity.



Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Committee Structure
Commission Guidance
Inventory of Campaign Records

Part II. Overview of Campaign
Campaign Organization
Overview of Financial Activity

Part III. Summaries
Findings and Recommendations
Summary of Amounts Owed to the United States Treasury

Part IV. Findings and Recommendations
Finding 1. Net Outstanding Campaign Obligations - Surplus
Finding 2. Matching Funds Received in Excess of Entitlement
Finding 3. Misstatement of Financial Activity
Finding 4. Disclosure of Debts and Obligations

Page

w NV

wn

14
15
18


13

The Commission concluded, by a vote of 4-0, to reaffirm JSFP’s original DOT as August
6, 2016. 9

The Preliminary Audit Report recommended that JSFP provide evidence that the audited
NOCO was not in a surplus position. Absent such evidence, the Audit staff stated it
would recommend that the Commission make a determination that $66,196, representing
the pro-rata portion of the surplus, was repayable to the United States Treasury.

C. Committee Response to Preliminary Audit Report

In response to the Preliminary Audit Report recommendation, JSFP continued to
maintain its position that ballot access laws in each state should dictate which expenses
qualify as qualified campaign expenses for the Primary election, and not necessarily the
candidate’s DOI, The Commission, however, concluded by a vote of 4-0 that JSFP’s
DOI was August 6, 2016. As noted in the legal standards above, only expenses incurred
on or before DOI can be considered qualified campaign expenses. Therefore, the Audit
staff did not include ballot access petitioning expenses incurred after DOL in its
calculation of the NOCO.

JSFP also provided documentation and an updated NOCO, which, when compared to its
initial NOCO, reflected an overall increase in total assets of $332,051, the majority of
which included an increase in cash on hand of $314,561. The Audit staff concurred with
$313,079, with the difference of $1,482 being JSFP’s overstatement of cash on hand.

JSFP’s updated NOCO also included an overall increase in total obligations of $294,820,
all of which pertained to “estimated winding down expenses” that JSFP’s NOCO
reflected as $516,789. JSFP did not provide a listing to support all of the winding down
expenses that justify this increase. JSFP provided bank statements for Primary and
General election bank accounts only, some check copies written on Primary, General and
Recount bank accounts, and accounting and payroll listings of selected expenses paid in
2017 and 2018. However, none of this documentation included election designation
information. This was important because JSFP paid certain winding down expenses,
such as salary, that were fully documented with payroll processing reports but those
reports did not include the amount allocated to the Primary election for each pay-period
and/or employee. To supplement the Committee’s documentation, the Audit staff used
the reports filed by JSFP with the Commission to calculate the amount allocated by the
Committee to the Primary election. The Audit staff's analysis resulted in additional
actual winding down expenses of $123,967 and a reduction in the estimated winding
down expenses of $31,525.

In addition to the analysis of winding down expenses, the Audit staff also reviewed
invoices that were previously submitted and identified additional accounts payable
expenses totaling $36,035.

19 JSFP presented no argument in its Request for Consideration of a Legal Question regarding the second
question, however, the response to this question is addressed directly in the Commission’s regulations. The
regulations provide for the payment of winding down costs, i.e. costs associated with the termination of
political activity, including compliance with statutory post-election requirements and other specifically
defined administrative costs. 11 CFR §§ 9034.4(a)(3) and 9034.11. Because the regulations directly
address the payment of winding down costs, there was no need for the Commission to reach a
determination on the second question in the request.



Part II
Overview of Campaign

Campaign Organization

Important Dates

© Date of Registration

July 14, 2015

¢ Eligibility Period’

April 13, 2016 — August 6, 2016

* Audit Coverage®

January 17, 2015 — December 31, 2016

Headquarters

Lexington, Massachusetts

Bank Information

« Bank Depositories

One

* Bank Accounts

Six (One checking and one savings account each
for primary, general and recount activity)

Treasurer

« Treasurer When Audit Was Conducted

Steven Welzer

e Treasurer During Period Covered by Audit

Steven Welzer

Management Information

e Attended Commission Campaign Finance No
Seminar

¢ Who Handied Accounting and Paid Staff
Recordkeeping Tasks

7 On March 28, 2016, the Candidate submitted a signed letter (dated March 18, 2016 and subsequently revised on
April 5, 2016), to the Commission seeking to become eligible to receive Presidential primary matching funds and
agreeing that she and her authorized committee would comply with the conditions set forth in 1 CFR §9033.1(b).

A threshold submission was submitted on March 28, 2016, and the Commission certified the Candidate as eligible to
receive matching funds on April 13, 2016. The period during which the Candidate was eligible for matching funds

ended on August 6, 2016, the Candidate’s DOT.

8 The audit covered the period from JSFP’s first bank deposit on January 17, 2015. The Audit staff also conducted
limited reviews of receipts and expenditures after December 31, 2016, to determine whether the Candidate was

eligible to receive additional matching funds.

|
|
|
|
|
'



19

B. Separate Schedules. An authorized 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.

¢ Once it has been outstanding 60 days from the date incurred, a debt of $500 or
less must be reported on the next regularly scheduled report.

e A debt exceeding $500 must be disclosed in the report that covers the date on
which the debt was incurred, except reoccurring administrative expenses (such as
rent) shall not be reported as a debt before the payment due date.

11 CER §104.11(b).

D. Disputed Debts. A disputed debt is a bona fide disagreement between the creditor
and the committee as to the existence of a debt or the amount owed by the committee.
Until the creditor and committee resolve the dispute (assuming the creditor did provide
something of value), the committee must disclose:

¢ The amount the committee admits it owes;

*® The amount the creditor claims is owed; and

e Any amounts the committee has paid the creditor. 11 CFR §116.10.

Facts and Analysis

A. Facts

During audit fieldwork, the Audit staff used the available disbursement records to
reconcile the accounts of JSFP’s largest primary election vendors, including accounts
payable expenses for the NOCO. The Audit staff identified debts owed to these vendors
totaling $17,015 that were not disclosed on Schedule D-P, as required. For one
transaction totaling $13,114, the majority of the error pertained to the disputed debt with
one advertiser that was initially invoiced to JSFP for services in August 2016 and was
ultimately paid in January 2017. During audit fieldwork, a JSFP representative related
the amount of this invoice had been in dispute, but agreed that this debt should have been
reported until the final invoice amount was negotiated and paid.

B. Preliminary Audit Report & Audit Division Recommendation

The Audit staff presented this matter to the JSFP representative at the exit conference and
provided schedules detailing the unreported debts for each relevant reporting period.
This matter was discussed with the JSFP representative during fieldwork and at the exit
conference. The representative stated he was familiar with the matter and understood the
finding. In its response to the exit conference, JSFP made no comment on this finding.

The Preliminary Audit Report recommended that JSFP provide documentation
demonstrating that the amount owed of $17,015 did not require reporting as debt on
Schedule D-P. Absent such documentation, the Preliminary Audit Report recommended
that JSFP amend its reports to disclose the outstanding debt and continue to disclose it
until extinguished.

i



ISFEB 1h PH 1:37

THE FEDERAL ELECTION COMMISSION

Washington, DC 20463
February 14, 2019

MEMORANDUM
To: The Commission
Through: Alec Palmer i?

Staff Director
From: Patricia C. Orrock AZO

Chief Compliance Officer

Nicole Burgess NB

Audit Manager
By: Mary Moss

Lead Auditor
Subject: Audit Division Recommendation Memorandum on Jill Stein for President

(JSFP)

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit Reports),
the Audit staff presented the Draft Final Audit Report (DFAR) to JSFP on November 19,
2018 (see attachment). In response to the DFAR, JSFP provided comments to Findings 1
through 4, as noted below.' JSFP did not request an audit hearing.

This memorandum provides the Audit staff's recommendation for each finding outlined in
the DFAR. The Office of General Counsel (OGC) has reviewed this memorandum and
concurs with the recommendations.

Committee Request to Delay Repayment Determination

In response to DFAR Finding 1 (Net Outstanding Campaign Obligations
(“NOCO”)), JFSP contends that the NOCO statement is incorrect and wrongly
results in a repayment obligation. JFSP requests that the Commission delay
making a repayment determination? to give it an opportunity to work with Audit
staff to resolve discrepancies it purports exist in the NOCO statement. In
exchange for the Commission delaying making a repayment determination, JSFP
proposes to: (1) waive its right to have the audit concluded by September 2019; (2)
comply with any repayment determinations identified by December 31, 2019; (3)

' On February 5, 2019, OGC verified that JSFP did not intend to submit additional documents.
2 Notification of repayment by the Commission must be made August 21, 2019 via the Final Audit Report
of the Commission.


the expenses that were documented as pertaining to the Primary election into its revised
NOCO, JSFP was still in a surplus position and therefore not entitled to the matching
fund payment it received after the Candidate’s DOI. Therefore, the Audit staff
recommends that the Commission make a determination that $134,900 is repayable to the
United States Treasury. (For more detail, see p. 14.)

Finding 3. Misstatement of Financial Activity

During audit fieldwork, a comparison of JSFP’s reported financial activity with its bank
records revealed a misstatement of receipts and disbursements for 2015 and 2016 and a
misstatement of ending cash in 2016. In 2015, JSFP understated its reported receipts and
disbursements by $31,495 and $35,042 respectively; and in 2016, JSFP understated its
reported receipts, disbursements and ending cash by $996,384, $800,310 and $192,527
respectively. The Preliminary Audit Report recommended that JSFP amend its disclosure
reports to correct the misstatements.

In response to the Preliminary Audit Report recommendation, JSFP related it was in the
process of making the necessary amendments to correct the misstatements but no reports
were filed. (For more detail, see p. 15.)

Finding 4. Disclosure of Debts and Obligations

During audit fieldwork, the Audit staff identified debts totaling $17,015 not disclosed on
Schedule D-P (Debts and Obligations), as required. The Preliminary Audit Report
recommended that JSFP amend its reports to disclose the outstanding debt.

In response to the Preliminary Audit Report recommendation, JSFP related it was in the
process of making the necessary amendments to correct the disclosure of debts and
obligations but no reports were filed. (For more detail, see p. 18.)

Summary of Amounts Owed to the United
States Treasury

Finding 1 Pro-rata portion of the Surplus Matching Funds $ 40,372
(p. 7)
Finding 2 | Matching Funds received in Excess of $ 134,900
(p. 14) Entitlement

Total Due United States Treasury $175,272

|



Part III
Summaries

Findings and Recommendations

Finding 1. Net Outstanding Campaign Obligations -
Surplus

The Audit staff's review of JSFP’s financial activity through December 31, 2016, and
estimated winding down costs indicated that the Candidate had a surplus of funds as of
her DOI in the amount of $200,856. Of this surplus amount, JSFP is required to make a
pro rata repayment of the $40,372.

In JSFP’s initial Statement of Net Outstanding Campaign Obligations (NOCO) filed
during the matching fund period, cash on hand was understated and both accounts
payable and winding down expenses were overstated. As such, JSFP’s NOCO indicated
an apparent deficit position and therefore eligible to receive matching funds. The Audit
staff's analysis of the NOCO, however, determined that surplus funds were received and
the Candidate was not eligible for all of the matching funds she received. The
Preliminary Audit Report recommended that JSFP provide evidence that the Candidate
did not have surplus funds as of her DOT.

In response to the Preliminary Audit Report recommendation, JSFP disagreed it was in a
surplus position and stated if the disallowed ballot access costs and recently updated
winding down estimates were considered, it would instead be in a deficit position and
therefore not be required to make a repayment. JSFP provided documentation and an
updated NOCO to support its position. Based on this documentation and JSFP’s 2017
and 2018 reported activity on Schedule B (Itemized Disbursements), the Audit staff
updated its NOCO to reflect increased ballot access costs incurred prior to DO] and
increased winding down actual costs. These adjustments reduced the repayment amount,
but the revised NOCO still reflected a surplus position, Therefore, the Audit staff
recommends that the Commission make a determination that $40,372 is repayable to the
United States Treasury. (For more detail, see p. 7.)

Finding 2. Matching Funds Received in Excess of

Entitlement

The Audit staff’s NOCO statement, as presented in Finding 1, indicated a surplus
position as of August 6, 2016, the Candidate’s DOI. Therefore, JSFP was not entitled to
the matching fund payment of $134,900 it subsequently received on January 18, 2017,
The Preliminary Audit Report recommended that JSFP provide evidence that the
Candidate did not have surplus funds as of her DOT.

In response to the Preliminary Audit Report recommendation, JSFP provided
documentation and an updated NOCO, and stated that it was entitled to all matching fund
payments due to its increased winding down expenses, even if previously disallowed
ballot access and other expenses were not considered. After the Audit staff incorporated



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,” JSFP requested early consideration of
two legal questions raised during the audit. The first question pertained to whether the
Commission’s original determination of the Candidate’s date of ineligibility (DOI) was proper.
The second question was whether committees should be permitted to incur winding down
expenses and other primary expenses after the DOI if they are clearly incurred to improve
compliance with existing laws and regulations or if they are clearly required in the course of
seeking the qualification for the ballot in various states,

The Commission concluded, by a vote of 4-0, to reaffirm JSFP’s original DOI as August 6,
2016. (See Finding 1, p. 7.)

Inventory of Campaign Records
The Audit staff routinely conducts an inventory of campaign records before it begins audit
fieldwork. JSFP’s records were materially complete when fieldwork commenced.°

4 Although JSFP’s request purported to identify three separate questions for review, two of the questions raised the
same essential issue, which is whether the Commission’s original DOI determination was proper. Therefore, those
two questions were consolidated into a single question.

5 JSFP presented no argument in its Request for Consideration of a Legal Question regarding the second question,
however, the response to this question is addressed directly in the Commission’s regulations. The regulations
provide for the payment of winding down costs, i.e. costs associated with the termination of political activity,
including compliance with statutory post-election requirements and other specifically defined administrative costs.
11 CFR §§ 9034.4(a)(3) and 9034.11. Because the regulations directly address the payment of winding down costs,
there was no need for the Commission to reach a determination on the second question in the request.

© The Audit staff encountered delays prior to fieldwork due to JSFP’s inability to timely provide complete
computerized information.



Legal Standard

Contents of Reports. Each report must disclose:

¢ the amount of cash-on-hand at the beginning 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)(1), (2), (3), (4) and (5).

Facts and Analysis

A. Facts

As part of audit fieldwork, the Audit staff reconciled JSFP’s reported activity? with its
bank records for calendar years 2015 and 2016. The reconciliation revealed that JSFP
misstated its receipts and disbursements for both years. The following charts outline the
discrepancies between JSFP’s disclosure reports and its bank records.

2015 Reported Activity to Bank Activity
Reported Bank Records Discrepancy
Beginning Cash Balance $0 $0 $0
@ January 1, 2015
Receipts $244,196 $275,691 $31,495
Understated
Disbursements $221,985 $257,027 $35,042
Understated
Ending Cash Balance @ $22,211 $18,664 $3,547
December 31, 2015 Overstated
The understatement of receipts resulted from the following:
© Contributions from individuals not on reports + $43,877
« Unexplained difference - 12,382
Net Understatement of Receipts + $31,495

20 Due to JSFP’s consolidated reporting as one entity for primary, general and recount activity; the
incorrect identification of election designations on the reports; the missing election designation information
in some of the database records; and the large volume of transactions not required to be itemized, it was
impossible for the Audit staff to exclude the general and recount activity from this reconciliation, especially
during the post DOT period, which was August 7, 2016 through December 31, 2016.



Draft Final Audit Report of the
Audit Division on

Jill Stein for President
(January 17, 2015 — December 31, 2016)

Why the Audit About the Campaign (p. 3)

Was Done Jill Stein for President is the principal campaign committee for Jill

Federal law requires Stein, a candidate for the Green Party nomination for the office of

the Commission to President of the United States. The Committee is headquartered in

audit every political Lexington, Massachusetts, For more information, see the chart on the

committee established Campaign Organization, p. 3.

by a candidate who . .

receives public funds Financial Activity? (p. 4)

for the primary + Receipts

campaign.' The audit o Contributions from Individuals $ 11,010,439

determines whether the o Matching Funds Received 456,035

candidate was entitled o Loans Received 40,000

to all of the matching o Offsets to Operating Expenditures 716,735

funds received, Total Receipts $ 12,223,209

whether the campaign

used the matching « Disbursements

funds in accordance o Operating Expenditures $ 11,885,379 i
with the law, whether o Transfers to Other Authorized i
the candidate is entitled Committees 22,300 :
to additional matching o Fundraising Disbursements 15,156

funds, and whether the o Contribution Refunds 2,465

campaign otherwise o Other Disbursements 250

complied with the Total Disbursements $ 11,925,550

limitations,

prohibitions, and Findings and Recommendations (p. 5)

disclosure requirements
of the election law.

Future Action
The Commission may
initiate an enforcement
action, at a later time,
with respect to any of
the matters discussed in
this report.

Net Outstanding Campaign Obligations - Surplus (Finding 1)
Matching Funds Received in Excess of Entitlement (Finding 2)
Misstatement of Financial Activity (Finding 3)

Reporting of Debts and Obligations (Finding 4)

1 26 U.S.C, §9038(a).

? These figures contain primary, general and recount activity. The general and recount activity combined
accounted for approximately $9,590,974, or 78% of total receipts, and approximately $9,618,886 or 81% of
total disbursements. See Committee Structure on p. |.


F. Documentation of Disbursements. Each candidate shall have the burden of proving
that disbursements made by the candidate and/or her authorized committee are qualified
campaign expenses. 11 CFR §9033.11.

G. Surplus. The Commission may determine through audits and examinations that the
candidate’s net outstanding campaign obligations, as defined in 11 CFR §9034.5, reflect
a surplus. When a surplus is identified, the candidate shall, within 30 days of the
ineligibility date, repay to the United States Treasury an amount which represents the
amount of matching funds contained in the candidate’s surplus. The amount shall be an
amount equal to that portion of the surplus which bears the same ratio to the total surplus
that the total amount received by the candidate from the matching payment account bears
to total deposits made to the candidate’s accounts. The Commission will provide the
candidate with a written notice of its repayment determination.

11 CFR §§9038.2(b)(1)(ii) and (c)(1) and 9038.3(c)(1).

H. Entitlement to Matching Payments after Date of Ineligibility. If, on the date of
ineligibility a candidate has net outstanding campaign obligations as defined under 11
CFR §9034.5, that candidate may continue to receive matching payments for matchable
contributions received and deposited on or before December 31“ of the Presidential
election year, provided that he or she still has net outstanding campaign debts on the day
when the matching payments are made, 11 CFR §9034.1(b).



11

i, Surplus Pro-Rata Repayment Calculation

The Audit staffs NOCO calculations indicated there were surplus funds of $200,856
as of DOL. Of this amount, $40,372 ($200,856 x .2010') is the pro-rata portion of
the surplus that is repayable to the United States Treasury.

ii. NOCO Differences: The primary differences between JSFP’s NOCO and the
NOCO prepared by the Audit staff are discussed below:

a. Cash In Bank

The primary difference between the assets section of the NOCO presented above
and those prepared by JSFP is the cash in bank balance. JSFP understated cash by
$313,079. Most of the understatement of cash represented funds received prior to
the Candidate’s DOI, but deposited after, with a majority consisting of
contributions less than $200 made by credit card. Further, a majority of these
credit card contributions were included in JSFP’s receipts database as
contributions made to the Primary election and were reported as unitemized
contributions. The remaining difference pertained to outstanding disbursement
checks that had not cleared the bank as of DOI that were not included in JSFP’s
cash in bank calculation. The understatement of assets caused the NOCO
statements to show a larger deficit and matching fund entitlement than was the
case,

b, Accounts Payable for Qualified Campaign Expenses
1. Ballot Access Petitioning Expenses

The primary difference between the accounts payable section of the
NOCO presented on the previous page and those prepared by JSFP is with
the amount of ballot access petitioning expenses.'4 JSFP included all
ballot access petitioning expenses, including those incurred after DOI,
thus overstating the amount calculated by the Audit staff by $255,671."
As noted in the legal standards above, only expenses incurred on or before
DOI can be considered qualified campaign expenses. Therefore, the Audit
staff did not include ballot access petitioning expenses incurred after DOI
in its calculation of the NOCO. Furthermore, in many instances, the
incurrence dates of the ballot access petitioning expenses were not
sufficiently documented by JSFP and JSFP made no additional
documentation available. Due to the lack of documentation, the Audit
staff also did not include these undocumented expenditures in its NOCO
calculations.

'3 This figure (.2010), as calculated pursuant to 11 CFR §9038.3(c)(1), represents JSFP’s repayment ratio
and was calculated by dividing the total matching funds received as of DOI ($456,035) by the adjusted total
deposits made to the candidate’s accounts as of DOI ($2,269,118). Therefore, the repayment ratio was
$456,035/$2,269,118 = 20.10%

‘4 Ballot access petitioning is required for all states when a minor party candidate seeks to be included on
the General election ballot for the state. Each state has unique petitioning requirements and cutoff dates,
and some dates were subsequent to the Candidate’s DOI.

'S The Audit staff's review of all disbursements paid post DOI also resulted in the identification of
additional expenses unrelated to ballot access that were not included in JSFP’s NOCO accounts payable
section.

|
|



The Audit staff recommends that the Commission find, in 2015, JSFP understated
its reported receipts and disbursements by $31,495 and $35,042 respectively; and
in 2016, JSFP understated its reported receipts, disbursements and ending cash by
$996,384, $800,310 and $192,527 respectively.

Finding 4. Disclosure of Debts and Obligations

In response to the PAR and DFAR, JSFP stated it was in the process of making the
necessary amendments to correct the disclosure of debts and obligations. To date,
no amended reports have been filed to correct the public record.

The Audit staff recommends that the Commission find that JSFP did not disclose
debts totaling $17,015 on Schedule D-P (Debts and Obligations), as required.

If this memorandum is approved, a Proposed Final Audit Report will be prepared within
30 days of the Commission’s vote.

In case of an objection, Directive No. 70 states that the Audit Division
Recommendation Memorandum will be placed on the next regularly scheduled open.
session agenda.

Documents related to this audit report can be viewed in the Voting Ballot Matters folder.
Should you have any questions, please contact Mary Moss or Nicole Burgess at 694-1200,

Attachments:
Draft Final Audit Report of the Audit Division on Jill Stein for President
Legal Analysis, dated February 13, 2019

ce: Office of General Counsel



20

C. Committee Response to Preliminary Audit Report

In response to the Preliminary Audit Report recommendation, JSFP related it was in the
process of making the necessary amendments to correct the disclosure of debts and
obligations but no reports were filed.



make a repayment within 60 days of a repayment determination or December 31,
2019, whichever comes first; and, (4) make a good faith initial pro rata repayment
of $40,372.

The Audit Division recommends that the Commission reject JSFP’s proposal in its
entirety to further delay the repayment notification deadline. (See OGC comments
in attached LRA #1021.)

Finding 1. Net Outstanding Campaign Obligations - Surplus

Review of JSFP’s financial activity through December 31, 2016 and estimated
winding down costs indicated that the Candidate had a surplus of funds as of her
Date of Ineligibility (DOT) in the amount of $200,856. In response to the
Preliminary Audit Report (PAR), JSFP stated that it disagreed with the audited
Statement of Net Outstanding Campaign Obligations (NOCO) and provided
documentation and an updated NOCO to support its position that, at the time of
DOI, the Candidate’s NOCO was in a deficit position and no repayment was
required. In response to the DFAR, JSFP contends that the Candidate did not owe
arepayment. According to JSFP, if the audited NOCO had included additional
winding down costs totaling $258,973, the Candidate’s NOCO would have
reflected a deficit amount totaling $58,117, and ultimately no repayment to the
United States Treasury would be required. No documentation was provided by
JSFP to support this position or the additional winding down costs. As such, the
Audit staff has not made any adjustments to the audited NOCO included in the
DFAR.

The Audit staff recommends that the Commission make a determination that a pro
rata repayment of $40,372 is repayable to the United States Treasury.

Finding 2. Matching Funds Received in Excess of Entitlement

The NOCO statement prepared by the Audit staff indicated a surplus position, as
of August 6, 2016, the Candidate’s DOI. Therefore, JSFP was not entitled to the
matching fund payment it received on January 18, 2017. In response to the DFAR,
JSFP contends that it did not agree that the Candidate was in a surplus position.
JSFP explained that it experienced confusion with respect to initial bank balances,
ballot access costs and its calculation of winding down expenses at the time it
submitted its last matching fund request, but JSFP still considered the NOCO
balance to be in a deficit position. JSFP did not provide any documents to support
its assertion.

The Audit staff recommends that the Commission make a determination that
$134,900 is repayable to the United States Treasury.

Finding 3. Misstatement of Financial Activity

In response to the PAR, JSFP agreed to file amended reports to correct the
misstatement. In response to the DFAR, JSFP stated it was still planning on filing
the amendments but needed additional time. To date, no amendments have been
filed to correct the public record.



Part IV
Findings and Recommendations

Finding 1. Net Outstanding Campaign Obligations -
Surplus

Summary

The Audit staff's review of JSFP’s financial activity through December 31, 2016, and
estimated winding down costs indicated that the Candidate had a surplus of funds as of
her DOI in the amount of $200,856. Of this surplus amount, JSFP is required to make a
pro rata repayment of the $40,372.

In JSFP’s initial Statement of Net Outstanding Campaign Obligations (NOCO) filed
during the matching fund period, cash on hand was understated and both accounts
payable and winding down expenses were overstated. As such, JSFP’s NOCO indicated
an apparent deficit position and therefore eligible to receive matching funds. The Audit
staff’s analysis of the NOCO, however, determined that surplus funds were received and
the Candidate was not eligible for all of the matching funds she received, The
Preliminary Audit Report recommended that JSFP provide evidence that the Candidate
did not have surplus funds as of her DOI.

In response to the Preliminary Audit Report recommendation, JSFP disagreed it was in a
surplus position and stated if the disallowed ballot access costs and recently updated
winding down estimates were considered, it would instead be in a deficit position and
therefore, not be required to make a repayment, JSFP provided documentation and an
updated NOCO to support its position. Based on this documentation and JSFP’s 2017
and 2018 reported activity on Schedule B (Itemized Disbursements), the Audit staff
updated its NOCO to reflect increased ballot access costs incurred prior to DOI and
increased winding down actual costs. These adjustments reduced the repayment amount,
but the revised NOCO still reflected a surplus position. Therefore, the Audit staff
recommends that the Commission make a determination that $40,372 is repayable to the
United States Treasury.

Legal Standard
A. Net Outstanding Campaign Obligations (NOCO). Within 15 days after the
candidate’s date of ineligibility (see definition below), the candidate must submit a
statement of “net outstanding campaign obligations.” This statement must contain,
among other things:

¢ = The total of all committee assets including cash-on-hand, amounts owed to the

committee and capital assets listed at their fair market value;
© The total of all outstanding obligations for qualified campaign expenses; and
« An estimate of necessary winding-down costs. 11 CFR §9034.5(a).

I
i
\



Facts and Analysis

A. Facts

The Candidate’s DOI was August 6, 2016. The Audit staff reviewed JSFP’s financial
activity through December 31, 2016; analyzed actual and projected winding down
costs;!? and prepared the NOCO that appears below.

Jill Stein for President
Statement of Net Outstanding Campaign Obligations
As of August 6, 2016
As determined at August 31, 2018

Assets

Cash in Bank $ 792,935 [a]

Accounts Receivable 13,289

Physical Assets @ 60% depreciation 4,200

Total Assets $ 810,424
Liabilities

Accounts Payable for Qualified Campaign Expenses as of 8/6/16 $ (237,602)

Loan Payable as of 8/6/2016 ( 40,000)

Actual Winding Down Costs (12/9/16 — 8/31/18) (262,611)

Estimated Winding Down Costs (9/1/18 — 7/31/2019) 69,355) [b

Total Liabilities $ (609,568)
Net Outstanding Campaign Obligations —-Surplus $200,856

Footnotes to NOCO Statement:

[a] Amount includes contributions dated prior to DOI and deposited after DOI.

[b] Estimated winding down costs for future reportable periods only. This amount will be
compared to actual winding down costs and will be adjusted accordingly. Estimated
winding down presented in the preliminary audit report was reduced from $100,880 to
$69,335 to reflect the remaining winding down period.

12 The actual winding down costs were reviewed through August 31, 2018, the last date JSFP provided
banking and disbursement documentation to support its actual winding down expenses,