Part I
Background

Authority for Audit

This report is based on an audit of Hostetler for Congress, 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 filea
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

At the start of fieldwork, HFC had not filed disclosure reports for the period April 8,

2004, through September 30, 2004. Therefore, testing receipts and disbursements for
itemization and disclosure during this period was not possible. On January 11, 2005,
HFC filed the required disclosure reports. The late filing of these reports is currently
being handled by the Commission in another context.

This audit examined:

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

The disclosure of contributions and other receipts.

The disclosure of disbursements, debts and obligations.
The consistency between reported figures and bank records.
The completeness of records.

Other committee operations necessary to the review.

NAWRWND


Part IV
Finding and Recommendation

| Omission of Disclosure Information

Summary

For the disclosure reports filed, the Audit staff reviewed all disbursements and noted that
HFC failed to properly disclose 27 disbursements totaling $45,243. Although HFC filed
amended reports, they did not materially correct the disclosure errors.

Legal Standard
A. Reporting Operating Expenditures. When operating expenditures to the same
person exceed $200 in an election cycle, the committee must report the:

e Amount;

e Date when the expenditures were made;

e Name and address of the payee; and

¢ Purpose (a brief description of why the disbursement was made—see below). 2

U.S.C. §434(b)(5)(A) and 11 CFR §104.3(b)(4)(i).

B. Examples of Purpose

e Adequate Descriptions. Examples of adequate descriptions of “purpose” include
the following: dinner expenses, media, salary, polling, travel, party fees, phone
banks, travel expenses, travel expense reimbursement, catering costs, loan
repayment, or contribution refund. 11 CFR §104.3 (b)(4)(i)(A).

e Inadequate Descriptions. The following descriptions do not meet the requirement
for reporting “purpose”: advance, election day expenses, other expenses, expense
reimbursement, miscellaneous, outside services, get-out-the-vote, and voter
registration. 11 CFR §104.3 (b)(4)(i)(A).

Facts and Analysis

For the disclosure reports that were filed, the Audit staff reviewed all disbursements. Our
testing revealed that HFC failed to provide a purpose for 21 disbursements totaling
$42,243. HFC also disclosed six disbursements totaling $3,000 to the wrong payee.
Documentation reviewed by the Audit staff contained sufficient information for HFC to
disclose a purpose and the correct payee for these transactions.

During the exit conference, the Audit staff provided HFC’s treasurer with workpapers
detailing those disbursements which were improperly disclosed. The treasurer indicated
that HFC would file amendments to correct the public records.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that HFC amend its reports to correct the disclosure errors
noted above. In response to the interim audit report HFC filed amended reports.
However, HFC failed to amend its October Quarterly report for the calendar year 2003,
which contained 12 (of the 21) disclosure errors relating purpose.

2 Several attempts were made to contact the Treasurer in order to resolve this matter. He neither responded
to telephone messages nor electronic mail messages.


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit

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

Part III. Summary

Finding and Recommendation

Part IV. Finding and Recommendation

Omission of Disclosure Information

Page


Part II
Overview of Campaign

Campaign Organization

Important Dates

Hostetler for Congress

e Date of Registration

January 28, 2003

e Audit Coverage

January 28, 2003 — September 30, 2004

Headquarters

Hershey, Pennsylvania

Bank Information

e Bank Depositories One

e Bank Accounts One

Treasurer

e Treasurer When Audit Was Conducted John H. Grab

* Treasurer During Period Covered by Audit _| John H. Grab

Management Information

e Attended FEC Campaign Finance Seminar__| No

e Used Commonly Available Campaign Yes
Management Software Package

¢ Who Handled Accounting and Volunteer Staff

Recordkeeping Tasks

Overview of Financial Activity
(Audited Amounts)

Cash on hand @ January 13, 2003 $0
o Receipts from Individuals 137,119
o Receipts from Political Committees 1,750
o Receipts from Candidate 2,000
Total Receipts $ 140,869
o Operating Expenditures 131,699
o. Refunds of Contributions to Individuals 2,000
Total Disbursements $ 133,699
Cash on hand @ September 30, 2004 $ 7,170


FEDERAL ELECTION COMMISSION

WASHINGTON, DC 20463

July 28, 2005

MEMORANDUM
TO: Press Office
FROM: Joseph F. Stoltz

Assistant Staff
Audit Division

SUBJECT: Public Issuance of the Final Audit Report on Hostetler for Congress
(A04-01)

Attached please find a copy of the audit report on Hostetler for Congress, which
was approved by the Commission on July 14, 2005.

The audit report may be released to the public on July 28, 2005.

Attachment as stated

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


Part III
Summary

Finding and Recommendation

Omission of Disclosure Information

For the disclosure reports filed, the Audit staff reviewed all disbursements and noted that
HFC failed to properly disclose 27 disbursements totaling $45,243. Although HFC filed
amended reports, they did not materially correct the disclosure errors.

(For more detail, see p. 4)


Report of the
Audit Division on

Hostetler for Congress
January 28, 2003 - September 30, 2004

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.' 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.

' 2 U.S.C. §438(b).

About the Committee (p. 2)

Hostetler for Congress (HFC) is the principal campaign
committee for Ronald Hostetler, Republican Candidate for the
U.S. House of Representatives from the state of Pennsylvania,
17" District. HFC maintains its headquarters in Hershey,
Pennsylvania. For more information, see the Campaign
Organization chart, p. 2.

Financial Activity (p. 2)

« Receipts
o Contributions From Individuals $ 137,119
o Contributions From Political 1,750
Committees
o Contribution From Candidate 2,000
o Total Receipts $ 140,869
¢ Disbursements
o Operating Expenditures $ 131,699
o Refunds of Contributions to 2,000
Individuals
o Total Disbursements $ 133,699

Finding and Recommendation (p. 3)
e Omission of Disclosure Information


Report of the

Audit Division

on

Hostetler for Congress

January 28, 2003 - September 30, 2004