Part II

Overview of Campaign

Campaign Organization

Important Dates

Martinez for Senate

e Date of Registration

January 5, 2004

e Audit Coverage

January 5, 2004 through December 31, 2004

Headquarters

Tampa, Florida

Bank Information

e Bank Depositories

Three

e Bank Accounts

Four

Treasurer

e Treasurer When Audit Was Conducted

Nancy H. Watkins

¢ Treasurer During Period Covered by Audit

Charles W. Puckett

Management Information

[

¢ Attended FEC Campaign Finance Seminar

Yes (current Treasurer only)

e Used Commonly Available Campaign
Management Software Package

Yes

¢ Who Handled Accounting, Recordkeeping
Tasks and Other Day-to-Day Operations

Paid and Volunteer Staff

Overview of Financial Activity
(Audited Amounts)

Cash on hand @ January 13 , 2004 $ 0
Receipts
o From Individuals $ 9,659,738
co From Political Committees 1,983,294
o__ Transfers from Affiliated/Other Party Committees 705,173
o Other Receipts 14,846
o Total Receipts $ 12,363,051

Disbursements

o Operating Expenditures $ 12,314,097
o Contribution Refunds 28,290
o Total Disbursements $ 12,342,387
Cash on hand @ December 31, 2004 $ 20,664


| Finding 2. Failure to File 48-Hour Notices

Summary

MFS did not file 48-hour notices for 109 contributions totaling $162,014 prior to both the
primary and general elections. In response to the interim audit report recommendation,
MFS agreed that 48-hour notices were not filed for the contributions in question.

Legal Standard

Last-Minute Contributions (48-Hour Notice). Campaign committees must file special
notices regarding contributions of $1,000 or more received less than 20 days but more
than 48 hours before any election in which the candidate is running. This rule applies to
all types of contributions to any authorized committee of the candidate. 11 CFR
§104.5(f).

Facts and Analysis

The Audit staff reviewed 1,496 contributions, totaling $2,743,379, which were greater
than or equal to $1,000 and received during the 48-hour notice filing periods of both the
primary and general elections. MFS did not file 48-hour notices for 109 contributions
totaling $162,014 ($21,500 for the primary election and $140,514 for the general
election). Most of the 48-hour notices that were not filed arose from credit card
contributions ($67,000) and contributions received by a telemarketer for MFS.

At the exit conference, MFS was provided schedules of the 48-hour notices not filed.
The MFS treasurer stated that these schedules would be reviewed and any comments or
corrections would be submitted in writing.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that MFS provide:
e documentation to demonstrate the contributions in question were
properly included in 48-hour notices; or,
e documentation establishing the contributions were not subject to
48-hour notification; and/or,
* any written comments it considers relevant.

In response to the interim audit report recommendation, MFS indicated that they had
reviewed the records and agreed that 48-hour notices were not filed for the contributions
in question.

Finding 3. Disclosure of Proceeds from Joint Fundraising
Activity

Summary

MEFS did not properly disclose the receipt of net proceeds from four joint fundraising
committees. In response to the interim audit report recommendation, MFS filed amended
reports that corrected the disclosure discrepancies.


Part IV
Findings and Recommendations

|Finding 1. Receipt of Contributions that Exceed Limits

Summary

MFS accepted 186 contributions from individuals that exceeded the limit by $313,235.
Most of these excessive contributions resulted from improper redesignations and/or
reattributions. In response to the interim audit report recommendation, MFS provided
copies of notices sent to contributors that were eligible for presumptive redesignation
and/or reattribution. In addition, MFS provided copies of negotiated refund checks
and/or copies of refund checks prepared but not negotiated.

Legal Standard

A. Authorized Committee Limits: An authorized committee may not receive more
than a total of $2,000 per election from any one person. Increased contribution limits are
provided for candidates facing self-financed candidates once the self-financed candidates
make expenditures from their personal funds that exceed a specific amount. 2 U.S.C.
§441a(a)(1)(A) and §441a(i); 11 CFR §§110.1(a) and (b) and 110.9(a).

B. Handling Contributions That Appear Excessive. If a committee receives a
contribution that appears to be excessive, the committee must either:
e return the questionable contribution to the donor; or
¢ deposit the contribution into its federal account and keep enough money on
account to cover all potential refunds until the legality of the contribution is
established. 11 CFR §103.3(b)(3) and (4).
The excessive portion may also be redesignated to another election or reattributed to
another contributor as explained below.

C. Redesignation of Excessive Contributions. The committee may ask the contributor
to redesignate the excess portion of the contribution for use in another election.

e The committee must, within 60 days of receipt of the contribution, obtain and
retain a signed redesignation letter which informs the contributor that a refund of
the excessive portion may be requested; or

e refund the excessive amount. 11 CFR §§110.1(b)(5), 110.1(1)(2) and 103.3(b)(3).

Notwithstanding the above, when an authorized political committee receives an excessive
contribution from an individual or a non-multi-candidate committee, the committee may
presumptively redesignate the excessive portion to the general election if the
contribution:

e Is made before that candidate’s primary election;

e Is not designated in writing for a particular election;

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

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

limit.


Part III
Summaries

Findings and Recommendations

Finding 1. Receipt of Contributions that Exceed Limits
MEFS accepted 186 contributions from individuals that exceeded the limit by $313,235.
Most of these excessive contributions resulted from improper redesignations and/or
reattributions. In response to the interim audit report recommendation, MFS provided
copies of notices sent to contributors that were eligible for presumptive redesignation
and/or reattribution. In addition, MFS provided copies of negotiated refund checks
and/or copies of refund checks prepared but not negotiated. (For more detail, see page 4.)

Finding 2. Failure to File 48-Hour Notices

MFS did not file 48-hour notices for 109 contributions totaling $162,014 prior to both the
primary and general elections. In response to the interim audit report recommendation,
MEFS agreed that 48-hour notices were not filed for the contributions in question. (For
more detail, see page 7.)

Finding 3. Disclosure of Proceeds from Joint Fundraising
Activity

MES did not properly disclose the receipt of net proceeds from four joint fundraising
committees. In response to the interim audit report recommendation, MFS filed amended
reports that corrected the disclosure discrepancies. (For more detail, see page 7.)

Finding 4. Disclosure of Occupation and Name of
Employer

MFS did not adequately disclose occupation and/or name of employer information for
approximately 46% of the contributions from individuals tested on a sample basis. In
addition, MFS did not demonstrate best efforts to obtain, maintain and submit the
information. In response to the interim audit report recommendation, MFS filed the
necessary amendments to materially correct the deficiencies noted. (For more detail, see

page 9.)


Of the excessive contributions, $218,628 (70%) resulted from improper presumptive
redesignations and/or reattributions. The remaining excessive contributions totaling
$94,607 exceeded the limits per election cycle and could not be resolved through
redesignation and/or reattribution based upon available documentation. MFS did not
maintain sufficient funds in its bank accounts to make the necessary refunds.

At the exit conference, the Audit staff provided the MFS treasurer with schedules of the
excessive contributions noted above. She agreed to review these schedules to determine
whether she concurred with the exceptions listed and respond accordingly.

Interim Audit Report Recommendation and Committee Response

The Audit staff recommended that MFS:

¢ Send notices to those contributors that were eligible for presumptive redesignation
and/or reattribution ($218,628) to inform those contributors how the contribution was
designated and/or attributed and offer a refund of the excessive portion. Absent a
request for a refund by the contributors, these notices would have obviated the need
for contribution refunds or payments to the U.S. Treasury. For notices sent to
contributors, MFS should have provided a copy of each notice and evidence that it
was sent. Such notice must demonstrate that both the contributor and the individual
to whom the contribution was reattributed were notified; and

¢ Provide evidence demonstrating that the remaining contributions totaling $94,607
were not excessive. Such evidence should have included, 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; or

e Absent such evidence, refund $94,607 to the contributors or to the U.S. Treasury and
provide evidence of such refunds (copies of the front and back of negotiated refund
checks); or

e If funds were not available to make the necessary refunds, disclose the contributions
requiring refunds on Schedule D (Debt and Obligations) until funds became available
to make such refunds.

In response to the interim audit report recommendation, MFS provided copies of notices
sent to contributors that were eligible for presumptive redesignation and/or reattribution.
MEFS also provided evidence (declaration from the treasurer) that the notices were sent to
both the contributors and the individuals to whom the contributions were reattributed.
For the remaining contributions totaling $94,607, MFS provided copies of negotiated
refund checks ($57,990) and copies of refund checks prepared but not negotiated
($36,617). Of the $36,617, refunds totaling $6,417 were reported. Until copies of
negotiated refund checks are submitted, the $36,617 is considered unresolved. MFS
stated its intention to provide copies of the remaining negotiated refund checks once they
clear the bank.


FEDERAL ELECTION COMMISSION
Washington, DC 20463

April 17, 2007

MEMORANDUM

To: Robert W. Biersack
Press Officer

From: Joseph F, Stoltz ,
Assistant Staff Or

Audit Division
Subject: Public Issuance of the Report of the Audit Division on Martinez for Senate
Attached please find a copy of the audit report which was approved by the
Commission on April 10, 2007.

The report may be released to the public on April 17, 2007.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library
~DSDD Website


Finding 4. Disclosure of Occupation and Name of
Employer

Summary

MEFS did not adequately disclose occupation and/or name of employer information for
approximately 46% of the contributions from individuals tested on a sample basis. In
addition, MFS did not demonstrate best efforts to obtain, maintain and submit the
information. In response to the interim audit report recommendation, MFS filed the
necessary amendments to materially correct the deficiencies noted.

Legal Standard

A. Required Information for Contributions from Individuals. For each itemized
contribution from an individual, the committee must provide the contributor’s occupation
and the name of his or her employer. 2 U.S.C. §431(13) and 11 CFR §100.12.

B. Best Efforts Ensures Compliance. When the treasurer of a political committee
shows that the committee used best efforts (see below) to obtain, maintain, and submit
the information required by the Act, the committee’s reports and records will be
considered in compliance with the Act. 2 U.S.C. §432(h)(2)(i).

C. Definition of Best Efforts. The treasurer and the committee will be considered to

have used “best efforts” if the committee satisfied all of the following criteria:

¢ All written solicitations for contributions included:

o Aclear request for the contributor's full name, mailing address, occupation,
and name of employer; and
o A statement that such reporting is required by Federal law.

e Within 30 days after the receipt of the contribution, the treasurer made at least one
effort to obtain the missing information, in either a written request or a documented
oral request.

e The treasurer reported any contributor information that, although not initially
provided by the contributor, was obtained in a follow-up communication or was
contained in the committee’s records or in prior reports that the committee filed
during the same two-year election cycle. 11 CFR §104.7(b).

Facts and Analysis

The Audit staff reviewed reported contributions from individuals on a sample basis as the
reports existed when MFS was notified of the audit” to determine if the necessary
contributor information was disclosed. The review indicated that MFS had not disclosed
the occupation and/or name of employer for 46% of the contributions tested. It was noted
that MFS solicitation devices properly contained a request for occupation and name of
employer. However, the records provided to the Audit staff did not contain any follow-

? Subsequent to receipt of the audit notification letter, MFS contacted contributors in an effort to obtain the
missing contributor information. Amendments were prepared, but not filed until after receipt of the interim
audit report.


Legal Standard

Itemization of Contributions from Joint Fundraising Efforts. Participating political
committees must report joint fundraising proceeds in accordance with 11 CFR
102.17(c)(8) when such funds are received from the fundraising representative. 11 CFR
§102.17(c)(3)(iii).

Each participating political committee reports its share of the net proceeds as a transfer-in
from the fundraising representative and must also file a memo Schedule A (Itemized
Receipts) itemizing its share of gross receipts as contributions from the original
contributors to the extent required under 11 CFR 104.3(a). 11 CFR §102.17(c)(8)(i)(B).

Facts and Analysis

MES was a participant in four joint fundraising committees. It received a total of
$319,816 in net proceeds from these committees; $245,370 from the 2004 Joint
Candidate Committee II (JCC2), $43,329 from the Senate Majority Committee (SMC),
$16,000 from Martinez Victory Fund (MVF), and $15,117 from the Majority Fund for
America’s Future (MFAF). The Audit staff's review of these transfers noted the
following:

e MEFS did not itemize its share of the gross receipts as contributions from the original
contributors as required on memo Schedules A for transfers totaling $260,487 from
JCC2 and MFAF. MF$’s records did contain the contributor information for the
transfer ($245,370) from JCC2.

¢ MEFS did not itemize transfers totaling $59,329 from the SMC or MVF on Schedule
A, line 12, Transfers from Other Authorized Committees, as required. Instead MFS
disclosed the contributors at a net amount on Schedule A, line 11a, Contributions
from Individuals, without any reference as to the source of the contribution.

The Audit staff discussed this matter with MFS’ treasurer at the exit conference. The
treasurer stated that amendments had already been prepared to correct the deficiencies
noted above.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that MFS file amended Schedules A to correctly disclose
the receipt of net fundraising proceeds, along with the required memo entries.

In response to the interim audit report recommendation, MFS filed amended reports that
corrected the disclosure discrepancies.


Also, the committee may presumptively redesignate the excessive portion of a general
election contribution back to the primary election if the amount redesignated does not
exceed the committee’s primary net debt position.

The committee is required to notify the contributor in writing of the redesignation within
60 days of the treasurer’s receipt of the contribution and must offer the contributor the
option to receive a refund instead. For this action to be valid, the committee must retain
copies of the notices sent. Presumptive redesignations apply only within the same
election cycle. 11 CFR §110.1(b)(5)(ii)(B) & (C) and (I)(4)(ii).

D. Reattribution of Excessive Contributions. When an authorized committee receives
an excessive contribution, the committee may ask the contributor if the contribution was
intended to be a joint contribution from more than one person.
e¢ The committee must, within 60 days of receipt of the contribution, obtain and
retain a reattribution letter signed by all contributors; or
e refund the excessive contribution. 11 CFR §§110.1(k)(3), 110.1()(3) and
103.3(b)(3).

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:

e how the contribution was attributed; and

e the contributor may instead request a refund of the excessive amount. 11 CFR

§110.1(k)(3)(ii)(B).

For this action to be valid, the committee must retain copies of the notices sent. 11 CFR

§110.1(1)(4)(ii).

E. 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

Martinez for Senate qualified for increased limits afforded candidates opposing self-
financed opponents. MFS’s limitation was increased threefold ($6,000) on June 14, 2004
and subsequently sixfold ($12,000) on July 16, 2004. The increased limitation period
ended on August 31, 2004, the date of the primary election.

The Audit staff reviewed all contributions from individuals to determine if excessive
contributions were received. The Audit staff identified 186 contributions from
individuals that exceeded the limit by $313,235. During this review, it was noted that
MFS routinely redesignated contributions to another election or reattributed contributions
to another contributor. However, no documentation was provided by MFS in support of
these redesignations and reattributions; neither signed redesignations or reattributions,
nor the contributor notifications required to take advantage of the presumptive
reattribution or redesignation options discussed above.


Part I
Background

Authority for Audit

This report is based on an audit of Martinez for Senate (MFS), 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:

The receipt of excessive contributions.

The receipt of contributions from prohibited sources.

The disclosure of contributions received.

The consistency between reported figures and bank records.

The completeness of records.

Other committee operations necessary to the review.

AWEWND


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. Summaries
Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Receipt of Contributions that Exceed Limits
Finding 2. Failure to File 48-Hour Notices
Finding 3. Disclosure of Proceeds from Joint Fundraising Activity
Finding 4. Disclosure of Occupation and Name of Employer

Page

enna


Report of the Audit Division on

Martinez for Senate
January 5, 2004 - December 31, 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.

About the Campaign (p. 2)

Martinez for Senate is the principal campaign committee for Mel
Martinez, Republican candidate for the U.S. Senate from the state of
Florida, and is headquartered in Tampa, Florida. For more information,
see chart on the Campaign Organization, p. 2.

Financial Activity (p. 2)

« Receipts
o From Individuals $ 9,659,738
o From Political Committees 1,983,294
o Transfers from A ffiliated/Other 705,173
Party Committees
o Other Receipts 14,846
o Total Receipts $ 12,363,051
« Disbursements
o Operating Expenditures $ 12,314,097
o Contribution Refunds 28,290
o Total Disbursements $ 12,342,387

Findings and Recommendations (p. 3)

Receipt of Contributions that Exceed Limits (Finding 1)

Failure to File 48-Hour Notices (Finding 2)

Disclosure of Proceeds from Joint Fundraising Activity (Finding 3)
Disclosure of Occupation and Name of Employer (Finding 4)

' 2US.C. §438(b).


10

up requests for missing contributor information. As a result, MFS did not appear to have
made “best efforts” to obtain, maintain and report occupation and name of employer
information.

The Audit staff discussed this matter with the MFS treasurer at the exit conference. The
treasurer stated that most of the omissions had been corrected in the database and
amendments had already been prepared.

Interim Audit Report Recommendation and Committee Response

The Audit staff recommended that MFS take the following action:

¢ Provide documentation such as phone logs, returned contributor letters, completed
contributor contact information sheets or other materials which demonstrate that MFS
timely made best efforts to obtain, maintain, and submit the required disclosure
information; or

« Absent such a demonstration, make an effort to contact those individuals for whom
required information is missing or incomplete and for which no documented effort to
obtain the information has been made, provide documentation of such contacts (such
as copies of letters to the contributors and/or phone logs), and amend its reports to
disclose any information obtained from those contacts.

In response to the interim audit report recommendation, the treasurer indicated that MFS
had already contacted the contributors in an effort to acquire the missing information.
Amended reports had already been prepared at the time of the exit conference and were
subsequently filed on February 26" and 27" of 2007. She stated that overall compliance
for all 2004 reports now stands at 93.05%. The amendments filed by MFS materially
corrected the deficiencies noted above.