FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

June 2,2017 

MEMORANDUM 

To: 

Through: 

From: 

The Commission 

Alec Palmer 

Staff Director 

Patricia C. Orrock 

Chief Compliance Officer 

Thomas E. Hinlermister|p^^ 

Assistant Staff Director 

Audit Division 

By: 

Subject: 

Douglas A. Kodish 

Audit Manager 

Lezhi Irving 

Lead Auditor 

Audit Division Recommendation Memorandum on the American Financial 

Services Association PAC (AFSAPAC) (A15-11) 

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit Reports), 

the Audit staff presented the Drafl Final Audit Report (DFAR) to AFSAPAC on April 21, 

2017 (see attached DFAR). In response to the DFAR, the committee provided additional 

information concerning finding 2. AFSAPAC did not request an audit hearing. 

This memo provides a brief overview of the findings in the attached DFAR and the Audit 

staffs recommendation for each finding outlined in the DFAR. The Office of General 

Counsel has reviewed this memorandum and concurs with the recommendations. 

Finding 1. Misstatement of Financial Activity 

A. Misstatement of Finariciai Activifv-MiPSt Reeeiit 

Audit 

Filed Priiar to.:the 

The Audit staff determined that for 2013, AFSAPAC understated its receipts by 

$10,081, its disbursements by $67,905, and its beginning and ending cash by 

$113,536 and $55,712, respectively. For 2014, AFSAPAC understated its 
beginning and ending cash balance by $55,712 and $53,393. Multiple 

amendments were filed after the beginning of the audit for both 2013 and 2014, 

but the amendments were not filed in response to the audit and did not fully correct 

the misstated amounts. 

The Audit staff recommends that the Commission find that AFSAPAC misstated 

its financial activity for calendar years 2013 and 2014. 

A. Misstatement of Financial Activity - Original Reports Fiied 

The Audit staff determined that AFSAPAC, based on the filing of its original 

reports, understated receipts by $310,683. AFSAPAC provided no additional 

comments in its responses to either the Interim or the Draft Final Audit Reports. 

The Audit staff recommends that the Commission find that AFSAPAC misstated 

its financial activity in its original reports filed for calendar years 2013 and 2014. 

Finding 2. Excessive Contributions Made to Federal Candidates 

The Audit staff found what appeared to be excessive contributions made to federal 

candidate committees totaling $18,000. However, subsequent to the exit 

conference, AFSAPAC clarified that $17,000 of the apparent excessive 

contributions were not excessive. And in response to the DFAR, AFSAPAC 

provided a copy of a $500 contribution refund check, which left an immaterial 

amount unresolved. 

The Audit staff recommends the Commission find that AFSAPAC made excessive 

contributions to two federal candidates totaling $1,000, of which $500 has been 

refunded to AFSAPAC. 

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 Lezhi Irving or Douglas Kodish at 694-

1200. 

Attachments: 

- Draft Final Audit Report of the Audit Division on the American Financial Seivices 

Association PAC 

cc: Office of General Counsel 
Draft Final Audit Report of the 

Audit Division on the American 

Financial Services Association 

PAC 

(Januaiy 1, 2013 - December 31, 2014) 

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 mej^ 

the threshold 

requirements for ^ 

substantial 

with the Ac(Jjsakt^udit 

d.etermi 

comra^fe complied 

the 

prohibiti.( 

disclosure iinents 

of the Act. 

Future Actioi 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Committe< 

The American Financial Serv}^ Association PAC is a qualified, 

non-party political action'C^^^^e headquartered in 

Washington, D.C. For i, see the chart on the 

Committee 6rganiziEU^u.P'2. 

Financial Ac;ii« 

• Receipts 

o-^Contributions Individuals 

o ^Btoibajions fia.n^ 

jmiitee; 

ents 

Sto Affiliated/Other 

ittees 

bns to Federal 

ftes/Other Committees 

Other Disbursements 

Disbursements 

$ 820,603 

10,000 

24,380 

S 854,983 

$22,000 

735,850 

25,304 

$ 783,154 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Excessive Contributions Made to Federal Candidates 

(Finding 2) 

52 U.S.C. §301 U(b). 
Draft Final Audit Report of tbe 

Audit Division on the 

American Financial 3e^icas 

Associatiott PAC 

(January 1, 2013 - Deo 31, 2014) 

v 
fable of Contents 

Page 

Part I. Background . 

Authority for Audit 

Scope of Audit 

Part 11. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Recomme 

Finding 1. Misstatement of Financial Activity 

Finding 2. Excessive Contributic^^ade to Federa'! 

2 

2 
IT 

Part 1 

Background 

Authority for Audit 

This report is based on an audit of the American Financial Services Association PAC 

(AFSAPAC), 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 52 U.S.C. 

§30111(b), which permits the Commission to conduct audits and investigations of 

any political committee that is required to file a report under §30104. Prior to 

conducting £uiy audit under this subsection, the Coimmissiog^M peffqnA an internal 

review of reports filed by selected committees to detdrtn^if tli^^orta filed by a 

particular committee meet the threshold requiEe'mejiit^,;^r^^bst9h£i^gmpliianee with the 

Act. 52 U.S.C. §30111(b). 

Scope of Audit 

Following Commission-approved procedures, the 

factors and as a result, this audit examined: 

p' occupation 

bligations; 

1. the disclosure of individual cqrit 

2. the disclosure of disbursements, del 

3. contributions to candidate dommi 

4. the consistency between reported figu^, an^:-

5.. other committee dpe^£^|^^.neces$ary t@M:b@ review: 

ilu^ted^r^srisk 

of employer; 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration March 17,1976 

• Audit Coverage January 1,20jg:jDleeeraber 31.2014 

Headquarters Washihgtdij^t^^ 

Bank Information 

• Bank Depositories Two,^#^, 

• Bank Accounts 

Treasurer 'v. 

• Treasurer When Audit Was Conducted 

• Treasurer During Period Covered by Audit Bill f^Wr - Management Information 

• Attended FEC Cairipaign Finance .Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

ff 

^ncial Activity 

mxlts) 

Cash-on-h^'d Janua^^, ^ S 246.207 

Receipts^^^i^. '''4W 

o Contrihiit^g from Indivf^ls 820,603 

o Contributiori^cpm Other •^litiGal 

Committees 

10,000 

o Other Receipts •'sko.,# 24i380 

Total Receipts W S 854,983 

Disbursements 

o Transfers to AfFiliated/Other Party 

Committees 

22,000 

o Contributions to Federal Candidates/Other 735,850 

Committees 

o Other Disbursements 25,304 

Total Disbursements $ 783,154 

Cash-on-hand @ December 31,2014 $ 318,036 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of AFSAPAC's reported.: 

bank records revealed a misstatement of receipts, dis|^ursem( 

ending cash balances for 2013, and the beginning and € 

2013, AFSAPAC understated the beginning cash b$l.anie^^$ 

receipts by $10,081, understated disbursements by $^^ai^ and 

cash balance by $55,712. For 2014, AFSAPAC up^i^^d the be 

by $55,712, and the ending cash balance by $51^3. Multiple amendm 

iCial activity with its 

'^e; beginning and 

balances for 2014. For 

6, understated 

iited the ending 

cash balance 

filed 

after the beginning of the audit for both 20 H i 

misstated amounts. 

In response to the Interim Audit Repi 

filed amended reports on January 13, 

amounts. However, these amendments 

misstatements identified by the audit. Al 

the misstatements, AFS^^.g jias not c.otn 

)14, bu^ey did not •nrectthe 

In addition, AFS/ 

receipts by $310,683." 

amended reports for eacr 

to the ^R^^^l^atiori'^^ 

regardip^its undersi^^ al 

I reeOmmeT^^bn, AFSAPAC stated that it 

j[ch sienificM^^h^need the misstated 

: in.diiee^^p6nse to the 

i to materially correct 

L's recommendation. 

reports for .%13 and 2014 materially understated 

l.atternpted to these misstatements and filed 

tfirfg the two year election cycle. In response 

not provide any additional comments 

< on its original reports. (For more detail, see p. 4.) 

Find E^Cfssive Contributions Made to Federal 

Candi 

AFSAPAC made l=^^^'mbulibns to seven federal candidate committees that, when 

aggregated with 22 p^^ous contributions, appear to have exceeded the contribution limit 

by $18,000. In response to the exit conference, AFSAPAC redesignated contributions of 

$17,000 related to the fmding, and was seeking or had obtained reftinds for the remaining 

amount. In response to the lAR recommendation, AFSAPAC stated that it had filed 

amended reports to properly reflect these redesignations; however, no amended reports 

have been received and the reftinds were not discussed. AFSAPAC has clarifled it did 

not make excessive contributions of $ 17,000. Absent further evidence of contribution 

refunds obtained by AFSAPAC, the remaining $1,000 is considered an excessive 

contribution made by AFSAPAC. (For more detail, see p. 8.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of AFSAPAC's reported financial activity with its 

bank records revealed a misstatement of receipts, disbursements, and the beginning and 

ending cash balances for 2013, and the beginning and ending cas|i@^^ces for 2014. For 

2013, AFSAPAC understated the beginning cash balance by ^^3,53py understated 

receipts by $10,081, understated disbursements by S67,90S^n^^derstated the ending 

cash balance by $55,712. For 2014, AFSAPAC imde 

by $55,712, and the ending cash balance by $53,393. 

after the beginning of the audit for both 2013 and 

misstated amounts. 

In response to the Interim Audit Report (lAR) re • AFSAPAG^tated that it 

filed amended reports on January 13,2016, which sigt^^ntly changed the misstated 

amounts. However, these aniendmen^Aijere not filed in response to the 

misstatements identified by the audit, ^^^^^ing amend^^^ts to materially correct 

the misstatements, AFSAPAC has not c^^pf^^Eitih. the JAR .^^mmendation. 

ing; cash balance 

;'s were filed 

correct the 

In addition, AFSAPAC 

receipts by $310,683< 

amended reports fpr'1 

to the lAR recommenc 

regarding its j^^state'miS 

tandard '' 

jif Reports. 

lount of C8 

•the tSi^aamount of] 

il reports f^^-@l3 an naterially understated 

I attempted'^to correct tiiese misstatements and filed 

; period duri^the two year election cycle. In response 

^PAC did no^i^yide. any additional comments 

! reports. 

St disclose: 

-han/'at the beginning and end of the reporting period; 

:eipts for the reporting period and for the calendar year; 

the total^^unt o.f|pisbursem.entjS for the reporting period and for the calendar 

year; and 

• certain transa^Ons that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Ttemi.zed:.Disbursements). 52 U.S.C. §30104. (b) (1), (2), (3), (4) 

and (5). 

Facts and Analysis 

A. Misstatement of Financial Activity- Most Recent Reports Filed Prior to the 

Audit 

1. Facts 
As part of this audit, the Audit staff reconciled AFSAPAC's reported financial 

activity with its bank records for calendar years 2013 and 2014. The following charts 

outline the discrepancies between AFSAPAC's disclosure reports and its bank 

records. Succeeding paragraphs explain why the discrepancies occurred. 

2013 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance @ 

January 1,2013 

$132,671 $246,207 $113,536 

Understated 

Receipts $380,743 $390,824. 

f 

$10,081 

Understated 

Disbursements $293,006 $36Q,^i $67,905 

Understated 

Ending Cash Balance 

@ December 31, 2013 

$220,408 , $^6.12d*- $55,712 

' Understated 

The beginning cash balance was understated 3,536 ^d the dlscr 

unexplained, but it likely resulted from prior perioiE^sst^^ments. 

The understatement of receipts readied from the 

• Contributions from individuali^^j^t not repoi 

• Unreported other receipts 

• Unexplained difference 

Net Understatem.eQ.t:9f Receipts 

The understatem^^of diso^ements rest 

• Contributions ti^Qlitica^ommittees n( 

Contribution i-efurt^ji,€^fe%BOi!t^. 

r 

from the following: 

rted 

ilburseme'dt^^l^po: 

itexplained dif^nce 

rstateinent cS^isbuf/ements 

ccount not reported 

$5,500 

10,775 

(6,194) 

mm 

$48,100 

5,000 

2,485 

10,775 

1.545 

mm 

2014 Comm'itt^:Activiti^ 

-.i:- ^ Reported Bank Records Discrepancy 

Beginning Cash BaT^be @ 

January 1,2014 

$220,408 $276,120 $55,712 

Understated 

Receipts $462,985 $464,159 $1,174 

Understated 

Disbursements $418,751 $422,243 $3,492 

Understated 

Ending Cash Balance 

@ December 31, 2014 

$264,642 $318,036 $53,394 

Understated 

The $53,394 understatement of the 2014 ending cash balance resulted mostly from 

reporting discrepancies noted above from the prior year. 
AFSAPAC filed amended reports on January 13,2016, subsequent to the audit 

notification letter, dated November 18,2015. These reports disclosed a cash increase 

of $42,915 for 2013. However, the amendments only minimally corrected the 

reporting discrepancies for 2013, and the beginning and ending cash balances for 

2014 remained materially misstated. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the misstatements for 2013 and 2014 with AFSAPAC's 

representatives during the exit conference and provided copies of relevant work 

sresentative stated 

r, the amendments 

)unts were still 

^correct the 

at 

papers detailing the misstatements. In response, an AFSAP^i^ 

that it filed amended reports to correct the misstatements;^^ 

were filed after AFSAPAC was notified of the audit a^j.dvtf' 

misstated as described in the preceding paragraph.^ 

The lAR recommended that AFSAPAC ame^^^s disclosure rep 

misstatements for both 2013 and 2014. In .f^^^^tion, theJAR recomme 

AFSAPAC amend its most recently filed repdf^^po correo^jthe cash-on-h^ balance 

with an explanation that the change resulted frofh^fUpEfor petiod audit at^ustment. 

Further, that AFSAPAC should reconcile the cash W^ce of its most recent report to 

identify any subsequent discrepanoigSr^at may affect't^;.adjustment recommended 

by the Audit staff. 

[endatiori^^S^APA^^ed that it filed amended 

rhich signif^antly changed the misstated amounts and 

amounts'evidences AFSAPAC's corrective action. 

itatemen,^^ere all timing related, due to staff 

3. Committee Response to Interim And 

In response to die I 

reports on Januaj 

that the reductt 

AFSAPAC also 

limitation.: •• 

y'" A&^ated in the I. 

""•'"re. 

filed by AFSAPAC prior to the issuance of the 

I^/^'^Lid not sufficiehf^^correc^e 2013 and 2014 misstatements. The following 

"ed reports. For 2013, the beginning cash balance, 

receipts, dY^b^^ ending cash balance were understated by $70,621, 

$9,981, 67r^jiand $12;i§97, respectively. For 2014, AFSAPAC understated its 

beginning caslf%^$%'by $12,697, and its ending cash balance by $10,379. The 

Audit staff was a^^' to verify certain problems in filing reports mentioned by 

AFSAPAC, but they were resolved quickly. Absent the filing of amended reports to 

correct the misstatements above, AFSAPAC has not complied with the lAR 

recommendation. 

B. Misstatement of Financial Activity - Original Reports Filed 

1. Facts 

In addition to reconciling AFSAPAC's most recent reports (filed prior to audit 

notification) with its bank statements, the Audit staff ^so compared its originally 

filed reports with its bank statements. The purpose of this additional reconciliation 
was to identify the degree to which AFSAPAC had misstated its original filings. 

From this review, the Audit staff determined that AFSAPAC understated its receipts 

by $310,683, for the two-year period that ended December 31,2014. However, as 

shown in the charts above, under discrepancies for receipts, AFSAPAC filed 

amendments that corrected all but $11,255 ($10,081 + $1,174) of this receipt 

understatement. 

The Audit Staff also noted that AFSAPAC filed multiple amended reports for every 

filing period for 2013 and 2014, filing a total of 151 amendments. For example, for 

the August 2013 monthly report AFSAPAC filed amended repgrfs three times in 

2014, two times in 2015, and one time in 2016. ..ax' •-v. 

2. Interim Audit Report & Audit Division Recommem 

The Audit staff discussed AFSAPAC's understatemd^of rec^^S' contained in the 

original reports it filed at the exit conference. Iru^ppftse, an ^^|PAC 

representative made a rebuttal to the potentialjSMerstatement fmdm^^ providing 

information about the corrections made in.jj^mendedifilings. The 

explained to the representative that.amen^men^^ave i^unpact on the ^^ng.since 

the finding is based upon the original reports fil'd 

The lAR recommended that AFS 

necessary with respect to this mal 

3. Conomittee Response to Interim Aud 

AFSAPAC did not proyi^^^y.^omments 

irovidie any ^iS^dohai-comments it deemed 

i-f 

ng'thi^atter. 

Finding 2. Exc4^siv$!^;G;^Qtributl6 Made to Federal 

Candid^j^' 

ade 11 coni 

22 previoi 

^tipns J^seven federal candidate committees that, when 

aggregatecTv^hp 22 .previou;^j[^ontribufions, appear to have exceeded the contribution limit 

by $ 18,000. M^^^onse to^ie exit conference, AFSAPAC redesignated contributions of 

$17,000 related fii)^.^g, and was-seeking or had obtained refimds for the remaining 

amount. In respons'^S^lie lAR recommendation, AFSAPAC stated that it had filed 

amended reports to properly reflect these redesignations; however, no amended reports 

have been received and the refunds were not discussed. AFSAPAC has clarified it did 

not make excessive contributions of $17,000. Absent further evidence of contribution 

refunds obtained by AFSAPAC, the remaining $1,000 is considered an excessive 

contribution made by AFSAPAC. 

Liegal Standard 

A. Contribution Defined. A gift, subscription, loan (except when made in accordance 

with 11 CFR §§100.82 and 100.83), advance, or deposit of money or anything of value 
made by any person for the purpose of influencing any election for Federal office is a 

contribution. 11 CFR§ 100.52(a). 

B. Contribution Limits. No muiticandidate political committee shall make contributions 

to any candidate and his authorized political committees with respect to any election for 

Federal office which, in the aggregate, exceed $5,000. 52 U.S.C. §30116 (a)(l)(2)(A). 

C. Definition of IMultieandidate Committee. 

• A muiticandidate committee is a political committee (other than an authorized 

candidate committee) that has satisfied the following 3 -'^ntS: 

•• It has been registered under the federal election gn law for at least 6 

months. 

• It has received contributions from more than 

• It has made contributions to at least 5 

requirement does not apply to state pa 

§30116(a)(4). 

• A political committee affiliated with anotlief 

qualified as a muiticandidate committee autom 

committee by virtue of that affiliation. But it .si 

affiliated committee. 52 U.S.C. 

Facts and Analysis 

A. Facts 

The Audit staff revie 

committees .totailir 

candidate committees 

contribution li#t.by $18, 

B. Injtar'im Audit 

At thtl'^^t:..c0nference', 

AFSAPA^I^resentativei 

contributi.on'S'^lie Audit s\ 

aggregation wi#^e[r coi 

The Audit staff asl 

documentation for 

ittees.) 52" 

ittee that ^ imady 

>mes a multiSwdidate 

contributions limits with its 

iC's repoi 

: this amouni 

id with 22' 

x>:'" 

cqiitributions made to federal candidate 

l;pontributions to seven federal 

ler contributions appear to exceed the 

JOiyi^ion Recommendation 

^presented the excessive contribution matter to 

^Ided a schedule of potentially excessive 

• explained that the excessive contributions resulted from 

ihutions made to the same committees for the same election. 

^FAC's representatives to provide an explanation and 

on the schedule, that they believed to be incorrect. The 

representatives stat 

response. 

that they would review the items and provide an appropriate 

In response to the exit conference, AFSAPAC's representative did not mention any 

corrections to the schedule of excessive contributions, but did provide the Audit staff 

redesignation letters that were sent out to six of the excessive recipient committees for 
17,000 of the excessive $18,000 amount.^ For the remaining excessive contributions, it 

was said that a refund had been received and another refund was being sought. 

The lAR recommended AFSAPAC amend its reports to properly report the elections for 

which the contributions totaling $17,000 were redesignated and provide evidence for the 

$1,000 in contribution refund checks and their deposit, or provide evidence (or make 

other comments) that any of the excessive contribution amounts were not excessive. 

C. Committee Response to Interim Audit Report 

In response to the lAR recommendation, AFSAPAC stated it had ^'de'signat^'d- and 

amended their reports for excessive contributions totaling $18,0^"^. the schedule only 

addressed $ 17,000 of the finding amount.^ In addition, no-a^nStd reports were 

received to reflect the redesignation for any of the amount^kd^d. AFSAPAC mention 

or provide copies of any refund checks for the $1,000 in t^ainifp^cessive 

contributions. AFSAPAC has clarified it did not mh^^d:^Siyb di^n^.uti'ons of 

$17,000. Absent further evidence of.«ontr.ib!Li.tiQiy!!^nds obtained by'i^^^PAC, the 

remaining $1,000 is considered an excessive c^mbution'tpide by AFSA 

^ The committee provided redesignation letters for $18,000 but one of the letters redesignated a 

contribution for $1,000 to a different election that was not found to be excessive by the Audit staff, leaving 

$ 1,000 that was not redesignated or for which refunds were not received.