FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

September 26,2008 

Todd H. Dittrich, Treasurer 

Cranley for Congress 

49 Forest Avenue 

Fort Thomas, KY 41075 

Dear Mr. Dittrich: 

Attached, please find the Report of the Audit Division on Cranley for Congress. 

The Commission approved this report on September 24,2008. 

The Commission approved Final Audit Report will be placed on the public record 

on October 1, 2008. Should you have any questions regarding the public release of this 

report, please contact the Commission's Press Office at (202) 694-1220. 

Any questions you may have related to matters covered during the audit or in the 

report should be directed to Jeff Spilizewski or Thomas Hintennister of the Audit 

Division at (202) 694-1200 or toll free at (800) 424-9530. 

Sincerely, 

Wanda J. Thomas 

Acting Assistant Staff Director 

Audit Division 

Attachment as stated 
Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial compliance 

with the Act. I The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any ofthe 

matters discussed in this 

report. 

2 U.S.c. §438(b). 

Report of the 

Audit Division on 

Cranley for Congress 

November 22,2005 - December 31,2006 

About the Campaign (p. 2) 

Cranley for Congress (CFC) is the principal campaign committee 

for John 1. Cranley, IV, Democratic candidate for the U.S. House 

ofRepresentatives from the state of Ohio, 1st District. CFC is 

headquartered in Cincinnati, Ohio. For more information, see the 

Campaign Organization Chart, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals $ 1,403,314 

o Contributions from Political Committees 549,135 

o Contributions from the Candidate 2,100 

o Bank Loans 110,000 

o Other Receipts 2,845 

o Total Receipts $ 2,067,394 

• Disbursements 

o Operating Expenditures $ 1,938,044 

o Bank Loan Repayments 110,000 

o Refunds of Contributions 1,100 

o Total Disbursements $ 2,049,144 

Findings and Recommendations (p. 3) 

• Receipt of Contributions That Exceed Limits (Finding 1) 

• Misstatement of Financial Activity (Finding 2) 

• Reporting of Earmarked Contributions (Finding 3) 

• Disclosure of OccupationIName ofEmployer (Finding 4) 

• Disclosure of Disbursements (Finding 5) 

• Reporting of Debts and Obligations (Finding 6) 

• Disclosure of Line of Credit (Finding 7) 

I 
Table of Contents 

Part I. Background 

Authority for Audit
 

Scope ofAudit
 

Limitations
 

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 ofContributions That Exceed Limits 

Finding 2. Misstatement of Financial Activity 

Finding 3. Reporting of Earmarked Contributions 

Finding 4. Disclosure of OccupationlName of Employer 

Finding 5. Disclosure of Disbursements 

Finding 6. Reporting ofDebts and Obligations 

Finding 7. Disclosure ofLine ofCredit 

Page 

2
 

2
 

3
 

5
 

8
 

9
 

11
 

12
 

14
 

14
 
Part I 

Background 

Authority for Audit 

This report is based on an audit of Cranley 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 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 

This audit examined: 

1. The receipt of excessive contributions and loans. 

2. The receipt of contributions from prohibited sources. 

3. The disclosure of contributions received. 

4. The disclosure of disbursements, debts and obligations. 

5. The consistency between reported figures and bank records. 

6. The completeness of records. 

7. Other committee operations necessary to the review. 

Limitations 

Although CFC complied with the recordkeeping requirements of the Act by providing a 

cancelled check.i 49% of the disbursement records reviewed did not contain additional third 

party documentation to support the expenditure. As a result, the scope of the review for 

disbursements, with respect to disclosure, personal use, and debts & obligations, was limited to 

those disbursement records containing a receipt or invoice from the vendor. 

2 If the disbursement was in excess of $200, the records must include a receipt or invoice from the payee, or a 

cancelled check to the payee. II CFR §I02.9(b)(2). 
2 

Part II 

Overview of Campaign 

Campaign Organization 

Important Dates Cranlev for Conaress 

• Date of Registration December 8,2005 

• Audit Coverage November 22, 2005 - December 31, 2006 

Headquarters Cincinnati, Ohio 

Bank Information 

• Bank Depositories One 

• Bank Accounts Three checking and one line of credit 

Treasurer 

• Treasurer When Audit Was Conducted Todd H. Dittrich 

Todd H. Dittrich • Treasurer During Period Covered by Audit 

Management Information 

• Attended FEC Campaign Finance Seminar No

• Used Commonly Available Campaign Yes Management Software Package 

• Who Handled Accounting and Recordkeeping Paid Staff Tasks 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand (a} November22, 2005 - $ 0 

1,403,314 

549,135 

2,100 

110,000 

2,845 

$ 2,067,394 

0 Contributions from Individuals 

0 Contributions from Political Committees 

0 Contributions from the Candidate 

0 Bank Loans 

0 Other Receipts 

Total Receipts 

0 Operating Expenditures 

0 Bank Loan Repayments 

0 Refunds ofContributions 

Total Disbursements 

1,938,044 

110,000 

1,100 

$ 2,049,144 

Cash on hand @ December 31,2006 $ 18,250 
3 

Part III 

Summaries 

Findings and Recommendations 

Failure to Respond to the Interim Audit Report 

An interim audit report was issued on March 4,2008, advising CFC of the findings and 

recommendations resulting from the audit of Cranley for Congress. A March 13,2008 

telephone conversation with the treasurer confirmed receipt of the interim audit report. 

CFC was requested to respond to the interim audit report by April 7, 2008. On April 2, 

2008 the treasurer was sent an e-mail reminding him of the response due date. CFC did 

not respond to the interim audit report recommendations or request additional time to 

respond. 

Finding 1. Receipt of Contributions That Exceed Limits 

The Audit staff identified contributions from 51 individuals and one partnership that 

exceeded the limitation by $96,162. Excessive contributions totaling $85,000 were 

caused by CFC's failure to send individuals notification of election redesignation and 

contributor reattribution. Also included in the excessive amount were contributions 

totaling $550 that were untimely refunded. The remaining $10,612 were not eligible for 

presumptive redesignation and/or reattribution and must be refunded. 

The Audit staff recommended that CFC provide evidence demonstrating that the 

contributions were not excessive, send notices to those contributors that were eligible for 

presumptive redesignation and/or reattribution, or refund the excessive amounts. 

(For more detail, see p. 5) 

Finding 2. Misstatement of Financial Activity 

A comparison ofCFC's reported financial activity to the bank records revealed a 

misstatement of activity in calendar year 2006. Reported receipts were understated by 

$42,787; reported disbursements were understated by $27,648; and the ending cash 

balance on December 31, 2006 was understated as a resulted of the receipt and ­

disbursement discrepancies. The Audit staff recommended that CFC amend its 

disclosure reports to correct the misstatement. 

(For more detail, see p. 8) 

Finding 3. Reporting of Earmarked Contributions 

The Audit staff identified earmarked contributions totaling $508,122 that were not 

reported or improperly disclosed on Schedules A. The Audit staff recommended that 

CFC amend its reports to correctly report and disclose these earmarked contributions. 

(For more detail, see p. 9) 
4 

Finding 4. Disclosure of Occupation/Name of Employer 

A sample review of contributions from individuals revealed that a material amount of 

transactions lacked or did not adequately disclose the occupation and/or name of 

employer. The projected dollar value of these contributions was $466,784. Furthermore, 

there was no evidence that "best efforts" to obtain, maintain, and submit the information 

had been exercised. The Audit staff recommended that CFC contact each contributor for 

which the information is lacking, submit evidence ofsuch contact, and disclose any 

information received. 

(For more detail, see p. 11) 

Finding 5. Disclosure of Disbursements 

A sample review of disbursements itemized on Schedules B revealed a material amount 

of transactions that lacked or inadequately disclosed the required information. The 

projected dollar value of these disbursements was $1,464,982. These disclosure 

discrepancies consisted of missing addresses, missing or inadequate purposes, or missing 

memo entries for reimbursements to individuals. The Audit staff recommended that CFC 

amend its reports to correct the disclosure of disbursements on Schedules B. 

(For more detail, see p. 12) 

Finding 6. Reporting of Debts and Obligations 

The Audit staff identified debts totaling $106,605 that were not itemized on Schedules D
 

(Debts and Obligations). The Audit staff recommended that CFC amend its disclosure
 

reports to itemize these debts and obligations on the appropriate Schedules D.
 

(For more detail, see p. 14)
 

Finding 7. Disclosure of Line of Credit 

The Audit staff identified a line of credit itemized on Schedules C (Loans) and Schedules 

C-l (Loans and Line of Credit from Lending Institutions) that lacked or inadequately 

disclosed the required information. The Audit staffrecommended that CFC amend its 

reports to correctly disclose the line ofcredit itemized. 

(For more detail, see p. 14) 
5 

Part IV
 

Findings and Recommendations
 

Failure to Respond to the Interim Audit Report 

An interim audit report was issued on March 4, 2008, advising CFC of the findings and 

recommendations resulting from the audit of Cranley for Congress. A March 13, 2008 

telephone conversation with the treasurer confirmed receipt of the interim audit report. 

CFC was requested to respond to the interim audit report by April 7, 2008. On April 2, 

2008 the treasurer was sent an e-mail reminding him of the response due date. CFC did 

not respond to the interim audit report recommendations or request an additional time to 

respond. 

IFinding 1. Receipt of Contributions That Exceed Limits 

Summary 

The Audit staff identified contributions from 51 individuals and one partnership that 

exceeded the limitation by $96,162, Excessive contributions totaling $85,000 were 

caused by CFC's failure to send individuals notification of election redesignation and 

contributor reattribution. Also included in the excessive amount were contributions 

totaling $550 that were untimely refunded. The remaining $10,612 were not eligible for 

presumptive redesignation and/or reattribution and must be refunded. 

The Audit staff recommended that CFC provide evidence demonstrating that the 

contributions were not excessive, send notices to those contributors that were eligible for 

presumptive redesignation and/or reattribution, or refund the excessive amounts. 

Legal Standard 

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

than a total of$2,000 per election from anyone person." 2 U.S.c. §441a(a)(I)(A) 

and 11 CFR §110.1(a) and (b). The Bipartisan Campaign Reform Act of2002 

(BCRA) includes provisions that indexes the individual contribution limit for 

inflation. The limit for individuals' contributions to candidates for the 2006 election 

cycle was $2,100. 

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

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

•	 return the questionable contribution to the donor; or 

•	 deposit the contribution into a campaign depository 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). 

3	 Person refers to and individual, partnership, or any group ofpersons, not including the federal
 

government. II CFR §100.1O.
 
6 

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 ofthe contribution for use in another election. 

•	 The committee must, within 60 days of receipt ofthe contribution, obtain and 

retain a signed redesignation letter which informs the contributor that a refund of 

the excessive portion may be requested; or 

•	 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: 

•	 Is made before that candidate's primary election; 

•	 Is not designated in writing for a particular election; 

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

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

limit. 

The committee is required to notify the contributor in writing ofthe 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 CPR §110.I(b)(5)(ii)(B) & (C) and (1)(4)(ii). 

D.	 Reattribution of Excessive Contributions. When an authorized committee receives 

an excessive contribution, the committee may ask the contributor ifthe contribution 

was intended to be a joint contribution from more than one person. 

•	 The committee must, within 60 days ofreceipt ofthe contribution, obtain and 

retain a reattribution letter signed by all contributors; or 

•	 refund the excessive contribution. 11 CFR §§ IlO.l(k)(3), 110.1(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 ofmore than one individual may be 

attributed among the individuals listed unless instructed otherwise by the 

contributor(s). The committee must inform each contributor: 

•	 How the contribution was attributed; and 

•	 That the contributor may instead request a refund of the excessive amount. 11 

CFR §110.I(k)(3)(ii)(B). 

Por this action to be valid, the committee must retain copies ofthe notices sent. 11 

CPR §110.I(l)(4)(ii). 
7 

Facts and Analysis 

The Audit staff identified contributions from 51 individuals and one partnership that 

exceeded the limitation by $96,162. Ofthese excessive contributions, 34 contributors 

totaling $67,050 were excessive for the primary election and 18 contributors totaling 

$29,112 were excessive for the general election. 

In most instances, CFC either reattributed the excessive portion ofthe contribution to 

another individual, or redesignated the excessive portion of the contribution to the next 

election. However, in either case, CFC did not provide evidence of timely reattributions 

or redesignations or provide evidence that the contributors were notified of any 

presumptive reattribution or redesignation made by CFC. Of the excessive contributions, 

$85,000 would have been resolved had CFC notified contributors under the presumptive 

redesignations and/or reattributions rules. 

Also included in the excessive amount were two refunds totaling $550 that were not 

made in a timely manner. 

Finally, the remaining excessive contributions totaling $10,612 could not be resolved by 

redesignation and/or reattribution and therefore must be refunded to the contributor or 

paid to the U.S. Treasury. In most instances, these contributions were written on single 

account checks for the general election and the excessive portion of these contributions 

were not eligible for redesignation or reattribution. It should also be noted that CFC 

maintained a sufficient balance in its bank account to refund the excessive contributions. 

Interim Audit Report Recommendation 

The Audit staff recommended that CFC: 

•	 Provide evidence demonstrating that the contributions were not excessive. 

Evidence could include documentation that was not available during the audit 

including copies of solicitation cards completed by the contributors at the time of 

their contribution that clearly inform the contributors of the limitations; timely 

notifications sent to contributors eligible for presumptive redesignation and/or 

reattribution; or, timely refunds, redesignations, or reattributions made for 

excessive contributions (copies of the front and back of negotiated refund checks) 

or; 

•	 Absent such evidence, CFC should send notices to those contributors that were 

eligible for presumptive redesignations and/or reattributions ($85,000) to inform 

those contributors how the contribution was designated and/or attributed. These 

notices must also offer the contributors the option of receiving a refund of the 

excessive amount. CFC should provide evidence to the Audit staff that the 

notices were sent. Absent the contributor's request for a refund, these notices 

obviate the need to refund the contributions or make a payment to the U.S. 

Treasury. 

•	 For the remaining excessive contributions for which refunds have not been issued 

($10,612), CFC must refund the excessive portion to the contributors and provide 

evidence ofsuch refunds (copies ofthe front and back ofnegotiated refund 

checks) or pay the amount to the U.S. Treasury; or 
8 

•	 If funds are not available to make the necessary refunds, disclose the 

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

become available to make such refunds. 

Finding 2. Misstatement of Financial Activity 

Summary 

A comparison ofCFC's reported financial activity to the bank records revealed a 

misstatement of activity in calendar year 2006. Reported receipts were understated by 

$42,787; reported disbursements were understated by $27,648; and the ending cash 

balance on December 31, 2006 was understated as a resulted of the receipt and 

disbursement discrepancies. The Audit staff recommended that CFC amend its 

disclosure reports to correct the misstatement. 

Legal Standard 

Contents of Reports. Each report must disclose: 

•	 The amount of cash on hand at the beginning and end ofthe reporting period; 

•	 The total amount ofreceipts for the reporting period and for the election cycle; 

•	 The total amount of disbursements for the reporting period and for the election 

cycle; and 

•	 Certain transactions that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 2 U.S.c. §434(b)(1), (2), (3), (4), and (5). 

Facts and Analysis 

The Audit staff reconciled the reported financial activity to the bank records and 

determined there was a misstatement of activity in 2006. The following chart outlines the 

discrepancies. 

2006 Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

January 1,2006 $ 179,094 

$ 1,836,816 

$ 179,094 

$ 1,879,603 

$ ° $ - 42,787 

Understated Receipts 

Disbursements $ 2,012,799 $ 2,040,447 $ 27,648 

Understated 

Ending Cash Balance 

December 3 1, 2006 $ 3,111 $ 18,250 $ 15,139 

Understated 

The understatement ofreceipts resulted from the following: 

• Contributions not reported	 + $137,972 

• Contributions reported with incorrect amounts (Net)	 + 4,207 

• Contributions reported twice	 8,875 
9 

•	 Reported amounts not traced to bank activity 87,973 

•	 Unexplained difference 2,544 

•	 Net Understatement of Receipts $ 42,787 

CFC received contributions via credit cards and through conduits; however, these 

contributions were not consistently reported. The amount above for "Contributions not 

reported" included earmarked contributions from individuals totaling $60,308 and credit 

card contributions from individuals totaling $69,434 that were either not reported or were 

included in the transactions discussed below. 

The amount above for "Reported amounts not traced to bank activity" included $53,058 

disclosed as a lump sum from ActBlue for earmarked contributions, and $31,830 

disclosed as a lump sum from Newtek Merchant Solutions, CFC's credit card processor. 

CRC did not maintain reconciliation documentation to validate these two transactions, 

nor was the Audit staff able to find any entry or combinations of entries on CFC's bank 

statements that explained these amounts. 

The understatement of disbursements resulted from the following: 

•	 Disbursements not reported + $44,730 

•	 Disbursements reported with incorrect amounts (Net) 1,758 

•	 Disbursements reported twice 3,212 

•	 Reported amounts not traced to bank activity 12,138 

•	 Unexplained difference + 26 

•	 Net Understatement of Disbursements $ 27,648 

The understatement of the Ending Cash Balance on December 31, 2006 resulted from the 

receipt and disbursement discrepancies noted above. 

Interim Audit Report Recommendation 

The Audit staff recommended that CFC amend its disclosure reports for calendar year 

2006 to accurately report the receipt and disbursement activity. CFC should also amend 

their most recently filed report to correct the cash on hand balance and include a notation 

that the change is due to audit adjustments. 

IFinding 3. Reporting of Earmarked Contributions 

Summary 

The Audit staff identified earmarked contributions totaling $508,122 that were not 

reported or improperly disclosed on Schedules A. The Audit staff recommended that 

CFC amend its reports to correctly report and disclose these earmarked contributions. 

Legal Standard 

A.	 Reporting by Political Committee Conduit. A political committee that serves 

as a conduit of an earmarked contribution must disclose the earmarked 
10 

contribution, regardless of amount, on two separate reports: the committee's next 

regularly scheduled FEC report, and a special "Transmittal Report" sent to the 

recipient authorized committee. 11 CFR §110.6(c)(I). 

B.	 Reporting by Recipient Committee. When a candidate committee receives an 

earmarked contribution(s) through an allowable conduit, each individual 

contribution should be itemized when the individual's total contributions to the 

committee aggregate over $200 per election cycle. This itemization must include 

the full name, address, occupation, and employer of the individual contributor 

along with the date the contribution was received by the conduit. Contributions 

from PACs, authorized committees, or any political committees must be itemized 

regardless of the amount contributed. 

In addition, the total contribution(s) transmitted through the conduit should be 

itemized on Schedule A as a memo entry. The conduit's full name and address 

must be provided, along with the date the contribution(s) was received by the 

candidate committee and the total amount of earmarked contributions received 

from the conduit. 11 CFR §1l0.6(c)(2). 

Facts and Analysis 

The Audit staff identified earmarked contributions from individuals and political 

committees received by CFC totaling $508,122 that were not reported or improperly 

disclosed on Schedules A. These contributions were passed on to CFC through eight 

different conduits via 97 transmittals totaling $504,020. 4 Forty-seven of these 

transmittals totaling $158,797 were passed on in the form of the original contributors' 

check. The remaining fifty transmittals totaling $345,223 were passed on in the form of 

the conduit's check. A review of all earmarked contributions identified the following 

discrepancies: 

Contributor Dlscrepancles' 

• Contributions from individuals reported but lacking identification as 

earmarked $183,076 

• Contributions from individuals not reported" 250,046 

• Contributions from political committees reported but lacking 

identification as earmarked .75,000 

Total earmarked contributions $508,122 

4	 This amount represents gross earmarked contributions totaling $508,122 minus $4,102 in processing fees. 

5	 Approximately 38% of the earmarked contributions from individuals aggregated over $200 and were 

required to be itemized on Schedule A. All ofthe earmarked contributions from political committees 

were required to be itemized on Schedule A regardless of amount. 

6	 This amount includes contributions totaling $191,077 (net of processing fees) reported as contributions 

from the conduit rather than as earmarked contributions from individuals, and earmarked contributions 

totaling $60,308 that do not appear to have been reported. The earmarked contributions totaling $60,308 

are included as an adjustment in Finding 2 - Misstatement of Financial activity. 
11 

Conduit Discrepancies 

•	 Conduit transmittals not reported as memo entries $312,943 

•	 Transmittals reported as contributions from the conduit rather than as 191,077 memo entries 

Total conduit transmittals $504,020 

Interim Audit Report Recommendation 

The Audit staff recommended that CFC amend its reports to correctly report and disclose 

these earmarked contributions. 

IFinding 4. Disclosure of Occupation/Name of Employer 

Summary 

A sample review of contributions from individuals revealed that a material amount of 

transactions lacked or did not adequately disclose the occupation and/or name of 

employer. The projected dollar value of these contributions was $466,784. Furthermore, 

there was no evidence that "best efforts" to obtain, maintain, and submit the information 

had been exercised. The Audit staff recommended that CFC contact each contributor for 

which the information is lacking, submit evidence of such contact, and disclose any 

information received. 

Legal Standard 

A. Disclosure of Receipts. For each itemized contribution, the committee must provide 

the following information: 

•	 The full name and address (including zip code) of the contributor or other source; 

•	 The name of the contributor's employer (if the contributor is an individual); 

•	 The contributor's occupation (if the contributor is an individual); 

•	 Election to which a contribution or loan was designated; 

•	 The date of receipt; 

•	 The amount; and 

•	 The aggregate election cycle-to-date of all receipts (within the same category) 

from the same source. 11 CFR §§100.12 and 104.3(a)(4) and 2 U.S.c. 

§434(b)(3)(A). 

B. Election Cycle. The election cycle begins on the first day following the date of the 

previous general election and ends on the date of the next general election. 1I CFR 

§100.3(b). 

C.	 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). 
12 

D. 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	 A clear request for the contributor's full name, mailing address, occupation, 

and name of employer; and 

o	 The statement that such reporting is required by Federal law. 

•	 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. 

•	 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 

A sample review of contributions from individuals revealed that a material amount of 

transactions lacked or did not adequately disclose the contributor's occupation andlor 

name of employer. The projected dollar value of these contributions was $466,784. In 

most cases, the required information was either missing or disclosed as "Best Efforts." 

The records provided to the Audit staffdid not contain any follow-up request for the 

information. Therefore, CFC did not demonstrate "Best Efforts" to obtain, maintain, and 

submit the necessary information. 

Interim Audit Report Recommendation 

The Audit staff recommended that CFC contact each contributor for which the 

information is lacking, submit evidence of such contact, and disclose any information 

received. 

IFinding 5. Disclosure of Disbursements 

Summary 

A sample review ofdisbursements itemized on Schedules B revealed a material amount 

of transactions that lacked or inadequately disclosed the required information. The 

- projected dollar value ofthese disbursements was $1,464,982. These disclosure 

discrepancies consisted of missing addresses, missing or inadequate purposes, or missing 

memo entries for reimbursements to individuals. The Audit staff recommended that CFC 

amend its reports to correct the disclosure of disbursements on Schedules B. 

Legal Standard 

A.	 Reporting Operating Expenditures. When operating expenditures to the same
 

person exceed $200 in an election cycle, the committee must report the:
 

•	 Amount; 

•	 Date when the expenditures were made; 
13 

•	 Name and address ofthe payee"; and 

•	 Purpose (a brief description of why the disbursement was made-see below). 11 

eFR § 104.3(b)(4)(i). 

B.	 Examples of Purpose. 

•	 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). 

•	 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 eFR §104.3 (b)( 4)(i)(A). 

c.	 Reporting Reimbursements to Individuals for Expenses Other than Travel and 

Subsistence. When itemizing reimbursements to individuals for goods or services, if 

the payment to the original vendor aggregates in excess of $200 in an election cycle, a 

memo entry including the name and address of the original vendor, as well as the 

date, amount and purpose of the original purchase must be provided. 11 eFR §104.3 

(b)(4)(i) and Advisory Opinions 1992-1 and 1996-20. 

Facts and Analysis 

A sample review of disbursements itemized on Schedules B revealed a material amount 

of transactions that lacked or inadequately disclosed the required information. The 

projected dollar value of these transactions was $1,464,982. The majority of these 

discrepancies were due to missing addresses, missing or inadequate purposes, or missing 

memo entries for reimbursements to individuals. 

For those transactions with an inadequate purpose, it was determined that a person not 

associated with CFC would not easily discern why the disbursement was made when 

reading the name of the recipient with the purpose disclosed on Schedules B. The sample 

also revealed that CFC did not disclose as memo entries the original vendors for expense 

reimbursements to individuals. 

Interim Audit Report Recommendation 

The Audit staff recommended that CFe amend its reports to correct the disclosure of 

disbursements on Schedules B. 

7 Payee means the person who provides the goods or services to the committee. 11 CFR 

§102.9(b)(2)(i)(A). 
14 

IFinding 6. Reporting of Debts and Obligations 

Summary 

The Audit staff identified debts totaling $106,605 that were not itemized on Schedules D 

(Debts and Obligations). The Audit staff recommended that CFC amend its disclosure 

reports to itemize these debts and obligations on the appropriate Schedules D. 

Legal Standard 

A.	 Continuous Reporting Required. A political committee must disclose the amount 

and nature of outstanding debts and obligations until those debts are extinguished. 2 

U.S.C §434(b)(8) and 11 CFR§§104.3(d)and 104.11(a). 

B.	 Separate Schedules. A political committee must file separate schedules for debts 

owed by the committee and debts owed to the committee, together 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. 

•	 A debt of $500 or less must be reported once it has been outstanding 60 days from 

the date incurred (the date of the transaction); the committee reports it on the next 

regularly scheduled report. 

•	 A debt exceeding $500 must be disclosed in the report that covers the date on 

which the debt was incurred. 11 CFR §104.11(b). 

Facts and Analysis 

The Audit staff identified debts totaling $106,605 that were not itemized on Schedules D. 

These debts consisted of eight transactions to seven vendors, all of which were more than 

$500 and not paid in full during the reporting period in which the debt was incurred. The 

majority ofthese debts were incurred during the October 15,2006 Quarterly and 12 Day 

Pre-General reporting periods. It was also noted that CFC did not report any debts or 

obligations owed during the audit period. 

Interim Audit Report Recommendation
 

The Audit staff recommended that CFC amend its reports itemizing these debts and
 

obligations on-the appropriate Schedules D.
 

I Finding 7. Disclosure of Line of Credit 

Summary 

The Audit staff identified a line of credit itemized on Schedules C (Loans) and Schedules 

C-l (Loans and Line of Credit from Lending Institutions) that lacked or inadequately 

disclosed the required information. The Audit staffrecommended that CFC amend its 

reports to correctly disclose the line of credit itemized. 
15 

Legal Standard 

A.	 Reporting Loans. All loans received by a committee must be itemized and 

continuously reported until repaid. All repayments made on a loan must also be 

itemized. II CFR § 104.3(a)(4)(iv) and II CFR § 104.3(b)(4)(iii). 

B.	 Schedule C. Both the original loan and payments to reduce principal must be 

reported on Schedule C each reporting period until the loan is repaid. 11 CFR 

§104.3(d). 

C.	 Schedule C-l. A committee that obtains a loan from a bank or other permissible 

lending institution must also file Schedule C-I with the first report due after a new 

loan or line of credit has been established. In the case of a committee that has 

obtained a line of credit, a new Schedule C-l must be filed with the next report 

whenever the committee draws on the line of credit. An authorized representative of 

the lending institution must sign the statement on Line 1. II CFR §104.3(d)(l) and 

(3). 

Facts and Analysis 

CFC established a line of credit at a lending institution in the amount of $190,000. The 

term of the loan was one year beginning February 22,2006, with an interest rate of 

9.50%. The Candidate was listed as a guarantor for the line of credit according to bank 

documents, and CFC's checking account balance was used as collateral. CFC made five 

draws totaling $110,000 and two repayments as follows: 

Line of Credit Draws Line of Credit Repayments 

February 24, 2006 $ 30,000 

March 9, 2006 $ 30,000 

April 18, 2006 $ 20,000 

May 10,2006 $ 10,000 May 22,2006 $ 60,000 

May 11,2006 $ 20,000 May 23,2006 $ 50,000 

$110,000 $110,000 

Based on the above information, the Audit staff identified several reporting discrepancies 

on Schedules C. First, CFC did not disclose the due date or interest rate on Schedules C 

for the February 24,2006 and March 9, 2006 line of credit draws. Second, CFC 

disclosed the entire $110,000 repayment on the May 11, 2006 Schedule C ($20,000), 

resulting in a $90,000 credit balance outstanding. CFC should have applied the payment 

separately to each of the five line of credit draws on Schedules C. Third, CFC did not 

disclose the Candidate as a guarantor on any of the Schedules C filed. 

CFC also failed to disclose required information on Schedules C-l on the 12 Day PrePrimary and July Quarterly reporting periods. For the 12 Day Pre-Primary report, CFC 

improperly disclosed the loan amount (disclosed as $60,000 instead of $190,000). In 

addition, CFC did not disclose any information under Section B for the amount ofthe 

draw and the outstanding balance (Amount ofDraw should have been $60,000 and Total 

Outstanding Balance should have been $60,000). 
16 

For the July Quarterly report, CFC improperly disclosed on the loan amount (disclosed as 

$0 instead of $190,000) and again did not disclose any information under Section B 

(Amount of Draw should have been $50,000 and Total Outstanding Balance should have 

been $110,000). In addition, this Schedule C-l was not signed by a representative of the 

lending institution as required. 

Interim Audit Report Recommendation 

The Audit staff recommended that CFC amend its reports to correctly disclose the line of 

credit itemized on Schedules C and Schedules C-1.