Part II

Overview of Campaign

Campaign Organization

Important Dates

Cannon for Congress

e Date of Registration

April 14, 1999

e Audit Coverage

January 1, 2003 through December 31, 2004

Headquarters Provo, Utah
Bank Information

e Bank Depositories 3

e Bank Accounts 3 Checking

Treasurer

¢ Treasurer When Audit Was Conducted

Curtis $. Bramble

¢ Treasurer During Period Covered by Audit

Stanley R. de Waal (through August 18, 2003);
Curtis S. Bramble (from August 19, 2003)

Management Information

e Attended FEC Campaign Finance Seminar

Yes

¢ Used Commonly Available Campaign
Management Software Package

Yes

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

Paid Accounting Firm

Overview of Financial Activity
(Audited Amounts)

Cash on hand @ January 1, 2003 S748)?
Receipts
o From Individuals $ 161,367
o From Political Committees 476,006
o__ Offsets to Expenditures 2,885
co Total Receipts $ 640,258
Disbursements
o__Operating & Other Disbursements $ 633,906
o_ Total Disbursements $ 633,906
Cash on hand @ December 31, 2004 $ 5,604

? The negative balance represents a “book” balance; its bank account balances were never negative.


The Audit staff discussed this matter with CFC representatives at the exit conference.
The representatives indicated they were not aware of the need to file the Form 3Z-1 with
the July 15" Quarterly report and provided no explanation for the inadequate disclosure
on the Form filed with the Year-End Report.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that CFC demonstrate Form 3Z-1 was correctly filed or
provide any comments it may have relative to this matter.

In its response to the interim audit report, CFC states it takes this omission very seriously.

The response notes that CFC simply was not aware of this new requirement to file Form
3Z-1, particularly when the Candidate had not made, nor did he anticipate making, any
contributions to CFC. CFC accepts and acknowledges these findings and has taken steps
to ensure future compliance, to include retaining legal counsel to guide it in complying
with its responsibilities, to educate it regarding new regulatory obligations, and to
implement more exacting procedures to insure compliance.


Part I
Background

Authority for Audit

This report is based on an audit of Cannon for Congress (CFC), 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:

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

The disclosure of contributions received.

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.

NAMA YN


Part III
Summary

Finding and Recommendation

Inadequate Disclosure - Form 3Z-1

CFC failed to file Form 3Z-1 (Consolidated Report of Gross Receipts for Authorized
Committees) with its 2003 July 15" Quarterly Report and, although it filed one with its
2003 Year-End Report, disclosure was inadequate. The Audit staff recommended that
CFC demonstrate that the required forms were correctly filed or provide any comments it
may have relative to this matter. In response to the interim audit report, CFC indicated it
was unaware of this new filing requirement and has taken steps to ensure future
compliance. (For more detail, see p. 4)


FEDERAL ELECTION COMMISSION
WASHINGTON, D.C. 20463

September 27, 2005

MEMORANDUM
TO: ROBERT W. BIERSACK
PRESS OFFICER
PRESS OFFICE
FROM: — JOSEPHF. STOLTZ 7 ip
ASSISTANT STAFF pitECTOR
AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE AUDIT REPORT ON
CANNON FOR CONGRESS

Attached please find a copy of the audit report on Cannon for Congress which was
approved by the Commission on September 19, 2005.

All parties involved have received informational copies of the report and the report
may be released to the public.

Attachment as stated

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


Part IV.
Finding and Recommendation

| Inadequate Disclosure - Forms 3Z-1

Summary

CFC failed to file Form 3Z-1 (Consolidated Report of Gross Receipts for Authorized
Committees) with its 2003 July 15" Quarterly Report and, although it filed one with its
2003 Year-End Report, disclosure was inadequate. The Audit staff recommended that
CFC demonstrate that the required forms were correctly filed or provide any comments it
may have relative to this matter. In response to the interim audit report, CFC indicated it
was unaware of this new filing requirement and has taken steps to ensure future
compliance.

Legal Standard

Special Reporting Requirements. Principal campaign committees of candidates for the
U.S. House and the U.S. Senate must file FEC Form 3Z-1 as part of their July Quarterly
and Year-End Reports in the year preceding the year in which the general election for the
office sought is held. The information in this form allows opposing candidates to
compute their “gross receipts advantage” used to determining whether a candidate is
entitled to an increased contribution limit. The following information must be disclosed:

1. Gross receipts to date for the primary and general elections,

2. Aggregate amount of contributions from personal funds of the candidate for the
primary and general elections, and,

3. A calculation of gross Teceipts less the candidate’s personal contributions for each
election. 11 CFR §104.19.

Facts and Analysis

The Audit staff reviewed all filings by CFC and noted that it did not provide a Form 3Z-1
with its 2003 July 15'" Quarterly Report, as required. Further, the disclosure on Form 3Z-
1 (the Form) filed with its 2003 Year-End Report was inadequate; it disclosed no gross
receipts for the primary or general elections.

Using the electronic data provided by CFC, the Audit staff determined gross receipts for
the primary of $72,213,* and for the general of $15,240, should have been disclosed on
the Form and included with its 2003 July 15" Quarterly report. There were no personal
contributions by the Candidate.

For the 2003 Year-End Report, the Form should have disclosed gross receipts for the
primary of $148,528 and for the general of $18,240. Again, there were no personal
contributions by the Candidate.

> This regulation became effective January 27, 2003; as such, this election cycle is the first where this form
was required

“ In the state of Utah, a convention is held prior to the primary election and has a separate contribution
limitation. Since the form makes no provision for receipts designated for the convention, such receipts
are included with primary figures.


Report of the
Audit Division on

Cannon for Congress
January 1, 2003 - December 31, 2004

Why the Audit About the Campaign (p. 2)

Was Done Cannon for Congress (CFC) is the principal campaign committee for
Federal law permits the Christopher B. Cannon, Republican candidate for the U.S. House of
Commission to conduct Representatives from the state of Utah, Third District. CFC is
audits and field headquartered in Provo, Utah. For more information, see chart on the
investigations of any Campaign Organization, p. 2.

political committee that is

required to file reports Financial Activity (p. 2)

under the Federal ¢ Receipts

Election Campaign Act © From Individuals $ 161,367

(the Act). The o From Political Committees 476,006
Commission generally o Offsets to Expenditures 2,885
conducts such audits o Total Receipts $ 640,258
when a committee

appears not to have met « Disbursements

the threshold o Operating & Other Disbursements $ 633,906
requirements for o Total Disbursements $ 633,906

substantial compliance
with the Act.' The audit
determines whether the
committee complied with
the limitations,
prohibitions and
disclosure requirements
of the Act.

Finding and Recommendation (p. 3)
e Inadequate Disclosure — Form 3Z-1

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).



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
Inadequate Disclosure — Form 3Z-1

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