FEDERAL ELECTION COMMISSION

WASHINGTON. D.C. 20463

September 2, 1999

MEMORANDUM

TO: RON HARRIS

PRESS OFFICER

PRESS OFFICE

FROM: ROBERT J. COSTA ~f'. ASSISTANT STAFF DI~JQ; AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON THE

SAN DIEGO CONVENTION AND VISITORS BUREAU, INC.

Attached please find a copy ofthe final audit report and related documents on the

San Diego Convention and Visitors Bureau, Inc. which was received by the Commission

on August 19, 1999.

Informational copies ofthe report have been received by all parties involved and

the report may be released to the public.

Attachment as stated

cc: Office ofGeneral Counsel

Office of Public Disclosure

Reports Analysis Division

FEC Library
TABLE OF CONTENTS

SAN DIEGO CONVENTION AND VISITORS BUREAU, INC.

!:}

(~i Page ~1

fi'1 Audit Report 1

ii! Background 1 It!

-=

• Findings 3

j

""-'"

0 Legal Analysis 11

•

roo

Transmittal to Committee 16 n~

n~.~

Chronology 17
FEDERAL ELECTION COMMISSION

WASHINGTON. DC. 204&3

I.

REPORT OF THE AUDITDIVISION

ON THE

SANDIEGO CONVENTIONAND VISITORS BUREAU, INC.

BACKGROUND

A. AUDIT AUTHORITY

"'"ib£

This report is based on an audit ofthe San Diego Convention And Visitors

Bureau, Inc. (Convis), to determine whether there has been compliance with the

provisions ofthe Federal Election Campaign Act of 1971, as amended (the Act). The

audit was conducted pursuant to 1I CFR §9008.54 which states that the Commission

shall conduct an examination and audit of each host committee registered under II CFR

§9008.5I.

B. AUDIT COVERAGE

The audit covered the period from March 1994, the date Convis began

making disbursements to promote the suitability ofthe City of San Diego as the site of

the Republican National Convention, through April 1997.

C. COMMITTEE ORGANIZATION

The 1996 Republican National Convention was held in San Diego,

California on August 12, 1996 through August 15, 1996. It was funded by the 1996

Committee on Arrangements for the Republican National Convention (COA), San Diego

Host Committee/Sail to Victory San Diego '96 (San Diego Host Committee), Convis and

the City Civic Events Fund.

Convis registered with the Federal Election Commission on September 4,

1996, as a host committee as specified by 11 C.F.R. §9008.5 I. The Treasurer for the

period audited was Dr. Joyce Gattas. On November 12, 1998, Mr. Reint Reinders

assumed that position. Convis maintains offices in San Diego, CA, Washington, D.C.,

and Chicago, IL. Convis' records are maintained in San Diego, CA.

Convis was incorporated in California on October 20, 1954 exclusively for

non-profit purposes. It was formed with the "goal of developing, promoting and
2

maintaining a healthy convention and visitor industry in the San Diego region". Convis

is an ongoing organization through which the City ofSan Diego is promoted as a location

for conventions and other events. It is supported largely by its members, city and county

transient occupancy taxes, and the Port of San Diego.

For fiscal year 1996 (July 1, 1995 through June 30, 1996) Convis

generated about $11,200,000 in revenues, mainly from city and county appropriations and

disbursed approximately $11,200,000, primarily related to attracting and hosting

conventions and marketing the City of San Diego as a convention location and travel

destination. Essentially, "from the same sources and for the same purposes, $11,500,000

in revenues and $11,600,00 in disbursements were recorded for fiscal year 1997 (July 1,

1996 through June 30,1997). During these two fiscal years, approximately $1,622,500

was spent in connection with the 1996 Republican National Convention (the

Convention), in addition $108,500 was spent in connection with the Convention prior to

July 1, 1995.

In March of 1994, Convis joined the City ofSan Diego in its efforts to

attract the Convention. As part oftheir normal course ofbusiness, Convis initially made

disbursements to promote the suitability ofthe city. On December 12, 1995, COA

released a media advisory stating the Convention would be held in San Diego, CA.

Convis then continued to assist the City of San Diego and the San Diego I-lost Committee

in their preparations for the Convention.

Convis was responsible for the collection of donations and program fees

paid by participants for the Youth Fund Program (Youth Fund), as well as, the payment

ofrelated expenses. This program provided an opportunity for persons (16-25 years old)

to participate in the Convention as convention pages and delegation aides. Thc program

fees, which represent about two-thirds ofthe cost ofthe program, were paid by

participants in exchange for lodging, meals and events.

D. AUDIT SCOPE AND PROCEDURES

The audit ofConvis included testing of the following general categories:

1. The receipt ofdonations from prohibited sources, those from outside ofthe

San Diego Metropolitan Area (See Finding III.B.);

2. proper disclosure ofreceipts to include the itemization ofthose receipts when

required, as well as, the completeness and accuracy ofthe information

disclosed (See Finding IILA.);

3. proper disclosure of disbursements including the itemization ofdisbursements

when required, as well as, the completeness and accuracy of the information
3

disclosed (See Finding lILA.);

4. review ofthe disbursements to determine compliance with the requirements of

II CFR §9008.52(c)(See Finding III.B.);

5. the accuracy oftotal reported receipts, disbursements and cash balances;(See

Finding IIIA)

6. adequate reco~dkeeping for convention related transactions;

7. other audit procedures that were deemed necessary in the situation.

As part ofthe Commission's standard audit process, an inventory of

committee records is conducted prior to the audit fieldwork. This inventory is conducted

to determine ifthe auditee's records are materially complete and in an auditable state.

Based on our review of records presented, it was concluded that the records were

materially complete and fieldwork began immediately.

Unless specifically discussed below, no material non-compliance was

detected. It should be noted that the Commission may pursue further any ofthe matters

discussed in this memorandum in an enforcement action.

Unlike the San Diego Host Committee, Convis was not dedicated

exclusively to supporting the Convention, but rather to both continuing its traditional role

and limited Convention related activities. As a result ofthis dual role, the audit of Convis

was limited to those functions that in some way related to the Convention. The

recommendations below deal only with the Convention related functions.

III. AUDIT FINDINGS AND RECOMMENDATIONS

A. FAILURE TO REpORT RECEIPTS AND DISBURSEMENTS

Section 9008.52 ofTitle 11 ofthe Code of Federal Regulation states, in

part, a host committee includes any local organization, such as a local civic association,

business league, chamber of commerce, real estate board, board oftrade or convention

bureau: Which is not organized for profit; whose net earnings do not inure to the benefit

of any private shareholder or individual; and whose principal objective is the

encouragement of commerce in the convention city, as well as the projection of a

favorable image ofthe city to convention attendees.

Further, 11 CFR 9008.51 states, in relevant part, each host committee shall

register with the Commission within 10 days ofthe date on which the political party

chooses the convention city. Further each host committee is required to file a disclosure

report on the earlier of 60 days following the last day the convention is in session or 20

days prior to the presidential general election. Thereafter, disclosure reports shall be filed
4

quarterly until the host committee ceases reportable activity. The reports shall disclose

all receipts and disbursements, including in-kind contributions, made with respect to a

presidential nominating convention.

When Convis registered with the Commission, it filed letters describing its

role in the 1996 Republican Convention and one report that did not conform to the

requirements cited above. This report noted transfers to the San Diego Host Committee

but, did not itemize any other transactions related to Convis' other convention activity.

However, copies ofchecks received in connection with the Youth Fund were filed with

the Commission in response to correspondence from the Commission's Reports Analysis

Division.

In addition to its other convention related activities, Convis was

approached by COA to take part in broadcasting the Convention. In a July 15, 1996

memorandum from Convis' President to its Executive Committee, it is explained that in

exchange for sponsoring the coverage, Convis would be allowed sufficient time to air

programming or commercials which promoted San Diego. The minutes of a July 29,

1996 Convis Board ofDirectors meeting explains that the RNC had sponsors ready to

underwrite $1.3 million in costs. The same document notes that Amway had already

contributed $1.3 million to "promote San Diego as part ofthe convention." The Amway

donation was deposited by Convis on July 18, 1996. On July 23, 1996, Convis

transferred $1.2 million to National Media, Inc. On August 2, 1996, Convis handdelivered a letter to William Greener, COA Convention Manager, discussing its

withdrawal from participation in the Convention broadcast. In an August 9, 1996 letter to

the president ofNational Media, Inc., Convis explained that since the broadcast would be

without commercial interruption, there could be no promotion of the City of San Diego.

Convis requested a refund from National Media, Inc. and subsequently transferred the

money back to Amway, Inc. on August 13, 1996. None ofthese transactions were

reported by Convis.

Other receipts in connection with the Convention consisted of: Youth

Fund receipts of approximately $123,000; Youth Fund program fees ($325 and $45 paid

by participating individuals nationwide); city and county transient occupancy taxes; hotel

commissions received pursuant to an agreement that stated 1996 rates would be

comrnissionable at an amount not to exceed 5% and payable to the host committee to

defray convention costs; local donations; and, reimbursement from the San Diego

Convention Center Corporation for site selection expenses.
5

An analysis ofConvis receipts and disbursements related to the

Convention is presented below:

I. Receipts

2.

Total amount ofReceipts

Youth Fund Receipts

Transient Occupancy Tax Dollars

Hotel Commission Rebates

Local Donors

San Diego Convention Center

Corporation, Inc.

Amount Received from Amway

Amount Refunded to Amway

Correct Reportable Receipts

Disbursements

$366,875

655,650

607,270

3,000

104,233

1,320,000

(1,320,000)

$1,737,028

$1,737,028

Operating disbursements were comprised of expenses paid on

behalf ofthe Youth Fund, expenses related to promoting the City of San Diego as the

Convention site, transfers to the San Diego Host Committee, housing services including

brochures, basic convention "meet and greet" services, and information center activities.

Total Amount of Disbursements

Youth Fund Expenditures

Site Selection Expenditures

Transfers to the San Diego Host

Committee

Other Host Expenses Pursuant to

§9008.52

Amount Paid to National Media, Inc.

Amount Refunded from National Media,

Correct Reportable Disbursements

$363,598

111,947

850,000

405,606

1,188,000

(1,188,000)

$1,731,151

$1,731,151

At the exit conference meeting, the Audit staffsupplied Convis computer

files that contained most ofthe disbursement information that was to be reported and a

portion ofthe receipt information.

In the Exit Conference Memorandum(ECM), the Audit staffrecommended

that, within 60 calendar days ofservice ofthe ECM, Convis file a comprehensive
6

amended report, including necessary supporting Schedules A and B, disclosing its

convention related receipts and disbursements.

In response to the ECM, Convis explains that COA delegated the function

ofdepositing and issuing checks on behalf ofthe Youth Program to it. Consequently,

"Convis' role in administering the checks was purely ministerial in nature as Convis did

not exercise any independent discretion but merely followed directions and procedures

outlined by the COA." The staffdoes not dispute this statement, rather the review of

Convis' records confirms it.

Convis asserts COA collected and prepared all checks for deposit by

Convis, making a clear distinction between having control over the funds and simply

forwarding them to a depository. Because ofthis arrangement, Convis does not feel that

it was required to report these transactions.

Convis further contends it did not exercise any discretion in expending

funds from the Youth Fund account. Instead, all funds dispersed were at the direction of

the COA, through Request For Purchase orders (RFP). The RFP was required to have

certain signatures ofCOA officers for authorization of a check. Furthermore, Convis

argues that its role did not even rise to that of a collecting agent.

"In an analogous setting FEC regulations allow collecting agents to collect

and in some instances solicit contributions, and to make certain

discretionary disbursements to and from separate segregated funds. Such

collection agents are not required to report the transactions they handle as

they are not deemed the recipient or source ofthe payments."

Even ifthis analogy were apt, it reverses the roles of the entities involved.

As Convis stated in its response, COA collected the funds and forwarded them to Convis

for deposit in an account that Convis controlled. Consequently, in the collecting agent

analogy, COA represents the collecting agent and Convis represents the segregated fund

responsible for record keeping, reporting, and compliance.

Convis also compares its role to that of a bank teller. It states that a bank

teller receives deposits and issues payments for the account holder, likewise Convis

deposited checks and "issued checks as requested with proper authority by the account

holder". However, a bank teller does not have control ofthe customer's account, nor

does the teller have signature authority on the account. Convis controlled the account and

its officers were the only ones to have signature authority on the account (COA officers

did not have signature authority).

Finally, Convis stated in its response that it had initially offered to

supplement its disclosure reports over two years ago. Convis refers to a letter filed with

the Commission January 8, 1997, explaining the receipts and disbursements relating to

the Republican convention and volunteering its assistance to the Commission should it
7

require further details regarding reportable transactions. The Commission did not pursue

further detail at that time. Accordingly, Convis does not feel a fine or late fee for any

technical violation found would be appropriate.

The staff acknowledges that the Youth Program was, in large part,

controlled by the COA and that Convis' role was that of an administrator. However, it

was Convis that had access to the account into which the program fees and other funds

were deposited and from which the disbursements were made. It is also noted that since

Convis controlled the account and the associated records COA properly did not report the

Youth Program transactions.

Although Convis argues that its role in the Youth Fund was ministerial

and did not rise to the level that requires it to report the Youth Fund transactions, it

complied with the staffs recommendation. Convis also filed reports disclosing the NonYouth Fund transactions

B. CONVENTION-RELATED EXPENDITURES

Section 9008.8(b)(l) ofTitle I I oftlIe Code of Federal Regulations states,

in relevant part, expenditures made by the host committee shall not be considered

expenditures by the national committee and shall not count against the expenditure

limitations provided the funds are spent in accordance with II CFR 9008.52.

Section I 14.1(a)(2)(viii) ofthe Code of Federal Regulations states, the

terms contribution and expenditure shaH not include activity permitted under II C.F.R.

§§9008.9, 9008.52 and 9008.53 with respect to a presidential nominating convention.

Section 9008.12(b)(7) ofTitle I I ofthe Code of Federal Regulations

states, in relevant part, the Commission may seek repayment, or may initiate enforcement

action, if the convention committee knowingly helps, assists or participates in the making

of a convention expenditure by the host committee not in accordance with I I CFR

9008.52 or 9008.53, or the acceptance of a contribution by the host committee from an

impermissible source, such as a non-local business.

Section 9008.52(c) ofTitle II ofthe Code of Federal Regulations states,

in part, that local businesses (excluding banks), local labor organizations, and other local

organizations or individuals may donate funds or make in-kind donations to a host

committee to be used for the following: to defray those expenses incurred for the purpose

of promoting the suitability ofthe city as a convention site; to defray those expenses

incurred for welcoming the convention attendees to the city, such as expenses for

information booths, receptions, and tours; to defray those expenses incurred in facilitating

commerce, such as providing the convention and attendees with shopping and

entertainment guides and distributing the samples and promotional material specified in

II CFR 90DS.9(c); to defray the administrative expenses incurred by the host committee,
8

such as salaries, rent, travel, and liability insurance; and to provide the national

committee use of an auditorium or convention center and to provide construction and

convention related services for that location such as: construction ofpodiums; press

tables, false floors, camera platfonns; additional seating; lighting, electrical, air

conditioning and loudspeaker systems; offices; office equipment; and decorations.

Further, donations may be used to defray the cost ofvarious local

transportation services, including the provision of buses and automobiles; to defray the

cost oflaw enforcement services necessary to assure orderly conventions; to defray the

cost of using convention bureau personnel to provide central housing and reservation

services; to provide hotel rooms at no charge or a reduced rate on the basis ofthe number

ofrooms actually booked for the convention; to provide accommodations and hospitality

for committees ofthe parties responsible for choosing the sites ofthe conventions; and to

provide other similar convention-related facilities and services.

Section 9008.8(b)(3) ofTitle 11 ofthe Code of Federal Regulations states,

expenditures made by presidential candidates from campaign accounts, by delegates, or

by any other individual from his personal funds for the purpose of attending or

participating in the convention or convention related activities, including, but not limited

to the costs oftransportation, lodging and meals, or by State or local committees ofa

political party on behalf ofsuch delegates or individuals shall not be considered

expenditures made by or on behalf ofthe national party, and shall therefore not be subject

to the overall expenditure limitations ofthis section.

Section 9008.7(a)(4) ofTitle 11 ofthe Code of Federal Regulations states,

in relevant part, "Convention expenses" include all expenses incurred by or on behalf of a

political party's national committee or convention committee with respect to and for the

purpose of conducting a presidential nominating convention or convention-related

activities. Subsection (viii) ofthis regulation states that convention expenses include

entertainment activities which are part ofthe official convention activity sponsored by the

national committee, including but not limited to dinners, concerts, and receptions.

As noted above, the CGA sponsored the Youth Fund, which provided an

opportunity for young persons to participate in Convention activities. Students

nationwide applied to the program beginning in May of 1996. Upon acceptance to the

program, the student paid a fee to cover such expenses as housing, transportation,

catering, production and other related activities. Program fees collected totaled

approximately $240,000. As would be expected, most participants were not from the San

Diego area. Consequently, most ofthe associated receipts were from persons outside the

San Diego metropolitan area. The level of control exercised by CGA in administration of

the Youth Fund, meets the requirements of 11 CFR 9008.12 (b)(7) for a repayment by

CGA should any ofthe Youth Fund expenses be detennined to be convention expenses.

As explained above, CGA delegated the handling of all financial

transactions to Convis. CGA outlined specific accounting procedures to govern the funds
9

associated with this program. Checks were deposited into a separate Youth Fund bank

account, maintained by Convis. Invoices were forwarded from either San Diego Host

Committee or COA to Convis with authorizing signatures. These expenditures were then

paid from the Youth Fund bank account.

During a review ofConvis' Youth Fund disbursement records, payments

to vendors totaling $50,316 were identified that could be considered convention

expenses, rather than items noted as permissible host committee expenses at 11 CFR

§9008.52(c). The majority ofthese expenses related to housing and catered food for

participants, with the remainder attributed to hotel rooms and entertainment.

The hotel rooms were for persons associated with the Convention and for

persons conducting the Youth Fund program, not for the participants themselves. While

the regulation does allow Convis to provide rooms at no charge or at a reduced rate, this

is only applicable when it is based upon the total number ofrooms booked for the

convention. There is no evidence that the rooms provided are based on some number of

others rooms booked.

Therefore, the program fees could have been viewed as donations from

persons outside the San Diego metropolitan area and the noted costs as impermissible

host committee expenses and in-kind contributions by Convis to COA.

In the ECM, the Audit staffrecommended that within 60 calendar days of

receipt ofthis memorandum, Convis demonstrate that:

• The program fees collected are not from persons outside the San

Diego metropolitan area, should not be considered donations pursuant to 11 CFR

§9008.52(c), or are otherwise permissible host committee receipts:

• The disbursements noted above are permissible host committee

expenses pursuant to 11 CFR §9008.52(c), do not represent the use of "donations" to

a host committee, or are otherwise permissible disbursements.

Convis asserts COA collected and prepared all checks for deposit by

Convis, making a clear distinction between having control over the funds and simply

forwarding them to a depository. Convis contends that this arrangement obviates the

need for it to determine whether funds deposited complied with applicable law. Rather

this was the responsibility of COA before forwarding the funds.

Convis believes the transfer offunds does not constitute a transfer of value

and therefore should not be characterized as an in-kind contribution. They refer to

Advisory Opinions 1986-22 and 1985-28. These Advisory Opinions deal with the

legality of a corporation offering rebates to political committees in the normal course of

business and the requirements ofthe corporation to report the rebates. The situations in
10

the Advisory Opinions are not analogous. However, in the Advisory Opinions the

Commission determined that the political committees were required to report any cash

value received from the rebates, while the corporations had no reporting obligation.

Although these receipts and disbursements must be reported by Convis, the staff

concludes that the program fees paid by the participants do not represent "donations" that

must be from local businesses and individuals. Rather these fees! were paid pursuant to

Section 9008.8(b)(3), which provides that disbursements made from a person's personal

funds to attend or participate in a convention or convention related activities do not count

against the convention committee's expenditure limit. Furthermore, the non-local

businesses that provided funds so that youths could participate in the convention were

apparently not motivated by election-influencing purposes, but either charitable or

promotional purposes and therefore these receipts are consistent with the purposes of

11 C.F.R. §9008.52.

Similarly, the disbursement ofthese fees for the service provided primarily to the

payers ofthe fees, are expenditures that are similar to welcoming the convention

attendees to the city pursuant to 11 C.F.R. §9008.52(c)(l)(ii). Because ofthe obvious

needs of youths for additional supervision or security, their attendance at the convention

may have been impossible without the facilities and services provided by the Youth

Fund. Moreover, Section 9008.8(b)(3) provides that expenditures made by an individual

from his or her personal funds for the purpose ofattending or participating in the

convention or convention related activities are not subject to the convention's committee

expenditure limitation.

The Commission voled to receive this report without any determination on the

merits ofthe analysis ofthe facts or the interpretation ofthe law contained herein.

I Some of the fees were paid by the participants' parents. However, disbursements made by a youth's

parents so that the youth may attend a convention are sufficiently similar to "expenditures made by ...

individuals from his or her personal funds" referenced in 9008.8(b)(3) so that, in this setting, the regulation

can apply to the parents' disbursements as well.
I I Mm1Yl+ a,eG & G~r

"1 - .}.!1 - <t ~1

FEDERAL ELECTION COMMISSION

WASHINGTON. D.C. 20463

July 28, 1999

MEMORANDUM

Robert 1 Costa

Assistant StaffDirector

Audit Division

FROM:

THROUGH: James A. Pehrkon

StaffDirector

TO:

Lorenzo Holloway _.~

Assistant General Counsef

J. Duane Pugh Jr.~. Attorney (S't--

SUBJECT: Audit Report of San Diego Convention and Visitors Bureau (LRA 515)

I. INTRODUCTION

On September 1, 1998, the Commission determined that the San Diego

Convention and Tourist Bureau, Inc., d/b/a San Diego Convention and Visitors Bureau

("ConVis") acted as a host committeel for the 1996 Republican National Convention2 and

The San Diego Host Committee/Sail to Victory '96 also acted lIS a host committee for the

1996 Republican National Convention. The Commission approved an Audit Report on the San Diego Host

Committee on April 23, 1998..

The Republican National Convention was held in San Diego, California from August 12

through 15, 1996. The 1996 Committee on Arrangements for the Republican National Convention's Audit

Report was issued by the Commission on June 25, 1998. The Audit Report includes a determination that

the 1996 Committee on Arrangements for the Republican National Convention (the "Convention

Committee") and the Republican National Committee must repay $1,772,643 to the United States
12

Memorandum to Robert J. Costa

Audit of San Diego Convention and Visitors Bureau

(LRA 515)

Page 2

authorized an audit of ConVis as required by 11 C.F.R. § 9008.54. The Office ofGeneral

Counsel has reviewed the proposed Audit Report ofConVis, which was submitted to this

Office on May 25, 1999.3 This memorandum presents our comments on the proposed

Audit Report. Ifyou have any questions concerning our comments, please contact Duane

Pugh, the attorney assigned to this review.

We concur with the proposed Audit Report's finding: Failure to Report Receipts

and Disbursements (III, A.). ConVis amended its report in an effort to comply with the

Exit Conference Memorandum recommendations. However, ConVis contends that it was

not required to report the receipts and disbursements because its role was purely

ministerial so that its participation did not result in reportable receipts or disbursements.

This Office disagrees with ConVis's position because ConVis: accepted funds, deposited

those funds into certain bank accounts, controlled exclusively those accounts, and

disbursed funds from those accounts, all of which was in connection with the 1996

Republican National Convention. Accordingly, the receipts and disbursements must be

reported by ConVis as required by II C.F.R. § 9008.5I(b).~

II. CONVENTION-RELATED EXPENDITURES (III, B.)

As pmi of its activities in connection with the 1996 Republican National

Convention, ConVis administered a Youth Program Fund. The Youth Program Fund

served as a depository offunds for the Young Voters Program, which allowed persons

who were 16 to 2S years old to participate in the Convention as convention pages and

delegation aides. Participants in the Young Voters Program came from throughout the

United States and paid program fees in exchange for lodging, meals and events. To carry

out its responsibilities related to the Young Voters Program, ConVis maintained and

controlled a Youth Program Fund account; ConVis received and deposited $366,875 into

Treasury. The Repayment Determination in that Audit Report is currently before the Commission in an

Administrative Review. The Commission may issue an additional repayment determination where there

exist facts not used as the basis for any previous determination. II C.F.R. §§ 9007.2(1) and 9008. 12(c).

The Commission must notify the Republican National Committee of any repayment determinations not

later than three years after the last day of the Presidential nominating convention, which was August 15,

1996. II C.P.R. § 9008.12(a)(2).

Because the proposed Audit Report concerns the audit of a host committee, we recommend that

the Commission consider this document in open session in accordance with II C.F.R. §§ 9008.54,

9007. I(e)(l) and 9038.I(e)(I). Consideration ofthe proposed Audit Report is not entitled to an exemption

under the Government in the Sunshine Act. See II C.F.R. § 2.4.

The proposed Audit Report also notes transactions between ConVis, Amway Corporation and

National Media, Inc. that were related to broadcasting the Convention. These transactions were previously

addressed by the Commission in MUR 4428, in which the Commission found no reason to believe that

ConVis violated any statute or regulation within the Commission's jurisdiction for the reasons described in

the complaint in MUR 4428. See Certification, MUR 4428 (Dec. 28, 1998).
13

Memorandum to Robert J. Costa

Audit of San Diego Convention and Visitors Bureau

(LRA 51S)

Page 3

this account, and it made disbursements of $363,598 from this account. Ofthe receipts,

the participants' program fees accounted for approximately $240,000.

The proposed Audit Report analysis ofthe Youth Program Fund concerns both its

receipts and disbursements. The proposed Report notes that some ofthe receipts were

from outside the San Diego metropolitan area, which is contrary to 11 C.F.R.

§ 9008.52(c)(I). The analysis concludes that the receipts from outside the San Diego

metropolitan area should"not be viewed as donations subject to 11 C.F.R.

§ 9008.52(c)(I), but instead should be viewed as "other receipts." The proposed Report

identifies expenditures from the Youth Program Fund account of$50,316 that were not

for permissible host committee activity similar to the examples listed in 11 C.F.R.

§ 9008.52(c)(I). The proposed Report concludes that these expenditures are not subject

to 11 C.F.R. § 9008.52(c)(l), but instead are classified as "other expenditures."

As a preliminary matter, this Office recommends that the discussion of applicable

Commission regulations be expanded to include three additional regulations. The

proposed finding should discuss II C.F.R. §§ 114.1 (a)(2)(viii), 9008.8(b)(1), and

9008.12(b)(7) in order to address the legal significance of host committees' operating in

accordance with section 9008.52(c). Activity permitted under section 9008.52 is not a

contribution or expenditure for the purposes of II C.F.R., Part 114. II C.F.R.

§ I 14. 1(a)(2)(viii). Host committee funds spent in accordance with section 9008.52 shall

not count against the convention committee's expenditure limitation. 11 C.F.R.

§ 9008.8(b)(I). If a host committee disbursement for a convention expense is not in

accordance with section 9008.52 or if a host committee accepts a donation from a source

not permitted by section 9008.52, and ifthe convention committee knowingly helped,

assisted or participated in the host committee's action, then the Commission may seek

repayment from the convention committee or initiate an enforcement action. II C.F.R.

§ 9008.12(b)(7). Additionally, the proposed Audit Report should state that it is clear that

the Convention Committee knowingly helped, assisted or participated in ConVis's

actions. The proposed Audit Report presents facts that establish that the Convention

Committee directed ConVis's actions in connection with the Youth Program Fund, but it

should also state specifically that the requirement in 11 C.F.R. § 9008.12(b)(7) has been

satisfied.

A. Youth Program Fund Receipts

The Office of General Counsel agrees with the Report's conclusion that the Youth

Program Fund receipts were not contributions to the Convention Committee and therefore

not subject to its expenditure limitation. However, this Office disagrees with the Report's

conclusion that ConVis's receipts in connection with the Youth Program are "more

correctly classified as 'other receipts.''' Furthermore, this Office disagrees with the

Report's apparent conclusion that a host committee's "other receipts" are not within the

scope of 11 C.F.R. § 9008.52(c), which requires that host committees receive their funds
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14

Memorandum to Robert J. Costa

Audit of San Diego Convention and Visitors Bureau

(LRA 515)

Page 4

from local sources. These funds were used by a host committee in connection with the

1996 Republican National Convention. The convention financing regulations do not

contemplate another category ofhost committee receipt offunds in connection with a

convention that is not within the scope of 11 C.P.R. § 900S.52(c).5 Therefore, the receipt

and expenditure offunds must comply with the requirements of 11 C.F.R. § 900S.52(c) in

order to qualify for the exemptions of 11 C.F.R. §§ 114.1(a)(2)(viii) and 9008.8(b)(1).

Nonetheless, this'Office believes that the receipts are not attributable to the

convention committee's expenditure limitation. Section 900S.S(b)(3) provides that

disbursements made to attend or participate in a convention or convention related

activities do not count against the convention committee's expenditure limit, without

regard to their geographic origin. Some ofthe fees were paid by the participants' parents.

However, disbursements made by a youth's parents so that the youth may attend a

convention are sufficiently similar to "expenditures made by ... individuals from his or

her personal funds" referenced in 11 C.F.R. § 9008.8(b)(3) so that the regulation can

apply to the parents' disbursements as well.

ConVis's receipts also came from "businesses," which may include corporations.

As the participating youths were from across the country, the funds also came from nonlocal businesses. Disbursements by non-local businesses, including corporations, were

apparently to permit the youth to attend the convention and were not in connection with

the election of any ofthe party's candidates to be the party's presidential nominee. The

Commission's basis for permitting local corporations to provide funds to host committees

was its presumption that such actions would be "solely for bona fide advertising or

promotional purposes, rather than political purposes, the Commission did not consider

this activity to be prohibited by 2 U.S.C. § 441 b." See 44 Fed. Reg. 63,037 (1979).6

Thus, because the non-local businesses that provided program fees so that youths could

participate in the convention were apparently not motivated by election-influencing

purposes, but either charitable or promotional purposes, this Office believes that the

corporate receipts are consistent with the purposes of 11 C.F.R. § 9008.52.

B. Youth P"ogram Fund Expenditures

This Office disagrees with the proposed Audit Report's conclusion that the

$50,316 ofYouth Program Fund expenditures were not pennissible host committee

expenditures similar to those listed in 11 C.F.R. § 9008.52(c)(I)(i) through (xi). In this

context, considering the special needs of youths attending a convention, this Office

However, host committees may accept goods or services from commerciafvendors under the

same terms and conditions for convention committees. See II C.F.R. §§ 9008.9 and 9008.52(b).

Although the host committee regulation has'since been amended, see 59 Fed. Reg. 33,614 (1994),

local businesses remain permitted to contribute to host committees pursuant to 11 C.F.R. § 9008.52(c)(l)

and (2).

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Memorandum to Robert J. Costa

Audit of San Diego Convention and Visitors Bureau

(LRA 515)

Page 5

believes that the expenditures are sufficiently similar to welcoming convention attendees

to the city pursuant to 11 C.F.R. § 9008.52(c)(I)(ii). Because ofthe obvious special

needs of youths for additional supervision or security,7 their attendance at the convention

may have been impossible without the facilities and services provided by the Young

Voters Program. On this basis, the entirety ofthe Young Voters Program can be

considered welcoming the Young Voters Program participants to the convention city.

Section 9008.8(b)(3) ofthe Commission's regulations provides an additional basis

to conclude that the ConVis Youth Program Fund expenditures should not count toward

the convention committee's expenditure limitation. That section provides that

expenditures made by any individual from his or her personal funds for the purpose of

attending or participating in the convention or convention related activities are not subject

to the convention committee's expenditure limitation. 11 C.F.R. § 9008.8(b)(3). Thus,

the Commission has expressly stated that expenditures made to enable individuals to

attend or participate in conventions or convention related activities will not be considered

expenditures made on behalf ofthe convention committee. Recognizing the special

needs ofyoulhs attending the convention, this Office believes that a broader range of

disbursement purposes can be considered necessary "for the purpose of attending or

participating in the convention or convention related activities" as provided by 11 C.F.R.

§ 900S.S(b)(3) for a youth program than would be appropriate for adult convention

participants.

Due to the nature of an event like a major political party's presidential no~inating convention,

those responsible for youth participation could reasonably conclude that the supervision and security needs

were best met by the construction of a dedicated facility like the Youth Pavilion along with employing staff

who would need accommodations during the convention. Furthermore, additional catering and

entertaining could be required for youths in order to maintain the supervision and security.
16

FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

August 27,1999

Mr. Reint Reinders, Tre.asurer

San Diego Convention and Visitors Bureau, Inc.

401 B Street

Suite 1400

San Diego, CA 92101·4237

Dear Mr. Reinders:

Attached please find the Audit Report on the San Diego Convention and Visitors

Bureau, Inc.. The Commission received this report on August 19, 1999.

The Audit Report will be placed on the public record on September 2, 1999.

Should you have any questions regarding the public release ofthis report, please contact

Ron Harris of the Commission's Press Office at (202) 694-1220.

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

audit report should be directed to Erica D. Holder or Joe Stoltz ofthe Audit Division at

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

Attachment as stated
17

CHRONOLOGY

SAN DIEGO CONVENTION AND VISITOR BUREAU, INC.

Audit Fieldwork

Exit Conference Memorandum

to the Committee

Response Received to the

Exit Conference Memorandum

Audit Report Received

10/10/98-10/17/98

01121199

03/23/99

08/l9/99
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