FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

May 6,2011 

MEMORANDUM 

To: The Commission 

Through: Alec Palmer 

Acting Staff Director 

From: PatriciaCarmona y 

Chief Compliance Officer 

Joseph F. Stoltz 

Assistant Staff DvKciOT 

Audit Division 

Thomas J. Nurthen (jjL-^ 

Audit Manager ' 

By: Mary Moss ^ , fj/lA 

Lead Auditor 

Subject: Audit Division Recommendation Memorandum on the United Association 

Political Education Committee (UAPEC) (A09-27) 

Discussed below are revisions to the attached Draft Final Audit Report (DFAR) as 

well as the Audit Division's recommendations. The revisions and recommendations are 

based on UAPEC's response to the DFAR. The Office of General Counsel reviewed this 

memorandum, concurs with the recommendations and provided the attached comments. 

UAPEC declined the opportunity for an audit hearing. 

Finding 1. Excessive Contributions to Candidates and Other Political 

Committees. 

In response to the Draft Final Audit Report, UAPEC acknowledged that it made 

excessive contributions. It stated, however its belief that the Draft Final Audit Report 

statement that the excessive contributions resulted from its failure to track contributions 

made by its affiliates was misleading. 
UAPEC stated it had certain procedures in place, albeit not foolproof, to track 

contributions by affiliated committees. Through the years, UAPEC had requested its 

affiliates, in writing, to advise it of contributions made to federal candidates. UAPEC 

explained that it called or otherwise communicated with affiliates that had PACs 

organized within a state where a candidate was seeking office to ascertain whether a 

contribution had already been made by the affiliate. UAPEC further stated it had no 

control over affiliates' day-to-day operations or access to their records. Therefore, 

identifying contributions made by aiffiliates was a difficult and challenging process. With 

respect to the remaining excessive contributions, UAPEC noted that it made written 

requests for refunds prior to the audit. 

Finally, UAPEC provided documentation that it received an additional refund of 

$500 from a candidate committee, thus reducing the remaining excessive contributions to 

$25,000 ($25,500 - $500). 

The Audit staff offers the following conceming UAPEC's response. With respect 

to the two excessive contributions totaling $10,000, these contributions would not have 

been addressed in the Interim Audit Report had the documentation submitted in response 

been made available during the audit fieldwork. 

The following was noted with respect to the remaining nine excessive 

contributions: 

o Prior to the audit, UAPEC sent letters to four committees, requesting refunds 

from three and asking that the excessive amount be applied to debt reduction 

for another.' These letters were sent subsequent to UAPEC's receipt of 

Requests for Additional Information from the Commission that questioned 

whether the contributions were excessive. 

o For the remaining five excessive contributions, UAPEC has not presented any 

evidence that it attempted to resolve the matter prior to the audit. 

It is the Audit staff's opinion that UAPEC resolved excessive contributions 

totaling $17,225 and made efforts to resolve the remaining excessiye contributions 

totaling $25,000. 

The Audit staff recommends that the Commission find that UAPEC made 

excessive contributions in the amount of $42,225 and that $25,000 of that amount remains 

outstanding. 

UAPEC subsequently requested that this committee refund the excessive contribution. 
Finding 2. Failure to File Notices and Properly Disclose Independent 

Expenditures. 

In response to the Draft Final Audit Report, UAPEC stated, that although it 

understood the 24-hour and 48-hour independent expenditure notice requirement, it did 

not believe that the Act or Regulations provided any guidance on when materials such as 

yard signs, mini-billboards, shirts, hats, etc., should be considered disseminated. 

Therefore, although it planned on implementing its new revised procedures, it requested a 

clarification conceming the precise date when the 24 and 48-hour notices should have 

been filed. 

The Audit staff and the Office of General Counsel agree that the practical 

dissemination date for campaign materials as described in this report can either be the date 

UAPEC receives the materials from its vendors at its headquarters or the first date that 

UAPEC's local unions make the materials available to members of its restricted class. 

The Audit staff reconunends that the Commission find that UAPEC was required 

to file 24 or 48-hour notices for independent expenditures based on the dissemination date 

rather than payment date, and that UAPEC failed to keep a record of the dissemination 

date for the materials that were the result of the independent expenditures. Finally, 

UAPEC may consider die date such materials are delivered to its headquarters as the 

dissemination date for the purpose of filing 24 or 48-hour notices. 

Finding 3. Failure to Properly Disclose Transfers from Affiliated Committees 

The Audit staff recommends tfiat the Commission find that UAPEC incorrectly 

disclosed transfers from affiliated political committees. 

If the above recommendations are approved, the Audit staff will prepare a 

Proposed Final Audit Report within 30 days of the Commission's vote. 

Should an objection be received, 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 on Voting Ballot Matters. 

Should you have any questions, please contact Mary Moss or Thomas Nurthen at 694-

1200. 

Attachments: 

- Draft Final Audit Report of the Audit Division on the United Association Political 

Education Committee 

- Office of General Counsel Analysis Received January 18,2011 

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

Audit Division on the 

United Association Political 

Education Committee 

January 1, 2007 - December 31, 2008 

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 commi 11 cc 

appears not to have nicl 

the threshold 

requirements for 

subsuiiuial coiiiplianc^' 

with the Act.' 'ilic aiiilic 

de||cnnillc^ whcihcr ilic 

comniiiice complied wiih 

the limiiaiions, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Actioif 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed m this 

report. 

About the Commj^ e (p. 2) 

The United Associatiot\^0pical Education Committee is a separate 

segregated fund of thellf n^^Association of Joumeymen and 

Apprentices of the !l^iitjSTibiri^p|^ Pipefitting Industry of the United 

States and Cana^^headquart^r^ in Annapolis, Maryland. For more 

informationy::^]^: tiie Committee Si^ization chart, p. 2. 

Financiili^tivity (p. 2) 

• Receipts ''^'}^^. 

.,>^.:.q Contribufll{fei|f!E^^fidivi '^|?|?. 

&;s^ransfers frSf^Sftiliates 

^^nds from FSlitol Candidates 

iS^eipts 

Cdl^H^Bns to^^l^al Candidates 

IndepilKpent Expenditures 

Operat&. Expenditures 

er lift^rsements 

urscmtents 

$ 3,130,530 

313,467 

33,500 

230.574 

$ 3,708,071 

$ 2,103,850 

510,314 

72,655 

1.392.617 

$ 4,079,436 

It 

m 

Findings and Recommendations (p. 3) 

• Excessive Contributions to Candidates and Other Political 

Committees (Finding 1) 

Failure to File Notices and Properly Disclose Independent 

Expenditures (Finding 2) 

Failure to Properly Disclose Transfers from Affiliated 

Committees (Finding 3) 

2 U.S.C. §438(b). 
Draft Final Audit Report of the 

Audit Division on the 

United Association Political 

January 1, 2007 - Q^rriber 31, 2008 

4' 
Table of Contents 

Page 

Part I. Backgroimd 

Authority for Audit 1 

Scope of Audit 1 

Part II. Overview of Committee ^'i'^^ 

Committee Organization ^ 2 

Overview of Financial Activity ^ t|sSP;i.. 2 

Part III. Summaries 

Findings and Recommendations j 

% 

Part IV. Findings and Recomm^datioiis 

Finding 1. Excessive Contrife^jons to Candr^^:^niKl Other Political "^ii, 

Committees ^^S' " 4 

Finding 2. Failure to File Notii^'dli^^perly Di^fJ^e Independent 

Expenditures 'fe.^'^l^ . ''^^^ ^ 

Finding 3. Failurp^g^roperly DiS^^3.se TraM|||^. from Ai|S;iated 

Co A^-fe^^^ ^ -^^ ^ 7 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the United Association Political Education Committee^ 

(UAPEC), 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^i^Jield investigations of any 

political committee that is required to file a report under^JlifS.C. §434. Prior to 

conducting any audit under this subsection, the ConiMlplciii must perform an intemal 

review of reports filed by selected committees to dfjMhiri^.S.:the reports filed by a 

particular committee meet the direshold requireMfntis for su6lsMhtial compliance with the 

Act. 2 U.S.C. §438(b). 4^0'^' 

Scope of Audit 

Following Commission approved procedures, Wt^ Aiulii siafi^ evaluated var^^te factors 

and as a result, this audit examined: 

1. The disclosure of disbursements, debts and obligations. 

2. The disclosure of expenses allocated between federal and non-federal accounts. 

3. The review of contributions made iti federal candidates. 

4. The disclosure of individual conti ilniior's occupation and n-^e of employer. 

5. The consistency between reported f^ures and bank records. 

6. The completene.s.s of rectinls. 

7. Other commitiee oJVl•atioll^ necessary tq the review. 

^ On June 10,2010, UAPEC amended its Statement of Organization and changed its name to the United 

Association Political Education Conimittee (United Association of Journeymen and Apprentices of the 

Plumbing and Pipefitting Industry of the United States and Canada). UAPEC also added its connected 

organization's name to its Statement of Organization in this amendment. 
Part II 

Overview of Conmiittee 

Committee Organization 

Important Dates UAPEC 

• Date of Registration September 23,1976 

• Audit Coverage January 1, 2007 - December 31, 2008 

Headquarters AnnapoMi Pliryland 

Bank Information 

• Bank Depositories 

• Bank Accounts Ipree 

• 

Treasurer 

• Treasurer When Audit Was Conducted l^jlLiamgJ 

• Treasurer Durine Period Covere^l bv^udit Wii^ ^ Hite 

Management Information ^'^^^^ 

• Attended FEC Camp;ii^;ii Finance Se^ftjar 

• Used Commonly ^^ailabli* C^npaign"^ 

Management So^Sii'I'.'U'ki^^ N'Jy 

• Who Handled AcSfto g andS "fJ ff^olunteer staff and consultant 

Recordkeeping Tasic^' 

Sr.-

Overview of Finloicial Activity 

(Audited Amounts) 

Cash on hand^|j[pnuary 1, iOOT $ 1,121,310 

o Gontributionsl^^ Individuals 3,130,530 

o Transfers from A iTi 1 iaie.s 313,467 

o Refunds from Federal C'andiduics 33,500 

o Other Receipts ^ 230,574 

Total Receipts $ 3,708,071 

o Contributions to Federal Candidates 2,103,850 

o Independent Expenditures 510,314 

o Operating Expenditures 72,655 

o Otiier Disbursements 1,392,617 

Total Disbursements $4,079,436 

Cash on hand @ December 31,2008 $ 749,945 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Excessive Contributions to Candidates and 

Other Political Committees 

The Audit staff identified 12 contributions made by UAPJ-.Ci to nine candidate 

committees and two other political committees that, wh^ajiyregated with contributions 

made by its affiliates, appeared to have exceeded tiic Ii^|||pn by $42,225. The 

excessive contributions were not eligible for redesiyiiaiiori^i^ihjp Audit staff 

recommended that UAPEC provide evidence ^^^pnstrating fiitilhe contributions were 

not excessive or provide evidence that refundSt.were received f^6H^^i^e recipient 

committees. In response, UAPEC providtd'^jiyidence that two of thti^i^cessive 

contributions, totaling $10,000, were timely ri^s^lved and that it received-tcfunds totaling 

$6,725 from four recipient committees. UAPfi^^^o pj^ided copies of 1|t^rs mailed to 

the remaining five committees r^quesling refunds'©^^^^00. (For more defiiil, see p.4.) 

Finding 2. Failure to File Notices a^^roperly Disclose 

Independent Expenditures 

UAPEC disclosed i||^^^ t expenditures, loialing S51(),3i4^pn Schedule E (Itemized 

Independent Ex^i|i^^i:esj^The indepe^leiii expendiiures were reported when paid, which 

in most cases waiSer the date ofthe eledion. UAPEC should have disclosed these 

independent expen^^|§ as memo entries on Schedule E and a corresponding debt on 

Schedule.fti^:Hnally, U.-M'I-IC' failed to tmiely file.any corresponding 24 or 48-hour notices. 

UAPECliP^ m tiic Aiiclii staff s conclusio^pid, as recommended, provided a written 

co^ of its new pfoi|:dures. TFor more detail, sfe p. 5.) 

Findi%^ 3. Failure to Properly Disclose Transfers From 

Affilial%Committees 

UAPEC jncdni^^ disclosed triuisfers from affiliated political committees totaling 

$313,467 as eitn^t^putemized contributions from individuals or as contributions from 

other political comfM^^^M'hese transfers should have been reported and itemized as 

Transfers from Affili^^pBier Party Committees. UAPEC complied with tiie Audit 

staffs recommendation and filed amended reports properly disclosing all of the transfers. 

(For more detail, see p. 7.) 
Part rv 

Findings and Recommendations 

Finding 1. Excessive Contributions to Candidates and 

Other Political Committees 

Summary 

The Audit staff identified 12 contributions made by UAPEQ to nine candidate 

committees and two other political committees that, wheEti|t^egated with contributions 

made by its affiliates, appeared to have exceeded the Ij^^^hn by $42,225. The 

excessive contributions were not eligible for redesijinaii^^^e Audit staff 

recommended that UAPEC provide evidence demoiisiuitin'^toL the coritributions were 

not excessive or provide evidence that refund^^^j^^re received raSin.the recipient 

committees. In response, UAPEC provided:|\jpence that two orihl|?excessive 

contributions, totaling $10,000, were timelyffisolved and tiiat it rec^U refunds totaling 

$6,725 from four recipient committees. UAft]g.a1so provided copies^i||lf tters mailed to 

the remaining five committees requesting refurilfef $2I^SSS. 

••".'^ii: 

Legal Standard 

A. Authorized Committee Limifi;. N^Miiliicandidati^Mical committee shall make 

contributions to an authorized commiltee tiiai aggregate ii^^than $5,000 per election or 

to any other politic^p^^^^j^ee in any cajjendar vear which, in the aggregate, exceeds 

$5,000. 2 U.S.C,^;^r^(a7(^^) and (C);; 11 CI-'R ?f 110.2^.anl (d). 

B. Contribution Lilhitations Affiliated Coinmittees. For the purposes of tiie 

contribution limitationSiisf 1 \^0^^^^.2, alK^gntributions made by more than one 

affiliat^efiVcommittee, regarji® if mi||^*poIiii& comm under 11 CFR §100.5, 

shad!l>be"considered to be mad^^y a single^jBMcal committee. 11 CFR §110.3(a)(1). 

C. Re#signation of Eki^psive 

committe^ieceives an exC^jve coni 

ibutions. When an autiiorized candidate 

tion, (or a contribution that exceeds the 

committee"s-'i^t; debts outst'^ling), the conmiittee may ask the contributor to redesignate 

the excess portibllof the coiiS}ution for use in anotiier election. The committee must 

inform the contriDul^r^tha!^^ 

1. The redesigrftf <ii^]^:^U^t be signed by tiie contributor; 

2. The redesignatifeh must be received by tiie conunittee within 60 days after the 

committee received the original contribution; and 

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

§110.1(b)(5). 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper redesignation or refund the excessive portion to the donor. 11 CFR 

§§103.3(b)(3) and 110.1(b)(5)(ii)(A). Further, a political committee must retain written 

records conceming the redesignation in order for it to be effective. 11 CFR § 110.1(1)(5). 
Facts and Analysis 

The Audit staff identified contributions made by UAPEC that appeared to exceed the 

limitations by $42,225. These excessive contributions consisted of 10 contributions to 

nine candidate committees totaling $32,225 and two contributions to other political 

committees totaling $10,000. A majority of tiie excessive contributions were the result of 

UAPEC not tracking contributions made by its affiliated committees. UAPEC and its 

affiliates share a contribution limitation. At this time, the excessive contributions are not 

eligible for redesignation and UAPEC can only request a refund from the recipient 

committees. 

At tiie exit conference, the Audit staff provided UAPEC mS^Sentatives with a schedule 

of the excessive contributions. In response, UAPEC's.j^B^el (Counsel) provided copies 

of letters sent to each recipient committee requesting rc^^^of the excessive 

contributions. Counsel also related that well before the auiB^fAPEC underwent a 100% 

turnover in staff The new director instituted p|^^ams and prd^Mjiires designed to 

monitor the contributions made by affiliates^iS^omply more fiu^^ith the requirements 

of tiie Act. "^Mi,. 

Interim Audit Report Recommendation: ai^llf^itomniittee KiE^iiponse 

The Audit staff recommended that UAPEC provid^:^4jehce demonstrating tSe 

contributions were not excessive or continue to seek refiinds and provide evidence of any 

refunds received. . . 

In response to the reco^miiaendation, UAi|EC denionsfe^d tiiai;^|j 

• Two exces^5?,e contribiiiEiipns ($10,()()()} were resolved in a timely marmer. For 

one excessivfe,;:(iontributit),n, UAPEC' provided documentation tiiat it received a 

J^l^^efund in^^2OO3#p0|ii|jie^^^ contribution, UAPEC provided 

,^i^&piW^oJtetters to=iiaid from th^^teipierit^mmittee, agreeing tiiat the excessive 

^p^&rtion ($5?i|l§!|l.) should fee deposi^^li|p1the committee's non-federal account. 

^^ijt^The documentitipn disctiss^d above was not available during the audit fieldwork. 

• ir'p^ieived refunds filpm four cifehe recipient committees totaling $6,725. 

• SeconcTlllt^rs were seiit to the remaining committees requesting refunds totaling 

$25,500. ' ' i ^ ^ ' 

Finding 2. Failiure to File Notices and Properly Disclose 

Independent Expenditures 

Summary 

UAPEC disclosed independent expenditures, totaling $510,314, on Schedule E (Itemized 

Independent Expenditures). The independent expenditures were reported when paid, 

which in most cases was after the date of tiie election. UAPEC should have disclosed 

these independent expenditures as memo entries on Schedule E and a corresponding debt 

on Schedule D. Finally, UAPEC failed to timely file any corresponding 24 or 48-hour 
notices. UAPEC agreed with the Audit staff's conclusion and, as recommended, 

provided a written copy of its new procedures. 

Legal Standard 

A. Definition of Independent Expenditures. The term "independent expenditure" 

means an expenditure by a person for a communication expressly advocating the election 

or defeat of a clearly identified candidate that is not made in coordination with any 

candidate or authorized committee or agent of a candidate. 11 CFR § 100.16(a) 

B. Disclosure requirements - general guidelines. An indjcpendent expenditure shall be 

reported on Schedule E if, when added to other independ||&xpenditures made to the 

same payee during the same calendar year, it exceeds Independent expenditures 

made (i.e., publicly disseminated) prior to payment sK|&fl|be disclosed as "memo" 

entries on Schedule E and as a reportable debt on Sjfejieduie-^^^ expenditures 

of $200 or less do not need to be itemized, though^tHe commififeijnust report the total of 

tiiose expenditures on line (b) on Schedule E. IT CFR §§104.3ffipi)(vii), 104.4(a) and 

104.11 

C. Last-Minute Independent Expenditure Rej^Qj^ts (2^pour Notices)^^y 

independent expenditures aggregating $1,000 or rriq^^l^ith respect to any g^kn election, 

and made after tiie 20'*' day but more^ than 24 hours BlSe the day of an election must be 

reported and the report must be reCi^ij^ed E^^f the CommisfM within 24 hours after the 

expenditure is made. A 24-hour noticil is reqiiiied for eacfiteitional $1,000 that 

aggregates. The 24-te^nQtice must b%fi1ed on a Schedule^^^e date that a 

communication is#3Sy%s^pminated^i§W as tiie dale tiiat me Committee must use 

to determine wh^K^the total^^iount of inMncndent exiieiulitures has, in the aggregate. 

reached or exceedd^ threshc^i reportingmount of $1,000. 11 CFR §§104.4(f) and 

104.5(gK2). %^ 

D. Lust-Minute l^^^en%i^|Jp^xpenM^|4|^I|L^^ Any 

independent expenM^^, aggrSg^lting $ lO.oSiilr more with respect to any given election, 

at any lime during a cal^dar yeai;;"]^^ to and including the 20th day before an election, 

must disclo.se this activity^&thin 4^ fe^s each time that the expenditures aggregate 

$10,000 or moj^e. The noti^|^jrmust be'nled with the Commission within 48-hours after 

tiie expenditu^ls made.. 1 lli;lFR.§§ 104.4(f) and 104.5(g)(1). 

Facts and AnalysiadP' 

Between August 27, 2u|p»id December 3, 2008, UAPEC made eight disbursements 

totaling $510,314 for the purchase of materials such as mini-billboards, yard signs, 

posters, shirts, hats, etc. These disbursements were itemized on Schedules E, in support 

of Barack Obama, filed with the report covering the period in which the payments were 

made. A majority of the independent expenditures were related to one payment, in the 

amount of $324,209, tiiat was paid after the 2008 General election.^ UAPEC should have 

disclosed these independent expenditures as memo entries on Schedules E, filed with 

reports covering the dates when the materials were disseminated and included a 

corresponding debt on Schedule D (Debts and Obligations). 

^ UAPEC received a refund of $30,710 relative to this payment. 
Further, UAPEC did not timely file any 24 or 48-hour notices of its independent 

expenditures and did not maintain documentation of the dissemination date for any of the 

materials. However, the invoices were dated either October 31, 2008 or November 18, 

2008. Therefore, it appears likely that the materials were disseminated within a notice 

period. 

This matter was discussed witii UAPEC representatives during the exit conference. In 

response, Counsel stated that as a result of the audit, UAPEC's staff now understands the 

reporting requirements for independent expenditures, including 24 and 48-hour notices, 

and the need to document dissemination dates. However,^^were unsure how the 

dissemination date would be determined since UAPEQ^^trally distributes materials 

directly to local union members or ships the material^t¥&al unions for distribution. 

Counsel suggested that in the future, UAPEC will ehMge it^mcihod of recording, 

aggregating and filing the required notices bas.ed!:pn the date that materials are first 

received at UAPEC headquarters. This data wbtild be UAPEC'sMfcemination date for 

24 and 48-notices. 

Interim Audit Report Recommendaii^|l^,an<^:^mmittee Re^jponse 

The Audit staff recommended th^ilf^PEC implerS^rie^'ised procedures iri^irder to 

properly disclose independent exp^d%r!e:s on Schediu'lf s .E and/or D and track 

aggregation and dissemination for %tii tH'^ M and 48-h8^u^^nptice requirements. 

In response, UAPEC ^l^^^'iti i the Aiidit sia.fV'^j^m llusioM , as recommended. 

provided a written copy of^^pi^w 'mdcp^dcr0^^ptiim^ procedures 

Finding 3. Faflure tj^^roperl^jpisclose Transfers from 

Affiliated Committees 

Summary ^ '"'^W 

iiicoriectly (li>cIo.scd iian>|^s from affiliated political committees totaling 

$313,467. as either uniteini/.c(l conlteutions from individuals or as contributions from 

otiier poliucal committees. These transfers should have been reported and itemized as 

Transfers from Affiliated/Other Party Committees. UAPEC complied witii tiie Audit 

staff's recommendation and filed amended reports properly disclosing all of the transfers. 

Legal Standard 

Disclosure Required for Transfers from Affiliated Committees. A political 

committee must disclose the total amount of transfers from affiliated committees, and the 

identification of each affiiiated committee that makes a transfer to the reporting 

committee during the reporting period, together with the date and amount of each 

transfer. 2 U.S.C. §434(b)(2)(F) and (3)(D). 

Facts and Analysis 

UAPEC incorrectly disclosed transfers totaling $313,467 from affiliated political 

committees. Transfers from four affiliated committees totaling $27,867 were included in 
8 

tiie unitemized contributions from individuals' total. The remaining transfers from 21 

affiliated committees, totaling $285,600, were itemized as contributions from Other 

Political Committees. All of tiiese transfers should have been reported and itemized as 

Transfers from Affiliated/Other Party Committees. UAPEC representatives were advised 

of these disclosure errors at the exit conference. 

In response, UAPEC's Legal Counsel related there had initially been some uncertainty 

among UAPEC staff conceming whether the affiliates (local unions) were acting as 

collecting agents. Counsel stated after further investigation, UAPEC staff concluded the 

receipts were in fact transfers from affiliates and agreed to a^nend tiie reports as 

recommended. ^^-^^ 

Interim Audit Report Recommendation aia^^^^^^ Response 

The Audit staff recommended that UAPEC amend il^i fepoSvtQ. properly disclose the 

transfers from tiie affiliated committees totalirigC$313,467 ($2§iS-i^00 + 27,867) on 

Schedule A, Line 12, Transfers from Affi1iat;eii'C)ther Party Comiiifttees. In response, 

UAPEC filed amended reports properly disisjosing all of the transferSv; 

1^ "-^¥ 
FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 2(M6.3 

MEMORANDUM 

TO: 

FROM: 

SUBJECT: 

Patricia Cannona 

Chief Compliance Officer 

Joseph F. Stoltz 

Assistant Staff Director 

Christopher Hughey 

Acting General Counsel / 

Lawrence L. Calvert, Jr. 

Associate General Counse' 

Lorenzo Holloway ^-jj^^— 

Assistant General Counsel 

For Public Finance and Audit Advice 

Delanie DeWitt Painter g^^ ^^^^ 

Attomey 

Draft Final Audit Report of the Audit Division on the United Association 

Political Education Committee (LRA 818) 

The Office of General Counsel has reviewed the Draft Final Audit Report of the 

Audit Division (**Drait Report") and the Audit Division's Recommendation 

Memorandum ("ADRM") on the United Association Political Education Committee 

("UAPEC" or the "Committee") and has the following comments. The Draft Report sets 

forth the Audit Division's basis for three findings: Finding 1. Excessive Contributions to 

Candidates and Other Political Committees; Finding 2. Failure to File Notices and 

Properly Disclose Independent Expenditures; and Finding 3. Failure to Properly Disclose 

Transfers frohi Affiliated Committees. The Committee responded to the Draft Report on 

December 7,2010 ("DFAR Response") but did not request an audit hearing. The 

Committee, however, raises the legal issue of how to determine for reporting purposes 

when independent expenditures are disseminated to the public if the nature of the 

materials (yard signs, mini billboards, shirts, hats, etc.) that are sent from the national 

union to local chapters and members makes it difficult to know when the materials are 

disseminated to the public* Our comments focus on this legal issue (Finding 2). If you 

We note that we have not commented at any prior stage of this audit. 
Memorandum to Joseph F. Stoltz 

Draft Final Audit Report ofthe Audit Division on the 

United Association Political Education Committee (LRA 818) 

Page 2 

have any questions, please contact Delanie DeWitt Painter, the attomey assigned to this 

audit. 

I. BACKGROUND - FAILURE TO FILE NOTICES AND PROPERLY 

DISCLOSE INDEPENDENT EXPENDITURES (FINDING 2) 

The auditors conclude that UAPEC did not properly disclose independent 

expenditures on its reports and did not timely file 24 and 48 hour notices for its 

independent expenditures.^ UAPEC made 8 disbursements totaling $510,314 to purchase 

materials such as mini billboards, yard signs, posters, shirts, hats, etc. UAPEC itemized 

these disbursements as independent expenditures supporting Barack Obama on Schedule 

E as of the date of payment. Most of these independent expenditures relate to one 

payment of $324,209 made on December 3, 2008, after the 2008 general election, and 

disclosed on line 24 Schedule E with a date of December 10, 2010. The auditors state 

that UAPEC should have disclosed these independent expenditures as memo entries on 

Schedule E for the reports covering the dates when the materials were publicly 

disseminated, and included a corresponding debt on Schedule D. In addition, UAPEC 

did not timely file any 24 or 48-hour notices of independent expenditures. Because 

UAPEC did not maintain documentation ofthe public dissemination date for any of the 

materials, the auditors do not know the exact amount that required such notices. The 

auditors conclude that some of the materials were likely disseminated within the notice 

period because ofthe dates of some invoices close to the election and the $324,209 

payment after the election and because UAPEC acknowledges that the materials were 

disseminated prior to the election. 

The Draft Report states that UAPEC representatives told the auditors they were 

unsure how to determine the dissemination date because UAPEC generally distributes 

these materials directly to local union members or ships the materials to local unions for 

distribution. UAPEC suggested that in the future it would change its metiiod of filing the 

required notices and use the date that materials are first received at UAPEC headquarters 

as the dissemination date for filing 24 and 48-hour notices. 

In the Interim Audit Report ("lAR"), the auditors recommended that UAPEC 

implement revised procedures to properly disclose independent expenditures on 

^ The auditors provided us with additional information to clarify the facts in the Draft Report. We 

suggest that this information be included in the revised finding. Specifically, the auditors have informed us 

that the revised finding will clarify that UAPEC eventually filed notices, but did not file them timely, and 

that a £324,209 payment on December 3, 2008 was related to numerous invoices. 

^ According to the Audit staff, one payment check dated December 3,2008 related to $324,209 of 

the independent expenditures and was payment for a number of invoices dated between March 31, 2008 

and November 18,2008, but the invoices could not be traced directly to the payment. The remaining seven 

invoices for independent expenditures totaling $186,105 were dated between August 20,2008 and 

November 7,2008 and paid between August 27,2008 and November 12, 2008. 
Memorandum to Joseph F. Stoltz 

Draft Final Audit Report of the Audit Division on the 

United Association Political Education Committee (LRA 818) 

Page 3 

Schedules E and D and to track aggregation and dissemination for the 24 and 48 hour 

notice requirements. The Draft Report states that in response to the lAR, UAPEC agreed 

with the Audit staff's conclusion, and provided the recommended written copy of its new 

independent expenditure tracking procedures. 

Nevertheless, the Committee addresses the issue in its response. It states that it 

understood the independent expenditure notice requirements but was not able to identify 

an earlier dissemination date because the nature ofthe material made it unable to know 

precisely when the material was disseminated to the public. The Committee explained 

that the material "is not typically disseminated on the date the material is received at 

UAPEC headquarters, the date the material is sent to the affiliates or the date the material 

is sent to members of the restricted class." DFAR Response at 2. Instead, the material 

would only be disseminated to the public on "multiple unknown dates" when "a shirt is 

worn in public or a yard sign is posted in a yard." Id. The Committee contends that the 

statute and regulations do not provide guidance on when such materials should be 

considered disseminated. The Committee stated, however, that "given the impossibility 

of identifying the dates of dissemination" it will in the future consider the material to be 

disseminated for reporting purposes on the date the material is received. Id. at 2-3. We 

understand that the auditors concur that this approach would be acceptable. 

II. UAPEC MAY REPORT INDEPENDENT EXPENDITURES AS OF 

DATE WHEN IT RECEIVES MATERIALS FROM VENDORS 

BECAUSE OF PRACTICAL IMPOSSIBILITY OF DETERMINING 

ACTUAL DATES OF PUBLIC DISSEMINATION 

The issue here is how to determine when materials are publicly disseminated for 

reporting purposes when the nature of the materials, such as yard signs, mini billboards, 

shirts, hats, etc. that are sent from a union to local union chapters and members makes it 

difficult to know when the materials are actually disseminated to the public by tinion 

members. We concur with the Audit staff that UAPEC may use the date when UAPEC 

receives the independent expenditure materials from vendors as the date of public 

dissemination for reporting and aggregation purposes. UAPEC could also use a later 

date, such as the date it ships the materials to local unions or union members, if it 

maintains records to support that date. 

An independent expenditure is a communication expressly advocating the election 

or defeat of a cleariy identified candidate that is not coordinated with any candidate or 

authorized committee. 11 C.F.R. § 100.16(a). A committee must report independent 

expenditures as of the date when they are publicly distributed or publicly disseminated. 

See 11 C.F.R. §§ 104.4,104.5(g), see also 11 C.F.R. § 109.10. 

A committee must file notices within 48 hours of the date an independent 

expenditure is publicly distributed or otherwise publicly disseminated for independent 

expenditures aggregating $10,000 or more with respect to a given election made at any 
Memorandum to Joseph F. Stoltz 

Draft Final Audit Report of the Audit Division on the 

United Association Political Education Committee (LRA 818) 

Page 4 

time during the calendar year up to and including the 20th day before an election. 11 

C.F.R. §§ 104.4(b)(2) and 104.5(g). In addition, a committee must file a notice within 24 

hours of when each independent expenditure aggregating $1,000 or more with respect to 

any given election is publicly distributed or otherwise publicly disseminated if that occurs 

after the 20th day but more than 24-hours before the election. 11 C.F.R. §§ 104.4(c) and 

104.5(g). To determine when a committee must file 24 and 48-hour notices, independent 

expenditures are aggregated as ofthe first date that an independent expenditure is 

publicly distributed or otherwise publicly disseminated. 11 C.F.R. § 104.4(f), 104.5(g). 

The Commission explained in the rulemaking that the term "publicly distributed" 

for independent expenditures has the same meaning as the term does for electioneering 

communications in 11 C.F.R. § 100.29(b)(3).* Explanation and Justification, "Biparti-san 

Campaign Reform Act of 2002 Reporting," 68 Fed Reg 404, 407 (Jan. 3, 2003). The 

Commission further explained that "publicly disseminated" "refers to communications 

that are made public via other media, e.g., newspaper, magazines, handbills." Id. at 407 

and 409. The Commission noted that when a communication is publicly distributed or 

disseminated, the person paying for the communication would be able to determine 

whether the communication meets the independent expenditure requirements including 

express advocacy. Id. at 407 

The materials at issue here would be "publicly disseminated" rather than 

"publicly distributed" because they are not broadcast communications. See 68 Fed. Reg. 

404, 407 and 409 (Jan. 3, 2003). The regulations and regulatory history are silent on how 

to determine the date when independent expenditures such as shirts, hats, yard signs, or 

mini billboards provided by a union to local unions and members are "publicly 

disseminated." The term "publicly disseminated," however, can be generally understood 

to mean the first date when a communication could be seen or heard by a member of the 

public, equivalent to the publication date for printed media such as a newspaper.^ Thus, 

we believe that the date these materials are publicly disseminated is the first date when 

the materials can be viewed or heard by members of the public, rather than only members 

of the union's restricted class under section 114.1(j). The types of materials at issue here 

* Section 100.29 (b)(3)(i) defines "publicly distributed" for electioneering communications as aired, 

broadcast, cablecast or otherwise disseminated through the facilities of a television station, radio station, 

cable television system, or satellite system. Electioneering communications do not include any 

communication publicly disseminated through a means other than broadcast, such as print media. 11 

C.F.R. § l00.29(bX3). 

^ In a pre-BCRA rulemaking in 2001 and early 2002 for then-section 109.1, the Commission 

considered a multi-prong test to determine when an independent expenditure was made for reporting 

purposes but decided on a rule that an independent expenditure is made on the first date on which the 

communication is published, broadcast or otherwise publicly disseminated. See Explanation and 

Justification fbr 11 C.F.R. § 109.1,67 Fed. Reg. 12837 (Mar. 20,2002). One conunenter on the 

rulemaking objected to the other possible prongs and to using the word "printed" (which the Commission 

changed to "published" based on the comment) because an independent expenditure is not made until the 

communication is disseminated to the public. Id. 
Memorandum to Joseph F. Stoltz 

Draft Final Audit Report of the Audit Division on the 

United Association Political Education Committee (LRA 818) 

Page 5 

are likely to be eventually seen by members of the public at some rime. See 

Memorandum to Joseph F. Stoltz, "Proposed Interim Audit Report, Democrat, 

Republican, Independent Voter Education Political Campaign Committee ("DRIVE") 

LRA 729" at 3-4 (Dec. 27, 2007). The committee here implicitiy acknowledged that was 

its intent for these materials by reporting disbursements for them as independent 

expenditures. The materials were paid for and obtained by the national office of 

UAPEC, distributed by the national office to local unions, and then either publicly 

disseminated by the local imions or, and particularly in the case of items such as t-shirts, 

and yard signs, distributed by local unions to the individual members of the restricted 

class who then "publicly disseminated" the materials when they decided to wear the tshirt, put up a sign in their yard, etc. 

We concur with the auditors that UAPEC failed to timely file 24 and 48 hour 

notices or to properly report these independent expenditures. While we acknowledge the 

inherent difficulty of determining the precise date of public dissemination of these 

materials, there is no indication that UAPEC made any attempt to disclose these 

independent expenditures in a way that would make the infonnation available to the 

public prior to the date of the election. Nor did it maintain records that would assist it or 

the auditors in determining a date that would be as close as possible to the date of public 

dissemination. 

The problem for future disclosure is that in the case of the materials that are 

distributed by UAPEC through the local unions to union members for display at a time of 

the individual members' choosing, it is practically impossible for UAPEC to know 

precisely when these kinds of campaign materials are first viewed by members of the 

public rather than only by members of its restricted class. A union member could wear a 

shirt, for example, to a union meeting or in the member's home and the shirt would only 

be seen by members ofthe restricted class, but once the individual ventures out in public, 

assuming the shirt is visible, the message would be disseminated to the public. Similarly, 

a local union could give a yard sign to a member, who could put it into his garage for 

several days before putting it on this lawn where it could be viewed by the public passing 

by. So one box of materials sent to one local union chapter could result in public 

dissemination of the materials over.a number of different dates, because each of many 

union members would make individual decisions about when to publicly disseminate the 

materials by wearing or displaying them. Those individual decisions are the actual dates 

when the independent expenditures are "publicly disseminated." It would be burdensome 

and impractical to require a union to track the use of these types of materials to determine 

when they are first viewed by members of the public. 

Because it is impractical to determine the actual dates when these materials are 

publicly disseminated, UAPEC could use the next earliest date in the distribution chain: 

the first date when the local union makes these materials available to members of its 

restricted class (or when the local union itself publicly displays materials such as "minibillboards," which we understand are four-foot by eight-foot signs.) These dates could be 
Memorandum to Joseph F. Stoltz 

Draft Final Audit Report ofthe Audit Division on the 

United Association Political Education Committee (LRA 818) 

Page 6 

determined for future independent expenditures, but might create an additional 

recordkeeping responsibility for UAPEC and its locai union chapters. These would be 

the latest dates that UAPEC could pragmatically use to determine the dates of public 

dissemination of these independent expenditures. The Committee, however, has 

evidentiy decided that using those dates - or an earlier date, when it sends the materials 

from its national headquarters to its local unions or members - would impose too much 

ofa recordkeeping burden, and instead proposes an even earlier date, when it receives the 

materials from its vendors. The Audit Division appears to concur with this approach. 

The date a national imion receives materials from vendors is not the actual date of 

public dissemination; however, this date is earlier than would otherwise be required and 

would disclose the relevant information to the public for a longer period before the 

election. Therefore, we concur that this approach is acceptable, as long as UAPEC 

ensures that the materials are eventually publicly disseminated by the local unions and 

union members so that their reporting of them as independent expenditures is accurate.