Draft Final Audit Report of the 

Audit Division on the 

Colorado Republican Federal 

Campaign Committee 

January 1, 2007 - December 31, 2008 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations ofany 

political committee that 

is required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold :,f^'^ 

requirements for^ijp^^ij 

substantial compliance^' 

with the Act^I.,'Ihe audi? 

determii]^].lv^ill^^^g 

commiliee complie^^^th 

th%Himtations, 

prohibiti^i^and 

disclosure^^lF^uirements 

About the Committecr^2) 

The Colorado Republican Fe^rff^mipaign Committee is a state 

party committee headquarter^En Greenwood Village, Colorado. 

For more information, seet:the a^>on the Committee 

Organization, p. 2. 1^^^ 

Financial 4^<|tivit3^ (p. 2) 

• Receipts ^'='^^^^1^ ^ 

o Contributionl^froin^Individuals 

o Contributions frdm^Political 

••^gpmmittees 

o ^sCrMsfers from Affiliated -and 

Other ... . PliSiy^.^pmmittee^'*' 

o TrahsfersS*bffii^^'onTfe(leral 

Acclufits 

r 

of the Act. 

Future Action' 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

o All Oilier Receipts 

Total Reciiipts, 

w 

^il^^^emeiits 

o ^^^nn g Expenditures 

Transfers to Affiliated and 

Other Party Committees 

Contributions to Federal 

Candidates and Committees 

Other Disbursements 

Federal Election Activity 

Refund of Contributions 

Total Disbursements 

1,401,637 

1,148,144 

8,073,144 

437,078 

130,887 

$ 11,190,890 

$ 1,898,431 

4,656,015 

39,800 

54,872 

4,109,265 

25,275 

$ 10,783,658 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Allocation of Expenditures (Finding 2) 

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

Audit Division on the 

Colorado Republican Federal 

Campaign Committee 

January 1, 2007 - December 31, 2008 
Table of Contents 

Part I. Background 

Authority for Audit 

Scope of Audit 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Recommendations 

Page 

4h 

Part IV. Findings and RecommehdatiQns 

Finding 1. Misstatement of Financial Activity^l?^ ^^^^ 

Finding 2. Allocation of Expenditures 

Si 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Colorado Republican Federal Campaign 

Committee (CRFCC), 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^^d field investigations 

of any political committee that is required to file a report under|r U.S.C. §434. Prior to 

conducting any audit under this subsection, the Commissiqn'iinWst perform an intemal 

review of reports filed by selected committees to determiiief if tiie|ceports filed by a 

particular committee meet the threshold requirement^'-for substanti'al^Compliance with the 

Act. 2 U.S.C. §438(b). ' \•••'fJ- •:.*' 

Following Commission-approved procedures, the A^ii^it^s^ff evaluated various risk 

Scope of Audit 

factors and, as a result, this audit examined: 

1. 

2. 

3. 

4. 

5. 

6. 

the disclosure of disbursements, ^tesand obligations;|f 

the disclosure of expenses allocated^ej^pn federal andtifon^ederal accounts; 

the disclosure of individual contribi^s'^^^pation and n^ie of employer; 

the consistency between reported figun^ a^^m^^i^. 

the completeness of Fgeprds; and %F 

other committee operation^ngcessary to th,e review. 

^••^5:^*^^•• 

if' 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration February 17,1976 

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

Headquarters Greenwood Village, Colorado 

Bank Information 

• Bank Depositories One 

• Bank Accounts Five Federal anid^Jhree Non-federal 

Treasurer 

• Treasurer When Audit Was Conducted ,..!^5hard Westfall 

• Treasurer During Period Covered by Audit ^ ^%p h Horntio Chavez ^^p-"" 

(lM2,0MOT/45/2OO7) / 

Rich'arWestfall (8/16/2007 to Present) 

Management Information 

. Attended Commission Campaign Finanfe'^^l 

Seminar \ 

• Who Handled Accounting?and^ %j 

Recordkeeping Tasks "^^.^ % 

f¥'aid si&^>^^ 

Oveiytew^^f F Activity 

(.'X 

Cash-on-hahd @ JanuaryEf^2007 $ 2,638 

Receipts 

o Contributioii^.fi'om Individuals 1,401,637 

o Contributions^&t)m Political^r^ommittees 1,148,144 

o Transfers from AiS;liated,gpd Other Party Committees 8,073,144 

o Transfers from Nonlf^d^l Accounts 437,078 

o All Other Receipts , p 130,887 

Total Receipts $ 11,190.890 

Disbursements 

o Operating Expenditures 1,898,431 

o Transfers to Affiliated and Other Party Committees 4,656,015 

o Contributions to Federal Candidates and Committees 39,800 

o Other Disbursements 54,872 

o Federal Election Activity 4,109,265 

o Refund of Contributions 25,275 

Total Disbursements $ 10,783,658 

Cash-on-hand @ December 31,2008 $ 409,870 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of CRFCC's reported figures with bank records revealed a 

misstatement of receipts and disbursements in 2007. CRFCC understated receipts by $70,809 and 

disbursements by $61,104. ^^^ ^ 

In the Interim Audit Report, the Audit staff recommended that ^cF^^,amend its disclosure reports to 

correct the misstatements. ""^^^ 

CRFCC did not submit a response to the Interim Audi^|^eport? In addition^^CC did not comply 

with the Audit staffs recommendation to file amended^disclosure reports to cdir^ct the 

misstatements. (For more detail, see p. 4) '^^^'Sk jht, 

Finding 2. Allocation of Expenditures 

During audit fieldwork, a review of disbursen^^nts made for all^icible activity indicated that 

CRFCC overfunded its share of non-federal 'a|fis3^:Jb5^ $131,725r-I^^^ it appears that 

CRFCC paid $19,000 out of its allocation acc%it fb&llOQyp non-fe^S^^ activity. 

In the Interim Audit Report,>the)|fudlt staff recommended tha^^ 'CRFCC demonstrate that the nonfederal accounts did not o^jerfund tn^rj,share of allocable activity and provide additional comments 

regarding the payment of cT^irfederal^ctivity from1|L&j,]location account. Absent such a 

demonstration, the Audit stal^^cpinl^ende^ that C^C C reimburse the non-federal accounts 

$131,725. ^ ""' ^ 

with the AMlt^staff s recomi^^ation ^^imonstrate that the non-federal accounts did not 

overfund their Wa|^e of allocabr#activity. In addition, CRFCC has not provided any documentation 

that demonstrates^mktthe non-fMeral accounts were reimbursed. (For more detail, see p. 6) 

CRFCC did'febt submit a re^Bnse tolmplnterim Audit Report. As such, CRFCC did not comply 
Part IV 

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of CRFCC's reported figures with bank records revealed a 

misstatement of receipts and disbursements in 2007. CRFCC understated receipts by $70,809 and 

disbursements by $61,104. 

In the Interim Audit Report, the Audit staff recommended that CRECC^amend its disclosure reports to 

correct the misstatements. .;j 

CRFCC did not submit a response to the Interim Audit Rfefblft^ In additionv-GllFCC did not comply 

with the Audit staffs recommendation to file amended llisclosiu-e reports to correct the 

misstatements. /i " 4' 

Legal Standard 

Contents of Reports. Each report must disclpse: 

the amount of cash-on-hand at the begi^^||nd end of thelr^Qjgiiiig period; 

the total amount of receipts for the reporting ])M^^ d for the^lendar year; 

the total amount of disbursements for the re^rtin^S|^^^>for the calendar year; and 

certain transactions that ^iliir^Jemization on^Sdbedule ^'Itemized Receipts) or Schedule B 

(Itemized Disbursement^Tm^. §434(b)(1i (2), (3), 14) and (5). 

Facts and Analysis 

A. Facts ..^5^^*^'^ ^ 

As part of fieldwork, the Aip[|^staff rM^nciled reported activity with bank records for calendar 

years 200.7> and/2008. The fo1l|>)y^ing cMjfoutlines the discrepancies for receipts and disbursements 

in 2007. Succee.ding paragraph:s%idress'^the reasons for the misstatements, if known. 

2007 Commiiitee; Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2007 

$3,198 $2,638 $560 

Overstated 

Receipts $861,368 $932,177 $70,809 

Understated 

Disbursements $794,275 $855,379 $61,104 

Understated 

Ending Cash Balance 

@ December 31,2007 

$70,291 $79,436 $9,145 

Understated 
CRFCC overstated its beginning cash balance by $560, which is unexplained but likely resulted 

from prior period discrepancies. 

The understatement of receipts resulted from the following: 

• Transfers from non-federal accounts, not reported $ 51,500 

• Erroneous deposit of non-federal funds, not reported 7,950 

• Unexplained difference 11.359 

Understatement of Receipts $ 70.809 

CRFCC transferred non-federal funds of $51,500 to its allocation account to pay for shared 

activity; however, it did not report these transfers. Also, in Decembsri20P7, CRFCC 

erroneously deposited non-federal funds of $7,950 into its federal^Q|>^rations accoimt. Three 

weeks later, in January 2008, CRFCC transferred these funds ba6&CBFCC reported the transfer 

back; however, it did not report the initial deposit. 

The understatement of disbursements resulted from the^ffollowiiag: 

• Disbursements, not reported K ^$1^*^0,500 

• Transfers to non-federal account, not reported Jr 23,600 

• Prior year payroll disbursements reported in error ^^^ ^ ^ (10,568) 

• Disbursement reported not supported b|^check or debit^^^^ (585) 

• Unexplained difference "^w v 8.157 

Net Understatement of Disbursements?S'^:'^i%v=:^ ^iffe^ $ 61.104 

The $9,145 understatement of the ending cash bllane^fwas-tl^^^ of the misstatements 

described above. .^fD^e^gK M"^ .r 

B. Interim Audit Repdrf^&-Audit Division Recommendation 

The Audit staff discussed the^inisstat||nen^ 200Twith a CRFCC representative during the exit 

conference and prpyiided,copies'Qf^^^^^^ detailing the errors. The representative 

stated that corrp15five5'aiDfeQ&^^ based on the audit recommendation. The CRFCC 

representativi^did not subn!i|£^i;espori£(|^fpllowing the exit conference. 

In the Interi^^^Hit Report, l^^udit stliff recommended that CRFCC: 

• amend itsrepprts to corr|^t the misstatements for 2007; 

• amend its nios^centl^^filed report to correct the cash-on-hand balance with an explanation 

that the changeWsulted from a prior period audit adjustment; and 

• reconcile the cash'^iance of its most recent report to identify any subsequent discrepancies 

that may affect the adjustment recommended by the Audit staff. 

C. Committee Response to Interim Audit Report 

CRFCC did not submit a response to the Interim Audit Report. In addition, CRFCC did not comply 

with the Audit staffs recommendation to file amended disclosure reports to correct the 

misstatements. The Audit staff made several attempts to determine the reason for CRFCC's 

^ Under 11 CFR § 106.7, state party committees are allowed to mix funds from their federal and non-federal operating 

accounts to pay for allocable expenses utilizing an allocation account. These accounts are considered federal accounts 

from which a committee must report all activity, including the non-federal portion. 
noncompliance or failure to request an extended response period. During one attempt, a CRFCC 

representative stated that CRFCC's response had been sent by FedEx to the Audit staff. However, 

when shipping details (such as the tracking number) or an emailed copy of the response was 

requested, the representative could not comply. 

Finding 2. Allocation of Expenditures 

Summary 

During audit fieldwork, a review of disbursements made for allocable activity indicated that 

CRFCC overfunded its share of non-federal activity by $131,725. In;;addition, it appears that 

CRFCC paid $19,000 out of its allocation account for 100% non-fe&eral activity. 

In the Interim Audit Report, the Audit staff recommended thaf'(^RFCib^0monstrate that the nonfederal accounts did not overfund their share of allocable aibtivi# and provide..additional comments 

regarding the payment of non-federal activity from the-^Sillocation account. Absent such a 

demonstration, the Audit staff recommended that CRBQC reimburse the non-federal efccounts 

$131,725. '""^^^K^. W 

CRFCC did not submit a response to the Interim Audit Rep6rt|i;^s such, CRFCC did not comply 

with the Audit staffs recommendation to d^^|trate that the li^^-^ederal accounts did not 

overfund their share of allocable activity. Im^f iti^^RFCC ha^\n.dt?provided any documentation 

that demonstrates that the non-federal accoimt^wefe* remibursed. Jp^ 

Legal Standard \ W 

A. Paying for Allocable-^jKpensesl||he Commission regulations offer party committees two ways 

to pay for shared federal^Mi^federalleXpenses. 

• They may pay the en^i^'amotmtlpjrthe shared^pense from the federal account and transfer 

funds from^^thg inon-federal^accouht-tEitne^fe^^^ account to cover the non-federal share of 

that expense; or^?m, 

• The^ihay establish a^ep|irate,€ede^^^^ allocation account into which the committee deposits 

fuhd§-:frQm both its fedefkl and ncm-federal accounts solely for the puipose of paying shared 

federal/ftoti-federal expegles. 11 CFR § 106.7(b). 

B. Disbursements frdAi. the AUbcation Account. Funds from federal and non-federal accoimts 

must be deposited into the aUdcation account solely for the purpose of paying shared federal/nonfederal expenses. 11 CFK:§l06.7(f)(l)(ii). 

C. Transfers. Generally, a political committee may not transfer funds from its non-federal account 

to its federal accoimt, except when the committee follows specific rules for paying for shared 

federal/non-federal expenses. 11 CFR §§102.5(a)(l)(i) and 106.5(g). 

D. Reporting Allocable Expenses. A state, district or local committee that allocates federal/nonfederal expenses must report each disbursement it makes from its federal account (or separate 

allocation account) to pay for a shared federal/non-federal expense. Committees report these kinds 

of disbursements on Schedule H-4 (Disbursements for Allocated Federal/Non-federal Activity). 11 

CFR§104.17(b)(3). 
Facts and Analysis 

A. Facts 

CRFCC maintained five federal bank accounts and three non-federal bank accounts during 2007 

and 2008. CRFCC represented one of these federal accounts as an "allocation account." CRFCC 

paid shared federal and non-federal expenses from this account, but it also made disbursements for 

purely federal expenses, for purely non-federal expenses and for transfers to other federal and nonfederal accounts. During the audit period, CRFCC transferred $403,750 from non-federal accounts 

into the allocation account. As of December 31,2008, CRFCC had disbursed all funds from this 

account.^ 

•A, 

During audit fieldwork, the Audit staff calculated the non-federal ^a^e of Scpenditures required to 

be disclosed on Schedule H-4 and compared that to the amount trMsferred from non-federal 

accounts. The review indicated that the non-federal portion oiihared'^^tivity was $244,905 and 

CRFCC spent $19,000 on purely non-federal activity. Thj^fgllclwing cfia^jexplains the calculation 

of overfimding by the non-federal accounts of $ 131,725^ 

Net non-federal transfers to the allocation account<^^ ^ 1|s$-395,630 

Non-federal portion of allocable expenses ^^fe ^ ^ (244,905) 

100% non-federal expenditures ^ (19.000) 

Net Overfunding of Non-federal Fun^f^^|^ ^ $131.725 

This net overfunding amount does not includ^the^iinpennjssible n^^federal activity paid out of the 

allocation account ($19,000). A committee is prohib|t^d4^ii|r^ funds from a non-federal 

account to reimburse a federal^^i^PP^t for non-ailjopble actfi^ty. Per 11 CFR §106.7(f)(l)(ii), 

funds must be transferred toltlie alldetti accounf'^solely for the purpose of paying shared 

federal/non-federal experisilsi; ji-' 

B. Interim Audit Repprt & Auidit Divisl^^ 

When the Audit:$ti^ff pres)ente tfie-jb^yerfunding'^^^ pre-audit and fieldwork, CRFCC 

representative^ offered n6'0Xi)l|^ati6i&^^j:,A exit conference, the Audit staff further discussed the 

overflmding^witii a CRFCC r^¥esentati^;^^and provided spreadsheets outlining the calculation of 

the overflmdiiig^^^d solely noil^^eral e^enditures paid from the allocation account. The CRFCC 

representative did^b]^ submit a r^onse to the matters presented at the exit conference. 

In the Interim Audit Re^nt. the^udit staff recommended that CRFCC demonstrate that the nonfederal accounts did not o^emmd their share of allocable expenses ($131,725), and that CRFCC did 

not pay for non-federal activity ($19,000) out of the allocation accoimt. Absent such a 

demonstration, the Audit staff recommended that CRFCC reimburse the non-federal account 

$131,725 and provide additional comments with respect to the $19,000 in 100% non-federal 

expenditures from the allocation account. 

^ Per CRFCC's bank statements, the allocation account balance was -$4,877 at December 31,2008. 

* Net non-federal transfers to the allocation account consist of total transfers to the allocation account from non-federal 

accounts ($403,750) less transfers from the allocation account to non-federal accounts ($8,120). 
8 

C. Committee Response to Interim Audit Report 

CRFCC did not submit a response to the Interim Audit Report. As such, CRFCC has not 

demonstrated that the non-federal account did not overfund its share of allocable activity. In 

addition, no documentation has been provided that demonstrates that the non-federal accounts have 

been reimbursed $131,725.