Part I
Background

Authority for Audit

This report is based on an audit of Nader for President 2004 (NFP), undertaken by the
Audit Division of the Federal Election Commission (the Commission) as mandated by
Section 9038(a) of Title 26 of the United States Code. That section states “After each
matching payment period, the Commission shall conduct a thorough examination and
audit of the qualified campaign expenses of every candidate and his authorized
committees who received [matching] payments under section 9037.” Also, Section
9039(b) of the United States Code and Section 9038.1(a)(2) of the Commission’s
Regulations state that the Commission may conduct other examinations and audits from

time to time as it deems necessary.

Scope of Audit

This audit examined:

1. The receipt of excessive contributions and loans.

2. The receipt of contributions from prohibited sources.

3. The receipt of transfers from other authorized committees.
4. The disclosure of contributions and transfers received.

5. The disclosure of disbursements, debts and obligations.

6. The recordkeeping process and completeness of records.

7. The consistency between reported figures and bank records.
8. The accuracy of the Statement of Net Outstanding Campaign Obligations.
9. The campaign’s compliance with spending limitations.

10. Other campaign operations necessary to the review.

Inventory of Campaign Records
The Audit staff routinely conducts an inventory of campaign records before it begins the
audit fieldwork. NFP’s records were materially complete and the fieldwork began

immediately.



e  Anexpense incurred for the purpose of determining whether an individual should
become a candidate, if that individual subsequently becomes a candidate,
regardless of when that expense is paid. 11 CFR §9034.4.

e Anexpense associated with winding down the campaign and terminating political
activity. 11 CFR §9034.4(a)(3).

Value of Capital Assets. The fair market value of capital assets is 60% of the total
original cost of the assets when acquired, except that assets that are received after the date
of ineligibility must be valued at their fair market value on the date received. A
candidate may claim a lower fair market value for a capital asset by listing the asset on
the NOCO statement separately and demonstrating, through documentation, the lower
fair market value. 11 CFR §9034.5(c)(1).

Entitlement to Matching Payments after Date of Ineligibility. If, on the date of
ineligibility (see above), a candidate has net outstanding campaign obligations as defined
under 11 CFR §9034.5, that candidate may continue to receive matching payments
provided that he or she still has net outstanding campaign debts on the day when the
matching payments are made. 11 CFR §9034.1(b).

Facts and Analysis
The Candidate’s date of ineligibility (DOI) was September 2, 2004. After becoming

ineligible due to the application of 11 CFR §9033.5, the Candidate continued to
campaign for the general election. For purposes of determining Net Outstanding
Campaign Obligations, the Audit staff only considered winding down costs incurred after
December 3, 2004, the end of the expenditure report period as described in 11 CFR
§9002.12.° Winding down costs were allocated between NFP and Nader For President
2004 General Committee (General Committee) using a 67/33 ratio, respectively, as
proposed by NFP and verified for reasonableness by the Audit staff. In addition, the
Audit staff reviewed NFP’s financial activity through September 30, 2005, analyzed
estimated winding down costs, and prepared the Statement of Net Outstanding Campaign
Obligations that appears on the next page:

6 Therefore, all operating expenditures incurred by NFP between 9/3/04 and 12/3/04 were attributed to the
General Committee and, as of July 2005, were fully repaid to NFP. See Footnote [b] to NOCO Statement

on the following page.



Overview of Financial Activity

(Audited Amounts)
Cash on hand @ October 14, 2003 $0
o Contributions from Individuals $ 1,541,996"
o_ Matching Funds Received 865,425"
o Loans Received 694,500
o Offsets to Operating Expenditures 189,702
o_ Transfers from General Committee 96,328
o Other Receipts 39,506
Total Receipts $ 3,427,457
o Operating Expenditures $ 2,647,353
o Loan Repayments 694,500
o_ Transfers to General Committee . 71,136
o Contribution Refunds 10,949
o Other Disbursements 880
Total Disbursements $ 3,424,818
Cash on hand @ December 31, 2004 $ 2,639

4 ‘Approximately 15,500 contributions from 11,000 individuals.
5 NFP received an additional $25,603 in matching funds after 12/31/04 for a total of $891,028. This represents

4.78% of the maximum entitlement ($18,655,000).



Part II
Overview of Campaign

Campaign Organization

Important Dates Nader for President 2004
e Date of Registration February 23, 2004
© Eligibility Period ” May 26, 2004 — September 2, 2004
e Audit Coverage October 14, 2003 — December 31, 20047
Headquarters Washington, DC
Bank Information
e Bank Depositories One
e Bank Accounts Four - checking
Treasurer
e Treasurer When Audit Was Conducted Carl Mayer
e Treasurer During Period Covered by Carl Mayer
Audit
Management Information
¢ Attended FEC Campaign Finance Seminar | Yes
e Used Commonly Available Campaign Yes
Management Software Package
e Who Handled Accounting and Paid staff
Recordkeeping Tasks

2 The period during which the Candidate was eligible for matching funds, beginning on the date of certification of
eligibility and ending on the date the Candidate announced his withdrawal from the campaign. See 11 CFR

§9033.
3 Limited reviews of receipts and expenditures were performed through June 30, 2005 to determine whether the

Candidate was eligible to receive additional matching funds. ~



Part IV
Findings and Recommendations

| Finding 1. Net Outstanding Campaign Obligations

Summary

Based on its financial activity through December 31, 2004, and estimated winding down

costs necessary to terminate the campaign, NFP did not receive matching fund payments

in excess of the Candidate’s entitlement. In response to the preliminary audit report NFP
concurred with the Audit staff’s conclusion.

Legal Standard
Net Outstanding Campaign Obligations (NOCO). Within 15 days after the
candidate’s date of ineligibility (see definition below), the candidate must submit a
statement of “net outstanding campaign obligations.” This statement must contain,
among other things:
e The total of all committee assets including cash on hand, amounts owed to the
committee and capital assets listed at their fair market value;
e The total of all outstanding obligations for qualified campaign expenses; and
e Anestimate of necessary winding-down costs. 11 CFR §9034.5(a).

Date of Ineligibility. The date of ineligibility is whichever of the following dates occurs
first:
e The day on which the candidate ceases to be active in more than one state;
e The 30th day following the second consecutive primary in which the candidate
receives less than 10 percent of the popular vote;
e The end of the matching payment period, which is generally the day when the
party nominates its candidate for the general election; or
¢ Inthe case of a candidate whose party does not make its selection at a national
convention, the last day of the last national convention held by a major party in
the calendar year. 11 CFR §§9032.6 and 9033.5.

Qualified Campaign Expense. Each of the following expenses is a qualified campaign

expense.
e Anexpense that is:

o Incurred by or on behalf of the candidate (or his or her campaign) during the
period beginning on the day the individual becomes a candidate and
continuing through the last day of the candidate’s eligibility under 11 CFR
§9033.5;

o Made in connection with the candidate’s campaign for nomination; and

o Not incurred or paid in violation of any federal Jaw or the law of the state
where the expense was incurred or paid. 11 CFR §9032.9.



FEDERAL ELECTION COMMISSION
WASHINGTON, D.C. 20463

January 31, 2006

MEMORANDUM

TO: ROBERT W. BIERSACK
‘PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ
ASSISTANT STAFF CTOR
AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON
NADER FOR PRESIDENT 2004
Attached please find a copy of the final audit report and related documents on

Nader for President 2004 that was approved by the Commission on January 20, 2006.

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

Attachment as stated

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

Web Manager



The Statement of Net Outstanding Campaign Obligations as of September 2, 2004
presented above shows NFP to be in a deficit position in the amount of $418,951.
Presented below are adjustments for funds received after September 2, 2004:

Net Outstanding Campaign Obligations (Deficit) as of 9/2/04 ($ 418,951)

Private Contributions Received 9/3/04 through 3/1/05 215,703

Matching Funds Received 9/3/04 through 3/1/05 194,522

Net Outstanding Campaign Obligations (Deficit) Remaining ($ 8,726)
as of 3/1/05

As presented above, NFP has not received matching fund payments in excess of the
amount to which the Candidate is entitled.

The Audit staff’s prepared Statement of Net Outstanding Campaign Obligations was
provided to NFP at the conference held at the end of fieldwork and NFP offered no

response.

Committee Response to Recommendation and Audit Staff's

Assessment
In response to the preliminary audit report, NFP concurred with the Audit staff’s

conclusion that no matching funds were received in excess of the Candidate’s
entitlement.

| Finding 2. Stale-Dated Checks

Summary

The Audit staff identified 10 stale-dated checks totaling $2,731 issued by NFP. In the
preliminary audit report the Audit staff recommended that NFP provide evidence that the
checks were not outstanding or make a payment of $2,731 to the U.S. Treasury. In
response to the preliminarily audit report, NFP provided documentation that it voided and
subsequently reissued 4 checks totaling $1,578. NFP further demonstrated that as of
September 30, 2005, the recipients had cashed all 4 reissued checks. Finally, NFP
submitted payment to the U.S. Treasury for the remaining six stale-dated checks totaling

$1,153 ($2,731-1,578).

Legal Standard
Handling Stale-Dated (Uncashed) Checks. If a committee has issued checks that the

payees (creditors or contributors) have not cashed, the committee must notify the
Commission of its efforts to locate the payees and encourage them to cash the
outstanding checks. The committee must also submit a check payable to the U. S.
Treasury for the total amount of the outstanding checks. 11 CFR §9038.6.



Nader for President 2004
Statement of Net Outstanding Campaign Obligations
As of September 2, 2004
Prepared September 30, 2005

Assets
Cash in Bank $ 28,668
Cash on Hand 803
Accounts Receivable 36,808
Capital Assets 38,002
Other Assets 58,551
Total Assets
Liabilities
Accounts Payable for Qualified Campaign Expenses at 9/2/04 $ 186,491
Winding Down Costs:

Actual 12/4/04 — 9/30/05 $264,669

Estimated Winding Down Costs (10/1/05 - 6/30/06) 17,488 282,157
Loan Payable at 9/2/04 105,652
Due to NFP 2004 General Committee 6,330
Amount Payable to the U.S. Treasury for:

Stale-Dated Checks (See Finding 2) 1,153
Total Liabilities

Net Outstanding Campaign Obligations (Deficit) as of September 2, 2004
Footnotes to NOCO Statement:

[a]. Adjusted for stale-dated checks issued prior to DOI.
[b]

reimbursed the net amount payable to NFP.

a]

[b]
$162,832

[c]

(d]
$581,783
($418,951)

This figure includes operating expenditures of $20,149 incurred by NFP between 9/3/04 and 12/3/04, the
end of the expenditure report period (11 CFR §9002.12). As of July 28, 2005, the General Committee

[c] | The Audit staff will review NFP’s disclosure reports to compare actual figures with the estimates and

make adjustments accordingly.

[d] _ Inits response to the preliminary audit report, NFP settled this liability by submitting a payment to the
United States Treasury in the amount of $1,153. As a result, no amounts are owed to the United States

Treasury. See Finding 2.



Part III
Summaries

Findings and Recommendations

Finding 1. Net Outstanding Campaign Obligations

Based on its financial activity through December 31, 2004, and estimated winding down
costs necessary to terminate the campaign, NFP did not receive matching fund payments
in excess of the Candidate’s entitlement. In response to the preliminary audit report, NFP
concurred with the Audit staff’s conclusion. (For more detail, see p. 5)

Finding 2. Stale-Dated Checks

The Audit staff identified 10 stale-dated checks totaling $2,731 issued by NFP. In the
preliminary audit report the Audit staff recommended that NFP provide evidence that the
checks were not outstanding or make a payment of $2,731 to the United States Treasury.
In response to the preliminary audit report, NFP provided documentation that it voided
and subsequently reissued 4 checks totaling $1,578. NFP further demonstrated that as of
September 30, 2005, the recipients had cashed all 4 reissued checks. Finally, NFP
submitted its payment to the United States Treasury for the remaining six stale-dated
checks totaling $1,153 ($2,731-1,578). (For more detail, see p. 8)

Summary of Amount Owed to the U.S.
Treasury

No amounts are owed to the United States Treasury.



Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Inventory of Campaign Records

Part II. Overview of Campaign
Campaign Organization
Overview of Financial Activity

Part III. Summaries

Findings and Recommendations
Summary of Amounts Owed to the U.S. Treasury

Part IV. Findings and Recommendations
Finding 1. Net Outstanding Campaign Obligations
Finding 2. Stale-Dated Checks

Page

ns wn _

CO



Report of the
Audit Division on
Nader for President 2004

October 14, 2003 - December 31, 2004



Report of the Audit Division on

Nader for President 2004

October 14, 2003 - December 31, 2004

Why the Audit

Was Done

Federal law requires the
Commission to audit
every political
committee established
by a candidate who
receives public funds for
the primary campai ign.?
The audit determines
whether the candidate
was entitled to all of the
matching funds
received, whether the
campaign used the
matching funds in
accordance with the law,
whether the candidate is
entitled to additional
matching funds, and
whether the campaign
otherwise complied with
the limitations,
prohibitions, and
disclosure requirements
of the election law.

Future Action
The Commission may
initiate an enforcement
action, at a later time,
with respect to any of
the matters discussed in
this report.

' 26 U.S.C. §9038(a).

About the Committee (p. 2)

Nader for President 2004 is the principal campaign
committee for Ralph Nader, a candidate for the Independent
Party’s nomination for the office of President of the United
States. The Committee is headquartered in Washington, DC.

For more information, see chart on the Campaign

Organization, p. 2.

Financial Activity (p. 3)
Receipts

o00000 80000000

Contributions from Individuals

Matching Funds Received
Loans Received

Offsets to Operating Expenditures
Transfers from General Committee

Other Receipts
Total Receipts

isbursements

Operating Expenditures
Loan Repayments

Transfers to General Committee

Contribution Refunds
Other Disbursements
Total Disbursements

$ 1,541,996
865,425
694,500
189,702

96,328
39,506
$ 3,427,457

$ 2,647,353
694,500
71,136
10,949

880

$ 3,424,818

Findings and Recommendations (. 4)
Net Outstanding Campaign Obligations (Finding 1)

Stale-Dated Checks (Finding 2)



Facts and Analysis
The Audit staff’s reconciliation of NFP’s bank accounts through December 31, 2004, and

review of financial activity through March 10, 2005, identified 10 stale-dated checks
totaling $2,731 issued by NFP. The checks were dated between 4/27/04 and 9/3/04 and
had not cleared the bank as of July 31, 2005.

The Audit staff provided NFP a schedule of stale-dated checks at the exit conference.

Preliminary Audit Report Recommendation
The Audit staff recommended that NFP provide evidence within 60 calendar days of
service of this report that:
e The checks were not outstanding by providing copies of the front and back of the
negotiated checks along with bank statements; or
e The outstanding checks had been voided by providing either:
© Copies of the voided check with evidence that no obligation exists, or
o Copies of the front and back of negotiated replacement checks along with
bank statements.
e Absent such evidence, the Audit staff recommended that $2,731 be paid to the
US. Treasury; and
e The amount due should be disclosed on Schedule D-P (Debts and Obligations)

until paid.

Committee Response to Preliminary Audit Report

In response to the preliminarily audit report, NFP provided documentation that it voided
and subsequently reissued 4 checks totaling $1,578. NFP further demonstrated that as of
September 30, 2005, the recipients had cashed all 4 reissued checks. Finally, NFP
submitted payment to the United States Treasury for the remaining six stale-dated checks
totaling $1,153 ($2,731-1,578). NFP complied with the Audit staff’s recommendation

and therefore no further action is necessary.