| Finding 6. Reporting of Debts and Obligations

Summary

SEIU failed to report debts owed to two vendors, totaling $359,322, during calendar year
2000. The Audit staff recommended that SEIU file amended disclosure reports including
Schedules D (Debts and Obligations) disclosing these obligations. In response, SEIU
filed amended reports disclosing the debts and obligations.

Legal Standard

A. Continuous Reporting Required. A political committee must disclose the amount
and nature of outstanding debts and obligations until those debts are extinguished. 2
U.S.C §434(b)(8) and 11 CFR §§104.3(d) and104.11(a).

B. Separate Schedules. A political committee must file separate schedules for debts
owed by the committee and debts owed to the committee, together with a statement
explaining the circumstances and conditions under which each debt and obligation was
incurred or extinguished. 11 CFR §104.11(a).

C. Itemizing Debts and Obligations.
¢ A debt of $500 or less must be reported once it has been outstanding 60 days from
the date incurred (the date of the transaction); the committee reports it on the next
regularly scheduled report.
¢ A debt exceeding $500 must be disclosed in the Teport that covers the date on
which the debt was incurred. 11 CFR §104.11(b).

Facts and Analysis

The Audit staff's review of all disbursements identified two debts, totaling $359,322,
which were outstanding over several reporting periods but not reported. In order to
derive the total debts not reported, each outstanding debt was counted only once, even if
it was outstanding for several periods.

SEIU’s representatives were informed of the unreported debts at the exit conference and
provided schedules detailing these debts. They indicated that the appropriate amended
reports would be filed.

Interim Audit Report Recommendation and Committee Response
In response to the recommendation in the interim audit report, SEIU filed amended
disclosure reports including Schedules D to disclose the debts and obligations addressed
above.


Part III
Committee Receipt Records

Contributions received by SEIU were made through payroll deduction, fundraisers, or
one-time donations from members. Union locals transmitted these contributions either
bi-weekly, quarterly, semi-annually, etc. Each member was given a check-off form to
complete, in which they could choose whether or not to contribute by payroll deduction.
The payroll deduction amount per member usually was $3 or less per pay period. The
local unions (with the exception of individuals employed at the national office)
maintained all receipt records including payroll deduction records and payroll deduction
authorizations (PDA’s). The contributions, from approximately 300 local unions, were
transmitted to SEIU by check (“transmittals”).

Our initial review indicated that SEIU’s records for contributions from individuals
received by transmittals from local unions were incomplete. Fieldwork was suspended.

A list of certain transmittals was provided and SEIU was requested to produce records for
those transmittals, including the contributor’s name, contribution date, amount and the
respective payroll deduction authorization. SEIU contacted the local unions in order to
obtain the requested documentation. The Audit staff resumed fieldwork and determined
that a substantial number of local unions did not provide any relevant materials. Payroll
deduction authorizations or check-off pledge forms that were submitted were not
presented in an auditable state. Fieldwork was again suspended.

This matter was then considered by the Commission and SEIU was notified that it was
required to:
¢ Maintain PDAs for each member who made contributions via payroll deduction.
If SEIU choose to maintain those records at the various local unions, it was
necessary to assemble the PDAs at a central location and in an auditable state for
Audit staff review; and,
¢ Provide documentation to demonstrate that contributions that were transmitted by
employers and collecting agents were timely transmitted and deposited.

The Commission also advised that failure to comply may necessitate the issuance of
subpoenas and/or the initiation of a compliance action by the Commission.

Fieldwork again resumed shortly after expiration of the time permitted for SEIU to gather
the necessary records.


| Finding 2. Untimely Transmittal of Contributions

Summary

Transmittals were tested to determine if local unions transmitted contributions timely.
The sample results projected that contributions, totaling $383,588, made via payroll
deduction were not transmitted timely. The Audit staff recommended SEIU demonstrate
that such contributions were transmitted timely. SEIU stated it could not demonstrate
that the transmittals were made timely. However, SEIU submitted copies of revised
procedures that it indicated were sent to all local unions. It was also recommended that
SEIU demonstrate that its new procedures have been implemented. SEIU has complied
with the recommendations.

Legal Standard

A. Definition of Collecting Agents. A collecting agent is an organization or committee
that collects and transmits contributions to one or more separate segregated funds to
which the collecting agent is related. 11 CFR §102.6(b)(1).

B. Transmittal of Contributions. The full amount of each contribution collected bya
collecting agent, or any other person, on behalf of a separate segregated fund shall be
transmitted to that fund within 10 days of receipt if the amount of the contribution
exceeds $50; and, within 30 days of receipt if the amount of the contribution is $50 or
less. Finally, date of receipt is the date such person takes possession of the contribution.
11 CFR §§102.6(c)(4) and 102.8(a) & (b).

C. Separate Segregated Fund Responsible for Acts of Collecting Agent. The separate
segregated fund is responsible for ensuring that the recordkeeping, reporting and
transmittal requirements are met and is responsible for the acts of a collecting agent. 11
CFR §102.6(c)(1).

Facts and Analysis

The Audit staff conducted a sample review of the 3,671 transmittals totaling $1,670,018
received during the audit period. The projected dollar value of contributions that were
not forwarded timely from the union locals to SEIU was $383,588. The untimely
contributions were forwarded up to 712 days late. Many transmittals represented
contributions collected bi-weekly over a six month period; hence, the earlier
contributions in the transmittal were late while others were timely. There were other
instances where contributions were collected prior to the audit period (1999 — 2000) but
not transmitted until late in calendar year 2000.

At the exit conference, SEIU representatives were advised of this matter. They had
questions regarding the method used by the Audit staff to determine which transmittals
were not forwarded timely. The Audit staff provided workpapers which detailed how the
untimely transmittals had been determined.


Finding 5. Disclosure of Independent Expenditures

The Audit staff identified eleven independent expenditures, totaling $1,037,568, that
were not properly disclosed. SEIU disclosed these expenditures on Schedule B (Itemized
Disbursements) rather than itemizing on Schedules E (Independent Expenditures) as
required. In response to the interim audit report, SEIU filed amended reports itemizing
the expenditures on Schedules E. (For more detail, see p. 11)

Finding 6. Reporting of Debts and Obligations

SEIU failed to report debts owed to two vendors, totaling $359,322, during calendar year
2000. The Audit staff recommended that SEIU file amended disclosure reports including
Schedules D (Debts and Obligations) disclosing these obligations. In response, SEIU
filed amended reports disclosing the debts and obligations. (For more detail, see p. 12)


Part IV
Summaries

Findings and Recommendations

Finding 1. Failure to Maintain Contributor Payroll
Deduction Authorizations

Based on a sample of transmittals for which detailed contributor information was
provided, the Audit staff determined that payroll deduction authorization forms were not
available for approximately 50% of the contributors sampled. SEIU made available new
procedures designed to insure that all PDA’s would be maintained. The Audit staff
recommended that SEIU demonstrate that its new procedures have been implemented and
provide any other comments it may have relative to this matter. SEIU has complied with
the recommendations. (For more detail, see p. 6)

Finding 2. Untimely Transmittal of Contributions
Transmittals were tested to determine if local unions transmitted contributions timely.
The sample results projected that contributions, totaling $383,588, made via payroll
deduction were not transmitted timely. The Audit staff recommended SEIU demonstrate
that such contributions were transmitted timely. SEIU stated it could not demonstrate
that the transmittals were made timely. However, SEIU submitted copies of revised
procedures that it indicated were sent to all local unions. It was also recommended that
SEIU demonstrate that its new procedures have been implemented. SEIU has complied
with the recommendations. (For more detail, see p. 8)

Finding 3. Apparent Prohibited Contributions

The sample of transmittals also projected that contributions totaling $59,322 had been
received from prohibited sources. SEIU either made refunds to the local unions or
transfers to its political education account (treasury account) for contributions totaling
$46,733. The Audit staff recommended that SEIU provide evidence demonstrating that
the sample errors were not received from prohibited sources. Absent such a
demonstration, the Audit staff recommended that SEIU transfer $12,589 ($59,322 -
$46,733) to its treasury account and provide evidence of such transfer. In response, SEIU
stated that it accepted the finding and has transferred $12,589 to its treasury account. A
copy of the check was submitted with its response. (For more detail, see p. 9)

Finding 4. Disclosure of Transfers from Affiliated
Committees

SEIU failed to itemize forty-five transfers from affiliated committees totaling $565,370.
The Audit staff recommended that SEIU file amended disclosure reports itemizing these
transfers. In response, SEIU filed amended disclosure reports itemizing the transfers
from affiliated committees. (For more detail, see p. 10)


Interim Audit Report Recommendations

The Audit staff recommended that SEIU demonstrate that its new procedures have been
implemented. Once these procedures are in place, the Audit staff noted that it would
verify that they are adequate to assure compliance via follow-up audit work. Though not
required, it was recommended that the national office maintain copies of all PDAs.

Committee’s Response to Recommendations and the Audit Staff's
Assessment

As previously stated, SEIU submitted copies of revised procedures designed to insure all
PDAs are maintained. According to SEIU, the procedures were sent to all locals and
SEIU has scheduled training to insure that all procedures were understood and in place.
Therefore, it is the opinion of the Audit staff that SEIU has complied with the interim
audit report recommendations.

However, SEIU questioned whether there is affirmative obligation to keep and maintain
PDAs for each member who made contributions via payroll deduction. Although SEIU
acknowledged the Commission’s determination with respect to this issue in MUR 4955
(MetLife), it pointed out factual differences between MetLife and SEIU. SEIU noted that
MetLife was not only the sponsor of the separate segregated fund (SSF) but the employer
of the SSF’s contributors, whereas, neither SEIU nor the Union is the employer of its SSF
contributors. Further, SEIU contended that the most important difference between the
two was the question of best efforts. SEIU believes that MetLife was given an
opportunity by the Audit staff to demonstrate its used “best efforts” to obtain the missing
PDAs. SEIU is apparently referring to a passage in a document that was generated as
part of the compliance action which followed the audit. In that passage it was simply
noted that no follow-up request was made. In the MetLife case all of the PDAs executed
prior to a certain date had been lost. It was left up to MetLife to determine which
contributors needed to submit replacement PDAs. In the instant case SEIU was asked to
produce PDAs for specific transmittals. No evidence was provided that SEIU made any
follow-up requests for missing PDAs or any efforts to determine which PDAs were
missing within the transmittals evaluated by the Audit staff or in SEIU’s files in general.
Although no specific request to demonstrate best efforts was included in either audit
recommendation, SEIU had ample opportunity to demonstrate that it had attempted to
obtain replacement PDAs from those members whose forms were missing.

Although it is true that in the MetLife case the SSF and the contributors’ employer were
much more closely connected than is the case with SEIU and its contributors’ employers,
the Commission determined that the requirement to maintain PDAs, applies equally to
both SEIU and MetLife. The fact that half of the tested contributors’ forms were on file
suggests that the need to maintain PDAs is understood.

Nevertheless, as stated, SEIU has instituted improved procedures including revised
forms, training programs, and materials that address, among other topics, the
maintenance of PDAs and the timely transmittal of contributions.


FEDERAL ELECTION COMMISSION

WASHINGTON, DC 20463

November 1, 2004

MEMORANDUM

TO: ROBERT W. BIERSACK
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ;
ASSISTANT STA CTOR
AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE AUDIT REPORT ON THE SERVICE
EMPLOYEES INTERNATIONAL UNION POLITICAL CAMPAIGN
COMMITTEE (A01-31)

Attached please find a copy of the audit report on the Service Employees
International Union Political Campaign Committee (A01-31), which was approved by the
Commission on October 20, 2004.

The report may be released to the public on November 1, 2004.

Attachment as stated

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


10

¢ Foreign Nationals (including individuals who are not U.S. citizens and not
lawfully admitted for permanent residence; foreign governments and foreign
political parties; and groups organized under the laws of a foreign country or
groups whose principal place of business is in a foreign country, as defined in
22 U.S.C. §611(b)). 2 U.S.C. §§441b, 44 1c, 441e, and 44 If.

B. Receipt of Prohibited Contribution from Labor Organizations. Political
campaigns may not accept contributions made from the general treasury funds of labor
organizations. 2 U.S.C. §441b.

Facts and Analysis

As previously stated, SEIU was requested to obtain documentation for a number of
transmittals selected for review. Upon receipt of the documentation, SEIU determined
that certain transmittals from local unions were intended for its treasury account, but
inadvertently deposited into its federal account. As a result, SEIU either made refunds to
local unions or transfers to its treasury account in the amount of $46,733. These sample
errors, when used to determine the dollar value of contributions in the population
received from prohibited sources, resulted in a projection of $59,322.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that SEIU provide evidence demonstrating that the sample
errors were not received from prohibited sources. Absent such a demonstration, the
Audit staff recommended that SEIU transfer $12,589 ($59,322 - $46,733) to its treasury
account and provide evidence of such transfer (copy of the front and back of the
negotiated check or copy of the debit/credit advice). In response to the interim audit
report SEIU stated that it accepted the finding as stated and had transferred $12,589 to its
treasury account. A copy of the check was submitted with its response.

Finding 4. Disclosure of Transfers from Affiliated
Committees

Summary

SEIU failed to itemize forty-five transfers from affiliated committees totaling $565,370.
The Audit staff recommended that SEIU file amended disclosure reports itemizing these
transfers. In response, SEIU filed amended disclosure reports itemizing the transfers
from affiliated committees.

Legal Standard
A. When to Itemize. Political committees must itemize:
¢ Every contribution from any political committee, regardless of the amount.
¢ Every transfer from another political party committee. 2 U.S.C. §434(b)(3)(A),
(B) and (D).

B. Definition of Itemization. Itemization of contributions received means that the
recipient committee discloses, on a separate schedule, the following information:

e The amount of the contribution;


Subsequent to the exit conference, SEIU submitted copies of revised procedures that it
indicated were sent to all local unions. The procedures required that contributions to
SEIU be transmitted in a timely manner.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that SEIU demonstrate that contributions were transmitted
timely, and provide any comments it may have relative to these matters. It is also
tecommended that SEIU demonstrate that its new procedures have been implemented.
Once these procedures are in place, the Audit staff noted that it would verify that they are
adequate to assure compliance via follow-up audit work.

In response, SEIU stated that it had developed a guide for the handling of political funds
which has been distributed to every SEIU local union. SEIU explained further that it had
conducted extensive training of local union/collecting agent staff regarding the proper
handling and transmission of SEIU contributions. The training emphasized the
importance of timely transmittal and provided staff with specific advice on how this goal
could be achieved. It has implemented procedures to document the date of receipt by the
collecting agent and to screen each transmittal by staff at SEIU. SEIU further stated that
contributions identified as untimely will not be deposited in its federal account.

| Finding 3. Apparent Prohibited Contributions

Summary

The sample of transmittals also projected that contributions totaling $59,322 had been
received from prohibited sources. SEIU either made refunds to the local unions or
transfers to its political education account (treasury account) for contributions totaling
$46,733. The Audit staff recommended that SEIU provide evidence demonstrating that
the sample errors were not received from prohibited sources. Absent such a
demonstration, the Audit staff recommended that SEIU transfer $12,589 ($59,322 -
$46,733) to its treasury account and provide evidence of such transfer. In response, SEIU
stated that it accepted the finding and has transferred $12,589 to its treasury account. A
copy of the check was submitted with its response.

Legal Standard
A. Receipt of Prohibited Contributions - General Prohibition. Candidates and
committees may not accept contributions (in the form of money, in-kind contributions or
loans):
1. In the name of another; or
2. From the treasury funds of the following prohibited sources:
© Corporations (this means any incorporated organization, including a non-stock
Corporation, an incorporated membership organization, and an incorporated
cooperative);
e Labor Organizations;
e National Banks;
¢ Federal Government Contractors (including partnerships, individuals, and sole
proprietors who have contracts with the federal government); and


Part V
Findings and Recommendations

Finding 1. Failure to Maintain Contributor Payroll
Deduction Authorizations

Summary

Based on a sample of transmittals for which detailed contributor information was
provided, the Audit staff determined that payroll deduction authorization forms were not
available for approximately 50% of the contributors sampled. SEIU made available new
procedures designed to insure that all PDA’s would be maintained. The Audit staff
recommended that SEIU demonstrate that its new procedures have been implemented and
provide any other comments it may have relative to this matter. SEIU has complied with
the recommendations.

Legal Standard

Recordkeeping. Each political committee or other person required to file any report or
statement under this subchapter shall maintain all records relevant to such reports and
Statements. Records to be maintained with respect to the matters required to be reported,
include bank records, vouchers, worksheets, receipts, bills and accounts, which shall
provide in sufficient detail the necessary information and data from which the filed
reports and statements may be verified, explained, clarified, and checked for accuracy
and completeness. The Commission has determined that, under 11 CFR §104.14(b)(1),
separate segregated funds established pursuant to Part 114 of the Commission’s rules
must maintain copies of Payroll Deduction Authorizations for each individual who makes
any contributions(s) via automatic payroll deduction. See, e.g. MUR 4955 (Metropolitan
Life). 11 CFR §104.14(b)(1)

Facts and Analysis

The Audit Staff conducted a sample review of the 3,671 transmittals ($1,670,018) from
local unions received during the audit period. The sample results projected that
transmittals totaling $470,997 had no documentation or incomplete documentation.

For transmittals supported by contributor lists, the Audit staff sampled contributors to
determine if the respective PDA was available. This review indicated that for
approximately 50% of the sample items tested, the related PDA was missing.

At the exit conference, the Audit staff advised SEIU representatives of this matter.

Subsequent to the exit conference, SEIU submitted copies of revised procedures that it
indicated were sent to all local unions. The procedures were designed to insure that all
required information as well as PDAs would be maintained and available upon request.


Part II

Overview of Committee

Committee Organization

Important Dates

SEIU

e Date of Registration

April 17, 1972

e Audit Coverage

January 1, 1999 - December 31, 2000

Headquarters

Washington, DC

Bank Information

e Bank Depositories

e Bank Accounts

is)

Treasurer

¢ Treasurer When Audit Was Conducted

Anna Burger

Treasurer During Period Covered by Audit | Patricia Ford

Management Information

¢ Attended FEC Campaign Finance Seminar | Yes

¢ Used Commonly Available Campaign No
Management Software Package

¢ Who Handled Accounting and Paid Staff

Recordkeeping Tasks

Overview of Financial Activity

(Audited Amounts)
Cash on hand @ January 1, 1999 $ 144,162
o__From Individuals 1,969,770
o_ From Affiliated Committees 3,102,432
o Refunds and Other Receipts 48,816
Total Receipts $5,121,018
© Operating Expenditures 10,832
o_To Affiliated Committees 327,408
© Contributions to Federal Candidates 2,335,150
o Independent Expenditures 1,049,715
o Refunds and Other Disbursements 489,389
Total Disbursements $4,212,494
Cash on hand @ December 31, 2000 $1,052,686


Part I
Background

Authority for Audit

This report is based on an audit of the Service Employees International Union Political
Campaign Committee (SEIU), undertaken by the Audit Division of the Federal Election
Commission (the Commission) in accordance with the Federal Election Campaign Act of
1971, as amended (the Act). The Audit Division conducted the audit pursuant to 2
U.S.C. §438(b), which permits the Commission to conduct audits and field investigations
of any political committee that is required to file a report under 2 U.S.C. §434. Prior to
conducting any audit under this subsection, the Commission must perform an internal
review of reports filed by selected committees to determine if the reports filed by a
particular committee meet the threshold requirements for substantial compliance with the
Act. 2 U.S.C. §438(b).

Scope of Audit

This audit examined:

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

The disclosure of contributions received.

The disclosure of disbursements, debts and obligations.
The consistency between reported figures and bank records.
The completeness of records.

Other committee operations necessary to the review.

NQUWawN

Changes to the Law

On March 27, 2002, President Bush signed into law the Bipartisan Campaign Reform Act
of 2002 (BCRA). The BCRA contains many substantial and technical changes to the
federal campaign finance law. Most of the changes became effective November 6, 2002.
The period covered by this audit pre-dates these changes. Therefore, the statutory and
regulatory requirements cited in this report are those that were in effect during the audit
period.


Table of Contents

Page

Part I. Background

Authority for Audit 1

Scope of Audit 1

Changes to the Law 1
Part II. Overview of Committee

Committee Organization 2

Overview of Financial Activity 2
Part III. Committee Receipt Records 3
Part IV. Summaries

Findings and Recommendations 4

Part V. Findings and Recommendations
Finding 1. Failure to Maintain Contributor Payroll Deduction Authorizations 6

Finding 2. Untimely Transmittal of Contributions 8
Finding 3. Apparent Prohibited Contributions 9
Finding 4. Disclosure of Transfers from Affiliated Committees 10
Finding 5. Disclosure of Independent Expenditures 11

Finding 6. Reporting of Debts and Obligations 12


11

© The date of receipt (the date the committee received the contribution);
The full name and address of the contributor;
The calendar year-to-date total of all contributions from the same contributor. 11
CFR §§100.12 and 104.3(a)(4) and 2 U.S.C. §434(b)(3)(A) and (B).

Facts and Analysis

The Audit staff reviewed all transfers from affiliated committees. Although all transfers
were included in the amounts reported on Line 11.a.ii., of the Detailed Summary Page,
SEIU failed to itemize forty-five transfers from affiliated committees totaling $565,370.

Interim Audit Report Recommendation and Committee Response

In response to the recommendation in the interim audit report, SEIU filed amended
Schedules A (Itemized Receipts) for Line 12 itemizing these transfers.

| Finding 5. Disclosure of Independent Expenditures

Summary

The Audit staff identified eleven independent expenditures, totaling $1,037,568, that
were not properly disclosed. SEIU disclosed these expenditures on Schedule B (Itemized
Disbursements) rather than itemizing on Schedules E (Independent Expenditures) as
required. In response to the interim audit report, SEIU filed amended reports itemizing
the expenditures on Schedules E.

Legal Standard

Reporting Independent Expenditures. A political committee must disclose the name
and address of each person who receives any disbursement during the reporting period in
an aggregate amount or value in excess of $200 within the calendar year in connection
with an independent expenditure by the reporting committee, together with the date,
amount, and purpose of any such independent expenditure and a statement which
indicates whether such independent expenditure is in support of, or in opposition to, a
candidate, as well as the name and office sought by such candidate, and a certification,
under penalty of perjury, whether such independent expenditure is made in cooperation,
consultation, or concert, with, or at the request or suggestion of, any candidate or any
authorized committee or agent of such committee. 2 U.S.C §434(b)(6)(B)(iii).

Facts and Analysis

The Audit staff identified 11 independent expenditures, totaling $1,037,568, that were
incorrectly disclosed as operating expenditures on Schedules B. The documentation
demonstrated that the independent expenditures were for mailings, phone banks and
media, in support of or against eleven federal candidates. Reporting of independent
expenditures on Schedule E requires additional disclosure information as well as
certifications by SEIU.

Interim Audit Report Recommendation and Committee Response
In response to the recommendation in the interim audit report, SEIU filed amended
reports itemizing the expenditures on Schedules E for Line 24.