FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

r::D£RAL ELECTICN 

COMMISSION 

SECRETARIAT 

2013 JAN 10 PM 12 

January 10,2013 

MEMORANDUM 

To: 

Through: 

From: 

The Commission 

Alec Palmer 

Staff Director 

Patricia C. Orrock 

Chief Compliance Officer 

Tom Hintermister — 

Assistant Staff Director 

Audit Division 

Kendrick Smith 

Audit Manager 

By: 

Subject: 

Tesfai Asmamaw. -m 

Lead Auditor 

Audit Division Recommendation Memorandum on Randy Hultgren for 

Congress (All-01) 

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit Reports), 

the Audit staff presents its recommendation below and discusses the finding in the 

attached Draft Final Audit Report (DFAR). The Office of General Counsel has reviewed 

this memorandum and concurs with the recommendation. 

Misstatement of Financial Activity 

In response to tiie Interim Audit Report, Randy Hultgren for Congress filed 

amendments that materially complied with the recommendation. Randy Hultgren 

for Congress did not file an additional response to the DFAR. 

The Audit staff recommends tiiat the Commission find that Randy Hultgren for 

Congress misstated its financial activity for calendar years 2009 and 2010. 

The Committee did not request an audit hearing. 

If tiiis memorandum is approved, a Proposed Final Audit Report will be prepared witiiin 

30 days of the Commission's vote. 
In case of an objection, 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 in the Voting Ballot Matters folder. 

Should you have any questions, please contact Tesfai Asmamaw or Kendrick Smith at 

694-1200. 

Attachment: 

- Draft Final Audit Report of the Audit Division on Randy Hultgren for Congress 

cc: Office of General Counsel 
Draft Final Audit Report 

of the Audit Division on 

Randy Hultgren for Congress 

September 22. 2009 - December 31, 2010 

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 committee 

appears not to have met^ , 

the threshold 

requirements for 

substantial compliance . v 

with the Act.' The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to the matter 

discussed in this report. 

About the Campaign (p. 2) 

Randy Hultgren for Congress is the principal campaign committee 

for Randy Hultgren, Republican candidate for the United States 

House of Representatives from Illinois, 14*^ District, and is 

headquartered in St. Charles, Illinois. For more infonnation, see the 

chart on the Campaign Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Party 

Committees 

o Loans from the Candidate 

o Other Receipts 

Total Receipts 

• > Disbursements 

d : Operating Expenditures 

..-; . o Loan Repayments to the Candidate 

• r.;p Otiier Disbursements 

Total Disbursements 

$ 1,237,511 

393.942 

43.838 

19.146 

$ 1,694,437 

$ 1.590,720 

43.838 

4,625 

$ 1,639,183 

Finding and Recommendation (p. 3) 

• Misstatement of Financial Activity 

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

of the Audit Division on 

Randy Hultgren for Congress 

September 22, 2009 - December 31, 2010 

i. .'^•••'+/5'". 

•.Ill' 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Part II. Overview of Campaign 

Campaign Organization 2 

Overview of Financial Activity 2 

Part III. Summary 

Finding and Recommendation 3 

Part IV. Finding and Recommendation 

Misstatement of Financial Activity 4 
Part I 

Background 

Authority for Audit 

This report is based on an audit of Randy Hultgren for Congress (RHC), 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 tiie 

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 intemal review of reports filed by selected 

committees to determine whether 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 

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

1. the disclosure of individual contributors' occupation and name of employer; 

2. the disclosure of candidate loans to tiie committee; 

3. the disclosure and recordkeeping of disbursements to the candidate; 

4. the consistency between reported figures and bank records; and 

5. other committee operations necessary to the review. 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration September 21,2009 

• Audit Coverage September 22,2009 - December 31,2010 

Headquarters St. Charles, Illinois 

Bank Information 

• Bank Depositories One 

• Bank Account One checking account 

Treasurer 

• Treasurer When Audit Was Conducted Clifford A. Brown 

• Treasurer During Period Covered by Audit Clifford A, Brown 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

No 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-Hand @ September 22,2009 $0 

Receipts 

o Contributions from Individuals 1,237,511 

o Contributions from Party Committees 393.942 

o Loans from the Candidate 43.838 

o Otiier Receipts 19,146 

Total Receipts $ 1,694,437 

Disbursements 

0 Operating Expenditures 1.590.720 

o Loan Repayments to the Candidate 43.838 

0 Otiier Disbursements 4,625 

Total Disbursements $ 1,639,183 

Cash-on-Hand @ December 31,2010 $ 55,254 
Part III 

Sumniary 

Finding and Recommendation 

Misstatement of Financial Activity 

During audit fieldwork. a comparison of RHC*s reported financial activity with its bank 

records revealed a misstatement of receipts and disbursements for 2009 and 2010, as well 

as, ending cash-on-hand for 2010. For 2009, RHC understated receipts by $9,440 and 

disbursements by $7,911, respectively. In 2010, RHC understated receipts by $83,278, 

disbursements by $58,694, and ending cash-on-hand by $26,113. In response to tiie 

Interim Audit Report recommendation, RHC amended its disclosure reports and 

materially corrected the misstatements. (For more detail, see p. 4.) 
Part IV 

Finding and Recommendation 

I Misstatement of Financial Activity | 

Summary 

During audit fieldwork, a comparison of RHC's reported financial activity with its bank 

records revealed a misstatement of receipts and disbursements for 2009 and 2010, as well 

as, ending cash-on-hand for 2010. For 2009, RHC understated receipts by $9,440 and 

disbursements by $7,911, respectively. In 2010, RHC understated receipts by $83,278, 

disbursements by $58,694, and ending cash-on-hand by $26,113. In response to the 

Interim Audit Report recommendation, RHC amended its disclosure reports and 

materially corrected the misstatements. 

Legal Standard 

A. Contents of Reports. Each report must disclose: 

• The amount of cash-on-hand at the beginning and end of the reporting period; 

• The total amount of receipts for the reporting period and for the calendar year (to 

include the total amount of loans made by or guaranteed by the Candidate); 

• The total amount of disbursements for the reporting period and for the calendar 

year; and 

• Certain transactions that require itemization oh Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 2 U.S.C. §434(b)(l), (2), (3), (4) and (5). 

B. Itemizing Loans. Each person who makes a loan to the political committee during 

the reporting period must be disclosed with tiie following information: 

• Identification of any endorser or guarantor of the loan; 

• The date the loan was made; and 

• The amount of tiie loan. 11 CFR §104.3(a)(4)(iv). 

C. Schedule C. On a Schedule C (Loans), botii the original loan and payments to reduce 

principal must be reported each reporting period until the loan is repaid. The committee 

need only list the Candidate as the source of tiie loan. Also, the type of loan tiie 

Candidate receives (e.g. bank loan, brokerage account, credit card, home equity line of 

credit) must be disclosed in either tiie first box for endorsers and guarantors with a 

notation for loan type or in the box for "Loan Source" after the Candidate's name. 

11 CFR §§ 104.3(d) and 104.11. 
Facts and Analysis 

A. Facts 

As part of audit fieldwork, the Audit staff reconciled RHC's reported activity witii its 

bank records for 2009 and 2010. The following charts outiine the discrepancies for cashon-hand, receipts, and disbursements. Succeeding paragraphs address the reasons for tiie 

misstatements. 

2009 Campaign Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand 

@ September 22, 2009 

$0 $0 $0 

Receipts $167,171 $176,611 $9,440 

Understated 

Disbursements $130,946 $138,857 $7,911 

Understated 

Ending Cash-on-Hand 

©December 31, 2009 

$36,225 $37,754 $1,529 

Understated 

The understatement of receipts resulted from the following: 

• Loans from the Candidate not reported 

• Unexplained difference 

Net Understatement of Receipts 

The understatement of disbursements resulted from the following: 

• Disbursements not reported 

• Reported disbursements not supported by a check or debit 

• Unexplained difference 

Net Understatement of Disbursements 

$ 10,085 

(645) 

$ 9.440 

$ 8,200 

(453) 

164 

$ 7.911 

2010 Campaign Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand 

@ January 1,2010 

$36,225 $37,754 $1,529 

Understated 

Receipts $1,434,548 $1,517,826 $83,278 

Understated 

Disbursements $1,441,632 $1,500,326 $58,694 

Understated 

Ending Cash-on-Hand 

@ December3l,20l0 

$29,141 $55,254 $26,113 

Understated 
The understatement of receipts resulted from tiie following: 

• Contributions from individuals & PACs not reported $ 74,597 

• Loans from the Candidate not reported 8,953 

• Unexplained difference (272) 

Net Understatement of Receipts $ 83.278 

The understatement of disbursements resulted from the following: 

• Operating expenditures not reported $ 70,289 

• Reported disbursements not supported by check or debit (29,942) 

• Candidate loan repayments not reported 16,500 

• PAC contribution not reported 2,400 

• Unexplained difference (553) 

Net Understatement of Disbursements $ 58.694 

The $26.113 understatement of the ending cash-on-hand was the result of tiie 

misstatements described above. 

During tiie audit period, RHC provided a declaration, signed by tiie Candidate, 

attesting to loaning RHC $43,838. The loans consisted of checks written from the 

Candidate's personal accounts to RHC and payments the Candidate made directly to 

vendors for campaign-related expenses. RHC did not report some of the loan activity 

(as noted above); nor did it correctly disclose some U:ansactions as being in connection 

with the Candidate loans. The Audit staff notes that RHC fully repaid Candidate loans 

totaling $43,838. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the misstatements for 2009 and 2010 witii RHC representatives 

during the exit conference and provided copies of relevant work papers detailing the 

errors. A representative said that RHC would take corrective action based on the audit 

recommendation. 

The Interim Audit Report recommended tiiat RHC amend its disclosure reports to correct 

the misstatements for 2009 and 2010, to include tiie proper itemization and disclosure of 

Candidate loans and repayments, and to amend its most recentiy filed disclosure report to 

correct the cash-on-hand balance with an explanation that tiie change resulted from a 

prior-period audit adjustment. Furtiier. RHC should have reconciled the cash-on-hand 

balance of its most recent disclosure report to identify any subsequent discrepancies that 

may have had an impact on the $26.113 adjustment recommended. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation. RHC filed amended disclosure 

reports that materially corrected the misstatements.