fEDERAL El.[CTION (~OI\1"'1ISSI0N

1\2r; '" Sll~f II N \v.

W!\';liING I()N.D.C. 204bJ

*

....._'

REPORT OF THE AUDIT DIVISION

ON TUE

PRESIDENT FORO COMMITTEE

(General Election Campaign)

I. Background

This report covers the audit o·f The President Ford

Committee (PFC), undertaken by the Audit Division of the

Federal Election Commission to determine whelh~r there has

been compliance with the provisions of the Federal Flection

CuIII pa i 9n Act 0 f 1971, a samend cd (the Act). The audit'lla s

conducted pursuant to Section 438(a)(8) of the Act and Section

9007(a) of Chapter 95 of the Internal Revenue Code of 1954.

Section 438(a)(8) of the Act directs the Commission ."to make

fro III t i III C toti JI1 e audits and fie 1dinvcsti fJ a t ion s 'I' i t h res pec t

to t~eports and statements fi led under the provisions of thi s

c h(l pte r, and \'J i t h res pcc t to a11 eqed fa i 1II res to f i 1e any

r p po," tor s tat eIII ent r equi red unde r the pro vis i () nS 0 f t his

(: tlap t p t", and tog i v J1 rio r; t y tOll U di tin 9 and fie 1dinvest; - gating of the verification for, and the receipt and use of,

it ny paymen t s r ec e i v e d by a can did ate u nd e t" Chil pter 9 5 0 r

Chapter 96 of the Internal Revenue Code of 1954. 11 Section

9007{a) of Title 26 of the United Stiltf'S Codc (26 U.S.C.

9007{a)), dirccts the Commission to conduct an audit of

t.hl' qualified campaign expenses of every candidate and his

(Hi tho)" i zed comm; t tee s 'I' h0 r ece i ved aPr esid en t ; alE1cc t ; 0 n

CuIII pa i qn Fun d pa.Ymen tand to de t e r l~li np the am0 unt, i fan.Y , of repayment to the general fund of the u.S. Treasury.

The audit covered the period from August 19, 1976, the

beginning of the expenditure report period (26 U.S.C. 9002

(12}{A)), through January 31, 1978. The PFC reported beginning cash on hand of $0.00, total receipts of 523,806,015.19,

total expenditures of $23,582,089.31*" and ending cash on hand

of $223,925.88 for the period ending with the February 10, 1978

report.

RepOt~ted expenditures subject to the limitation is

... $21,811,590.40 (See 2 U.S.C. 441a(b)(1)(B)). ( \ \ .'\

::,,' ·c.l~';'··~ . •' ~~ ,-,"J " :;. .~.~ :" .'. ...... ''''ft ,.t', ..
.1-------------~-2~---------------

.,. The principal officers of the' prc durinq the period covered

by the audit; nc1uded ~, r. R0 qe t· r.. (\. M0 r t (l " (8/ 19/ 76 - 9/ 6/ 76)

and Mr. James A. Baker, III (9/1/lh to present), Chairmen. and

Mr. Rob er t C. ~, 0 0 t (8/1 9/ 76- 9/ (, / 76) ,1 nd Mr. I{ 0 Yston C. Hug he s

(9/7/76 to present), Treasurers.

This audit report is based Oil documents and working papers

sup PO r tin9 each 0 fits f act ua1 stat (' 111 ent s . They form part 0 f

the record upon which the Commissioll based its decisions on the

PIa t t c rsin t his rep 0r t, and we rca v\l i 1ub1e tothe Comm; s sion er s

and appropriate staff for review.

II. Findings and Conclusions

A• 0i s c 1~).J) ur e

(1) Pisc10sure of Repositories

A comparison between the PFC's Statement of

Organization and amendments thereto, and bank records reviewed

during the audit, revealed twenty-one repositories which were

not previously disclosed.

Recomlllp.ndation

Since the pre illllpnded its Stiltement of Organization

on July 12, 1977, listing the previously undisclosed reposito ric S III ent ion edab 0 ve, 'II erec0 IIIIIIend no act ion 0 nth isma t t er .

(2) ~ortinq of Debts and Obligations

Arevie\"' 0 f the PFC•sou t stan din 9 deb tsand

ob1i gat ion s ." eve aled t hat \'1 hi 1e the s e \'1 ere i t e111 i zed a t the

close of each respective reporting period, their subsequent 1i qui dat ion \'1 as evide nee d 0 III yin the r ecei pt S I and cxpen d; -

turcs' section of lilter reports, and were not reflected as

required on Schedule C for lines 26 and 27.

Recommendation

Since testing has given assurance that all reported deb tsand 0 b1; gl\ t ion s \"' ere 1i qu; dated, no aIII end i nq act; 0 n i s

bel ; eve d to beneces 5 aryon il n ; t em by i t eIII bas is. H0 \'1 eve r, \"J e

suggested that the PFC submit a statement for the public record,

signed by the Treasurer, indicating that all reported debts and

obligations have been liquidated as of a given reporting date

and that commencing with the May 10, 1977 report. debts and

obligations will be reported as required by the Act. The PFC

submitted this stiltcment on July 12, 1977, consequently, no

action is recommended.

- __~' ~--'_~""""_"' ~F""""__·""-"'--_"' •
-3-

( 3 ) Advit nee Rep 0 r ~iJ.~ ~1 -:\)' s t em

( i) The PFe, t ht" 0 u~J h0 U t the qP. nera 1 e1ec t ; 0 n

campaiqn, reported as an expenditure the amount of an advance

of funds made to pre state bank accounts. As the state entities

submitted expense reports to account for their advances, the PFe

would enter these vendors' expenses into their expenditure reporti n9 sy s tern 1I nd U S Q are v c ." sin ~J c nt t"Y tor(ldue c the pre v i 0 U sly

rep 0 r t dad van c c • l·J h i 1c the c1 dvan c epaYin ent s we r erep0 r ted 0 n

it timely basis, the expense reports of the state entities were

JH" () Ce sse d bet\AI e c none and t \AJ en t y - t h r e ewe e ks aft e r the act ua 1

s t. il t e c hec k wa ~j \AJ r itten tothc u1t i IIIate v end 0 r / payee. Ins 0 me

cases up to six (6) reporting periods elapsed between the date

t h{' c hec k \'/ as wr; t ten fro 111 the advunc e ac co un tan d \-1 hen the

u1 timate vend 0 r / payee deta i 1 \oj c1 5 rep 0 r ted. 110 \'1 eve r, ba 1a nee s

; nthcad v il n ceil ceo un t S \AJ ere sub tan t ; all y 1 ; qui datedund r eported as of the May 10, 1977 report.

(ii) Refunds and rebates received and deposited

i n pre non - Has h i n9ton Headquur t e r"sac C 0 unt S \'J ere net ted fro m

reported expenditures for the respective vendor/payee. This

\'J it site com p1 ish cd; nth e c xpen di t u res e c t ; 0 n 0 f the l" e POl" t, by

t" (IPOl" tin 9 nneq () t i veentry for the res p ec t ; vevendo r / payee , r (I the '''' t han (l r Po fun d 0 r reb ate (1 $ ali ne 17 )'" pCP i pt. This r(!~ul ted in i} reporting difference of at least S21,000.00.

This p'''' 0 c cd1I t' erne nt ion c d il h() v Po d; d not

rc.:sult in u mi!'.'";tiltp.ment of expenditures charljPclble to the {~xperHli ture 1ind tation but rather iln l,ndet"~)tilt.elll~nt in ."p.funds

and rpbil tps )"ecei ved and a 1; kc _~~IL~~r·5··f~1-t-(,-lllin·l ·fn---(~~xpclld-1TUr"e-s

·~-l"'--l;c-p-ort .

(iii) The PFC, in processing expense reports

." l' C ei v ed f l'0 III 5 t II tea d van c e ace 0 unt s, S 0 f11 e t ; IIIpsg r 0 upedt 0 -

~J p the r s eve t" a 1 sCPil rat c ex pen d; t u res to as; nq 1evendo r it nd

'" (~ p0 r ted them itsonc expc 11 d; t LJ rei nthc aq9'''' P q,l t e il rn 0 unt,

t huS red uc i 11 9 P)" 0 C (~ S sin9 time, hen c (~ cos t, b'y kecpin 9 1i ne

(\ n t t'" ; est 0 ami ni III UIII • A f C\'J 5 tilt e adv 8 nc cue c 0 unt s, i nrcporting buck to pre, also grouped expenditures together on

the i)" ex pen S erepo r t s •

This practice, either by pre or the state

(1 d Vi} nee ,1 ceo unt!), \'1 hi 1c n() t 100 con sis tell t \'1; t h t hPo Pl" 0 vis ion

o f rep 0 l" tin ~1 e tl chex pen d; t lJ rei n e xC(l S S 0 f S100 • 00 0." a99r e- ~1 i\ till ~I inc xce S S 0 f $100 . 00 ; n u cal end ilryea 1", did not

IIIute."; u11y dis t 0 f t dis clos ur e •

• •

[

~"""""'''·''''''-''''-·''''''''''''''''''''''''''''''''''''''''''·''''.'''''··''''''''•.'''·•. ''.· r,. .. 04 I .....-. ,_ _ _._..__ " .
'I· --.--·-··-..--------~----4-- --------------n No

..

t

(iv) A similar practice was noted in the PFC's

processing of state adVllllce account expens~ rC'ports. On

sQvcral occasions, pre gt40upcd incidental expenses (usually less than $25.00 or occasionally larger expenditures) for

which adequate information (name and address of vendor, etc.)

was not available at time of processing, under the name of

the state chairman or person in charge of the advance account

a s the vend 0 Y' / payee. This pr act; c call 0 \"J edti III ely pro c e S sin9

o f s tat e e x p(~ ns ere p0 r t s wit h cat e ~) 0 '" i za t ion 0 f e xpen s e S

(supplies, travel, etc.) when available.

While there is a possibility that certain

expenses procp~sed in this manner could conceivably aggregate

incxc (~ s S 0 f S100 . 00 per actua1 vend 0 r pe '" cal end a ryea r, t hU 5

requiring it('liliziltion, this practice did not have a material

effect on disclosure.

Recommendation

Wr feel that no amending action is required by the PFC

since ou~" r'evic\'J indicated that ultimate vendor/payee information

was In cl t e ria 11y ." e p 0 ~" ted, a1 tho ugh not al\'I ay son a curr en t bilsis •

D• He p (l y 1:1 en t toth e U. S. T." e(l S tn" V

Pursuant to Section 9007(b) of Title 26 of the United

S1:at(!s Code (?G U.S.C. 9007(b) and Commission Hegu1ations, ~cctiun l42.4(h) and 145.2 (11 (rR 142.4(b) clnd 145.2), the

rep ay III ent aIii () U n t upp1i cab 1e to the PFCis coIII put e d a s f 0 11 0 \oJ s :

(1) ~! nq Uil 1i fie d Ccl mra ·i_~~I!...C ns e£

(a) Our review of the pre's reports and records

"(' veale d t hut dis bur sem c nt s totall i nq $ 700 . 00 \oJ e t" e mad e i n paympnt of purkinq violation fines 1evipd il9ainst pre employees

il " d/ 0 r vol untee '" S \oJ hi 1e pe'" f 0 '"III i n9 C ilm pa i 9n r e1ated duti es .

Re C 0 Iill:. end at ion

HereC0 1~1 III end t hat the payIn ent 0 f par kin 9 vi 0 1a t ion fin es

be vip\.J e d II san unqlJ a 1; f; cdc uIII pa ; ~1 n c xpen sea nd the val ue (S 700 . 00 )

be repaid in full to the U.S. Treasury. In addition, the PFC shoul<1

be i.l rl v i $ edt hat. the val ue 0 f the '" cpa .Ymen tand the 0 '4 i ; nale xpen s (~ s

al"t? not suLj~ct to the spending limitation in Section t141a(b)(1)(B)

of Title 2 of tne United States Code (2 U.S.C. 44la(b)(1)(B)) •

......................--............_---------~_._ ..._----=-._....,.....~----,.---, .._-......-................-.......---------.....-, .
.1

4 ., - 5-

(2 )

c

(b) On December 1. I'l77, the PFe paid a bill . totalling $11,589.87 for leual ~"l'vic(ls rendpred in connection

with the disposition of the residual in the prc's "legal and

Accounting Comp1iilnce Fund. 1I This l~xpense \.,a5 incurred

by the Candidate during the expenditure report period; however,

the majority of the services were rendered in 1977 in seeking

approval from the Internal Revenue Service as to the method of

disposition. The PFC believes this expense milY be claSsified as

a "winding down cost" and therefore a qualified campaign expense.

On January 5, 1978, the Commission determined

that this expense did not further the election of the Candidate

and hen ee\'l clsan unqua 1i fie d caIII pui qn ex pen s e • The Co IIIrn itt c e

r eque s ted t hat they be a11 0 \./ ed to r e; mbursethe" Pub 1 i c Fun ds

Ace 0 u11 t II f '" 0 III t h(~ II Leg a1 and 1\ ceo untin 9 Com p1ian ce Fun dII rat her

t han III (l k ear p Pil .y fIl en t tot hcU. S. Trea sury • This am0 unt\'/ 0 u1d

then be included in the calculation of any campaign surplus to

be refunded to the U.S. Treasury. The Commission approved the

rei III bur s eIII enton Jan lJ a'"y 2 7, 19 78 tand the fun ds \./ ere t ran sfer red

by the Committee on the same datp..

necollllllcndlltion

Since the Committee's "Public Funds Account ll has

rpcovPl"cd the full amount of the unqua 1i fi ed campa i gn expense,

\'1 p r' ceoIIIIIIend n0 f ut the '" act ion .

Income Dp.ri\,('d From Invrstmrnt

O-f--il---P-o-t;f-'-on-o'(-1. t"1-e-(u·r~ci-P~~11C~I.lJ_

The PFe i nv cst ed () POt" t ; 0 n 0 f the Fun d pay 1:1 en tin

a sav i n ~J sac COli n t f 0" II t \'J 0 III 0 nth pel" i 0d c 0111 III ('~ nC i n ~~ 0n f\ uqUs t 24 ,

19 76 • The i nt ere s t C J r nect 0 tl the pl"; nc ; pal a 1\ d ; ntel" cst bas e

arn 0 unted to S71 , 11 74 . 29 • I n add it; 0 n, S28 • 08 \./ a s rea 1i zed as a

rcsult of interest earned on telephone deposits.

Recommendation

Section 142.4 of the Commission's Regulations (11 eFR

142.4) first published August 25, 1976, provides that earned

inter'cst income mU5t he retul"ned to the U. S. Treasury presumah 1y 1es sapp1 i cab 1e Fed era 1 and I 0 '" Stu t e inc 0 IIIeta xes . The

comput. a t ion bel 0 \'1 i 1 ius t rat Po 5 the 1:1 etho d 0 f II r '''; v i ngat the

atil 0 Un t t 0 be'"epII ; d tothell . S. Tr' euS U l"Y• I n il dd; t ; 0 n, the

pre should be udvised that the value of the ,"epa:lment und

inc 0 III C t II X payIII en t sis not sub j ec t tothc s pen d; n ~J 1; III ; tat; 0 n

in Section 441a(b)(1 )(8) of Title 2 of the United States Code

(2 U.S.C. 441a{b){1 )(B)).

, ,.- -...-.. • a ' w~.--..~ ..- ·...-..,........... ..- .
-6-

Total amount of interp~~t income earned

Less: Federal income lilX paid D.C. income tax paid

i

.,. .. o·

f

1 • . ,

• $ 71 t 502 . 37

(33,951.00)

$

LL,-9J_9..~_99~ 30,472.37

Repayment amount - Item B(2) $ 30,472.37

(3) Unused Portion of Fund Payment

The computation belo\-I illustrates the method of

arrlvlng at the amount to be repaid to the U.S. Treasury. Hith

the exception of the amount added fot" estimated Qualified

Campaign Expen~es net of estimated refunds and rebates, the

remainder of the computation is self-explanatory. I\ttachment #1

is a schedule conlprising PFC's best estimate of winding down costs

for the period february 1, 1978 through May 31, 1978 (projected

termination date of the PFC), accounts payable as of February 10,

1978 (; ncur'red duri nq the expendi ture report peri od), and accounts

receivable as of February 10, 1978.

The sees t ; mat e d fig ures \., ere rev i e\'1 c d by the J\ ud i t

staff lind are considprcd reasonable. The use of these estimates

\-1 i 11 perIII ita l" epa y III e n t de t e rIn; n il t ; 0 nat t his time, rat her t han

pes tponi n9 ,"epayment pendi nq actua 1 fi qur'cs for thc per; od

Feb r' U il l"Y 1, 1 9 7B t h r 0 U ~J h May 31, 1 9 78 • [ s t i In ate S VI ill be

c 0 III paredt 0 actlJ a 1 f i ~J u r c s by rev -, e \., i n~) f ut u rePr C r' e p0 r t s

f; 1edan ci / 0 r r Po cor d S i1 S nee e s sII r' y t h r 0 U ~I h the dute 0 f

tr!l"llIination. I\n odjllst.lilcnt to tha repaymcnt fiqure pr'escnted

'" ill b e 11\ ade; n a sup p1eIII cn tal t" e po r t, i f nec e s s dry •

I

j

I

j.

,

i

C't

,

c1

•

Cl

1'0.

1 Fund Puyment

Less: Expenditures subject to limitation

(8/19/76-1/31/78)

Current Surplus as of January 31, 1978

$ 21 ,820,000. 00

(21,811,590.110)

8,409.60

I,

[ s timate d Qua 1i fie d CaIII pa i ~J n Expen s e s Net

of Estimated ncfunds and Rebates as of

2/10/78 - See Attachment #1

Unused Portion of Fund Payment

Repayment amount - Item B(3)

s

( 6,222.55)

2,ln7.0~

$ 2,187.05

.~ ., ,.._~~ _, ~""'''_''''''' ••''''''''''''''''''''''''''''.'''''''''''L~'~ •. ''''''''''''''''''''''''''_.-'.''''''''''''''''''._:-~._''''''''''''''__ .''''''''.''''''._ .
-7-

Recap - Section B

Item 8(1) - Unqualified Campclign Expenses

Item 8(2) - Net Income rrom Investment

Item B(3) - Unused Portion of Fund Payment

Total Repayment Amount

$ 700.00

30,472.37

2,187.05

$ 33,359.42

ilI

1

On February 17. 1~78. the Committee Controller

hand delivered two (2) checks ($700.00 and $32,659.42), drawn on

the accounts of the President Ford Committee and made payable to

the United States Treasury for the sum of 533,359.42. This represents payment in full of the Committee's repayment obligation under

Section 9007 (b)(l) and (b)(4) of Title 26 of the United States

Code.

III. Auditor's Opinion

Except for the matters specifically noted in this report,

the audit disclosed that The President Ford Committee conducted

their activities in conformity with the Federal Election Campaign

Act of 1971, as amended, and i 11 conformi ty \'Ii th Chapter' 95 of

Title 26 of the United States Code in all material aspects.
Attachment til

Estimated Qualified Campaign Expenses and Receivables

as of Close of Business February 10, 1978

1

t

t

I

i

Accounts Payable February 10, 1978

Winding Down Costs February 1, 1978 to

Terminution

$ 4,518.93

3,975.00

(2,271.38)

s

$

$3,250.00

125.00

600.00

Salaries and Fees

Postage, Printin~

and Reproduction

Storage

Accounts Receivable February 10, 1978

Est i lila ted Qua 1 ; fie d Cit IIIPa ; ~J n Ex pen s es net

of estimatt":Jd refunds and rebates as of

February 10, 1978

.i

I

-,.~

c,J.

C'l

1

=-

-I

I

I

1

•

1

l ,.. , _ _ ---.. ,..., __u •• ,......-..~ ,