FfDi:RAl ELECTIO" CQ,\t\1ISSION

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Alt005899

January 17, 1995

MEMORANDUM

TO:

FROM:

RONALD M. HARRIS

PRESS OFFICER

PRESS OFFICE $--

ROBERT J. COSTA .

ASSISTANT STAFF DIRE OR

AUDIT DIVISION

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SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

LYNN YEAKEL FOR SENATE

Attached please find a copy of the final audit report

and related documents on Lynn Ye~kel for Senate which vas

approved by the Coaaission on Deceaber 29, 1994.

Informational copies of the report have been received by

all parties involved and the report aay be released to the

public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Reports Analysis Division

FEC Library
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REPORT OF THE AUDIT DIVISION

ON

Lynn Yeakel for Senate

Approved 11129194

FEDERAL ELECTION COMMISSION

999 E STREET. N.W.

WASHINGTON, D.C.
TABLB or CONTENTS

LYNN YEAKEL rOR SENATE

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Executive Suaaary

Final Audit aeport

Background

Finding_

Trans.ittal to Coaaitt••

Chronology

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FINAL AUDIT REPORT

ON

LYNN YEA~EL FOR SENATE

EXECUTIVE SUMMARY

Lynn Yeakel for Senate (the Coaaittee) registered with the

Secretary of the Senate on January 22, 1992, as the principal

campaign committee for Lynn Hardy Yeakel, D.mocratic candidate

for the u.s. Senate fro. the Coaaonwealth of Pennsylvania.

The audit was conducted pursuant to 2 u.s.c. S438(b) which

states that the Coaaialion aay conduct audita of any political

committee whose reports fail to ••et the threshold level of

compliance set by the Coaai.sion.

The findings of the audit were presented to the Co..itte.

at an exit conference h.ld after the fieldwork (2/16/94) and

later in an interi. audit report. The Coaaitt••'. r••pon••• to

those findings are includ.d in this final audit report.

The following is an overview of the findings contained in

the final audit report.

Misstate.ent of rinancial ActiVita- 2 u.s.c. 11434(b)(1),

(2) and (4). The Co..itte. understate its receipt. by $94,881

and its di.bur••••nt. by $94,649, larg.ly a. a r.sult of failing

to disclose activity relative to a t.l••arketing fundraising

prograa conducted by Gordon and Schw.nk••yer Inc .. The

Co.-ittee fil.d •••nded reports which aaterially corrected the

lIisstate••nt••

a. and Ite.ization of Recei ts and Di.burse••nts

2 u.s.c. , ~( ) an (): CPR . ( )( ) 111).

The Co..l~te. did not report and itemize tele.arketing

disbur••••nt. totaling $104,325. The Committee also did not

itemize the r.ceipt of loans totaling $355,500, loan repaya.nts

totaling $86,800, and contributions totaling $21,619 ($11,619 of

which also required iteaization as disbursements).

Additionally, the Coaaittee did not report and ite.ize off.ets

totaling $32,034 (of which $20,532 also required it••ization a.

disbursements) and did not itemize additi~nal off.ets totaling $47,001. After fieldwork, and in response to the interia audit

report, the Committee filed comprehensive amend.ents which

disclosed the aissing activity.

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Oai••ion of Disclosure Inforaation - a.cel t. and

Disbur••••nt. - U.S.C. SS (A an A). Th.

committ••'s report. contain.d incoaplete or ai••ing addre•• information for a material number of disburse.ent. and

inadequate information on contributions from individuals with

respect to earmarked contributions, contributor na.es and

addr••••s, and y.ar-to-d:~~. totals. After audit fieldwork the

Committe. filed a coaprehenaive a.endment which corrected the•• omissions.

Undocu••nted Cash Receipts - 2 u.s.c. SS4419; 11 CPR

11102.9(8) and 110.4(c)(2) and (3). With r••pect to a $6,878

cash deposit, the Coaaitt•• did not take r.co...nded action by

either producing evidence to docuaent the aourc. of the funds or

disposing of the••

Check. Rad. Payable to Cash - 2 u.s.c. S434(b); 11 c.r.R.

51102.9(6), 102.10, and 102.11. Th. Coaaittee did not prOVide disburse••nt docuaenta~ion for two checka totaling $7,000

payable to cash. The Coaaitt••'. r••pon.e to the interia audit

report did not provide .ufficient evidence docu••nting how the

funds were spent.

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Apparent Exce.sive Contributions - 2 U.S.C. 11441a,

431{11)f 11 cra 55110.1, 100.5, and 103.3. The Coaaitt.e

received contributions which exc••ded the donor.' ii.it.tiona by

$59,276. The Co..ittee had taten steps to re.olve $20,699 of

the exce.sive a.~unts (through red••ignations, r.attributions or

refunds) but not within the r.quired ti.e li.its. A. for the

re.aining exce••ive a.oun~s, the Coaaitt•• co.plied with an

interi. audit report r.co..end.tion by reporting the exce••ive

portions as debts owed to the contributor••

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FEDERAL ELECTION CO~1MISSION

REPORT or THE AUDIT DIVISION

ON

LYNN YEAalL roa SENATE

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I. Background

A. Overview

This report is bal.d on an audit of Lynn Yeakel for

Senate (the Co..itt••), undertaken by the Audit Division of the

rederal Ilection Co..i ••lon in accordanc. witb the provisions of

the 'ederal Slection C.apaign Act of 1971, as ...nded (tbe Act).

The audit va. conducted pursuant to Section 438(b) of Title 2 of

the United State. Code wbicb atat••, in part, tbat the

Co..i.sion ..y conduct audita and Lield lnv••tJ~a~ioD' of any political co..itt•• required to file a report under ••ction 434

of this title. Prior to conductiDg any audit UDder this

section, the Co..i ••ioD .hall perfora an int.rnal r.view of

reports filed by ••l.cted co~tt••• to de~.~D. if the reports

filed by a particular co.-itt.....t the threshold require••Dt.

for sub.tantial c08plianeo with the Act.

The audit covered the period fro. January 15, 1992,

the inception of bank aetivity, tbrou9b Dec•.a.r 31, 1992. The

Coaaitt.e r.ported be9inning ca.h on hand of -0-, total receipts

for the period of $5,200,870; total di.bur....nt. for the period

of $5,198,331; and endiDg ca.h on band of $1,497.!/

!/ The•• total. are the a.ounts accuaulated by report period.

The Co..itt•• reported $5,199,374 for the calendar

year-to-date total for di.bur••••nt. and $5,200,870 for the

calendar year-to-dat. total for receipts.

Totals do not foot because of an arith.etic discrepancy

within di.bur••••nt••

All figure. within this report have been rounded to the

nearest dollar.

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B. Campaign Organization

The Committee registered with the Secretary of the

Senate on January 22, 1992, as the principal campaign committee

for Lynn Hardy Yeakel, Democratic candidate for the U.S. Senate

from the Commonwealth of Pennsylvania. In addition, the

Candidate designated two authorized committees: Faces of Chanqe/~.S. Senate (FOCUS), and Women ... for a Change. The•• committees acted as fundraisinq representatives for the

Committee and other participating committees. The Committe.

maintained its headquarters in philadelphia, pennsylvania.

The audit indicated that 80\ ($4,140,000) of the

Committee'S receipts were contributions fro. individuals, 8\

($416,000) froa political committ••• and other organizationa, 9'

($485,500) were loans and a contribution froa the Candidate, and

the balance were offsets to expenditures, interest and receipts

from joint fundraising activity conducted by the authorized

committees.

This report is based on documents and workpaper. which

support each of its factual stateaents. They fora part of the

record upon which the Commission baaed its decisions on the

matters in the report and were available to Coaaissioners and

appropriate staff for review.

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c. Key Personnel

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The current Treasurer of the Coaaittee and the

Treasurer during the period covered by the audit is Mr. Sidney

D. Rosenblatt.

D. Scope

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The audit included testing of the following general

categories:

The receipt of contributions or loans in exc••• of the statutory li.itationa (Finding II.B.);

2. the receipt of contributions froa prohibited

sources, such as those fro. corporations or labor

organizations;

3. proper disclosure of receipts from individuals,

political eo.-itteea and other entitiea, to

include the iteaization of contributions or other

receipts when required, as well as, the

eoapleteness and accuracy of the infor.etion

disclosed (Findings II.F .. G., H.);

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4. proper disclosure of disbursements including the

itemization of disbursements when required, as

well as, the completeness and accuracy of the

information disclosed (Findings II.A.2., D., G.~

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s. proper disclosure of campaign debts and

obligations (Finding II.E.);

6. the accuracy of total reported receipts, disbursements and cash balances as compared to

campaign bank records (Finding II.A.1.);

7. adequate recordkeeping for caapaign transactlons

(Finding II.C.); and

8. other audit procedure. that were de.aed necessary in the situation.

The Audit staff was unable to deter.ine the source of

certain cash receipts and the use of cash disburse.ent. (se.

rindings II.C. and D.).

Although the Coaaitt•• eo.pli.d with the ainiaua

recordk••ping require.ents pursuant to 2 U.S.C. S432(c), the

Audit staff was unable to review the source docuaenta for

receipts totaling $130,054 which were raised by a tel...rketing

fira on behalf of the Coaaittee. The fir. provided receipts

infor.ation on aa9n.tic .edia, but did not provide copies of

contributor check., re.ponse device. or other conveyance docuaentation fro. the contributors.

Unle•• specifically discu••ed below, no aaterial

non-coapliance vas detected. It should be noted that the

Coaai••ion aay pursue any of the .atters discus.ed in this

report in an enforce.ent action.

II. rinding_ and .eco..endations

A. Ri••tate.eDt of rinancial Activity

Sections 434(b)(1), (2) and (4) of Title 2 of the

United State. Code require a political coaaitte. to report the

aaount cf cash on hand at the beginning of a reporting period

and the total amount of all receipts and disburse••nts for the

reporting period and calendar year.

Sections 434(b)(4)(A) and (S)(A) of Title 2 of the

United States Code state that each report shall disclose

expenditure. aade to .eet candidate or coaaitt•• op.rating

expenses; and the na•• and address of each person to whoa an

expenditure in an a9gregate a.ount or value in excess of $200

within the calendar year is aade by the reporting coaaitte. to

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meet a candidate or committee operating expense, together with

the date, amount, and purpose of such operating expenditure.

The Audit staff reconciled total bank activity, .1

determined at the close of fieldwork, to the reported activity

and determined that total receipts were overstated by $4,813;

disbursements were overstated by $4,839; and ending cash on hand

was overstated by $34. This reporting difference for receipts

was the result of a failure to report contributions from

political committees totaling $21,619, failure to report off.ets

to expenditures totaling $32,034 and net reconciling itea.

totaling $58,526. The difference in disburse.ents was the

result of a failure to disclose offset activity totaling

$20,532, failure to disclose contribution in-kinds totaling $11,619 and net reconciling itea. totaling $36,990.

The Coaaittee filed amended reports on March 3, 1994

which corrected the reporting discrepancies noted above.

Disclosure of Activity from a Tel••arketing Program

During fieldwork the Audit staff identified

$25,300 in credits to a Coaaittee account which were apparent

wire transfers. The credits were not supported by receipts

doeuaentation. During fieldwork and at the exit conference the

Audit staff requested docuaentation to support the credits. In

r••ponse to the exit conference the Coaaitte. provided

docuaentation and inforaation which identified the source of

these funds al net proce.ds froa a teles.rketing prograa wbich

vas conducted by Gordon and Schwenka.yer, Inc. (Gil), of £1

Segundo, California, on behalf of the Coaaitt•••

The tel.aarketing fira opened two accounts wACr

[As Custodians Por) Yeakel for u.s. Senate" to .anag. the

teleaarketing activity.~/ The Audit staff analyzed the activity

of these accountl and deter.in.d that the tele..rk.ting prog'•• generated gross receipts!/ totaling $130,054, ••d. di.bur••••nt.

totaling $104,488, and transferred net proce.ds totaling $15,300

to the Coaaittee through Deceaber 31, 1992. Only the net

proceeds transferred to the Coaaitte. were reported either in

~/ The depository for teleaarketing receipts was not disclosed on

the Coaaittee'. Statesent of Organization. In r.sponse to a

request from the Audit staff the Co.-ittee filed an a.ended

State.ent of Organization on Nay 9, 1994 discloling this

depository.

Although the Coaaittee did not a99reqate these

contributions with its other contributions for the purpose

of monitoring contribution Ii.it.tions or iteaizations, the

Audit staff did not identify any .aterial failure in the.e

areas with respect to the tele••rketing receipts.

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the original or in the amended disclosure reports. The reported

amount was included in unitemized contributions.

The Audit staff determined that for the reports

a••nded on March 3, 1994, the Committee's receipts were

understated in the amount of $99,754; disburseaents were

understated by $99,488; and ending cash on hand was understated

by $266. This misstatement resulted from the inclusion of a

voided check ($5,000) within total receipts and disbursements

and failure to include the $104,754 in tel.marketing receipts

($130,054 gross proceeds less $25,300 net proceeds) and $104,488

in telemarketing expenses for the activity as amended March 3,

1994. The understate.ent of the ending cash on hand ($266) was

the balance in the teleaarketing accounts on Deceaber 31, 1992.

2. Itemization of Disbursements - Tel.marketing

Activity

The Audit staff reviewed the teleaarketing

activity diseuss~d above and verified that unreported

disburse.ents totaling $104,325 required it••ization on

Schedule. B. The disbur••••nt. includ.d payaent. to aSI and PDR

A••ociates for fundraising expenses.

In the interia audit report the Audit .taff

reco...nded that the Coaaitte. take the follOWing action:

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... , o File aaended Suaaary and Detailed Suaaary pages

to correct the under.tate.ent. in receipts,

expenditure., and ending cash on hand noted

above; and

o file a••nded pages for Schedule 8 (It••ized

Di.bur••••nt.) to disclose the tel••arketing

expenditure. noted above.

In respon•• to the interi. audit report, the

Coaaitt.e filed a coapr.heneive •••nd.ent which a.teetally

corr.cted the under.tatea.nt of receipts, expenditure. and

ending cash. Al.o included in the co.prehen.ive •••nd.ent were

Schedule. 8 which aaterially corrected the disbur••••nt

ite.ization errors.

B. Apparent Excessive Contributions

Section 441a(a){1)(A) of Title 2 of the United State.

Code states that no person shall make contributions to any

candidate and his authorized political coaaitt••s with respect

to any election for rederal office which, in the aggregate,

exceed $1,000.

Section 110.1(b)(2) of Title 11 of the Code of Federal

Regulations states that with respect to any election aeans: (1)

in the case of a contribution designated in writing by the

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contributor, the election so designated; and (2) in the case of

a conlribution not designated in writing by the contributor for

a particular election, the next election for that Federal office

after the contribution is made. Subsection (4) of this Title

states that a contribution shall be considered designated in

writing for a particular election if the contribution is made by

a negotiable instrument which clearly indicates the particular

election for which the contribution is made; is accompanied by a

writing, signed by the contributor, which clearly indicates the

election; or is redesignated within sixty days from the date of

the treasurer's receipt of the contribution pursuant to

subsection (b)(S) of this Title.

Section 431(11) of Title 2 of the United States Cod.

defines the term person to include, .aong others, an individual,

any organization or group of persons, or coaaitte•.

Section 100.5(e)(3) of Title 11 of the Code of Federal

Regulations defines a aulti-candidate coaaittee as a political coaaittee which (i) has be.n registered with the Comaission,

Clerk of the House or Secretary of the Senate for at least 6 . Booths; (ii) has received contributions for Federal elections

from aore than 50 persons; and (iii) (except for any State

political party organization) haa aade contributions to 5 or

80re Federal candidates.

Section 110.1(k) of Title 11 of the Code of Federal

Regulations states, in part, that any contribution aade by aore

than one person, except for a contribution aade by a

partnership, shall include the signature of each contributor on

the check, aoney order, or other negotiable instruaent or in a

separate writing. A contribution aade by aore than one person

that doe. not indicate the aaount to be attributed to each

contributor shall be attributed equally to each contributor.

Furtheraore, a contribution shall be considered to be

reattributed to another contributor if the tre.surer of the

recipient political coaaittee asks the contributor whether the

contribution is intended to be • joint contribution by aore than

one per.on, and infor•• the contributor that he or she aay

request the return of the exc.ssive portion of the contribution

if it is not intended to be a joint contribution and within

sixty days froa the date of the treasurer'. receipt of the

contribution, the contributors pr~vide the treasurer with a

written r.attribution of the contribution, which is signed by

each contributor, and which indicates the aaount to be

attributed to each contributor if equal attribution is not

intended.

Sections 110.1(1)(3) and (5) of Title 11 of the Code

of Federal Regulations state, in part, that if a political

coaaittee receives a written reattribution of a contribution to

a different contributor, the treasurer shall retain the written

reattribution signed by each contributor. If a politic~!

comaittee does not retain the written records concerning

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reattribution as required, the reattribution shall not be

effective, and the original attribution shall control.

Section 103.3(b)(3) of Title 11 of the Code of rederal

Regulations states, in part, that contributions which exceed the

contribution limitations may be deposited into a campaign

depository or returned to the contributor. If any such

contributions are deposited, the treasurer may request

redesignation or reattribution of the contribution by the

contributor in accordance with 11 eFR 110.1(k). If a

redesignation or reattribution is not obtained, the treasurer

shall, within 60 days of the treasurer's receipt of the

contribution, refund the contribution to the contributor.

Finally, Section 103.3(b)(4) of Title 11 of the Code

of Federal Requlations states, in part, that any contribution

which appears to be illegal and which is deposited into a

campaign depository shall not be used for any disburse••nts by

the political comaittee until the contribution has been

determined to be legal. The political coaaittee aust either

establish a separate account in a caapaign depository for such

contributions or maintain sufficient funds to .ake such refunds.

1. Contributions Received fr08 Individuals

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The Audit staff's review of contributions

received fr08 individuals indicated that 107 individuals

exceeded their liaitation by $53,276. Of thi1 a.aunt, SS

excessive portions totaling $20,669 were resolved unti..ly

pursuant to 11 erR SllO.l(k), either by untiaely red••ignations,

reattributions, or refunds; and 60 excessive portions totaling $32,607 r••ain unresolved. The Coaaittee did not e.tablish a

separate account and did not aaintain sufficient fund. for

refunds pursuant to 11 CFR Sl03.3(b)(4).

The Audit staff provided the Coaaittee

representatives a schedule of the excessive contributions - both

resolved and unresolved - at the exit conferenc.. The Co..itte.

representative. stated that docu••ntation to support

redesignationa and reattributions of loae of these contributions

may be held by fora.r Coaaittee personnel in charge of

fundrailing. The Audit staff reco...nded that if the Coaaittee

is unable to provide refunds to the contributors, the Coaaittee

should disclose debts owed to the contributors for the

unresolved a.ounts on Schedule 0 - Debts and Obligation£.

On March 3, 1994 the Coaaittee filed, as part of

a comprehensive aaendaent, Schedule. 0 which disclosed .ost of

the refunds due for the unresolved excessive contributions as

debts owed to the contributors. However, the Coaaitt•• also

included as debts the excessive contributions which had been

refunded, reattributed or redesignated.

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In the interim audit report the Audit staff

reco...nded that the Committee take the following action:

In response to the interim audit report, the

Co..ittee did not provide any evidence that the contributions

were not excessive. The response did contain a.ended Schedule.

D which disclosed all of the unresolved excessive contributions

.s debts owed to the contributors.

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2.

Provide evidence that the contributions from

individuals noted above are not excessive.

Amounts characterized as excessive contributions

from individuals in this report may be resolved

if the Committee submits evidence indicating that

the excessive portion of a contribution was

timely reattributed to another contributor,

timely redesignated to another election, or

timely refunded;

absent such demonstrations, refund the unresolved

excessive contributions to the contributors, as

funds become available, and provide evidence of

such refunds in the form of copies of the

negotiated refund checks, both front and back;

and

with regard to the disclosure of the unresolved

excessive amounts, file an amended Schedule D

which includes as debts only the unre.olved

refunds payable to the individuals.

Contribccion Received fro. a Registered Political

Coaaittee

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The Coaaitt.e received a $5,000 contribution fro.

a political coaaittee, the excess':"fI roc~ion of which totaled

$4,000. Although the coaaittee is re9is~ered, it did not

qualify as a aulti-candidate co~~:t:ee at the ti.e the

contribution was aade. The leg1j ~Jn~ribucion Ii.it for a

non-qualifi.d political coaaittet . 3 political coaaitt.e which

is not a aulti-candidate co..it~~~' is $1,000 per election.

At the exit ~~~t~:ence the Audit staff advised

Coaaittee representatives th~t.t~e excessive nature of the

contribution could be resolv~d if the contributinq coaaitte.

could demonstrate to the Commission that it satisfied the

aulti-candidate requirements under 11 CFR S100.5(e)(3) at the

ti•• it aade the contribution to the Committee.

On March 3, 1994 the Committee filed, as part of

a coaprehensive aaendaent, a Schedule 0 disclosing a $4,000

refund payable to the political committee.

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3. Contribution Received from an Unregistered

Organization

The Committee received a 53,000 contribution from

an unregistered organization, the excessive portion of which

totaled $2,000. The contributor, IAPAC, is a Pennsylvania

Chapter of the Indian American Political Action Committee.

A review of the index of registered political

committees identified the Indian American Political Action

Committee - New Jersey Chapter (IAPAC-NJ) as a registered

rnon-qualified) politic.l committee. However, the Statement of

Organization for IAPAC-NJ does not include the Pennsylvania

Chapter as an affiliated or connected organization.

At the exit conference the Treasurer was notified

of the exce••ive contribution. He expressed concern about the

Committee's inability to recognize either the unregistered

nature of political organizations or whether or not

multi-candidate status has been achieved by political

coamittees.

In the interia audit report the Audit staff

recomaended that the Coaaittee take the following actions:

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Demonstrate that the contributions received fro.

the non-qualified political co.-itte. and the

unregistered organization are not exce.sive; or

absent such d••onstrations, refund the unresolved

excessive contributions to the contributors, •• funds beco.e available, and provide evidence of

such refunds in the fora of copi•• of the

negotiated refund checks, both front and back;

and

o file an ••ended Schedule D which include••s

debts the unresolved refunds payable to the

political organizations.

In its re.ponse to the interia audit report, the

Coaaitte. did not provide any evidence that the contributions

were not exc.ssive. The re.ponse did contain a.ended Schedules

D which disclosed all of the unresolved excessive contributions

as debts owed to the contributors.

C. Undocu.ented Cash Receipts

Section 441g of Title 2 of the United States Code

states, in relevant part, that no person shall make

contributions of currency of the United States to or for the

benefit of any candidate which, in the aggregate, exceed $100,

with respect to any caapaign of such candidate for election to

Federal office. Sections 110.4(c)(2) and (3) of Title 11 of the

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Code of rederal Regulations state that a committee receivin9 a

cash contribution in excess of $100 shall promptly return the

amount over $100 to the contributor: a coaaitte. receiving an

anonymous cash contribution in excess of $50 shall promptly

dispose of the amount over $50. The amount over $50 ••y be used

for any lawful purpose unrelated to any 'ederal election,

campaign, or candidate.

Section 102.9(a) of Title 11 of the Code of Federal

Regulations requires that an account be kept of all

contributions received by a political committee. For

contributions in excess of $50, such account shall include the

name and address of the contributor and the date of receipt and

a.ount of such contribution. Por contributions froa a political

committee such account shall include the identification of the

political co..ittee and the date of receipt and a.ount of such

contribution.

The Audit staff identified a deposit of currency in

the amount of $6,878 deposited on Noveaber 9, 1992. No

contributor list or other receipts docu.entation relevant to

this deposit vas available for reviev. Sub••quent to the exit

conference a Coaaittee repre.entative explained that the deposit

consisted of a $5,000 contribution fro. the Pennsylvania

Democratic State Coaaitte. (PDSe), and $1,878 in receipts fro.

the sale of T-shirts.

According to the Coaaitte. repr••entative, the $5,000

check fro. the pose wa. cashed, the cash was intended to be u.ed

for election day expenses. The Co..ittee repr••entative further

stated that the ca8h was not used and vas redeposited after the

election into a Co..itt.e account. The Audit st~ff note. that

the pose did not report a contribution to the Coaaitt••!/; nor

did the Coaaitt•• report, in its initial filing8, the receipt of

any contribution fro. the PDse. On March 3, 1994, the Co..ittee

filed aaended reports in which it reported the receipt of the.e

funds fro. the 'DSC.

With re.pect to the $1,878 in sal••, the Coaaittee

provided an invoice dated July 14, 1992 for i.printing 1,000

ite... The Coaaitte. disclosed pays.nt of this invoice on July

28, 1992. No docuaentation vas provided to support the T-shirt

sales. On Karch 3, 1994 the Coaaittee filed aaended reports on

which it it••ized the $1,878 total as receipts fro. sale of

T-shirts.

In the interia audit report the Audit staff expressed

the opinion that the information provided by the Coaaittee was

!/ The Audit staff also exaained the reports of two

non-federal coaaittees of the Pennsylvania D••ocratic

Party. The contribution was not reported by these entities

either.

Page 12, AP?roved 12/29/94
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insufficient to demonstrate the permissible nature of the cash

deposit.

The Audit staff recommended in the interim audit

report that the Committee provide the following documentation:

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A copy of the check (front and back) from the PDSe

or bank for the $5,000 contribution;

documentation to support the sale of the T-shirts,

including, but not limited to, price lists, sales

promotional materials, sales journals, and a list of

the events which featured the sales; and

any other inforaation or explanations which the

Coaaitte. feels is relevant to the issue.

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Lacking supporting docuaentation, the Audit staff

recoaaended that the Coaaittee dispose of $6,828 ($6,878 - $50)

pursuant to 11 crR 1110.4(c)(3) and provide copies of the

negotiated check(s) (front and back) to the Audit staff for

review.

In response to the interia audit report, the Coaaitt.e

Treasurer states that on nu.erous occasions the Coaaitt•• ha.

requested a copy of the ($5,000] check froa the Pennaylvania

D.aocratic Party but have not received it. Be further stat•• that PDSC said that its coaputer records do not go back to 1992

and that they are unable to help. Included vith the Co..itt••'.

response were affidavits fr08 the Coaaitt.e's a ••istant

treasurer and caapaign aanager which state that the caapalgn

.anager instructed the assistant treasurer to go to the

Pennsylvania Deaocratic Party in Barrisburg where he received a

$5,000 check which va. to be used for election day .xpen•••• The a.sistant treasurer state. that he was told to ca.b the

check in Harrisburg and that he brought the cash back to the

caapaign office whereupon it was deposited along with the petty

cash funds froa the sale of T-shirts.

Regarding the sale of T-shirts the treasurer and

caapaign ..nager state that petty cash records were kept

detailing receipts and disburse.ents and that all receipts were

fro. the ••le of caapaign paraphernalia. They stat. that the.e

records aust have been ai.placed or may have been inadvertently

disposed of during the winding down of the caapaign.

The Coaaittee's response to the interia audit report

doe. not provide any additional evidence docuaenting the source

of the cash deposit. Further the Coaaittee has not disposed of

the funds as recoaaended in the interia ~udit report.

page 13, Approved 12/29/94
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D. Checks Made Payable to Cash

Section 434(b)(S)(A) of Title 2 of the united Stat•• Code states that each report under this section shall disclo•• the name and address of each person to whom an expenditure in an

aggregate amount or value in excess of $200 within the calendar

year is made by the reporting committee to meet a candidate or

committee operating expense, together with the date, amount, and

purpose of such operating expenditure.

Sect:on l02.9(b) of Title 11 of the Code of Federal

Regulations spe~ifies that an account shall be kept of all

disbursements made by or on behalf of the political committ••, consisting of a record of the name and addr.s. of every person

to whom any disbursement is made, and the date, amount, and

purpose of the disbursement. Section 103.3(a) of this Title

requires that all disbursements be aade by check or siailar

drafts drawn on an account except for expenditures of $100 or

less made from a petty cash fund maintained pursuant to 11 CFR

102.11.

Section 102.10 of Title 11 of the Code of Federal

Regulations requires that all disburse••nts by a political

coaaittee, except for disburse.ents fro. the petty cash fund

under 11 crR 102.11, shall be aade by check or siailar draft

drawn on account(s) established at the coaaittee'. depository.

Section 102.11 of Title 11 of the Code of 'ederal

Regulations ~tates that a political coaaitte. aay a.lntain a

petty cash fund out of which it aay .ak. expenditure. not in

excess of $100 to any person per purchase or transaction. If a

petty cash fund is maintained, it shall be the duty of the

treasurer of the political coaaittee to keep and .aintain a

written journal of all disburse.ents. This written journal

shall include the naae and address of every person to whoa any

disburse.ent is aade, as well as the date, a.ount, and purpose

of such disburse.ent. In addition, if any disburse.ent is aade

for a candidate, the journal shall include the name of that

candidate and the office (including State and Congressional

district) sought by such candidate.

During the review of the Coaaittee's bank records the

Audit staff identified two checks totaling $7,000 ($5,000 and

$2,000) aade payable to cash. No petty cash journal or other

disbursement doeu.entation was provided relative to the.e

disbursements. Both checks were negotiated on April 27, 1992,

the day before the Primary election. The purposes of both

disbursements were disclosed on the reports as "Election Day

Expenses." The payees were disclosed as "Cash."

Subsequent to the exit conference a Committee

representative stated that the funds were used for election day

expenses, includinq lunches and payments to poll watchers. The

Page 14, Approved 12/29/94
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Coaaitt•• provided no documentation or detail beyond this

information.

In the interim audit report the Audit staff

recommended that the Committee take the fc!lowinq actions:

o Provide documentation, including the identification of

the persons who ultimately received the proceeds

of the checks payable to cash, along with the date.,

amounts, and purpos•• for each cash disburse~.~t,

pursuant to the recordk••ping require.ents oi :1 erR

Sl02.9(b); and

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a.end Schedule. 8 (Iteaized Disburse.ents) to disclose

tho•• payees receiving cash disburseaents which

require ite.ization.

In r••ponse to the interia audit report, the Coaaitte.

treasurer state. that the cash payaents were for election day

expenses and receipts were .aintained. Se further state. that to

the best of his knowledge the payaents vere for poll watchers

and aeals and that none of the pay.ents exceeded $100 per

person. The Coaaittee also provided an affidavit fro. the

caapaign manager in which she .tate. that to the best of her

knowledge none of the payaents exceeded $100 to anyone person and that the payaents were for lunches, poll watchers, and other

election day expenses. She further states that -The•• records

were kept with the petty cash and aay have been inadvert.ntly

disposed of during the winding down of the ca.paign."

The Co..ittee'. respon•• do.s not provide evidence

that the Coaaitt•• aaintained adequate records regarding the

cash di.bur••••nt. pursuant to 11 cra 1102.9(b). Further, the

Coaaitte. did not provide avidenc. to d••onstrate that th••• di.bur••••nt. vare in co.pliance with the ita.iaation

require.ents pursuant to 2 U.S.C. 434(b)(S)(A).

E. Ite.iaatian of Loans and Loan .epaxaents

Section. 434(b)(2)(G) and 434(b)(3)(E) of Title 2 of

the United States Code require the disclosure of all loans aade

by or 9uarant.ed by the candidat. and the identification of each

person who aat•• a loan to the reporting co..ittee during the

reporting period, toqether with the date and a.ount or value of

such loan.

Section 434(b)(4)(O) of Title 2 of the United States

Code requires for the reporting period and the calendar year,

disclosure of the total a.ount of all disburse.ents and the

repayaent of all loans aade by or guaranteed by the candidatee

Sections 104.3(b)(4)(iii) and (d) of Title 11 of the

Code of rederal Regulations specify that each authorized

coaaittee shall report the full name and address of each person

Page 15, Approved 12/29/94
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who receives a loan repayment from the reporting committee

during the reporting period together with the date and amount of

such loan repayment; and each report shall disclose on Schedule

e the amount and nature of outstanding debts and obligations

owed by the reporting committee.

During the audit period the Candidate made four loans

($148,000, $75,000, $200,000 and $7,500) totaling $430,500 to

the Committee. Although the amount of each loan was correctly

categorized and accurately reported on the Detailed Summary 'aqe

of the disclosure reports, three of the loans totaling $355,500

were not itemized on Sch~dule A. Similarly, nine repayments

totaling $179,800 were accurately categorized and the total

a.ounts reported, but six of the repayments totaling $86,800

were not itemized on Schedule B for the appropriate line nuaber.

The loans, loan repayments, and the loan balances outstanding

were summarized incorrectly on Schedule C, and the balance of

loans outstanding at December 31, 1992 was understated by $500.

At the exit conference the Committee was prOVided with

a schedule listing all loans and repayments. The Audit staff

explained that each loan from the Candidate should be

individually disclosed on Schedule C. The Coaaittee concurred

with the Audit staff recommendation that the Coaaittee file

a.ended Schedules A, Band C to coaplete and correct the public

record.

In the interim audit report the Audit staff

reco..ended that the Committee file amended Schedules A, 8, and

C to correct the public record.

In response to the interim audit report, the Coaaittee

filed amended Schedules A, B, and C which correctly disclosed

the loan activity.

F. Reporting of Receipts fr08 Political Coaaittees

Sections 434(b}(2)(C) and (0) of Title 2 of the United

States Code state., in relevant part, each report under this

section .hall disclose for the reporting period and calendar

year, the total amount of contributions from political party

committe•• and other political co..ittee•.

Section 434(b)(3)(B} of Title 2 of the United States

Code states that each report shall disclose the identification

of each political committee which aakes a contribution to the

reporting committee ~uring the reporting period, together with

the date and amount of any such contribution.

Sections 431(11) and (13)(8) of Title 2 of the United

States Code state that the term person includes a committ•• and

defines the term "identification- to ••an, in the case of a

person, the full name and address of such person.

Page 16, Approved 12/29/94
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The Audit staff reviewed receipts totaling $413,558

from political committees and unregistered organizations and

determined that the Committee failed to itemize 33 contributions

totaling $30,619; within these omissions, contributions totaling

$21,619 were not included in the correct line total on the

detailed summary page of recelpts and disbursements. Also

within this total, $11,619 represents in-kind contributions

which require itemization coth as receipts and expenditures.

Of the contributions that the Committee did itemize,

the Audit staff noted that 53 contributions totaling $92,290

were disclosed inadequately with respect to missing dates,

missing addresses, missing aggregate year-to-date totals,

and/or incorrect election designation. Most of the disclosure

errors (including all the date errors) occurred within the

reporting period covering April 9, 1992 through June 30, 1992.

Committee representatives explained that this period represented

a major influx of contributions froa political committees and

that they lacked processing experience in this area.

At the exit conference the Audit staff provided the

Committee with a schedule of the contributions not itemized and

not reported, and advised the Coaaittee of the types of

disclosure errors noted above. The Audit staff also recoaaended

that the Committee file amended reports to correct the matters

described above to include full disclosure ~f receipts fro.

political coaaittees and other organizations.

On March 3, 1994 the Coaaittee filed a.ended report., incl~ding Schedules A and S, which .aterially corrected the

public record.

Reporting and Iteaization of Offsets to Operating

Expenditurer.:

Sections 434(b)(2)(I) and (3)(r) of Title 2 of the Uni~ed States Code require that each report shall disclose for

the reporting period and calendar year the total a.aunt of all

rebates, refunds, and other offsets to operating expenditures.

In addition, this Section requires that the report shall

disclose the identification, including the date and a.ount of suc~ receipt, of &ach person who provides an offset to operating

expenditure. in an aggregate aaount or value in excess of $200

within the calendar year. 2 u.s.c. S431(13) defines

"identification" to aean the full name and address of such

person.

Section 431(11) of Title 2 of the United States Code

states, in relevant part, the term "Person" includes an

individual, partnership, coaaittee, association, corporation,

labor organization, or any other organization or group of

persons, but such term does not include the Federal Govern.ent

or any authority of the Federal Government.

Page 17, Approved 12/29/94
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The Audit staff reviewed remittance devices from

vendors, stubs from vendor refund checks, press billing

memoranda and general ledqer entries, and located S6 apparent

offsets to expenditures totaling $48,162.5/ Of these offset. the

Committee failed to report offsets totaling $32,034 in the

reports as initially filed. Included in the total not reported

were three offsets totaling $20,532, due from The Campaign

Group, Inc. Per Committee instruction, the refunds due were

directly credited against amounts owed to another vendor,

Hickman/Brown.

Finally, 37 offsets totaling $47,001 were not it.aized

as required.

A Committee representative explained that the

Committee had no procedure in place for properly recording the

receipt of offsets to expenditures; refunds received were often

not recorded as a separate category of activity but were

included within the total activity of reported receipts.

At the exit conference the Audit staff provided

Committee representatives with schedules which detailed the

reporting and itemization errors noted above. With regards to

those errors the Audit staff advised the Coaaitte. to: (1) file

a.ended reports to disclose the receipt of all offsets to

expenditure.; (2) file amended Schedule. A to it••ize the

offsets as required; (3) include on a.ended Schedules 8 the

expenditures to Hickman/Brown .s reflected by the refunds ..de

directly to Hickman/Brown froa The Caapaign Group, Inc., and (4)

deter.ine the status of 29 billings which specified ••ount. owed

by Press organizations, and adjust the reported and it••i.ed

activity, as discussed above, accordingly.

On March 3, 1994 the Coaaittee filed a.ended reports w~ich materially corrected the public record.

H. Disclosur. of Contributions froa Individuals

C', Section 434(b)(3)(A) of Title 2 of the United Stat•• Code stat••, in part, that each report shall disclose the

identity of all persons who make a contribution to the reporting

coaaitte. during the reporting period, whose contribution or

contributions have an aggregate amount or value in exce•• of

$200 within the calendar year together with the date and ••ount

of any such contribution.

~/ The Audit staff also reviewed 29 records which identified

an additional $7,160 sought from Press organizations. The

Committee'S records did not reflect any receipts related to

these items; nor were any amounts reported as owed to the

COllUllittee.

Page 18, Approved 12/29/94
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Section 431(13)(A) of Title 2 of the United State.

Code defines "identification~ to mean, in the case of any

individual, the name, mailing address, and the occupation of

such individual, as well as the name of his or her e.ploy,·.

Section 104.3(a)(4) of Title 11 of the Code of Federal

Regulations requires that in addition to the identification, the

aggregate year-to-date total for such contributor be reported.

Section 102.9(d) of Title 11 of the Code of Federal

Regulations states, in part, that in performing recordkeeping

duties, the treasurer or his or her authorized agent shall u.e

his or her best efforts to obtain, maintain and submit ti,e

required information and shall keep a record of such efforts.

Section 104.7(a) and (b) of Title 11 of the Code of

rederal Requlations state. that if best efforts have been used

to obtain, maintain and sub.it the inforaation required by the

Act for the political coaaittee, any report of such coaaitte.

shall be considered in co.pliance with the Act. Best efforts

will not be deemed to have been exercised if the treasurer has

not aade at least one effort per solicitation either by a

written request or by an oral request documented in writing to

obtain such information fro. the contributor. For purpose. of

11 erR 104.7(b), such effort shall consist of a clear request

for the information (i.e., na.e, mailing address, occupation,

and naae of ••ployer) which request informs the contributor ~hat

the reporting of such infor.ation is required by lave

Section 110.6(c)(2) of Title 11 of the Code of 'ederal

Regulations states in part that the recipient candidate or

authorized coaaitt.e Ihall report each conduit or inter.ediary

who forwards one or aore earaarked contribution~ which in the

agJregate exceed $200 in any calendar year. Por each

contribution which in the aggregate exceeds $200 for a

contributor in a calendar year, 11 crR 104.3(a)(4) requires the

identification and aggregate year-to-date total for such

contributor.

The Audit staff reviewed a saaple of contributions

fr08 individuals. The review identified a material error rate

with respect to disclosure of earaarked contributions, names of

contributors, aggregate year-to-date totals, and aissing

addresses.

At the exit conference the Coaaittee was advised of

the material error rate and the nature of the errors. The

Coaaittee representatives stated that they would file a.ended

reports to disclose the required infor••tion.

On March 3, 1994 the Co..ittee filed a.ended Schedules

A which materially corrected the public record.

Page 19, Approved 12/29/94
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I. Disclosure of Disbursements

Sections 434(b)(4)(A) and (S)(A) of Title 2 of the

United States Code state that each report shall disclose

expenditures made to meet candidate or committee operating

expenses; and the na.e and address of each person to whom an

expenditure in an aggregate amount or value in excess of $200

within the calendar year il made by the reporting comaitte. to

meet a candidate or committe. operating expense, together with

the date, amount, and purpose of such operating expenditure.

Our review of the Coaaitte.'s it••ized disburse••nts

identified 324 instance. of ai.sing or inadequate disclosure of

addre..... Of the 324 errors, 294 ite.s totaling $292,625, were

disbur••••nts for payroll.

At the exit conference Coaaitt.e repr•••ntative. were

notified of the proble.. On March 3, 1994 the Coaaittee filed

amended reports which .aterially corrected the public record.

Page 20, Approved 12/29/94

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FEDERAL ELECTION CO.\1MISSION .~KOOS874

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January 11, 1995

Mr. Sidney Ro.enblatt, Tre.lurer

Lynn Yeakel for Senate

3120 North 17th Stre.t

philadelphia, PA 19132

Dear Mr. Ro.enblatt:

Attached ple••• find the Final Audit aeport on Lynn Yeakel for S.nate. The Coaai••ion approved the report on

Dec.aber 29, 1994.

The Coaai••ion approved Pinal Audit .eport will be

placed on the public record on January 17, 1995. Should you have any question. regarding the public relea.e of the

report, ple.s. contact the C~i••ion'. Pr••• Offic. at (202)

219-4155. Any questiona you bave r.I.~.d to aatter.·co..red

during the audit or in the report sbould be directed to

Cornelia Riley or Ray List of the Audit Division at (202)

219-3720 or toll fr•• at (800) 424-9530.

Robert J. • A.siatant Staff Director

Audit Division

Attachaeftt •••t.~.d

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Page 22, Approved 12/29/94
- ..~-,,;~;>"t'>~{T:'Z; '¥"¥;~'1¥}~:4)4ht~i§bq.~.A",~,:~Y4" ";" 3!""J., ¥Q:g;-,~~~!5;¥!¥,:,,""_ -~-:9~¥7J11!4~~,{ ,~~c"~-";"?7&?"'#t#!;, ,.;: i' ~. :

CHRONOLOGY

LYNN YEAKEL rOR SENATE

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Audit Fieldwork

Interim Audit Report to

the Committee

R••ponse Received to the

Interi. Audit .eport

Final Audit Report Approved

12/13/93-2/16/94

8/29/94

10/3/94

12/29/94

Pag8 23, Approved 12/29/94
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