Draft Final Audit Report of the 

Audit Division on 

Ted Lieu for Congress 

(FebruEuy 18, 2014 - December 31, 2014) 

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 m^, 

the threshold ^ 

requirements for 

substantial 

with the Act,!«;]^e^udit 

determir^ 

comnii^ complied^i 

the IftTO^ons. 

prohibitir 

disclosiire rgSiSiements 

of the Act. 

Future Action 

The Cotmnission m^ 

initiate an enforcement 

action, at a later time, 

with respect to the matter 

discussed in this report. 

About the Campaign 

Ted Lieu for Congress is 

Ted Lieu, Democratic can( 

Representatives from th 

headquartered in Enqj 

the Campaign 

Financia! 

• Receipts 

Contributions" 

mtributions froU^ 

tees 

_ 1 from t 

Tra^fe^^ronT^^f Authorized 

Com^tees ^ 

Loans ^m the Candidate 

erating 

- ts 

otal Receipts 

ursements 

Operating Expenditures 

Loan Repayments to the 

Candidate 

Contribution Refunds 

Other Disbursements 

Total Disbursements 

ipaign committee for 

.S. House of 

fomia, 33"* District, and is 

nore information, see 

$ 1,686,988 

543,129 

5,200 

46,300 

76,000 

11,357 

87,810 

$ 2,456,784 

$2,115,224 

76,000 

17,600 

133,500 

$ 2,342,324 

Finding and Recommendation (p. 3) 

• Misstatement of Financial Activity 

52 U.S.C. §30111(b). 
Draft Final Report of the Audit 

Division on 

Ted Lieu for Congress 

(February 18, 2014 - December 31, 2014) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 

Scope of Audit 

Part II. Overview of Campaign 

Campaign Organization 

Overview of Financial Activity 

Part III. Summary 

Finding and Recommendation 

Part IV. Finding and Recomnivi initio 

Misstatement of Financial Activity 

2 

2 
Parti 

Background 

Authority for Audit 

This report is based on an audit of Ted Lieu for Congress (TLFC), 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 52 U.S.C. §30111(b), which permits the Commission to 

conduct audits and field investigations of any political committe^^is required to file a 

report under 52 U.S.C. §30104. Prior to conducting any audij^^ermis subsection, the 

Commission must perform an internal review of reports filee^^elected committees to 

determine if the reports filed by a particular committee tn^ lold requirements 

for substantial compliance with the Act. 52 U.S.C. S^l^bV ^ 

Scope of Audit 

Following Commission-approved procedi 

factors and as a result, this audit examined: 

1. the receipt of excessive contributions and loans, 

2. the receipt of contributions from 

3. the disclosure of contributions 

4. the disclosure of individual contribui 

5. the consistency between reported fi: 

6. the completeness of ^nd 

7. other conunittee o^nati^^^cessary to 

aluated vi 

le of employer; 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration February 6,2014 

• Audit Coverage February 18,2014^ecember 31,2014 

Headquarters Encino, Califo^ai^ ^ 

Bank Information 

• Bank Depositories Two ^ 

• Bank Accounts One C J 

Treasurer 

• Treasurer When Audit Was Conducted JiSSSb Leidei^man ^ 

• Treasurer During Period Covered by Audit ^ m^eiderigp ^ 

Management Information 

• Attended Commission Campaign Fin^ce 

Seminar 

No 

Who Handled Accounting and 

Recordkeeping Tasks 

Staff 

Ovci 

Cash-on-hand J 

ncii^Activity 

nts) 

Receipts >. 

o Contijj^ions fro ^uals^'^^^gh^ 1,686,988 

o Confiio^jans from Politl^kConu^^s 543,129 

o Contribut!^t&om the Camdate 5,200 

o Transfers frdlr^^her Auth^zed 

Committees W 46,300 

o Loans from the 76,000 

o Offsets to Operating ^penditures 11,357 

o Other Receipts 87,810 

Total Receipts $ 2,456,784 

Disbursements 

o Operating Expenditures 2,115,224 

o Loan Repayments to the Candidate 76,000 

o Contribution Refunds 17,600 

o Other Disbursements 133,500 

Total Disbursements S 2342324 

Cash-on-hand @ December 31,2014 $ 114,460 
Part III 

Summary 

Finding and Recommendation 

Misstatement of Financial Activity 

During audit fieldwork, a comparison of TLFC's reported financi|^ctivity with its bank 

records revealed a misstatement of receipts and disbursementsJlrca^ndar year 2014. 

TLFC understated its receipts by $87,748 and understated i^^^mrsements by $92,802. 

In response to the Interim Audit Report recoinmendation^^^F^mied amended disclosure 

reports that materially corrected the misstatements fq^euindar ye^'. -. (For more 

detail, see p. 4.) 

* 
Part IV 

Finding and Recommendation 

Misstatement of Financial Activity 

Summary 

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

records revealed a misstatement of receipts and disWsements for calendar year 2014. 

TLFC understated its receipts by $87,748 and understated its di^^j^ents by $92,802. 

In response to the Interim Audit Report reconunendation, TL^^Ied amended disclosure 

reports that materially corrected the misstatements for caleri^^ 2014. 

Legal Standards 

A. Contents of Reports. Each report musj 

• the amount of casb-on-band at the begim 

• the total amount of receipts for the report 

including other forms of receipts; 

• the total amount of disbursement^r the reporting 

• transfers to other committees autlw fie same 

• any other disbursements; and 

• certain transactions that require itei 

Schedule B (Itemized Disbursements) 

B. Categories 

An authorized 

other receipts receive 

11 C.F.R. 

the reportin 

the election 

[or Auth( 

idate for Fi 

f 

e 

and for the election cycle; 

idate; 

itemized Receipts) or 

i)(l), (2), (3), (4) and (5). 

id Committees. 

office shall report the total amount of 

[ and during the election cycle. 

TM TM » MM mm m' 

C. Ca^gories o^ 

An d^^^Md commit 

transfers^^feer commit 

period. 11 04.3( 

liacanc 

Uuthi 

2)(ii). 

for Authorized Committees. 

for Federal office shall report the total amount of 

rized by the same candidate made during the reporting 

D. Joint Fuiiili.iisiii^bv Committees. 

The participants in a^wt fimdraising effort under this section shall either establish a 

separate committee OT select a participating committee, to act as fundraising 

representative for all participants. The fundraising representative shall be a reporting 

political committee and an authorized committee of each candidate for federal office 

participating in the joint fundraising activity. 11 C.F.R. § 102.17(a)(l )(i). 
Facts and Analysis 

A. Facts 

As part of audit fieldwork, the Audit staff reconciled TLFC's reported activity with its 

bank records for calendar year 2014. The reconciliation revealed that TLFC misstated its 

receipts and disbursements. The following chart outlines the discrepancies between 

TLFC's 2014 disclosure reports and its bank records, and the succeeding paragraphs 

explain why the discrepancies occurred. 

2014 Campaign Activity 

Reported Bank Discrepancy 

Beginning Cash Balance @ 

February 18,2014 

$0 $0 

Receipts $2,369,036 y?f"'^,'456. $87,748 

Understated 

Disbursements $2, • $^2,324 $92,802 

/'Understated 

Ending Cash Balance @ 

December 31,2014 

$121,864-^ 

V 

.$114,460 $7,404 

Overstated 

The understatement of receipts resultei 

• Contributions for Lieu Victory Fi 

• Other receipts, ^Qt^berted 

Understate tm 

lowing: 

nc $ 86,750 

998 

S 87,748 

The understatement 

• Tran^m^fLieu 

• Otli^H^^ents;' 

ler-reporte^l^ursi 

^-reported di^^emen! 

rstatem^K of DiS^bursements 

resulted the following: 

lotions, not reported $ 86,750 

7,540 

2 

(1,490) 

S 92.802 

The $7,404 oveiSj|itement.pF the ending cash balance resulted from the misstatements 

described above.^^^||(^from a $2,350 mathematical discrepancy in calculating the 

ending cash balance/] 

TLFC miscalculated Its ending cash balance. It should be SI 19,S 14 (a difference of S2,3S0). Using the 

correct ending cash balance (SI 19,514), the discrepancy Is SS,0S4. 

On April 17,2014, TLFC entered Into a Joint fendralslng agreement with the Democratic State Central 

Committee of CA - Federal. The agreement established both committees as participants and a new 

committee, Lieu Victory Fund, was formed to serve as the fundralsing representative. TLFC did not 

disclose Lieu Victory Fund as a Joint fundralsing representative or the depository established to receive 

and distribute proceeds on Its Statement of Organization, received on February 7,2014. TLFC and Lieu 

Victory Fund share the same treasurer, Jane Leiderman. 
Regarding the $86,750 in receipts and disbursements that were not reported by TLFC, the 

Audit staff determined that TLFC processed credit card contributions designated for the 

Lieu Victory Fund. Per the TLFC treasurer, these credit card contributions were received 

on donation forms designating the Lieu Victory Fund as the recipient committee. The 

treasurer further informed the Audit staff that the Lieu Victory Fund had no way to 

accept/deposit credit card contributions because it had not established a credit card 

merchant account. Alternatively, the Lieu Victory Fund used TLFC's credit card 

merchant account to process its credit card contributions and then periodically transferred 

these contributions in bulk to the Lieu Victory Fund. TLFC did not report the receipt of 

these credit card contributions or the transfer (disbursement) to thgJLieu Victory Fund. 

However, TLFC did report the subsequent transfers of net proi ^Tfegm Lieu Victory 

Fund (including memo entries of the gross amounts), and /ictory Fund itemized 

each of the credit card contributions on its disclosure rej ^ 

B. Interim Audit Report & Audit Division Recra^R^^dhtion 

The Audit staff discussed the misstatement durin^^ exit conference 

treasurer with supporting documentation. The 

contributions deposited into the TLFC account 

Fund and that $46,000 of the $86,750 in contributidi 

TLFC as its share of proceeds from tto joint fundraise 

proceeds had also been properly repon FC. 

ivided the 

:d that the ci 

reported by l^u Victory 

illy wound up coming back to 

e treasurer added that the 

In response to the exit conference, the • 

TLFC merchant account to process Lieu 

campaign was in full 

further added that, 

account for the fo 

• Contributors 

wo 

y^ctory Fund 

transfi 

contribi 

treasi^^&irther si 

the 

1 the mo: 

urer, it 

thq^ecision to utilize the 

lutions was made when "the 

ceded toJIE processed immediately." She 

acceptable to use the TLFC merchant 

their credit card statements and this 

contribution to Lieu Victory Fund; 

eventually transferred back to TLFC when Lieu 

to the fundraiser participants; 

s to^fhburse Lieu Victory Fund the same day that the 

ns were processed by the TLFC merchant account. The 

that TLFC did not misuse the funds nor did it use any of 

ir Lieu Victory Fund. 

Alternatively, the 1 urer stated that she could have processed the credit card 

contributions througti her company's merchant account and made a disbursement to Lieu 

Victory Fund. But, she thought this method may cause complications with contributors 

not being able to easily identify a charge to their credit cards. 

In accordance with 52 U.S.C. §30104(b)(2), an authorized committee must report all of 

its receipts and disbursements, including, more specifically, transfers of fimds to a 

candidate's other authorized committees. Although the funds received may or may not 

ultimately be characterized as contributions to TLFC, they were, nevertheless, at least 

reportable as receipts. As a registered and, therefore, a reporting committee TLFC was 
required to report, at a minimum, the receipt of these contributions as "other receipts." 

S2U.S.C. §30104(b)(2)(J); 11 C.F.R. §104.3(a)(3)(x). Regarding the disbursements 

(transfers) to Lieu Victory Fund, a joint fundraising representative is considered an 

authorized committee of each candidate who participates in the joint fundraising 

arrangement. 11 C.F.R. §102.17(a)(l)(i). An authorized committee of a candidate is 

required to report transfers of funds made to other authorized committees of the same 

candidate. 11 C.F.R. §104.3(b)(2)(ii). Thus, TLFC was required to report its 

disbursements of funds to Lieu Victory Fund. 

The Interim Audit Report recommended that TLFC amend its disc gsure reports to 

correct the misstatements noted above and reconcile the cash ^.Qn its most recent 

report to identify any subsequent discrepancies that could aJB^Oi: recommended 

adjustments. Further, TLFC was reconunended to adjust^^^^ ^ance, as necessary, 

on its most recent report, noting that the adjustment w^^ resum |k)rior-period audit 

adjustments. 

C. Committee Response to Interim Audit 

In response to the Interim Audit Report recoihmi 

reports that materially corrected the misstatements 

filed an amended Statement of Organization identifyirij 

fundraising representative. 

filed amend^ disclosure 

idar year 2014. TLFC also 

Victory Fimd as a joint