FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

February 28,2018 

MEMORANDUM 

To: 

Through: 

From: 

The Commission 

Alec Palmer . 

Staff Director 

Patricia C. Orrock 

Chief Compliance Officer 

Thomas E. Hintermister 

Assistant Staff Director 

Audit Division 

7?/ 

Zuzana O. Pacious 

Audit Manager 

Up 

By: 

Subject: 

Sheraline Thomas ^ 

Lead Auditor 

Audit Division Recommendation Memorandum on McSally for Congress 

(MFC) (A 15-04) 

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

the Audit staff presented the Draft Final Audit Report (DFAR) to McSally for Congress 

on October 18,2017 (see attachment). In response to the DFAR, the committee provided 

additional comments, as noted below. McSally for Congress requested an audit hearing 

before the Commission; an audit hearing was held on Februaiy 8,2018. 

This memorandum provides the Audit staffs recommendation for each finding outlined in 

the DFAR. The Office of General Counsel has reviewed this memorandum and concurs 

with the recommendations. ^ 

Finding 1. Misstatement of Financial Activity 

The Audit staff determined that, for 2013, MFC understated its beginning cash-on-hand 

balance by $9,121 and overstated its receipts and disbursements by $15,676 and $8,177, 

respectively. In 2014, MFC understated its ending cash-on-hand balance by. $94,453. 

During audit fieldwork, in 2016, MFC filed amended disclosure reports for calendar years 

2013 and 2014 which materially corrected the 2013 misstatements, as well, as the 2014 

ending cash-on-hand misstatement. However, amended 2014 reports overstated receipts 
and disbursements by $94,528 and $85,472, respectively. In response to the Interim Audit 

Report (lAR), MFC maintained that it did not misstate its receipts and disbursements and 

stated that "filing a Form 99 referencing activity that occurred almost three years ago will 

create needless confusion." In response to the DFAR, MFC expressed its continued 

disagreement with the misstatement of the 2014 receipts and disbursements and 

maintained there was no misstatement. The legal counsel for MFC (Counsel) requested 

an audit hearing before the Commission to restate that MFC disagreed with this finding. 

Counsel maintained that it was reasonable for MFC to void previously reported 

disbursements on Schedule B with corresponding vendor refunds on Schedule A. Counsel 

further maintained that credit card chargeback amounts can be reported as contribution 

refunds. 

The Audit staff recommends that the Commission find that MFC misstated its 2014 

amended financial activity as stated above. 

Finding 2. Disclosure of Occupation/Name of Employer 

In response to the lAR, MFC reiterated that it utilized !'best efforts" to collect and report 

occupation/name of employer information during the entire history of MFC including the 

2014 cycle. In response to the DFAR, MFC stated that it demonstrated "best efforts" from 

its inception, and it believes that this finding should be removed altogether from the Final 

Audit Report. With respect to this matter. Counsel requested.an audit hearing before the 

Commission to restate that MFC demonstrated "best efforts" from its inception. Counsel 

reiterated that this finding should not be included in the audit report. 

The Audit staff recommends that the Commission find that MFC failed to disclose 

occupation/name of employer information for contributions from individuals totaling 

$687,572. 

Finding 3. Receipt of Contributions in Excess of the Limit 

In response to the lAR, MFC provided copies of negotiated refund checks totaling $6,500 

which untimely resolved four of the five remaining excessive contributions. In response 

to the DFAR, MFC provided the remaining copy of a signed redesignation letter that 

untimely resolved the last pending excessive contribution. 

This matter was not addressed at the audit hearing. 

The Audit staff recommends that the Commission find that MFC received contributions 

from individuals that exceeded the limit totaling $319,212. 

Finding 4. Failure to File 48-Hour Notices 

In response to the lAR, MFC reiterated that the volume of contributions it received before 

both Ae primary and general elections was "overwhelming." However, MFC restated it 

has implemented procedures and hired an experienced FEC compliance specialist to 

ensure future compliance. In response to the DFAR, MFC stated that the total amount of 

untimely filed 48-hour notices is not material considering the overall amount of financial 

. activity. 
This matter was not addressed at the audit hearing. 

The Audit staff recommends that the Commission find that MFC failed to file or filed 

untimely 48-hour notices totaling $99,853. 

Finding 5. Failure to Itemize Contributions from Political Committees 

In response to the lAR, MFC reiterated that it has hired an experienced FEC compliance 

specialist to serve as treasurer to ensure such inadvertent errors do not happen in the 

future. In response to the DFAR, MFC provided no additional comments. 

This matter was not addressed at the audit hearing. 

The Audit staff recommends that the Commission find that MFC failed to itemize 

contributions from political committees totaling $32,750. 

If this memorandum is approved, a Proposed Final Audit Report will be prepared within 

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 Zuzana Pacious or Sheraline Thomas at 

694-1200. 

Attachment: 

- Draft Final Audit Report of the Audit Division on McSally for Congress 

cc: Office of General Counsel 
Draft Final Audit Report of the 

Audit Division on 

McSally for Congress 

(January 1, 2013 - 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 met. 

the threshold 

requirements for 

substantial compliance 

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 any of the 

matters discussed in this 

report. 

About the Campaign (p. 2) 

McSally for Congress is the principal campaign committee for 

Martha E. McSally, Republican candidate for the United States 

House of Representatives from the state of Arizona, 2"^ 

Congressional District, and is headquartered in Tucson, Arizona. 

For more information, see the Campai^ Organization chart, p.2. 

Financial Activity (p, 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Political Parties 

o Transfers from Authorized 

Cornmittees 

o Offsets/Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Contribution Refunds 

o Other Disbursements 

Total Disbursements 

$ 3,757,456 

544,055 

304,638 

240,363 

$ 4,846,512 

$4,298,479 

42,228 

76,817 

S 4,417,524 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Disclosure of Occupation/Name of Employer (Finding 2) 

• Receipt of Contributions in Excess of the Limit (Finding 3) 

• Failure, to File 48-Hour Notices (Finding 4) 

• Failure to Itemize Contributions from Political Committees 

(Finding 5) 

• S2U.S.C. §30111(b). 
Draft Final Audit Report of the 

Audit Division on 

McSally for Congress 

(January 1, 2013 - December 31, 2014) 
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. Summaries 

Findings and Recommendations 3 

Part IV. Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 5 

Finding 2. Di^losure of Occupation/Name of Employer 9 

Finding 3. Receipt of Contributions in Excess of the Limit 11 

Finding 4. Failure to File 48-Hour Notices 14 

Findings. Failure to Itemize Contributions from Political Committees 15 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the McSally for Congress (MFC), 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 committee that is required to file a 

report under 52 U.S.C. §30104. Prior to conducting any audit under this subsection, the 

Commission must perform an internal review of reports filed by. selected committees to 

determine if the reports filed by a particular committee meet the threshold requirements 

for substantial compliance with the Act. 52 U.S.C. §30111(b). 

Scope of Audit 

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

factors and as a result, this audit examined: 

1. the receipt of excessive contributions; 

2. the receipt of contributions from prohibited sources; 

3. the disclosure of contributions received; . 

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

5. the consistency between reported figures and batik records; 

6. the completeness of records; and 

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

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration February 6,2012 

• Audit Coverage January 1,2013 - December 31,2014 

Headquarters Tucson, Arizoiia 

Bank Information 

• Bank Depositories Three 

• Bank Accounts Three checking, one sayings 

Treasurer • 

• Treasurer When Audit Was Conducted Paul .Kilgore (4/1/15 - Present) 

• Treasurer During Period Covered by Audit James C. Thomas III (10/2/14 - 3/31/15) 

Hieu Trail (11/11/13-10/1/14) 

Janine Kaucher (5/22/12 - 11/10/13) 

Managementlnformation 

• Attended FEC Campaign Finance Seminar •No.. 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

• s •• 

Cash-oii'-hand ^ January 1,2013 S 29,501 

Receipts 

o Contributions from Individuals 3,757,456 

o Contributions from Political Parties 544,055 

o Transfers froth Authorized Committees 304,638 

o Offsets /Other Receipts 240,363 

Total Receipts 54,846,512 

Disbursements 

o Operating Expenditures 4,298,479 

o Contribution Refunds 42,228 

o Other Disbursements 76,817 

Total Disbursements $4,417,524 

Cash-on-hand @ December 31,2014 $ 458,489 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of MFC's reported activity with its bank records 

identified misstatements in 2013 and 2014. In 2013, beginning cash-on-hand was 

understated by $9,121, disbursements were overstated by $8,177, and receipts were 

overstated by $15,676. In 2014, ending cash-on-hand was understated by $94,453. In 

2016, MFC filed amended disclosure reports for calendar years 2013 and 2014 which 

materially corrected some of the misstatements, including cash on hand. However, 2014 

receipts and disbursements remained misstated on the amended reports largely due to 

how MFC reported voided disbursements as offsets to operating expenditures. 

I 

In response to the Interim Audit Report recommendation, MFC discussed in detail the 

overstated receipts and disbursements on the amended 2014 reports. MFC maintained 

that it did not misstate its receipts and disbursements and that filing Form 99 

(Miscellaneous Text) for activity that occurred almost three years ago would create 

"needless confusion." The Audit staff maintains that 2014 receipts and disbursements 

remain overstated by $94,528 and $85,472, respectively. (For more detail, see p. 5.) 

Finding 2. Disclosure of Occupation/Name of Employer 

A review of contributions from individuals requiring itemization indicated that 1,266 

contributions totalirig $687,572 jacked disclosure, of occupation/name of employer. 

During audit fieldwork, MFC demonstrated "best efforts" to obtain, maintain and submit 

the missing occupation/name of employer information to materially correct the disclosure 

errors. Since MFCs.comctive action occurred after audit notification, the matter is 

included in this audit report. 

In response to the Interim Audit Report recommendation, MFC reiterated that it utilized 

"best efforts" to collect and report occupation/name of employer during the entire histoiy 

of MFC including the 2014 cycle. The Audit staff considers this matter resolved. (For 

more detail, see p.'9.) 

Finding 3. Receipt of Contributions in Excess of the Limit 

During audit fieldwork, the Audit staff reviewed contributions from individuals to 

determine if any contributions exceeded the limit. This review indicated that MFC 

received 153 apparent excessive contributions totaling $319,212. These errors occurred 

as a result of MFC not resolving the excessive portions of contributions by forwarding 

presumptive redesignation and/or reattribution letters to the contributors or issuing 

refunds in a timely manner. MFC has untimely resolved 148 contributions totaling 

$312,412. The five remaining excessive contributions totaling $6,800 could still be 

resolved, albeit untimely, via a presumptive redesignation and/or reattribution letter and 

refunds. 
In response to the Interim Audit Report recommendation, MFC provided copies of 

negotiated refund checks totaling $6,500 which untimely resolved four of the above 

excessive contributions. As such, MFC has materially complied with the 

recommendation and the Audit staff considers this matter resolved. (For more detail, see 

p. 11.) 

Finding 4. Failure to File 48-Hour Notices 

During audit fieldwork, the Audit staff noted that MFC failed to file or filed untimely 48-

hour notices for 33 contributions totaling $99,853, that were received prior to primary 

and general elections. 

In response to the Interim Audit Report recommendation, MFC reiterated that the volume 

of contributions it received before both the primary and general elections was 

"overwhelming." However, MFC restated it has implemented procedures and hired 

experienced FEC compliance specialists to ensure future compliance. The Audit staff 

maintains the 33 contributions totaling $99,853 were not filed or were filed untimely. 

(For more detail, see p. 14.) 

Finding 5. Failure to Itemize Contributions from Political 

Committees 

The Audit staff reviewed contributions from political committees and determined that 

MFC failed to itemize 15 contributions from such entities totaling $32,750 on Schedule A 

(Itemized Receipts) of its disclosure reports. During audit fieldwork, MFC filed amended 

reports and correctly disclosed these receipts. Since MFC's corrective action occurred 

after audit notification, the matter is included in this audit report. 

In response to the Interim Audit Report recommendation, MFC reiterated that it has hired 

an experienced FEC compliance specialist to serve as treasurer to ensure such inadvertent 

errors do not happen in the future. The Audit staff considers this matter resolved. (For 

more detail,..see p. 15.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of MFC's reported activity with its bank records 

identified misstatements in 2013 and 2014. In 2013, beginning cash-on-hand was 

understated by $9,121, disbursements were overstated by $8,177, and receipts were 

overstated by $15,676. In 2014, ending cash-on-hand was understated by $94,453. In 

2016, MFC filed amended disclosure reports for calendar years 2013 and 2014 which 

materially corrected some of the misstatements, including Cash on hand. However, 2014 

receipts and disbursements remained misstated on the amended reports largely due to 

how MFC reported voided disbursements as offsets to-operating expenditures. 

In response to the Interim Audit Report recommendation, MFC discussed in detail the 

overstated receipts and disbursements on the amended 2014 reports. MFC maintained 

that it did not misstate its receipts and disbursements and that filing Form 99 

(Miscellaneous Text) for activity that occurred almost three years ago would create 

"needless confusion." The Audit staff maintains that 20 i 4 receipts and disbursements 

remain overstated by $94,528 and $85,472, respectively. 

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 election cycle; 

• The total amount of disbursements for the reporting period and for the election cycle; 

and 

• Certain transactioiis that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 52 U.S.C. §30104(b)(1), (2), (3), (4) and (5) 

and 11 CFR§ 104.3. .. 

B. Formal Requirements Regarding Reports and Statements. Each 

treasurer of a political committee is responsible for the timely and complete filing of 

the report or statement and for the accuracy of any information or statement contained 

in it. 11 CFR§ 104.14(d). 

Facts and Anal3rsis 

A. Facts 

Duriiig audit fieldwork, the Audit staff reconciled MFC's reported activity with its bank 

records for calendar years 2013 and 2014. The reconciliation revealed that MFC 

misstated its beginning cash-on-hand, receipts, and disbursements for 2013 and its ending 

cash-on-hand for 2014. The following charts outline the discrepancies between MFC's 

2013 and 2014 disclosure reports and its bank records. The succeeding paragraphs 

explain why the discrepancies occurred. 
6 

2013 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand 

@ January 1,2013 

$ 20,380 $ 29,501 $ 9,121 

Understated 

Receipts $740,944 $725,268 $15,676 

Overstated 

Disbursements $213,349 $205,172 $ 8,177 

Overstated 

Ending Cash-on-Hand @ 

December 31,2013 

$547,975 $549,597 $ 1,622 

Understated 

The $9,121 understatement of beginning cash-on-hand likely resulted from prior-period 

discrepancies. 

The overstatement of receipts resulted from the following: 

• Offset to operating expenditure not supported by bank deposit^ $(15,000) 

• Contribution refund from individual not reported as a negative (150) 

• Reported contribution from individual not supported by bank deposit (500) 

• Unexplained difference f26) 

Overstatement of Receipts . . 805.676^ 

The overstatement of disbursements resulted from the following: 

• Reported disbursements not clearing bank $(8,584) 

• Unreported in-kind contribution 334 

• Unexplained difference 73 

Overstatement of Disbursements Sffl.177^ 

2014 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand 

January 1,2014 

$ 547,975 $ 549,597 $ 1,622 

Understated 

Receipts $4,067,069 $4,121,244 $54,175 

Understated 

Disbursements $4,253,328 $4,212,352 $40,976 

Overstated 

Ending Cash-on-Hand @ 

December 31,2014 

$ 364,036 $ 458,489 $94,453 

Understated 

The $94,453 understatement of the ending cash-on-hand resulted from various reporting 

discrepancies for receipts and disbursements.^ 

^ This transaction relates to a 2012 media disbursement. From the documents provided, the Audit staff 

could not confirm whether MFC was issued a credit for the presumed payment. However, no actual 

refond was deposited into MFC's bank account. 

^ The reported 2014 ending cash-on-hand includes a $2,320 mathematical discrepancy. 
During audit fieldwork, MFC filed comprehensive amended disclosure reports for 

calendar years 2013 and 2014. The Audit staff analyzed the amended reports and 

determined that MFC materially corrected the 2013 misstatements noted above as well as 

the 2014 ending cash-on-hand misstatement.^ 

However, by amending the reports, MFC overstated its 2014 receipts and disbursements 

by $94,528 and $85,472,^ respectively. The Audit staff discussed these misstatements at 

the exit conference. 

B. Interim Audit Report & Audit Oivisiou Recommeudatiou 

The Audit staff discussed the misstatement of financial activity for. both audited and 

amended reports with MFC representatives at the exit conference arid provided work 

papers detailing the differences. The Audit staff stated that, by amending the disclosure 

reports, MFC materially corrected the misstatements identified in the audited reports filed 

prior to audit notification. However, MFC inadvertently created additional reporting 

discrepancies in the amended reports. 

In response to the exit conference, MFC representatives stated that they undertook a 

comprehensive internal review of MFC's accounting and disclosure reports beginning 

with MFC's inception in 2012 and reconciled over $12.3 million in financial activity. As 

a result, MFC amended every disclosure report filed from 2012 through the year-end 

2014. The representatives further stated that MFC spent considerable time and resources 

to ensure that the public record was as cpihplete and accurate as possible. With respect to 

the 2013 and 2014 misstatements, MFC representatives stated that they would review the 

Audit staffs figures and wpuld provide a detailed response at the completion of their 

review. 

As mentioned above, MFC's amended disclosure reports materially overstated its 2014 

receipts and disbursements! The .majority of the misstatements was caused by the way 

MFC voided previously reported payments, and credit card chargebacks. With respect to 

the reported payments MFC subsequently voided, instead of disclosing these voids as 

negative amounts on Schedule B, Line 17 (Operating Expenditures), MFC incorrectly 

added itfunds on Schedule A, Line 14 (Offsets to Operating Expenditures) to offset the 

voided disbumements. While such reporting will create a material agreement in the 

ending cash-on-hand balances per bank and reports, it will also effectively inflate both 

receipts and disbursements. Similarly, the credit card chargebacks should have been 

disclosed as negative entries on Schedule A, Line 1 la (Contributions from Individuals). 

Instead, MFC report^ these chargebacks as disbursements on Line 20a (Refunds of 

Contributions), which also contributed to an overstatement of receipts and disbursements. 

Regarding the 2014 voided payments, MFC acknowledged that the Commission guidance 

provides that non-negotiated checks written by a committee should be repotted as 

negative entries rather than as offsets to operating expenditures. However, MFC further 

stated that it does not believe its decision to report these amounts as offsets is inconsistent 

with the Commission regulations. The FEC Campaign Guide for Congressional 

* MFC correctly removed 33 receipt transactions totaling $27,11S. 

^ The initial overstatement was $93,122, however, MFC later clarified the treatment of two disbursements 

totaling $7,6S0. ($85,472 = $93,122 - $7,650) 
Candidates and Committees, however, states otherwise and provides instructions on how 

to address these transactions. The Audit staff maintains that MFC's reporting of voided 

checks is incorrect. MFC merely reported an accurate cash-on-hand balance but such 

reporting is insufficient because the Act and Commission regulations also requires 

disclosure and accurate reporting of receipts and disbursements. As such, the Audit staff 

notes that 2014 receipts and disbursements remain overstated by $94,528 and $85,472, 

respectively. 

The Interim Audit Report recommended that MFC file a Form 99 (Miscellaneous Text) 

to further explain its reporting methodology regarding the transactions as a matter of 

public record. The Interim Audit Report further recommended that,.in the future, MFC 

correctly disclose voided payments as negative entries on Schedule B. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MFC representatives 

maintained that the receipts and disbursements, as amended, were not materially 

.misstated. Their response to the Interim Audit R.eport, similarly as their response to the 

exit conference, contained the same arguments djscussed in detail above. With respect to 

the voided payments, MFC continued to argue that its reporting of these items as receipts 

was to ensure that the cash on hand was accurate. MFC explained that the Detailed 

Summary Pages delineate between the contributions from individuals and other types of 

receipts and, because these "vendor refunds" did not represent contributions from 

individuals, MFC concluded that no overstatepient occurred. The Audit staffs ppsition 

remains unchanged; reporting voided disbursements and the corresponding non-existent 

vendor refunds did result in overstatement of total disbursements and total receipts, 

respectively, regardless of the fact that the subtotals for certain subcategories of receipts 

and disbursements, were accurate. The overstatement occurred because MFC reported 

items that did not clear the bank. Therefore, MFC's reconciliation of its intemal records 

did not translate to an accurate reporting even though the cash-on-hand was in agreement 

with the bank balance. 

MFC diid not file a Form 99. The representatives stated that filing Form 99 and 

referencing activity that occurred almost three years ago would create "needless 

confusion." In. addition, MFC stated that even if this could be considered a misstatement, 

it would "barely represent 1.5% of MFC's receipts and disbursements," a percentage 

MFC considers immaterial. MFC also stated that the Commission's audit was "just a 

sample,", whereas its intemal review was a complete recreation of the database.^ 

' The Audit staff notes that MFC's intemal review coincided with the audit's fieldwork. Also, the Audit 

staff notes that the bank reconciliation does not involve a sample or sampling. The hank reconciliation 

involves detail comparison of the reconciled bank entries with the reports MFC filed with the 

Commission during the audit period. 
I Finding 2. Disclosure of Occupation/Name of Employer 

Summary 

A review of contributions from individuals requiring itemization indicated that 1,266 

contributions totaling $687,572 lacked disclosure of occupation/name of employer. 

During audit fieldwork, MFC demonstrated "best efforts" to obtain, maintain and submit 

the missing occupation/name of employer information to materially correct the disclosure 

errors. Since MFC's corrective action occurred after audit notification, the matter is 

included in this audit report. 

In response to the Interim Audit Report recommendation, MFC reiterated that it utilized 

"best efforts" to collect and report occupation/name of employer during the entire history 

of MFC including the 2014 cycle. The Audit staff considers this inatter resolved. 

Legal Standard 

A. Itemization Required for Contributions from Individuals. An authorized 

candidate committee must itemize any contribution from an individual if it exceeds 

$200 per election cycle, either by itself or when combined with other contributions 

from the same contributor. 52 U.S.C. §301.04(b)(3)(A). 

B. Required Information for Contributions from Individuals. For each itemized 

contribution from an individual, the committee must provide the following 

information: 

• the contributor's full name and address (including zip code); 

• the contributor's occupation and the n^e of his or her employer; 

• the date of receipt (the date the committee received the contribution); 

• the amount of the.contribution; and 

• the election cycle year-to-date total of all contributions from the same individual. 

52 U.S.C. §30104(b)(3)(A) and 11 CFR §§100.12 and 104.3(a)(4)(i). 

C. Best Efforts Ensure Compliance. When the treasurer of a political committee 

shows that the committee used best efforts (see below) to obtain, maintain, and 

submit the information.required by the Act, the committee's reports and records will 

be considered in compliance with the Act. 52 U.S.C. §30102(i) and 11 CFR 

§104.7(a). . 

D. Definition of Best Efforts. The treasurer and the committee will be considered to 

have used "best efforts" if the committee satisfied all of the following criteria. 

• All written solicitations for contributions included: 

o a clear request for the contributor's full name, mailing address, occupation, 

and name of employer; and 

o the statement that such reporting is required by Federal law. 

• Within 30 days of receipt of the contribution, the treasurer made at least one effort 

to obtain the missing information, in either a written request or a documented oral 

request. 

• The treasurer reported any contributor information that, although not initially 

provided by the contributor, was obtained in a follow-up communication or was 
10 

contained in the committee's records or in prior reports that the committee filed 

during the same two-year election cycle. 11 CFR §104.7(b). 

Facts and Anal3r8is 

A. Facts 

A review of itemized contributions from individuals indicated that 1,266 contributions 

totaling $687,572, or 29 percent of the dollar value of individual contributions required to 

be itemized by MFC, lacked disclosure of occupation/name of employer. The majority of 

the contributor entries with missing information were either disclosed with notations of 

"Information Requested" or were left blank on the Schedule A (Itemized Receipts). 

During audit fieldwork, the Audit staff reviewed the receipt documents provided by MFC 

to determine if MFC utilized "best efforts" to obtain, maintain and submit the missing 

information. MFC presented a variety of documents to demonstrate its efforts to obtain 

and maintain the documentation as follows: 

• MFC provided a written statement from its former Finance Director which 

summarized his roles and duties with respect to the "best efforts." According to 

MFC, its solicitation materials and devices notified contributors of MFC's 

obligation under Federal Law to collect and report the name, mailing address, 

occupation and employer of individuals whose contributions exceeded $200 in an 

election cycle. However, if the contributor did not provide the information, MFC 

sent a letter and asked for the infoiination. 

• The above statement was accompanied by samples of e-mail correspondence 

between the former Finance Director and the former Treasurer. In these, the 

former officials discussed the follow-up procedures for the contributors whose 

occupation/name of employer information was missing. 

• Further, MFC provided samples of the "best effort" letters; a spreadsheet template 

used to create a list for the mail merge; as well as an example of the populated 

mail merge spreadsheet listing the dates and names of contributors whose 

information was requested: 

Finally, MFC described its "best efforts" procedures in the intemal control 

questionnaire the Audit staff requested MFC to complete as follows: campaign 

staff would either call the contributor and explain the "best efforts" requirement to 

request, obtain and report the occupation/name of employer information, or, 

would send letters explaining the requirements and requesting the information. 

Based on the contributor responses from the efforts noted above, MFC filed amended 

disclosure reports during audit fieldwork. The Audit staff reviewed these reports and 

determined that MFC materially disclosed the occupation/name of employer information. 

B. Interim Audit Report and Audit Division Recommendation 

The Audit staff presented this matter to MFC representatives at the exit conference and 

noted that MFC has materially resolved this matter and no further action was required. 

However, because MFC's corrective action was taken after the audit notification, the 

matter would be presented in the audit report. In response to the exit conference, MFC 

representatives reiterated that MFC utilized "best efforts" to collect and report the 

occupation/name of employer information during the 2014 election cycle. They further 
11 

stated that solicitation materials included a clear request for the name, address, and 

occupation/name of employer of individuals whose contributions aggregated $200 during 

the election cycle. In instances where the contributor did not provide such information, 

MFC made at least one effort to obtain the information. 

The Interim Audit Report recommended that MFC provide any additional comments it 

deemed necessary with respect to this matter. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MFC again stated that it 

utilized "best efforts" to collect and report occupation/name of employer during the entire 

history of the committee, including the 2014 cycle. MFC reiterated that its solicitation 

materials included a clear request for the required occupation/name of employer 

information and in instances where the information was not provided, MFC made at least 

one effort to obtain the information. 

I Finding 3. Receipt of Contributions in Excess of the Limit | 

Summsury 

During audit fieldwork, the Audit staff reviewed contributions from individuals to 

determine if any contributions exceeded the limit. This review indicated that MFC 

received 153 apparent excessive contributions totaling $319,212. These errors occurred 

as a result of MFC not resolving the excessive portions of contributions by forwarding 

presumptive redesignation and/or reattribution letters to the contributors or issuing 

refunds in a timely manner. MFC has untimely resolved 148 contributions totaling 

$312,412. The five remaining excessive contributions totaling $6,800 could still be 

resolved, albeit untimely, via a presumptive redesignation and/or reattribution letter and 

refunds. 

In response to the Interim Aujdit Report recommendation, MFC provided copies of 

negotiated refund checks totaling $6,500 which untimely resolved four of the above 

excessive contributions. As such, MFC has materially complied with the 

recommendation and the Audit staff considers this matter resolved. 

Legal Standard 

A. Authorized Committee Limits. For the 2014 election, an authorized committee may 

not receive more.than a total of $2,600 per election from any one person or $5,000 

per election from a multicandidate political committee. 52 U.S.C. §§30116(a)(1)(A) 

and (a)(2)(A); 11 CFR §§110.1(a) and (b) and 110.9. 

B. Handling Contributions That Appear Excessive. If a committee receives a 

contribution that appears to be excessive, the committee must either: 

• Retum the questionable check to the donor; or 

• Deposit the check into its federal account and: 

• Keep enough money in the account to cover all potential refunds; 

• Keep a written record explaining why the contribution may be illegal; 

• Include this explanation on Schedule A if the contribution has to be itemized 

before its legality is established; 
12 

• Seek a reattribution or a redesignation of the excessive portion, following the 

instructions provided in the Commission regulations (see below for 

explanations of reattribution and redesignation); and 

• If the committee does not receive a proper reattribution or redesignation 

within 60 days after receiving the excessive contribution, refund the excessive 

portion to the donor. 11 CFR §§ 103.3(b)(3), (4) and (5) and 

110.1(k)(3)(ii)(B). 

C. Joint Contributions. Any contribution made by more than one person (except for a 

contribution made by a partnership) must include the signature of each contributor on 

the check, money order, or other negotiable instrument or in a. separate writing. A 

joint contribution is attributed equally to each donor unless a statement indicates that 

the ftinds should be divided differently. 11 CFR §110.1 (k)(l) and (2). 

D. Reattribution of Excessive Contributions. The Commission regulations permit 

committees to ask donors of excessive contributions (or contributions that exceed the 

committee's net debts outstanding) whether they had intended their cpiitribution to be 

a joint contribution from more than one person and whether they would like to 

reattribute the excess amount to the other contributor. The committee must inform 

the contributor that: 

• The reattribution must be signed by both contributors; 

• The reattribution must be received by the committee within 60 days after the 

committee received the original contribution; and 

• The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.1(k)(3). 

Within 60 days after receiving the excessiye contribution, the committee must either 

receive the proper reattribution or refund the. excessive portion to the donor. 11 CFR 

§§ 103.3(b)(3) and 110.I(k)(3)(ii)(B). Further, a political committee must retain 

written records conceming-the reattribution in order for it to be effective. 11 CFR 

§11.0:l(l)(5). 

Notwithstanding the aboye, any excessive contribution that was made on a written 

instrument that is imprinted with the names of more than one individual may be 

attributed among the individuals listed unless instructed otherwise by the 

contributor(s). The committee must inform each contributor: 

• How the contribution was attributed; and 

• The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.1(k)(3)(ii)(B). 

E. Redesignation of Excessive Contributions. When an authorized candidate 

committee receives an excessive contribution (or a contribution that exceeds the 

committee's net debts outstanding), the committee may ask the contributor to 

redesignate the excess portion of the contribution for use in another election. The 

committee must inform the contributor that: 

• The redesignation must be signed by the contributor; 

• The redesignation must be received by the committee within 60 days after the 

committee received the original contribution; and 
13 

• The contributor may Instead request a refund of the excessive amount. 11 CFR 

§110.1(b)(5). 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper redesignation or refund the excessive portion to the donor. 11 CFR 

§§ 103.3(b)(3) and 110.1 (b)(5)(ii)(A). Further, a political committee must retain 

written records concerning the redesignation in order for it to be effective. 11 CFR 

§110.1(0(5). 

When an individual makes an excessive contribution to a candidate's authorized 

committee, the campaign may presumptively redesignate the excessive portion to the 

general election if the contribution: 

• Is made before that candidate's primary election; 

• Is not designated in writing for a particular election; 

• Would be excessive if treated as a primary election contribution; and 

• As redesignated, does not cause the contributor to exceed any other contribution 

limit. 

• The committee is required to notify the contributor of the redesignation within 60 

days of the treasurer's receipt of the contribution, and must offer the contributor 

the option to receive a refund instead. 11 CFR §110.1(b)(5)(ii)(B)(l), (2), (3), 

(4), (5), and (6). 

Facts and Anal3r8is 

A. Facts 

During audit fieldwork^ the Aiidit staff identified 117 individuals with 153 apparent 

excessive contributiohs totaling $319,212. MFC resolved $259,969 of the excessive 

contributions by sending presumptive reattribution and/or redesignation letters that were 

untimely. The remaining excessive contributions totaling $59,243 were primarily credit 

card or single accounts check contributions requiring additional documentation. These 

contributions could still be resolved, albeit untimely, via reattribution and/or 

redesignation letters or refunds. During the campaign, MFC maintained sufficient funds 

in its accouhts to make refunds of these apparent excessive contributions. 

' 

B. Interim Audit Report & Audit Divisiou Recommeudatiou 

The Audit staff discussed this matter with the MFC representatives at the exit conference. 

The Audit staff provided schedules of the apparent excessive contributions along with a 

description of actions necessary to resolve them. Subsequent to the exit conference, 

MFC presented additional presumptive letters sent to the contributors that untimely 

resolved additional excessive contributions totaling $20,550 and provided copies of 

negotiated refund checks that untimely resolved excessive contributions totaling $31,893. 

The remaining five excessive contributions totaling $6,800^ could still be resolved, albeit 

untimely, as follows: One excessive contribution could be resolved with a signed 

redesignation letter and the remaining four excessive contributions could be resolved 

with refunds to the contributor. 

^ Remaining excessive contribution balance of S6,800 = SS9,243 - S20,S50 - S31,893. 
14 

The Interim Audit Report recommended that MFC provide documentation demonstrating 

that it resolved the remaining excessive contributions totaling $6,800. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MFC provided copies of 

negotiated refund checks totaling $6,500 which untimely resolved four of the five 

excessive contributions. As such, MFC has materially complied with the 

recommendation. 

I Finding 4. Failure to File 48-Hour Notices 

Summary 

During audit fieldwork, the Audit staff noted that MFC failed to file or filed untimely 48-

hour notices for 33 contributions totaling $99,853, that were received prior to primary 

and general elections. 

In response to the Interim Audit Report recommendation, MFC reiterated that the volume 

of contributions it received before both the primaiy and general elections was 

"overwhelming." However, MFC restated it has implemented procedures and hired 

experienced FEC compliance specialists to ensure future compliance. The Audit staff 

maintains the 33 contributions totaling $99,853 were not filed or were filed untimely. 

I* 

Legal Standard 

Last-Minute Contributions (48-Hour Notice). Campaign committees must file special 

notices regarding contributions of $1,000 or more received less than 20 days but not more 

than 48 hours before any election in which the candidate is running. This rule applies to 

all types of contributions to any authorized coinmittee of the candidate, including: 

• contributions from the candidate; 

• loans frorn the candidate and other non-bank sources; and 

• endorsements or jguarantees of loans from the banks. 11 CFR § 104.5(1). 

Facts and Analysis 

A. Facts .. 

During audit fieldwork, the Audit staff identified 187 contributions totaling $442,543 that 

equaled or exceeded $1,000 and were received during the 48-hour notice period for the 

primary and general elections. A review of these contributions indicated that MFC did 

not file 48-hour notices for 29 contributions totaling $91,053 and untimely filed 48-hour 

notices for four contributions totaling $8,800. These contributions are summarized as 

follows. 
15 

Primary General Total 

48-Hour Notices Not Filed $13,200 $77,853 $91,053 

48-Hour Notices Filed Late $0 $8,800 $8,800 

TOTALS $13,200 $86,653 $99,853 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed the filing of 48-hour notices with MFC 

representatives and provided schedules of the contributions for which 48-hour notices 

were not filed or were filed in an untimely manner. In response to the exit conference, 

MFC stated that the volume of contributions it received before the primary and general 

elections was at times overwhelming but it filed notices for almost 90 percent of the 

amount raised during the 48-hour time period. MFC also confirmed that it has 

implemented procedures and hired experienced FEC compliance specialists to ensure 

future compliance. 

The Interim Audit Report recommended that MFC provide evidence that the 48-hour 

notices were not required to be filed; or were filed in a timely manner; or provide any 

further comments it considers relevant. 

C. Committee Response tolnterim Audit Report 

In response to the Interim Audit Report recommendations, MFC stated that the total error 

amount for non-filed and untimely filed 48-hour notices differed from the amount 

presented at the exit conference.' MFC also reiterated that the volume of contributions 

received before both the primary and general elections was overwhelming at times. MFC 

has implemented i3rocedures and hired experienced FEC compliance specialists to ensure 

future compliance. The Audit-Staff maintains the 33 contributions totaling $99,853 were 

not filed or Vere filed untimiely. * •* 

Finding 5. Failure to Itemize Contributions from Political 

Committees 

Summary 

The Audit staff reviewed contributions from political committees and determined that 

MFC failed to itemize 15 contributions from such entities totaling $32,750 on Schedule A 

(Itemized Receipts) of its disclosure reports. During audit fieldwork, MFC filed amended 

reports and correctly disclosed these receipts. Since MFC's corrective action occurred 

after audit notification, the matter is included in this audit report. 

In response to the Interim Audit Report recommendation, MFC reiterated that it has hired 

an experienced FEC compliance specialist to serve as treasurer to ensure such inadvertent 

errors do not happen in the future. The Audit staff considers this matter resolved. 

' The Audit stafTroutinely ^nsmVi preliminary findings at the exit conference. These preliminary 

findings may be subject to change or modification based on additional documentatiori; internal review; 

the legal advice, etc. 
16 

Legal Standard 

Regardless of Amount. Several types of receipts must be itemized on Schedule A 

regardless of amount. They include: 

• Contributions from political committees and similar organizations; 

• Transfers from other party committees and party organizations; 

• Refunded contributions received from political committees. 52 U.S.C. 

§30104(b)(3)(B),(C),and(D). 

Facts and Analsrsis 

A. Facts 

Based on a review of all contributions from political committees, the Audit staff 

identified 15 contributions totaling $32,750 that were not itemized, as required and 

regardless of amount, on Schedule A, Line 1 Ic (Contributions from Other Political 

Committees). All of these contributions were reported by the donor committees. 

The Audit staff traced ten of these contributions totaling $23,250 to MFC's receipt 

database. MFC had apparently recorded the receipt.of these contributions and 

presumably reported them as unitemized contributions. The remaining five, contributions 

totaling $9,500' were neither included in MFC's receipt database, nor itemized on 

Schedule A. 

B. Interim Audit Report & Audit Divisiou ReCommendatipn 

The Audit staff discussed the unitemized contributions from political committees with 

MFC representatives and presented a schedule of the unitemized contributions. The 

Audit staff also noted, that the .review of the amended reports filed after audit notification 

indicated that MFC correctly disclosed all of these contributions on Schedule A. 

However, the Audit staff also noted that because MFC's corrective action was taken after 

the audit notification, the matter will be presented in this audit report. In response to the 

exit conference, MFC represenMives stated that MFC hired an experienced FEC 

compliance specialist.tp serve as treasurer and to file the FEC reports. MFC further 

stated it will make eveiy effort to ensure such inadvertent errors do not happen in the 

future. 

The Interim Audit Report recommended that MFC provide any comments it deemed 

necessary with respect to this matter. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, MFC representatives reiterated 

that they hired an experienced FEC compliance specialist to serve as treasurer to ensure 

such inadvertent errors do not happen in the future. The Audit staff considers this matter 

resolved. 

' This amount is also included in the 2014 understatement of receipts total (see Finding 1).