Draft Final Audit Report of the 

Audit Division on the Colorado 

RepubUcan Committee 

(January 1, 2011 - December 31, 2012) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

irivestigations 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 

the threshold 

requirements for 

substantiaj^^^iai.. 

withi^^^^^feiaudii 

de^^nes whei 

comffitee complied 

the lii^@4pns, 

prohibitiCT^nd 

disclosure tlq^ ints 

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 Co 

The Colorado Republl 

headquartered in Gi 

information, see^' 

e (p. 3) 

mittee is a state party committee 

Village, Colorado. For more 

Committee Organization, p. 3, 

Financil^Lctivitv (p. 3) 

Receipts 

~ Contribui 

sntributio 

idividuals 

Political 

Expenditures 

Federaf Election Activity 

funds of Contributions 

TSf3! Disbursements 

$ 1,975,834 

61,630 

8,332,317 

1,940 

235,765 

S 10,607,486 

$ 8,863,660 

1,374,497 

3,050 

$ 10,241,207 

Findings and Recommendations (p. 4) 

• Misstatement of Financial Activity (Finding 1) 

• Reporting of Apparent Independent Expenditures (Finding 2) 

• Recordkeeping for Communications (Finding 3) 

• Failure to Itemize Debts and Obligations (Finding 4) 

52 u.s.e. §30111(b). 
Draft Final Audit Report of the 

Audit Division on the 

Colorado Republican Committee 

(January 1, 2011 - December 31, 2012) 
Table of Contents 

Part Illi Summaries 

Findings and Recommendations 

i • 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Commission Guidance 1 

Limitations 2 

Part II. Overview of Committee 

Committee Organization 3 

Overview of Financial Activity ^ 

11 

Part IV. Findings andJ|ecommi 

Finding 1. Misstatement of^^jBial Activity'' ' 6 . 

Finding 2. Reporting of Appa^^^|^dent Lx,;^i^ures 11 

Findings. Recordkeeping for ^mmum^^^ 17 

Finding 4. Failure to Itemize Dei^tand OMp 19 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Colorado Republican Committee (CRC), 

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 investigation&^^ny political committee that 

is required to file a report under 52 U.S.C. §30104. Prk^pSonducting any audit under 

this subsection, the Commission must perform an int^^feyiew of reports filed by 

selected committees to determine if the reports fileipy'Spmicular committee meet the 

threshold requirements for substantial compl'.! -^-^with the ASy.2 U.S.C. §30111(b). 

Scope of Audit 

Following Commissionrapproved procedu 

factors and as a result, this audit examined: 

1. the receipt of contributions fi^^nrohibited 

2. the disclosure of individual 

3. the disclosure of disbursemeni 

4. the disclosure of expenses alloc^ 

5. the consistenc) "•.•Cr.- -.-ported 

6.- the complete! 

7. other commii 

- I-J Vuditi 

Cor 

' evaluate^i'.us risk 

id name of employer; 

i-federal accounts; 

idance ~ 

^;omiin|ston Consid|g|iol^ a Legal Question 

fto the Con^ssioir^^ilicy Sta^^ht Establishing a Program for Requesting 

ation of Leg^^uestioi^^the Commission," CRC requested early 

considei^ypn of a legal^^tion rS^lduring the audit. Specifically, CRC questioned 

whether t^^uirement ul^r 11 CF^ 104.3(d) to disclose outstanding debt on 

Schedule D^|bt and Obli^^ns) violated attorney - client privilege when the debt 

related to outst^ine legal ^Presentation services. 

The Commission cond^d, oy a vote of 6-0, that the Colorado rules of confidentiality 

do not preclude the Conffission from requiring CRC to report an outstanding debt and/or 

obligation owed by or to CRC from its legal counsel under 52 U.S.C. §30104(b)(8) and 

11 C.F.R. §104.3(d). The Audit staff informed CRC's Counsel of the Commission's 

decision on CRC's request. This audit report includes findings and recommendations 

with respect to CRC's failure to disclose outstanding debt owed to its legal 

representative. (See Finding 4, p. 19.) 
Limitations 

CRC satisfied the minimum disbursement recordkeeping requirements of 11 CFR§ 102.9. 

However, in response to the Internal Control Questionnaire (ICQ) presented by the Audit 

staff at the beginning of the audit, CRC representatives identified a federal bank account 

titled "Federal Transfer Account" but did not provide bank statements from the audit 

period pe^ining to that account. Without these statements, the Audit staff could not 

determine jf federal activity related to this account was properly reported. 

.. ^ 

V 

> A 

•T* 

y-
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration February 17,1976 

• Audit Coverage January 1,2^1 - December 31,2012 

Headquarters GreenwQg^^iiage. Colorado 

Bank Information 

• Bank Depositories 

• Bank Accounts Jl^^fral, 8 l^^federal 

Treasurer 

• Treasurer When Audit Was Conducted Marty Neilson (1 l^^l 5 - present) 

l^bert Balink (5/9/2o!^l 1/19/2015) 

^istine^tin (6/10/2(^-. 5/8/2014) 

• Treasurer During Period Coveredito|Audit RltBgMWestfall (8/15/2¥#-

6/9/T^ 

Management Information 

Attended Commission Campaign Fil 

Seminar 

Who Handled Ai 

Recordkeeping 

ew o] 

Transfers from Affif 

Committees 

immittees 

Other Party 

o Transfers from Non-Federal Accounts 

o Other Receipts 

Total Receipts 

Disbursements 

o Operating Expenditures 

dal Activity 

ibunts) 

$ 70,571 

1.975.834 

61.630 

8,332,317 

235.765 

$ 10.607,486 

8.863.660 

o Federal Election Activity 

o Refunds of Contributions 

Total Disbursements 

Cash-on-hand @ December 31,2012 

1.374.497 

3.050 

S 10,241,207 

$ 436,850 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

A comparison of CRC's bank activity with its most recent ajgiended reports prior to the . 

audit revealed material misstatements in both 2011 and 2^^pin addition, a comparison 

of CRC's bank activity with its original reports for 20^^M2012 also revealed material 

misstatements. In response to the Interim Audit Rro^^^Wimendation, CRC stated that 

the misstatements were inadvertent and agreed to i^^ne^^nts to the relevant reports. 

CRC subsequently amended its reports to ma^^ly correct t^^bstatements identified 

for 2011. As of the date of this report, how^ScRC has not mildly complied with 

the recommendations to correct the misst^^^ts in 2012, nor hasT^ade an adjustment 

to reconcile the cash balance on its most rec^Sbsport. ^ 

ided bank^f^j^-iii s and other relatd^ 

mventio^^gense Account, an apparent 

^ny rece^^nd disbursement activity 

In respS|^|[o the Interim Audit 

?ub"@mSbIationS^nvention Expense 

n toat this account was not 

I fedei^account. Absent bank 

iated with the Convention Account, the 

more detail, see p. 6.) 

During audit fieldwork, CRC al: 

documentation for a Republican 

federal account. CRC did not rei 

pertaining to this account on its 

Report recommend^^^^^ning 

Account, CRC s^^^o^^^ously 

controlled by Cl^^d, as su^^ not an 

documentation that^^firms was 

Audit stafT-Considersli^ ' Bfcesolved. 

Findilig Independent 

Expmiditures 

During^|it fieldwork. tB^udit H^Rreviewed operating expenditures totaling 

$3S7,89r^^RC disclos^ton Scheiule B, Line 21b (Operating Expenditures) that 

appeared to^^irect mail o^edia-related independent expenditures that should have 

been disclosedonedulei^temized Independent Expenditures). 

Additionally, of thelE^^^5 appeared to be independent expenditures, CRC did not 

provide sufficient documEitation pertaining to dissemination dates to verify whether 

24/48-hour reports were required to be filed for the apparent independent expenditures 

totaling $203,995. CRC also did not provide invoices associated with 77 direct mail 

communications that contained express advocacy as defined under 11 CFR 100.22 (a) or 

(b). 

In response to the Interim Audit Report recommendation, CRC stated it disagreed with 

the recommendation. CRC reiterated its belief that the comihunications at issue were not 

reportable as independent expenditures because they were subject to the volunteer 
material exemption. CRC further stated it has provided all such documentation in its 

possession to substantiate application of the volunteer material exemption. 

The Audit staff reexamined the documentation provided related to the volunteer materials 

exemption for specific communications totaling $93,090 and determined the 

disbursements were not independent expenditures. For the remaining communications 

(consisting of $110,905 and 77 mailers with no invoices) that CRC claims the volunteer 

materials exemptions is applicable, the Audit staff again recommends that CRC provide 

further evidence to support the application of the volunteer materials exemption to the 

specific communications involved. The Audit staff considered the disbursements for 

radio advertisements for $153,900 to be independent expd^^res that also required 

filing of 24 hour reports totaling $32,164. (For more<d^^see p. 11.) 

Finding 3. Recordkeeping for 

During audit fieldwork, the Audit staff reviej 

the information and proper classification 

reported 28 expenditures totaling $5,812,^ 

Expenditures) with purposes of "direct mail,' 

mail." Documentation that was provided by CI 

determination pertaining to the 

operating expense. 

In response to the Inte 

the recommendatio, 

possession in a 

staff. CRC indie 

communications wii 

commu^^^with 

the-

(F^- • )re inform^^ksee 

Finding. Failu 

During au^^el^dwork, thi 

obligations ov^^o three vi 

Report recommi^^ion. 

period and disclose 

not amend its reports 

mmuhications 

isbursement^^torify the accuracy of 

tions disclose^^^^orts. CRC 

IP Schedule B, Line ^|toperating 

maiMdvertising" • " • :ty direct 

icient to maxet^ 

ments and verification as an 

ted it. disagreed with 

mentation in its 

file site links to the Audit 

vided invoices and 

ide the final record associating all 

of records, the Audit staff considers 

lentsatll CFR §104.14(b)(l). 

sed Debts and Obligations 

lit staffTioted that CRC failed to disclose debts and 

irs totaling $235,968. In response to the Interim Audit 

igreed to amend its disclosure reports for the applicable 

'ed to CRC's former legal counsel. CRC stated it would 

ilose the debt owed to its former get-out-the-vote (GOTV) 

vendor due to the termination of the contract. CRC subsequently filed amended reports 

to disclose debt owed to the two non-GOTV vendors. Absent the filing of amended 

reports to include the debt owed to the GOTV vendor, the Audit staff considers the matter 

unresolved. (For more detail, see p. 19.) 
Part IV 

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity 

Summary 

A comparison of CRC's bank activity with its most recent amended reports prior to the 

audit revealed materia! misstatements in both 2011 and 201^ In addition, a comparison 

of CRC's bank activity with its original reports for 2011 

misstatements. In response to the Interim Audit Rep^ 

the misstatements were inadvertent and agreed to Q 

CRC subsequently amended its reports to materi 

for 2011. As of the date of this report, howi-i «^^RC has not 

the recommendations to correct the misst^'-":-.; Ts in 2012, nor I 

to reconcile the cash balance on its most im'.- -eport. 

12 also revealed material 

mendation, CRC stated that 

lents to the relevant reports, 

isstatements identified 

iaily complied with 

le an adjustment 

During audit fieldwork, CRC al: 

documentation for a Republic 

federal account. CRC did not 

pertaining to this account on its di 

Report recommendation pertaining 

Account, CRC stai 

controlled by C 

documentation 

Audit staff considi 

iviously 

is not 

was noi 

hresolvei 

ind other rel 

Account, an ^parent 

and disbursement activity 

to the Interim Audit 

invention Expense 

at this account was not 

lunt. Absent bank 

Convention Account, the 

I of Repo^^i^Ui mustl 

amount of cal^n-hanS^^e beginmhg and end of the reporting period; 

amount of n^ipts foP&^porting period and for the calendar year; 

• The to^ampunt of dis^- - jment^r the reporting period and for the calendar year; 

and 

• Certain transqj^ns that uire itemization on Schedule A (Itemized Receipts) or 

Schedule B (ll^tzcil l|:«!- irsements). 52 U.S.C. §30104(b)(1), (2), (3), (4) and (5). 

Facts and Analysis 

A. Misstatement of Financial Activity- Most Recent Reports Filed Prior to the 

Audit • 

1. Facts 

The Audit staff reconciled CRC's reported financial activity with its bank records for 

calendar years 2011 and 2012. The following charts outline the discrepancies 
between CRC's disclosure reports and its bank records. Succeeding paragraphs 

explain why the discrepancies occurred. 

2011 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand @ 

Januaiy Ij^Ol 1 

$71,745 $70,571 ($ 1,174) 

Overstated 

Receipts $722,469 $717,741 ($4,728) 

Overstated 

Disbursements $634,792 Jp3.321 ($38,529) 

Understated 

Ending Cash-on-Hand @ 

December 31,2011 

$ 159,422 |il||n 4.991 ($ 44,431) 

Overstated 

The beginning cash balance was ovi 

unexplained, but likely resulted from 

The understatement of disbursements resu 

• Transfers to non-federal^ .• • 4, not re] 

• Disbursements not report 

• Unexplained difference 

Understatement of Disburse^nia 

A The overstat 

discrepancie 

of receipts. 

•'isburser .-.-.Is descr 

'^1,174 and tHB^crepancy is 

riod discrepancies^ 

!>1 lowing: 

$35,805 

2,448 

. 226 

!t38.52Q 

}ve as wi 

^w^a result of the reporting 

the $4,728 overstatement 

20^( iiiiimiiiffl^£tivii> 

RepolW Bank Records^ Discrepancy 

Be|¥^^ig Cash-on-H^I^ ^ 

Januat!lii2012 ^ 

^$159.422 $114,991 ($44,431) 

Overstated 

Receipts'* „ • ' 

^ . I 

$9:678,749 $9,889,745 $210,996 

Understated 

Disbursements''^^ . . $9,422,685 $9,567,886 ($145,201) 

Understated 

Ending Cash-on-Haiilc^^^ 

December 31,2012 

$415,486 $ 436,850 $21,364 

Understated 

' Correct reportable activity includes an adjustment to the bank account for $9,146 itemized by ORG on 

Schedule A (Itemized Receipts) to correct the cash balance as recommended in a prior audit of CRC. See 

the Final Audit Report on the Colorado Republican Federal Campaign CommittM, 2008 election cycle, 

Finding 1 - Misstatement of Financial Activity, Audit Division Recommendation, page 8. 
The understatement of receipts resulted from the following: 

• In-kind contributions, not reported as receipts^ 

• Receipts from an individual and a PAC, not reported 

• Unexplained difference 

Understatement of Receipts 

$162,099 

25,000 

23.897 

g21Q.996 

The understatement of disbursements resulted from the following: 

. • In-kind contributions, not reported as disbursements^ $162,099 

• Disbursements in bank, not on reports 

• Disbursements on reports, not in bank 

• Incorrect or duplicate disbursement amounts i 

• Unexplained difference 

Understatement of Disbursements 

The $21,364 understatement of the endin*^. balance waslfesult of the reporting 

discrepancies noted above. 

27,666 

(13,336) 

(23,228) 

(8-000^ 

2. Interim Audit Report & Audit Divi^ 

The Audit staff provided wor^apers and dis 

activity at the exit conferencl^^^Egpresentatix 

during the discussion, howevi 

disbursements or receipts misstal 

The Interim Aj^t— 

correct the nrn^ftements* 

recent report toS^ntify an; 

recommended adju^en'-

.3. f ommii 

sponse to 

idit Division' 

ndation 

misstatement or tliilancial 

sked questions for clarification 

oonse to either the 

itrdisclosure reports to 

sh balance on its most 

repancies that may affect the 

the d^^tatements 

reports^msistent with 

to materia^^pect the] 

report, howe^^^RC 

correct the misl 

balance on its mo^ 

^he Inresiii^i^lt Report 

Ejrim ?)^mt Reportr^mmendation, CRC stated it agreed with 

jmmi^lidons regarding Finding 1 A. CRC explained that 

idvert^mnd that it would file amendments to the relevant 

immendation. CRC subsequently amended its reports 

istatements identified for 2011. As of the date of this 

lot materially complied with the recommendations to 

in 2012, nof has it made an adjustment to reconcile the cash 

It report. 

^ The unreported in-kind transactions discussed above were for disbursements paid on behalf of CRC for 

equipment and software licensing by the Republican National Committee (RNC) and the Republican 

Party of Wisconsin (RPW). Both the RNC and the RPW reported these transactions as in-kind 

contributions made to CRC. 
B. Misstatement of Financial Activity - Original Reports Filed 

1. Facts 

During audit fieldwork, in addition to examining CRC's most recent reports filed 

prior to audit notification, the Audit staff compared CRC's originally filed repiorts 

with its bank records. The purpose of this additional reconciliation was to identify 

the degree to which CRC had misstated its original filings. 

The Audit staff calculated that CRC understated the sum of the reported receipts on 

the original reports filed by $803,097 and the sum of th^eported disbursements on 

the original reports filed by $637,688 over the two-y^^»iod (2011-2012). These 

figures include.the $4,728 and $38,529 understate^^^ receipts and disbursements, 

respectively from 2011, and the $210,996 and the understatement of 

receipts and disbursements, respectively, fromjUo discl^^ in Section A above 

(Misstatement of Financial Activity - Mo^B^cent Repoiro^iiled Prior to the Audit). 

2. Interim Audit Report & Audit iTi^gign Recommendation 

The Audit staff discussed the understatem^of recej^and disbursqn^ts on its 

original reports during the exij^nference ar^^^M^^ooies of releiS^schedules 

detailing the receipts and not rep^^^ZRC representati^ asked 

questions for clarification, andj^^^gy unders^^the finding, but related that 

they inadvertently filed incorre^-; .nffl^ports. 

The Interim Ai 

it deemed m 

3. Committee 

In respjons&tp the 

immi 

rect to tBi- •:"=! 

I 

nse III the Interii 

>%BPPrt 

len^ 

itemenf 

additional comments 

idit Report 

lendation, CRC stated it agreed with 

g Finding IB but provided no further 

icial activity for the original reports 

C. Missi ent of Financiiil ActT^^ -Unreported Bank Account 

1. Facts '' 

During audit f^^vor^ ( \<C representatives provided bank statements and other 

banking documen^Pfefor a bank account that was identified on the bank statements 

as the Colorado Sta^Republican Central Committee Republican National 

Convention Expense Account (Convention Account).^ This account was maintained 

at the same financial depository used by CRC for other federal and non-federal bank 

Net disbursement adjustments identified in Section A above (Misstatement of Financial Activity - Most 

Recent Reports Filed Prior to the Audit), totaling S9,686, were correctly disclosed on the original reports 

in 2012. 

As noted in the scope section of this report, CRC representatives also identified an additional federal 

bank account in its written response to the Internal Control Questionnaire, but have not yet provided 

bank statements or other documentation pertaining to this account to indicate whether there was 

reportable activity during the audit period. See p. 2. 
10 

accounts. The bank statements reflected that the Convention Account was active in 

January 2012, although it had a zero balance until April 20,2012, at which time a 

deposit of $1,000 was made.^ Although CRC provided copies of bank statements, 

deposit tickets and cancelled checks pertaining to this account, none of the receipts or 

disbursements appeared to have been reported. For the calendar year 2012, the total 

activity and the cash balance were as follows: receipts, $87,354; disbursements, 

$86,428; and ending cash-on-hand, $926.^ 

In response to an Audit staff query, CRC's Chairman (Chairman) explained that the 

financial activity from this account did not need to be 

account that belonged to a separate legal entity idenU 

Host Committee for the Republican National Coi 

neither CRC or any of its officers or agents 

activities. The Chairman also provided a 

reflected the Colorado RNC Host was in 

Profit SO 1(c)(4) corporation on June 

accept contributions and pay for certaf 

their guests from Colorado and other stati 

'National Convention in Tami 

Colorado Secretary of State 

Lited since it was a bank 

the Colorado Chairman's 

(Colorado RNC Host) and 

itrolled that committee's 

le Ar^^^of Incorporation that 

in the sEM^f Colorado as a Nonand was establH^^independently to 

nts and promotion iteR^r delegates and 

inne^^with the Z^^Republican 

Florida. Tl^'l-.-.'.nnr^rovided a limH^the 

and relate.: .• v . jditional questions^rtaining to 

the Colorado RNC Host shou 

The Chairman did not explain 

statements and othj 

why the bank 

Committee, i 

requested, C 

confirm the Em] 

lid C 

ihi^ 

d to thaf^mriittee's legal representatives, 

le to be tm%ssession of the bank 

:ewis^roj,Chairman did not explain 

lublican Central 

iccount. Although 

Itaff to sulmit a request to the bank to 

(BIN)' that was associated with this 

from the bank that would clarify 

2. Iqterim Audif^j^port j^^idit Division Recommendation 

Th'^^dit staff discu^d the C^^ntion Account during the exit conference and 

provi^^[|elevant sch^^s detai^ the financial activity pertaining to this account. 

At that u^^he Audit S^M again requested that CRC provide documentation from 

the bank or^^jhe Aui^ptaff authority to contact the bank to confirm the BIN 

associated witj^^sa^TOt. The CRC representatives provided documentation . 

pertaining to the^^^^the Colorado Chairman's Host Committee for the 

Republican NationarConvention, but did not provide additional documentation from 

the bank to verify that the Convention Account was assigned to this BIN. 

The next deposit into this account was not made until June 13,2012 (SS,2S0). The first debit (by wire) 

occurred on August 10,2012 (S 10,000). 

The tables and charts presented in Part A (Most Recent Reports Filed Prior to the Audit) do not include 

an analysis of the Convention Account. 

The BIN is a unique nine-digit number that the Internal Revenue Service and other federal agencies use 

to identify a business. Banks will not allow a business entity to open an account without providing an 

BIN. 
11 

The Interim Audit Report recommended that CRC provide additional documentation 

to resolve the question of ownership and control of the Convention Account. To 

support its position, CRC should have obtained pertinent bank documentation 

confirming that the CRC's BIN was not associated with the Convention Account and, 

therefore, CRC was hot required to report the financial activity associated with this 

account. 

3. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendation, CRC expressed its 

disagreement regarding Finding IC. CRC stated that it.has previously provided 

documentation demonstrating that the account in quj 

and, as such, was not an unreported federal accoi 

its prior correspondence, sufficiently demonsi 

Convention Account. With its response, CRC ^ 

correspondence. 

not controlled by CRC 

s position is that it has, by 

loes not control the 

of the prior 

The Audit staff maintains that previoui 

question of ownership and control of the 

documentation that confirmsj^£ was not 

the Audit staff considers thi^^R^unreso 

ivided documentatii 

ention Afccount. A 

the Convei 

not resolve the 

ccount. 

Finding 2. Reporting o^ppatent In 

Expenditures 

Summary 

During audit field 

$357,895 that CRC d' 

apoearej^^^irect md 

b 

Addr^^y, of the 

provid^^MRcient documi 

24/48-hou^^grts were re£ 

totaling $203^v CRC als 

communicati6nFlrat.contaii 

(b). 

ndent 

operating expenditures totaling 

21b (Operating Expenditures) that 

dent expenditures that should have 

ht Expenditures). 

1 to be independent expenditures, CRC did not 

ling to dissemination dates to verify whether 

filed for the apparent independent expenditures 

[id not provide invoices associated with 77 direct mail 

r express advocacy as defined under 11 CFR 100.22 (a) or 

In response to the Interim Audit Report recommendation, CRC stated it disagreed with 

the recommendation. CRC reiterated its belief that the communications at issue were not 

reportable as independent expenditures because they were subject to the volunteer 

material exemption. CRC further stated it has provided all such documentation in its 

possession to substantiate application of the volunteer material exemption. 

The Audit staff reexamined the documentation provided during fieldwofk related to the 

volunteer materials exemption for specific communications totaling $93,090 and 

determined the disbursements were not independent expenditures. For the remaining 
12 

communications (consisting of $110,905 and 77 mailers with no invoices) that CRC 

claims the volunteer materials exemptions is applicable, the Audit staff again 

recommends that CRC provide further evidence to support the application of the 

volunteer materials exemption to the specific communications involved. The Audit staff 

considered the disbursements for radio advertisements for $153,900 to be independent 

expenditures that also required filing of 24 hour reports totaling $32,164. 

Legal Standard 

A. Definition of Independent Expenditures. An independent expenditure is an 

expenditure made for a communication expressly advocating^e election or defeat of a 

clearly identified candidate that is not made in cooperatio^p^sultation, or concert with, 

or at the request or suggestion of, a candidate, a candjjd^^authorized committee, or 

their agents, or a political party or its agents. 

A clearly identified candidate is one whose 

appears, or whose identity is apparent thi 

Congressman," or through an unambiguoil 

such as "the Democratic presidential nomim 

this state." ..... 

Expressly advocating means an\ conii 

• Uses phrases such as "voic 

communications of campai 

can have nq^^^^^nable 

more cle^^pentm^..! didate: 

• When take^s^ whol.- ni with 

proximity t^^electi -n. oould 

ickname, pH^graph or drawing 

biguous refere^^such as "your 

ice to his or her s^toM a candidate, 

Re|- 1\ m candid^^^Senate in 

lect your Congressman" or 

i(s), which in context 

•r^ele^h or defeat of one or 

Terences I'd external events, such as 

by a reasonable person only as 

more clearly identified candidates. 

lure ReauiF^ents -^lli^neral GulS[elines. An independent expenditure shall 

be repo^^n Schedule^ 

same pav^lurine the si 

made (i.e., puMsk dissemi! 

on Schedule Ea^gs a debt 

need not be itemi^pkhoi 

line (b) on Schedule 

, whet^^^d to other independent expenditures made to the 

Mendar^^r, it exceeds $200. Independent expenditures 

I prior to payment should be disclosed as memo entries 

! Schedule D. Independent expenditures of $200 or less 

ie committee must report the total of those expenditures on 

FR§§104.3(b)(3)(vii), 104.4(a) and 104.11. 

C. Last-Minute Independent Expenditure Reports (24-Hour Reports). Any 

independent expenditures aggregating $1,000 or more, with respect to any given election, 

and made after the 20"* day but more than 24 hours before the day of an election, must be 

reported and the report must be received by the Commission within 24 hours after the 

expenditure is made. A 24-hour report is required each time additional independent 

expenditures aggregate $1,000 or more. The date that a communication is publicly 

disseminated serves as the date that the committee must use to determine whether the 
13 

total amount of independent expenditures has, in the aggregate, reached or exceeded the 

threshold reporting amount of $1,000. 11 CFR §§104.4(f) and 104.5(g)(2). 

D. Independent Expenditure Reports (48-Hour Reports). Any independent 

expenditures aggregating $10,000 or more with respect to any given election, at any time 

during a calendar year, up to and including the 20th day before an election, must be 

disclosed within 48 hours each time the expenditures aggregate $10,000 or more. The 

reports must be filed with the Commission within 48 hours after the expenditure is made. 

11 CFR §§104.4(f) and 104.5(g)(1). 

E. Formal Requirements Regarding Reports and S 

committee shall maintain records with respect to the 

which shall provide in sufficient detail the neces: 

filed reports may be verified, explained, clarifie^S 

completeness. 11 CFR §104.14(b)(l). . 

its. Each political 

required to be reported 

ion and data from which the 

r accuracy and 

F. Volunteer Activity. The payment by 

costs of campaign materials (such as pins, hi 

party tabloids or newsletters, and^rd signs) ui 

volunteer activities on behalf of^^||Dminee(s) o 

provided that the following cond^n^EBjnet: 

committee of a poii 

idbills. 

immittee in 

is not a contri 

1. Such payment is not for cos 

newspaper, 

communii 

mailing( 

The portil 

paid from c 

S'lc' 

•"1 

^uch mai 

s 

all 

The e» 

party 

§100.147(1 

zine, bill 

litical advl 

rcoi 

[the cos! 

butions 

:.rj di 

i^ial vend 

such ma! 

yect to th! 

Lcontri! 

'^canditli^^or Fl 

ited by 

Lconneciiiai^ith any broadcasting, 

,.or simi^lifype of general public 

ail means any 

ade from commercial lists, 

allocable nS^ederal candidates must be 

itations and prohibitions of the Act. 

ns designated by the donor to be spent 

1 office. 

rs and not by commercial or for-profit 

, such payments shall be reported by the political 

lenfi^ccordance with 11 CFR §104.3 but need not be 

ididates in committee reports. 

licable to campaign materials purchased by the national 

FR §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR 

I, (e) and (g). 
14 

Facts and Analjrsis 

A. Reporting of Apparent Independent Expenditures 

1. Facts 

During audit fieldwork, the Audit staff reviewed disbursements to ensure proper 

reporting. The Audit staff noted that CRC did not disclose any independent 

expenditures on Schedule E, however, made apparent media-related expenditures 

totaling $357,895 and disclosed them as operating expenditures. These 

communications, as well as others that are not assocU^ with invoices, were 

identified as possible independent expenditures. A4o^kdown analysis of these 

expenditures is as follows: 

Independent Expenditures Reporte^a^'Opvia 

(Associated Invoice Provided)^-

CRC made nine apparent iridcr-.-i.^iht expenditures 

were documented as follows: , 

i. CRC made six disbursemen -

direct mail totaling $203,995 fol 

mailer with an a^^^^ invoice, 

these direct maileaj^mfeined langua] 

Expenditures 

$357,895 that 

or defeat of a clear! 

§ 100.22(a). 

ii. 

b. 

dependentrexBgnditures for 

ivided a copy'^toe direct 

to the Audit sMf, each of 

iressly advocating the election 

fined under 11 CFR 

ti 

advi 

defined 

dependent expenditures 

ivided supporting 

reconciliations, airing dates, scripts and 

Lof the audio files included the voice of 

upon this portion of the audio 

ppeared this radio ad expressly 

or defirat of a clearly identified candidate as 

00.22(b). 

inilimendent 1 \p^nditnres Reported as Operating Expenditures (No 

In^?qre&^soci:iira) 

CRC aifferent direct mail communications that contained 

express ). as defined under 11 CFR 100.22(a) or (b). The 

communic^^s are as follows: 

i. 72 direct mail communications contained language expressly 

advocating the election or defeat of clearly identified candidates, as 

defined under 11 CFR 100.22(a). 

ii. Five direct mail communications contained language that encouraged 

the reader to vote for Republicans and help repeal "Obamacare", with 

various reasons why Obamacare was bad for Colorado and/or 

America's economy. Based on the definition of express advocacy 

under 11 CFR 100.22(b), these communications could only be 
15 

interpreted by a reasonable person as advocating the election or defeat 

of clearly identified candidates. 

CRC did not provide sufficient information to allow each of the 77 

communications to be associated with an invoice. Without this additional 

information, the Audit staff is unable to calculate the disbursement amount 

for each communication. (See Finding 3.) 

Volunteer Material Exemption 

In response to the Audit staffs request during 

to support that volunteers participated in exj 

forms signed by 22 different mail procesj 

reflected the volunteer's name, site U 

The mail piece section was left blanMnSSll foi 

which a candidate's last name W3.^^ified. Bi 

forms, it appeared most of th^ >. 

to the 2012 General Election. 

Ldwork for documentation 

:ivity,' CRC provided 

lunteers. These forms 

in most forms, the date. 

|ith one exception, in 

.the dates on the 

iteer activity occOq^.immediately prior 

The Commission ha&addressed the 

exemption in the Fi^^^^Reports 

Democratic Executi^^mlTMttee of Floi 

Party. In these reports^^feCo^^Mion 

regardingthe^plicatioi^^he vi 

Commisalp^Sd^ttemptedipfcform] 

I sub^^al voluir 

of the volumee^aterials 

irizona Republicanrarty, the 

id the Tennessee Republican 

a lack of clarity 

mateMBitexemption. The 

isenl^policy regarding what 

^he purpose of applying the 

In view o 

needed to q 

[lount of dod 

?ieved. Sin^a lack of clarity exists 

lunteer materials exemption, it follows 

ation needed to support volunteer 

icenaihtv regarding the amount of volunteer involvement 

for t^^olunteer materials exemption, as well as the 

itatio^mquired to support such an exemption, the Audit 

immen at the conclusion of fieldwork that CRC provide more 

inform n and documentation for any volunteer involvement 

h mailer. 

2. Interim Audit ^Sport and Audit Division Recommendation 

At the exit conference, the Audit staff presented the schedule of disclosure errors for 

independent expenditures. CRC representatives provided a listing of additional 

invoice numbers and invoice amounts in response to the exit conference but did not 

provide any copies of communications or further information that would allow the 

available invoices to be associated with the copies of the communications. 

' CRC has not claimed that any exemptions apply with respect to any expenditures discussed above such 

as, for example, volunteer material exemption, slate cards exemptions, etc. 

10 Proposed Interim Enforcement Policy, Agenda document No. 10-16. 
16 

The Interim Audit Report recommended that CRC: 

• Provide additional invoices and/or information associating the 77 direct mail 

communications containing express advocacy with an invoice; and 

• Provide documentation and evidence that apparent independent expenditures 

totaling $357,895 and the 77 direct mail communications containing express 

advocacy, did not require reporting as independent expenditures. Evidence 

should have included any documentation such as volunteer timesheets and 

photographs to support the involvement of volunteers in the processing or 

distribution of the communications noted above. 

• Absent such evidence, CRC should have amend^ts reports to disclose these 

disbursements as independent expenditureso^^^ule E and submit revised 

procedures for reporting independent e\j-.-: 

3. Committee Response to the Interim 

In response to the Interim Audit Report 

with the recommendation. CRC reitei 

were not reportable as independent ex^ 

volunteer material exemption. CRC furtli 

in its possession substantiate 

the location where the work 

CRC stated it had never been 

photographs, and that it did not 

"...it has provided^QPUgh infoi 

material exenig^paliipthat it woi 

disbursemenf^^uesti 

ated it 

:olunteer inv 

and the 

provide 

[formal 

rKeport 

lendation, 

I belief that the 

jres because they 

[teted it disagreed 

nications at issue 

iject to the 

Tovided an^^jmentation 

luding the vo^meer names, 

the volunteer involvement, 

iteer timesheets and 

RC further stated that 

' apgllbation of the volunteer 

to disclose the 

The Audit staff int on radio communications should be 

volunteer materials exemptions does 

sspect to thi 

$93W"- 'he Audit 

docuiiii-ii^on providi 

with sucl^^^nce prov 

considered mPispnden 

of $110,905 

materials exempt! 

olun irms signed by volunteers on direct mailers of 

led the documentation and believes the 

suppoft%f the volunteer materials exemption is consistent 

in past audits. As a result, these disbursements are not 

ditures. For the remaining communications (consisting 

ilers without invoices) that CRC claims the volunteer 

plicable, the Audit staff again recommends that CRC 

provide further evidrace to support the application of the volunteer materials 

exemption to the specific communications involved. Such evidence will assist the 

Commission in determining if the volunteer materials exemption is applicable to 

these communications. 
17 

B. Failure to File 24/48 Hour Reports for Apparent Independent Expenditures 

1. Facts 

In addition to not reporting any independent expenditures during the audit period, 

CRC also did not file 24 or 48-hour reports for any independent expenditures. 

Therefore, the apparent independent expenditures identified above by the Audit staff 

may also have required such a filing. 

2. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided CRC schedule of possible 

. undisclosed 24/48-'hour reports. CRC representatives^^ot offer any comments 

regarding this matter. 

The Interim Audit Report recommended 

apparent independent expenditures totali 

communications containing express 

independent expenditures (per Part A 

the date of public dissemination for each 

filing of a 24/48-hour report was required. 

3. Committee Response to ilir ii 

In response to the Interim Audii 

with the recommoidatipn. CRC 

were not reportam^^^deoendent' 

volunteer maj^^^xe 

hour reports wei^necessai« ' - these 

The 

: requif 

it docTOgiitation and evidence that 

7,895 and n^^direct mailer 

did not require pjyrting as 

CRC provide docur^^tion to support 

iunicatlMto determiS^ether a 

fRC stated it disagreed 

ommunicafions at issue 

were subject to the 

not believe any 24 or 48-

advertisements are independent 

ng $32,164. 

^udit staff mSi^tins thal^nless further evidence of the volunteer involvement 

witl^Mspecific communicati(^^sprovided. the Commission may conclude the 

remairamdirect mailei - .-••aling $M0,905 as well as the 77 direct mailers without 

invoice^^^be report:.- as independent expenditures and may require 24 or 48-

hour repor 

Finding 3. for Communications 

Summary 

During audit fieldwork, the Audit staff reviewed disbursements to verify the accuracy of 

the information and proper classification of transactions disclosed on reports. CRC 

reported 28 expenditures totaling $5,812,448, on Schedule B, Line 21b (Operating 

Expenditures) with purposes of "direct mail," "direct mail advertising" or "party direct 

mail." Documentation that was provided by CRC was insufficient to make a 

determination pertaining to the purpose for these disbursements and verification as an 

operating expense. 
18 

In response to the Interim Audit Report recommendation, CRC stated it disagreed with 

the recommendation and explained it provided all the requested documentation in its 

possession in a series of letters, USB thumb-drives and online file site links to the Audit 

staff. CRC indicated that it was working to associate the provided invoices and 

communications with each other and would provide the final record associating all 

communications with invoices. Absent the provision of records, the Audit staff considers 

the matter a violation of the recordkeeping requirements at 11 CFR §104.14(b)(1). 

Legal Standard 

A. Formal Requirements Regarding Reports and St 

committee shall maintain records with respect to the i 

which shall provide in sufficient detail the neces 

filed reports may be verified, explained, clarified. ^thecE 

completeness. .II CFR §I04.I4(b)(I). 

B. Preserving Records and Copies of ^ 

must preserve all records and copies of repo 

U.S.C. §30102(d). 

Facts and Analysis 

Its. Each political 

required to be reported 

tjon and data from which the 

1 accuracy and 

jcal committee 

filed. 52 

A. Facts 

During audit field 

the information 

28 expenditures 

determination perta? 

ScheduleiSjsLine 2Ib 

Ty -•it staffs 

verify the accuracy of 

lonagfsysed on reports. CRC made 

lumentalK was insufficient to make a 

ments were correctly reported on 

i. J^^^rsements- Nu Jovoic^lbr Conies of Communications Provided 

DisEl^m^ents totaiij^$2,156,415 were paid to two direct mail vendors, and 

were di^^ed on Si^plule B with purposes of "direct mail", "direct mail 

advertisin^^"pai^^@irect mail", but no invoices or associated communications 

were provideil^pfout sufficient details, the Audit staff is unable to verify 

CRC's reportinfWthese amounts as operating expenditures. The Audit staff 

requested copies of the invoices and the associated direct mail piece for each of 

the disbursements. To date, these invoices or other information to associate the 

payments to a particular communication have not been provided. 
19 

ii. Disbursements- Invoices Provided - Not Able to Associate with Conies of 

Communications ffl3.656.033) 

Disbursements totaling $3,656,033 were paid to direct mail vendors and were 

disclosed on Schedule B with purposes of "direct mail," "direct mail advertising" 

or "party direct mail." For these disbursements, ORG provided invoices but did 

not provide information about the related mail communications. Without 

sufficient details, the Audit staff is unable to verify CRC's reporting itemization 

of these amounts as operating expenditures. The Audit staff requested 

information that would allow an association between the invoice and the • 

communication, however, CRC has not responded ' - ^is request. 

B. Interim Audit Report & Audit Division Recom^midiition 

At the exit conference, the Audit staff presented a a^pBL . f^he disbursements for 

which further records were necessary to verify i^e®curacy'G®^C's reporting. The 

Audit staff again requested that CRC provid^^Piional invoice^^ information that 

would associate each invoice to the corresngSme communicatioTB^RC representatives 

provided a listing of additional invoice nun^ 

exit conference but did not provide any copie 

that would allow the available inM£iices to be i 

communications. 

and invoice 

Kgommi stions or 1 

I the copies of 

iponse to the 

information 

The Interim Audit Report recomm^^tn^^^provid^B sufficient detail, the 

necessary informationfmm which th^port^^^rating ex^^tures totaling 

$5,812,448 may b^^^^^^explaine^^uchu^^^^houlSmve included: 

• Copies o^^^es^^^entifican>7i .• I'^ll'asswil^; communication, and 

• If the coin^^cation ^^Iready '-j.-i-. provided, infoimation associating each 

commuhicati^^idth ..r- 'n\-•.•-e(s). 

C.^^imiiiiiii-i- i<anonse 

In^^nsetothe 

the^^^mendation 3 

its possi&iQn in a series 

Audit stafl^RC was woi 

with each otn^^id would 

invoices as soo^^Jie 

staff considers the 

§104.14(b)(1). 

port 

lendation, CRC stated it disagreed with 

e Int» 

Aulrnmeport i 

laii^hhat it has provided all the requested documentation in 

:ers?ligB^thumb-drives and online file site links to the 

to ass^ate the provided invoices and communications 

ide the final record associating all communications with 

I complete. Absent the provision of records, the Audit 

ktion of the recordkeeping requirements at 11 CFR 

I Finding 4. Failure to Itemize Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff noted that CRC failed to disclose debts and 

obligations owed to three vendors totaling $235,968. In response to the Interim Audit 

Report recommendation, CRC agreed to amend its disclosure reports for the applicable 

period and disclose the debt owed to CRC's former legal counsel. CRC stated it would 

not amend its reports to disclose the debt owed to its former get-out-the-vote (GOTV) 
20 

vendor due to the termination of the contract. CRC subsequently filed amended reports 

to disclose debt owed to the two non-GOTV vendors. Absent the filing of amended 

reports to include the debt owed to the GOTV vendor, the Audit staff considers the matter 

unresolved. 

Legal Standard . 

A. Continuous Reporting Required. A political committee must disclose the amount 

and nature of outstanding debts and obligations owed by or to the reporting committee 

until those debts are extinguished. 52 USC §30104(b)(8) and 11 CFR §§ 104.3(d) and 

104.11(a). 

B. Separate Schedules. A political committee m 

owed by or to the committee, together with a state] 

conditions under which each debt and obligatioi 

§104.11(a). 

C. Itemizing Debts and Obligations. 

• A debt of $500 or less, not including 

administrative expenses, must be repoi 

from the date incurred (tHlate.jpf the 

next regularly scheduled 

• Regularly recurring adminisi 

debts until due. 

• A debt exce^m^^Rmust be^plo 

which thdHlm was mMfcred. 11 

^ -.i-iirate schedules for debts 

jning the circumstances and 

mcurri^r extinguished. 11 CFR 

jher regulafi^eoccurring 

been outstuid^^60 days 

committee reports it on the 

not have to be treated as 

covers the date on 

D. Disputed DebfN. 

and the coinTiiiiiuc as td^ 

Until ilK>ciudii(ir,ji^^omr 

something of valueffi^omf 

le amount th&^inmit 

imount the cf 

}unts the ci: 

Facts and 

2t is a boi 

samr''® 

: reso 

: must cli' 

lits it owes; 

[de disagreement between the creditor 

le amount owed by the committee, 

(assuming the creditor did provide 

-r clain^s owed; and 

•litteehaspaid the creditor. 11 CFR §116.10. 

A. Facts ^ 

During audit fieldwork, the Audit staff used available disbursement records to reconcile 

the accounts" of three CRC vendors. This review identified debts owed to these three 

vendors totaling $235,968 that should have been disclosed on Schedule D.'^ 

" The reconciliation consisted of calculating invoiced and paid amounts for individual reporting periods in 

the 2011 - 2012 election cycle. The Audit staif then determined whether outstanding debts were 

correctly disclosed on Schedule D. Each debt amount was counted once, even if it required disclosure 

over multiple reporting periods. 

There was no debt reported during the audit period for any of these three vendors. 
21 

One of the vendors provided legal services and had debt outstanding at the end of four 

reporting periods totaling $100,197, including an outstanding balance at the end of the 

audit period of $13,541. A second vendor that provided accounting services had an 

outstanding balance at the end of one reporting period for $2,284, but did not have an 

outstanding balance at the end of the audit period. The last vendor had debt outstanding 

at the end of the audit period of $133,487 that pertained to the unpaid balance of a 

contract for a GOTV program. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed these disc 

representatives.and provided them with schedules detail! 

reported. CRC representatives disagreed with the Ai 

respect to the disclosure of debts owed to the ven 

Subsequent to the exit conference, CRC reqi 

by the Commission regarding the disclosure 

payment. CRC contended the disclosure 

privileges.'^ CRC representatives also di 

for the GOTV program, stating that CRC 

provided all contracted services. X^RC repi 

letter, sent by CRC to the GO 

immediate termination of the 

vendor. 

Based on the terms of 

to make pro rata 

that it termina' 

which suggests 

the termination of 

did not indieate^s to 

toC 

ire errors with CRC 

debts that were not 

s determination with 

ided legal services, 

consigj^tion of a legal question 

debt for le^^^ices prior to 

Violate confidenu^^tomey/client 

with the requiremM^xdisclose debt 

inate^^contract be^&Ae vendor 

IM^wSed a copy ofSbnsiened 

t, its tei 

The4nierim Audit Re| 

that e^^l^res totali 

GOTV pr^hm vendor, 

provide info^mon and d< 

the vendor pro'i^pLbefore 

was not signed, C. 

vendor, e-mails or to 

the Interim Audit Repoi 

debts and obligations. 

idvised this vendor of an 

RC from the obligation 

lees 

Qntrag^^ore 

; vendo^movided i 

gtractj^yailable 

-Aretedoytp vendor. CRC stated 

ivid^i^feof the contracted services 

'some of thixontracted services before 

ment documentation provided by CRC 

: for services that the vendor provided 

ided that CRC provide documentation demonstrating 

S,9^^^^ot require reporting on Schedule D. As for the 

iterim mmit Repoit further recommended that CRC 

entation relating to debt remaining for any services that 

rmination of the contract. Since the termination letter 

ive submitted documentation such as a signed letter to the 

ogs regarding the termination. Absent such documentation, 

mmended that CRC amend its reports to disclose these -

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendations, CRC stated that, given the 

Commission's determination that the amounts owed to CRC's former counsel were not 

privileged from disclosure, CRC agreed to amend its disclosure reports for the applicable 

period and disclose the debt owed to CRC's former legal counsel. CRC stated it would 

See Part 1 Background, Commission Guidance at p. 1. 
22 

not amend its reports to disclose the debt owed to its former GOTV vendor due to the 

termination of the contract. CRC provided the previously submitted unsigned 

termination letter but did not submit any documentation related to debt for any services 

prior tp termination of the contract. CRC subsequently filed amended reports to disclose 

debt owed to the two non-GOTV vendors. Absent the filing of amended reports to. 

include the $133,487 debt owed to the GOTV vendor, the Audit staff considers the matter 

unresolved. 

4 

4-

>s 

\ 

4