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. 1 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. 

1 52 U.S.C. §3011 l(b). 

Final Audit Report of the 

Commission on the Conservative 

Majority Fund 

(July 9, 2012 - December 31, 2012) 

About the Committee (p. 2) 

The Conservative Majority Fund is a non-connected committee, 

headquartered in Arlington, Virginia. For more information, see 

the chart on Committee Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Independent Expenditures 

Total Disbursements 

Commission Findings (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

$2,814,766 

$2,814,766 

$ 1,125,320 

1,620,530 

$2,745,850 

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

• Reporting of Apparent Independent Expenditures (Finding 3) 

• Reporting of Debts and Obligations (Finding 4) 

• Recordkeeping for Communications (Finding 5) 
Final Audit Report of the 

Commission on the Conservative 

Majority Fund 

(July 9, 2012 - December 31, 2012) 
Table of Contents 

Part I. Background 

Authority for Audit 

Scope of Audit 

Audit Hearing 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Commission Findings 

Part IV. Commission Findings 

Finding 1. Misstatement of Financial Activity 

Finding 2. Disclosure of Occupation and Name of Employer 

Finding 3. Reporting of Apparent Independent Expenditures 

Finding 4. Reporting of Debts and Obligations 

Finding 5. Recordkeeping for Communications 

Page 

1 

1 

1 

2 

2 

3 

6 

8 

11 

19 

22 
Part I 

Background 

Authority for Audit 

1 

This report is based on an audit of the Conservative Majority Fund (CMF), 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. §3011 l(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. §3011 l(b). 

Scope of Audit 

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

factors and as a result, this audit examined: 

1. the disclosure of contributions received; 

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

3. the disclosure of debts and obligations; 

4. the consistency between reported figures and bank records; 

5. the completeness of disbursement records; 

6. the disclosure of independent expenditures; and 

7. other committee operations necessary to the review. 

Audit Hearing 

CMF requested a hearing before the Commission. The request was granted and the 

hearing was held on September 14, 2017. At the hearing, CMF addressed one issue, 

Reporting of Apparent Independent Expenditures. (For more detail, see Finding 3, p.11 ). 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration July 9, 2012 

• Audit Coverage July 9, 2012 - December 31, 2012 

Headquarters Arlington, Virginia 

Bank Information 

• Bank Depositories One 

• Bank Accounts One Checking Account 

Treasurer 

• Treasurer When Audit Was Conducted Scott Mackenzie 

• Treasurer During Period Covered by Audit Scott Mackenzie 

July 9, 2012 - December 31 , 2012 

Management Information 

• Attended Commission Campaign Finance Yes 

Seminar 

• Who Handled Accounting and Treasurer 

Recordkeeping Tasks 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand (iiJ July 9, 2012 $0 

Receipts 

0 Contributions from Individuals 2,814,766 

Total Receipts $2,814,766 

Disbursements 

0 Operating Expenditures 1,125,320 

0 Independent Expenditures 1,620,5302 

Total Disbursements $2,745,850 

Cash-on-hand ® December 31, 2012 $68,916 

2 

2 This amount, as well as the amount for operating expenditures, has been revised as a result of the Commission's 

final consideration of Finding 3. 
Part Ill 

Summaries 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

3 

The Audit staffs comparison of CMF's financial activity with its bank records revealed a 

material misstatement of disbursements in calendar year 2012. CMF misstated its 

disbursements by $2,163,830. In response to the Interim Audit Report recommendation, 

the CMF Treasurer stated that CMF did not agree that it had misstated its disbursements 

by $2,163,830, and it had amended its 2012 disclosure reports to correct some of the 

errors for incorrect dates and names. However, no amended reports were filed. In 

response to the Draft Final Audit Report, CMF stood by its Interim Audit Report 

response, and acknowledged that amended reports were not filed. Absent the filing of 

amended reports, CMF disbursements remained misstated by $2,163,830. 

The Commission approved a finding that in 2012, CMF misstated its disbursements by 

$2,163,830. 

(For more detail, seep. 6.) 

Finding 2. Disclosure of Occupation and Name of 

Employer 

During audit fieldwork, a review of all contributions from individuals requiring 

itemization indicated that 527 contributions totaling $86,745 lacked adequate disclosure 

of the contributor's occupation and name of employer. CMF did not demonstrate "best 

efforts" to obtain, maintain and submit this information. In response to the Interim Audit 

Report recommendation, the CMF Treasurer stated that CMF had amended its disclosure 

reports to correct the errors. However, no amended reports were filed. In response to the 

Draft Final Audit Report, CMF stood by its Interim Audit Report response, and 

acknowledged that amended reports were not filed. Absent the filing of amended reports, 

the amount of contributions lacking adequate disclosure of occupation and name of 

employer remained as $86,745. 

The Commission approved a finding that CMF failed to disclose occupation and name of 

employer information for 527 contributions from individuals totaling $86,745. 

(For more detail, seep. 8.) 

Finding 3. Reporting of Apparent Independent 

Expenditures 

During audit fieldwork, the Audit staff reviewed disbursements to verify the independent 

expenditures that CMF reported on Schedule E (Itemized Independent Expenditures) 

were accurately and completely disclosed. 
The Audit staff identified disbursements totaling $469,136 which were not reported as 

apparent independent expenditures. Also independent expenditures totaling $185,663 

were disclosed with an incorrect vendor name. 

With respect to the filing of 24/48-hour reports required for certain independent 

expenditures, CMF did not file 24-hour reports totaling $90,260 in a timely manner and 

did not file 24/48-hour reports for apparent independent expenditures totaling $469,136 

noted above. 

4 

In response to the Interim Audit Report recommendation, the CMF Treasurer stated that 

the actual amount of independent expenditures was $914,856 and CMF has filed new and 

amended 24/48-hour reports for independent expenditures totaling $764,082. After 

reviewing additional vendor invoices that were provided, the Audit staff accepted that 

expenditures totaling $195,839 were not independent expenditures, and reduced the 

apparent independent expenditures not reported to $273,297 ($469,136 - $195,839). 

Also, CMF' s response mentioned that it had filed amended reports to correct the 

reporting of the 51 independent expenditures totaling $185,663 disclosed with the 

incorrect vendor name. However, even though the CMF Treasurer said that amended 

reports were filed, as of the date of this report, CMF did not file any amended disclosure 

reports concerning the independent expenditures. In response to the Draft Final Audit 

Report, CMF stood by its Interim Audit Report response, and acknowledged that 

amended reports were not filed. Absent evidence that the expenditures in question did 

not require reporting as independent expenditures and did not require 24/48-hour reports, 

the Audit staff considered the expenditures totaling $273,297 to be independent 

expenditures, and CMF did not comply with the recommendation to correct the 

disclosure for 51 independent expenditures totaling $185,663. 

The Commission approved a finding that CMF did not properly disclose apparent 

independent expenditures totaling $273,297 on Schedule E; and failed to correct the 

vendor name for independent expenditures totaling $185,663 disclosed on Schedule E. In 

addition, the Commission approved a finding that CMF failed to file 24/48-hour reports 

for apparent independent expenditures totaling $273,297; and that 24-hour reports 

totaling $90,260 were filed untimely. 

(For more detail, seep. 11.) 

Finding 4. Reporting of Debts and Obligations 

During audit fieldwork, the Audit staff identified debts totaling $67,800 that were not 

disclosed on Schedule D (Debts and Obligations) as required. CMF contended that it was 

not liable for a portion of the expenses, as they were incurred by another committee. In 

response to the Interim Audit Report recommendation, the CMF Treasurer provided a 

check copy (front only) written by a 527 organization for payment of $93,990 along with 

ten invoices billed to the 527 organization, and concluded that all debts and obligations 

owed have been properly reported. The Audit staff did not consider this adequate 

documentation to demonstrate that the debts totaling $67,800 did not require disclosure 

by CMF. In response to the Draft Final Audit Report, CMF stood by its Interim Audit 

Report response. CMF did not provide documentation to support whether or not CMF 
5 

received the services on the invoices. Absent further documentation, the amount of debts 

required to be disclosed on Schedule D remained as $67,800. 

The Commission approved a finding that CMF failed to disclose debts and obligations 

totaling $67,800. 

(For more detail, seep. 19.) 

Finding 5. Recordkeeping for Communications 

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

the information and proper classification of transactions disclosed on reports. The Audit 

staff identified $304,399 for which sufficient records were not provided. Without a copy 

of the invoices and the associated communications, the Audit staff was unable to 

determine how CMF should have reported these disbursements. In response to the 

Interim Audit Report recommendation, the CMF Treasurer provided two media vendor 

invoices, four television advertisements, and stated that CMF believed that all 

documentation needed by the Audit staff has been provided. In response to the Draft 

Final Audit Report, CMF stood by its Interim Audit Report response. The Audit staff 

concluded that the records provided by CMF demonstrated that disbursements totaling 

$224,768 were operating expenditures and disbursements totaling $79,631 were 

insufficiently documented. In addition, disbursements totaling $38,302, which were 

originally included in the apparent independent expenditure finding, are not sufficiently 

documented. Absent further documentation, the Audit staff considered the remaining 

disbursements totaling $117,933 ($79,631 + $38,302) to be insufficiently documented. 

The Commission approved a finding that CMF did not provide the necessary records 

pertaining to disbursements totaling $117,933. 

(For more detail, seep. 22.) 
6 

Part IV 

Commission Findings 

I Finding 1. Misstatement of Financial Activity 

Summary 

The Audit staffs comparison of CMF's financial activity with its bank records revealed a 

material misstatement of disbursements in calendar year 2012. CMF misstated its 

disbursements by $2,163,830. In response to the Interim Audit Report recommendation, 

the CMF Treasurer stated that CMF did not agree that it had misstated its disbursements 

by $2,163,830, and it had amended its 2012 disclosure reports to correct some of the 

errors for incorrect dates and names. However, no amended reports were filed. In · 

response to the Draft Final Audit Report, CMF stood by its Interim Audit Report 

response, and acknowledged that amended reports were not filed. Absent the filing of 

amended reports, CMF disbursements remained misstated by $2,163,830. 

The Commission approved a finding that in 2012, CMF misstated its disbursements by 

$2,163,830. 

Legal Standard 

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 calendar year; 

• the total amount of disbursements for the reporting period and for the calendar 

year; and 

• certain transactions that require itemization on Schedule A (Itemized Receipts) or 

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

(5). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reconciled CMF's reported financial activity with 

its bank records for calendar year 2012. The reconciliation determined that CMF 

misstated disbursements for 2012. The following chart outlines the discrepancies 

between CMF's disclosure reports and its bank records. The succeeding paragraphs 

explain why the discrepancies occurred. 
7 

2012 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance $0 $0 $0 

@ July 9, 2012 

Receipts $2,814,767 $2,816,253 ($1,486) 

Understated 

Disbursements $2,745,851 $2,747,337 ($1,486) 

Understated 

Ending Cash Balance $68,916 $68,916 $0 

@ December 31, 2012 

CMF understated its disbursements by $1,486 in 2012. However, when evaluating the 

identified errors, regardless of whether the errors were positive or negative (absolute 

value), the Audit staff discovered that CMF misstated its disbursements by $2,163,830 as 

follows: 

The misstatement of disbursements resulted from the following differences: 

• Expenditures under-reported or not reported3 

• Expenditures over-reported or not supported by bank payments 

• Bank charges not reported 

Sum of Reporting Adjustments 

$1,081,176 

1,081,172 

1.482 

$2,163,830 

Although the chart demonstrated that overall CMF had only understated its 

disbursements by $1,486 in 2012, the Audit staff found that CMF did not properly report 

the majority of its disbursements. The disbursements were reported in such a manner 

that, during the period from CMF's inception through October 23, 2012, the Audit staff 

was unable to match vendor payments to any disclosed disbursement. The continued 

over-reporting and under-reporting on its disclosure reports resulted in CMF overreporting expenditures of $1,081,172 and under-reporting expenditures and bank charges 

of $1,082,658. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided schedules of the misstated activity and 

discussed the reporting errors that caused the misstatement. The CMF Treasurer had no 

additional comments. 

The Interim Audit Report recommended that CMF amend its reports to correct the 

misstatements for 2012 as noted above. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, the CMF Treasurer stated that 

CMF strongly disagreed that it had misstated its disbursements by $2,163,830. Also, the 

CMF Treasurer stated that "[t]he discrepancy of$1,486 was a simple case of bank 

3 This amount includes two expenditures totaling $79,631 for which documentation was insufficient to 

make a determination pertaining to how these disbursements should be reported. See Recordkeeping for 

Communication Finding, p.22. 
8 

charges mistakenly being reported as contra-receipts (not-sufficient-funds checks or 

credit card chargebacks, that reduce receipts) instead of as bank service charges." CMF 

did agree that some payee names and some dates were reported incorrectly; therefore, the 

CMF Treasurer said amended 2012 disclosure reports were filed to correct the payee 

names, incorrect dates, and the reporting of the bank service charges only (see Finding 3 

-Reporting of Apparent Independent Expenditures). However, as of the date of this 

report, the Audit staff determined that no amended reports were filed by CMF to correct 

the public record. Absent the filing of amended reports, CMF disbursements remained 

misstated by $2,163,830. 

D. Draft Final Audit Report 

The Draft Final Audit Report reiterated that CMF did not file amended reports to correct 

the misstatement of financial activity. 

E. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, the CMF Treasurer stated that CMF stood by 

its response to the Interim Audit Report, and acknowledged that amended reports were 

not filed. The CMF Treasurer added that the disclosure reports will be amended. 

F. Audit Hearing 

CMF did not address this finding during the Audit Hearing. 

Commission Conclusion 

On October 25, 2017, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission adopt a 

finding that in 2012, CMF misstated its disbursements by $2,163,830. 

The Commission approved the Audit staffs recommendation. 

Finding 2. Disclosure of Occupation and Name of 

Employer 

Summary 

During audit fieldwork, a review of all contributions from individuals requiring 

itemization indicated that 527 contributions totaling $86,745 lacked adequate disclosure 

of the contributor's occupation and name of employer. CMF did not demonstrate "best 

efforts" to obtain, maintain and submit this information. In response to the Interim Audit 

Report recommendation, the CMF Treasurer stated that CMF had amended its disclosure 

reports to correct the errors. However, no amended reports were filed. In response to the 

Draft Final Audit Report, CMF stood by its Interim Audit Report response, and 

acknowledged that amended reports were not filed. Absent the filing of amended reports, 

the amount of contributions lacking adequate disclosure of occupation and name of 

employer remained as $86,745. 
9 

The Commission approved a finding that CMF failed to disclose occupation and name of 

employer information for 527 contributions from individuals totaling $86,745. 

Legal Standard 

A. 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 name of his or her employer; 

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

• the amount of the contribution; and 

• the calendar 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). 

B. 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). 

C. 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. 

o Note: The request and statement must appear in a clear and conspicuous 

manner on any response material included in a solicitation. 

• Within 30 days ofreceipt 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 

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 Analysis 

A. Facts 

A review of all contributions from individuals requiring itemization indicated that 527 

contributions totaling $86,745, or 30% of total contributions from individuals required to 

be itemized by CMF, lacked disclosure of the contributor's occupation and name of 

employer. For most of these entries, the contributor's occupation and name of employer 

information ( 455 of 527) were blank on the Schedule A (Itemized Receipts) filed with the 

Commission. 
The Audit staff reviewed the receipt records provided by CMF to determine if it had 

utilized "best efforts" to obtain, maintain and submit the missing information. 

• CMF did not provide documentation showing it made follow-up best efforts 

requests for 48 contributions totaling $9,340 ($86,745 - $77,405). 

• CMF had the required information for 479 contributions totaling $77,405; 

however, this information was not disclosed on its disclosure reports. 

10 

In response to the audit, CMF submitted written procedures of "best efforts" 

requirements: (i) within thirty days of the receipt of the contribution, a letter would be 

sent, clearly asking for the missing information, without soliciting a contribution; (ii) 

contributors would be informed of the requirements of federal law for the reporting of 

such information; and (iii) a pre-addressed return envelope, a fax number and an email 

address would be provided to the contributor. The Treasurer stated that upon receipt of 

the information, CMF would amend its reports to provide the new information. Although 

occupation and name of employer information was obtained for the majority of its 

contributors, CMF did not provide confirmation that these follow up letters were sent to 

contributors. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided schedules and discussed the omission of 

the contributor's occupation and name of employer. The CMF Treasurer commented that 

he had obtained a lot of the missing occupation and name of employer information. In 

response to the exit conference, CMF provided documentation detailing the contributor's 

occupation and name of employer information for $45,369 of the errors, however 

amended disclosure reports were not filed. 4 This amount was included in the $77,405 

noted above. 

The Interim Audit Report recommended that CMF establish "best efforts" by amending 

its reports to disclose the missing information relating to the 4 79 contributions totaling 

$77,405. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, the CMF Treasurer stated that 

CMF had obtained occupation and name of employer information for all but 30 of its 

contributors and restated its "best efforts" procedures. The response also included a 

listing of the 30 contributors for whom CMF was unable to obtain the missing occupation 

and name of employer information. In addition, 4 78 "best efforts" letters were provided. 

Further, the response mentioned that CMF had amended its disclosure reports to correct 

the majority of the errors. However, as of the date of this report, the Audit staff 

determined that no amended reports were filed by CMF to correct the public record. 

Absent the filing of amended reports, the amount of contributions lacking adequate 

disclosure of occupation and name of employer remained as $86,745. 

4 CMF's database contained the occupation and name of employer information for an additional 203 

contributions totaling $32,036. 
11 

D. Draft Final Audit Report 

The Draft Final Audit Report reiterated that absent the filing of amended reports, the 

amount of contributions lacking adequate disclosure of occupation and name of employer 

remains as $86,745. 

E. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, the CMF Treasurer stated that CMF stood by 

its response to the Interim Audit Report, and acknowledged that amended reports were 

not filed. The CMF Treasurer added that the disclosure reports will be amended. 

F. Audit Hearing 

CMF did not address this finding during the Audit Hearing. 

Commission Conclusion 

On October 25, 2017, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission adopt a 

finding that CMF failed to disclose occupation and name of employer information for 

527 contributions from individuals totaling $86,745. 

The Commission approved the Audit staffs recommendation. 

Finding 3. Reporting of Apparent Independent 

Expenditures 

Summary 

During audit fieldwork, the Audit staff reviewed disbursements to verify the independent 

expenditures that CMF reported on Schedule E (Itemized Independent Expenditures) 

were accurately and completely disclosed. 

The Audit staff identified disbursements totaling $469,136 which were not reported as 

apparent independent expenditures. Also independent expenditures totaling $185,663 

were disclosed with an incorrect vendor name. 

With respect to the filing of 24/48-hour reports required for certain independent 

expenditures, CMF did not file 24-hour reports totaling $90,260 in a timely manner and 

did not file 24/48-hour reports for apparent independent expenditures totaling $469,136 

noted above. 

In response to the Interim Audit Report recommendation, the CMF Treasurer stated that 

the actual amount of independent expenditures was $914,856 and CMF has filed new and 

amended 24/48-hour reports for independent expenditures totaling $764,082. After 

reviewing additional vendor invoices that were provided, the Audit staff accepted that 

expenditures totaling $195,839 were not independent expenditures, and reduced the 

apparent independent expenditures not reported to $273,297 ($469,136 - $195,839). 
12 

Also, CMF's response mentioned that it had filed amended reports to correct the 

reporting of the 51 independent expenditures totaling $185,663 disclosed with the 

incorrect vendor name. However, even though the CMF Treasurer said that amended 

reports were filed, as of the date of this report, CMF did not file any amended disclosure 

reports concerning the independent expenditures. In response to the Draft Final Audit 

Report, CMF stood by its Interim Audit Report response, and acknowledged that 

amended reports were not filed. Absent evidence that the expenditures in question did 

not require reporting as independent expenditures and did not require 24/48-hour reports, 

the Audit staff considered the expenditures totaling $273,297 to be independent 

expenditures, and CMF did not comply with the recommendation to correct the 

disclosure for 51 independent expenditures totaling $185,663. 

The Commission approved a finding that CMF did not properly disclose apparent 

independent expenditures totaling $273,297 on Schedule E; and failed to correct the 

vendor name for independent expenditures totaling $185,663 disclosed on Schedule E. In 

addition, the Commission approved a finding that CMF failed to file 24/48-hour reports 

for apparent independent expenditures totaling $273,297; and that 24-hour reports 

totaling $90,260 were filed untimely. 

Legal Standard 

A. Definition of Independent Expenditures. The term "independent expenditure" 

means an expenditure by a person for a communication expressly advocating the 

election or defeat of a clearly identified candidate that is not made in coordination 

with any candidate or authorized committee or agent of a candidate. 11 CFR 

§100.16. 

B. Disclosure Requirements - General Guidelines. An independent expenditure shall 

be reported on Schedule E if, when added to other independent expenditures made to 

the same payee during the same calendar year, it exceeds $200. Independent 

expenditures made (i.e., publicly disseminated) prior to payment should be disclosed 

as memo entries on Schedule E and as a debt on Schedule D. Independent 

expenditures of $200 or less need not be itemized, though the committee must report 

the total of those expenditures on line (b) of Schedule E. 11 CFR §§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 20th 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 total amount of independent expenditures has, in the 

aggregate, reached or exceeded the threshold reporting amount of $1,000. 11 CFR 

§§104.4(t) and 104.5(g)(2). 
13 

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 received by the Commission within 48 hours after the 

expenditure is made. The date that a communication is publicly disseminated serves 

as the date that the committee must use to determine whether the total amount of 

independent expenditures has, in the aggregate, reached or exceeded the threshold 

reporting amount of$10,000. 11 CFR §§104.4(f) and 104.S(g)(l). 

E. Definition of Expressly Advocating. The term "expressly advocating" means any 

communication that; 

• Uses phrases such as "vote for the President," "re-elect your Congressman," 

"defeat" accompanied by a picture of one or more candidate(s), "reject the 

incumbent," or communications of campaign slogan(s) or individual word(s), 

which in context can have no other reasonable meaning than to urge the election 

or defeat of one or more clearly identified candidate(s), such as posters, bumper 

stickers, advertisements; or 

• When taken as a whole and with limited reference to external events, such as the 

proximity to the election, could only be interpreted by a reasonable person as 

containing advocacy of the election or defeat of one or more clearly identified 

candidate(s) because: 

o the electoral portion of the communication is unmistakable, unambiguous, 

and suggestive of only one meaning; and 

o reasonable minds could not differ as to whether it encourages actions to 

elect or defeat one or more clearly identified candidate(s) or encourages 

some other kind ofreaction. 11 CFR §100.22(a) and (b). 

F. Formal Requirements Regarding Reports and Statements. Each political 

committee shall maintain records with respect to the matters required to be reported 

which shall provide in sufficient detail the necessary information and data from which the 

filed reports may be verified, explained, clarified, and check for accuracy and 

completeness. 11 CFR § 104.14(b )(1 ). 

Facts and Analysis 

A. Reporting of Apparent Independent Expenditures 

1. Facts 

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

reporting of independent expenditures. The Audit staff identified the following: 

• Apparent independent expenditures not reported totaling $469,136. 

• Vendor name incorrectly reported on Schedule E totaling $185,663 . 
14 

Background Information 

The Audit staff was unable to match vendor invoices or payments to any 

disbursements disclosed on either Schedule B (Itemized Disbursements) or Schedule 

E. The Audit staff asked CMF to explain how it classified communications and how 

it reported the associated disbursements, as well as, if any documentation was 

available to verify the reported amounts. CMF stated that portions of some 

disbursements were reported as independent expenditures and the remaining portions 

as operating expenditures. However, CMF did not explain its methodology for 

determining how the disbursements were disclosed. 

Absent documentation of how disbursements were disclosed, the Audit staff used the 

following approach to determine the amount5 that should have been reported as 

apparent independent expenditures: 

• Communications such as the telephone calls, follow-up letters, and television 

advertisements containing express advocacy of a clearly identified candidate 

were considered to have most likely disseminated before the date of the 

general election. 11 CFR §100.22(a) 

• Based on communications that the Audit staff determined were disseminated 

before the November 6, 2012 general election, any associated costs were 

considered independent expenditures. 

• Based on communications that the Audit staff determined were disseminated 

after the general election, any associated costs were considered operating 

expenditures. 6 

a. Apparent Independent Expenditures (Copy of Invoice and Communication 

Made Available) 

The Audit staff determined that CMF made apparent independent expenditures 

totaling $1,816,369. However, CMF only reported independent expenditures 

totaling $1,347,233. Therefore, the Audit staff calculated an under-reported 

5 The Audit staff originally included in its calculation of the total costs attributed to independent 

expenditures a variety of other types of cost described on the invoices, such as, postage of "fulfillment 

letters"; costs associated with credit card processing connected with "fulfillment letters" and with 

"acquisition and processing"; check debiting for "acquisition and processing"; "rental lists"; 

"prospecting"; "lockbox services," and costs associated with creating and sending "premiums" such as a 

flag and bumper sticker. These costs described on the invoices are not defined in terms of how they are 

related to the communications, but the descriptions might raise questions whether some of them should 

be considered costs for the communications. See 11 C.F.R; § 100.16. Upon further review after CMF's 

response to the Interim Audit Report, the Audit staff deducted costs associated with credit card 

processing connected with "fulfillment letters" and acquisition/processing, "lockbox services", and flags 

since these are not directly associated with producing and distributing the communications. 6 The Audit staff used the range of dates listed on each invoice to estimate the date on which CMF's 

vendor completed the services. The Audit staff treated the last day of the date range as the date of 

completion for all invoices, except for those invoices in which the date range occurred partly before and 

partly after the general election date. In that case, the Audit staff chose to pro-rate the cost of the service 

according to the proportion of the date range occurring before and after the general election. 
15 

amount of apparent independent expenditures totaling $469,136, for which CMF 

provided the associated communications which included phone scripts and call 

dates, advertisements, and solicitation letters. This amount included $328,250 

that CMF had not paid and for which CMF should have disclosed memo entries 

on Schedule E when the communications were disseminated. The corresponding 

debt owed7 also should have been disclosed on Schedule D (Debts and 

Obligations). The phone calls and television advertisements contained language 

expressly advocating the election or defeat of a clearly identified candidate, as 

defined under 11 CFR § 100.22(a), while the follow up letters contained language 

advocating the election or defeat of a clearly identified candidate, as defined 

under 11 CFR §100.22(b) .

8 

b. Independent Expenditures Reported on Schedule E (Independent 

Expenditure Schedule) - Disclosure Errors 

CMF disclosed 51 independent expenditures totaling $185,663 with an incorrect 

vendor name. These expenditures were disclosed as paid to the media vendor. 

However, CMF did not make direct payments to this vendor. The media vendor's 

services were billed to CMF through invoices from another vendor, and CMF 

made direct payments to that vendor instead of the media vendor. 

2. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff presented schedules of apparent independent 

expenditure reporting errors. In response to the exit conference, the CMF Treasurer 

provided an email addressing $301,972 of the expenses billed but not paid in section 

A. 1 (a) above. The email showed that June 2012 expenses totaling $92,411 that were 

billed to CMF were actually incurred by another committee and should have been 

paid by that committee.9 Other than the email provided by CMF, the CMF Treasurer 

did not provide any other documentation to support that the other committee is liable 

for $92,411. 

The Interim Audit Report recommended that CMF: 

• Provide documentation and evidence that apparent independent expenditures 

totaling $469,136 did not require reporting as independent expenditures. 

Absent such evidence, CMF should have amended its reports to disclose these 

disbursements as independent expenditures on Schedule E and submit revised 

procedures for reporting independent expenditures. 

7 Only $67,800 of the $328,250 would be required to be disclosed as debt, since CMF disclosed debt owed 

to this vendor totaling $260,450 on its 2012 year-end report. See Finding 4 - Reporting of Debts and 

Obligations, p.19. 8 CMF indicated that the two telephone scripts, two follow-up letters, and three television advertisements 

in the Audit staffs possession represent the entire universe of communications that were made during the 

audit period. However, invoices indicated there were two additional television advertisements, see 

Finding 5 - Recordkeeping for Communications, p. 22. Based on the content of the communications, one 

telephone script, one follow-up letter, and two television advertisements contained express advocacy. 9 The other committee that CMF contends is liable for the $92,411 debt is not registered with the 

Commission. 
16 

• Amend its reports to correct the vendor name for the 51 independent 

expenditures totaling $185,663. 

3. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendation, the CMF Treasurer stated 

that CMF believed that the actual amount of independent expenditures was $914,856 

and that this amount was reflected on the amended disclosure reports. CMF provided 

an attachment that explained how it determined whether an expenditure was an 

operating expenditure or an independent expenditure, along with 20 additional vendor 

mv01ces. 

CMF considered the following costs as independent expenditures: all costs 

associated with the media vendor ($629,730), 20% of all outbound phone calls 

($153,256) since approximately one minute of an average five minute call contained a 

taped anti-Obama message, 50% of all rental list costs ($50,223) since the lists were 

used for outbound calls which had a dual purpose of delivering a political message 

and soliciting a contribution, and all bumper sticker costs incurred before the general 

election ($2,087), since the costs contained a political message. Costs totaling 

$92,411 were considered to be costs associated with a 527 organization10 (see Finding 

4 - Reporting of Debts and Obligations), and all other costs 11 were considered to be 

either fundraising or administrative in nature. CMF did not provide any new phone 

scripts. 12 

The Audit staff maintained the script used for the telephone calls, the follow-up 

letters sent, and the media television advertisements provided by CMF and made 

before the general election contained express advocacy, making the costs for these 

and all other related costs independent expenditures. CMF's statement that some of 

the costs were fundraising only does not take into account that fundraising letters with 

express advocacy language are not excluded from the regulation definition at 11 CFR 

§100.16.13 Also, CMF's response mentioned that it had filed amended reports to 

correct the reporting of the 51 independent expenditures totaling $185,663 disclosed 

with the incorrect vendor name. However, as of the date of this report, CMF did not 

file any amended disclosure reports concerning the independent expenditures. 

After reviewing additional vendor invoices that were provided by CMF, the Audit 

staff reduced the apparent independent expenditure total by $195,839. The Audit 

staff accepted that legal and accounting expenditures totaling $64,160 were not 

independent expenditures. Also, the Audit staff accepted that costs relating to the 

purchase and mailing of American flags ($13,122), costs relating to lock box services 

10 See footnote 16. 11 See footnote 5. 12 CMF provided one more television advertisement, bringing the total provided by CMF to four. The 

CMF Treasurer stated this television advertisement is an independent expenditure. However the Audit 

staff did not consider this particular television advertisement to be an independent expenditure because it 

did not contain express advocacy. And the cost is not a part of this finding. 13 See the Final Audit Report of the Commission on the Legacy Committee Political Action Committee, 

Finding 2 (2008 election cycle). 
17 

($4,650), and credit card processing and fulfillment charges ($75,605) were not 

apparent independent expenditures. In total, the Audit staff removed disbursements 

of $157,537 from its apparent independent expenditures costs and now considers 

these to be operating expenditures. Further, costs totaling $38,302 were removed 

from the apparent independent expenditure total and moved to the recordkeeping 

finding because the documentation provided for these expenditures was not sufficient 

to determine how these expenditures should have been reported (See Finding 5 -

Recordkeeping for Communications). 

In total, the Audit staff reduced the amount of apparent independent expenditures to 

$1,620,530 ($1,816,369 - $195,839). As previously stated, CMF reported 

independent expenditures in the amount of $1,347,233. Therefore, CMF did not 

demonstrated that apparent independent expenditures totaling $273,297 ($1,620,530 -

$1,347,233) did not require reporting as independent expenditures. Absent evidence 

that the expenditures in question did not require reporting as independent 

expenditures, the Audit staff considered these expenditures to be independent 

expenditures. 

4. Draft Final Audit Report 

The Draft Final Audit Report reiterated that CMF did not file amended reports to 

disclose expenditures totaling $273,297 as independent expenditures, nor did CMF 

correct the reporting of the 51 independent expenditures totaling $185,663 disclosed 

with the incorrect vendor name. 

5. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, the CMF Treasurer restated that CMF 

stood by its response to the Interim Audit Report, that the expenditures were properly 

reported as operating expenditures, and acknowledged that amended reports were not 

filed. The CMF Treasurer added that the disclosure reports will be amended. 

6. Audit Hearing 

At the audit hearing, the CMF Treasurer described how the telephone calls that CMF 

made had a dual purpose of providing a political message and soliciting a 

contribution, and stated that the costs of telephone calls should be allowed to be 

allocated as such. The CMF Treasurer also referred to the October 2014 Journal of 

Accountancy article that mentioned how not-for-profit committees could allocate 

joint costs using a rational and systematic allocation methodology. The CMF 

Treasurer concluded that he acted in good faith and in accordance with the American 

Institute of Certified Public Accountants by allocating joint costs in a reasonable 

manner and applying those costs consistently throughout the audit period. Therefore, 

the difference between the Audit staffs determination of apparent independent 

expenditures and CMF's allocated determination of independent expenditures should 

not result in a fine. 
18 

Commission Conclusion 

On October 25, 2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission adopt a finding that CMF did not properly disclose apparent independent 

expenditures totaling $273,297 on Schedule E; and failed to correct the vendor name 

for independent expenditures totaling $185,663 disclosed on Schedule E. 

The Commission approved the Audit staffs recommendation. 

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

1. Facts 

During audit fieldwork, the Audit staff reviewed disbursements to determine whether 

24/48-hour reports were properly filed. 14 The Audit staff determined that CMF filed 

untimely 24-hour reports for 13 independent expenditures totaling $90,260. For these 

expenditures, 24-hour reports were filed 13 to 27 days after the dissemination date. 

As noted above, the Audit staff also identified apparent independent expenditures 

totaling $469,136 which may also require filing of 24/48-hour reports. 

2. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff presented schedules of untimely and possible 

24/48-hour reports that were not filed. The CMF Treasurer had no additional 

comments. 

Absent documentation and evidence that apparent independent expenditures totaling 

$469,136 did not require reporting as independent expenditures (per section A.1.(a) 

above), the Interim Audit Report recommended that CMF provide documentation to 

support the date of public dissemination for the communications to determine 

whether a filing of a 24/48-hour report was required. The Interim Audit Report also 

recommended that CMF provide documentation to demonstrate that the 24-hour 

reports totaling $90,260 were filed timely. 

3. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendation, the CMF Treasurer stated 

that the actual amount of independent expenditures was $914,856 and CMF has filed 

new and amended 24/48-hour reports for independent expenditures totaling $764,082. 

The CMF Treasurer did not specifically address the 24-hour reports totaling $90,260 

that were filed untimely. The Audit staff restated that CMF under-reported the 

reduced apparent independent expenditures totaling $273,297. The Audit staff was 

not able to verify if the 24/48-hour reports filings CMF made addressed these 

apparent independent expenditures. Absent evidence that the expenditures totaling 

$273,297 (as determined in section A.3. above) did not require reporting as 

independent expenditures, the Audit staff considered these expenditures may have 

required filing of 24/48-hour reports. 

14 See footnote 6. 
19 

4. Draft Final Audit Report 

The Draft Final Audit Report reiterated that the Audit staff considers that apparent 

independent expenditures totaling $273,297 may have required filing of 24/48-hour 

reports, and that CMF filed untimely 24-hour reports for 13 independent expenditures 

totaling $90,260. 

5. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, the CMF Treasurer stated that CMF 

stood by its response to the Interim Audit Report, and acknowledged that amended 

reports were not filed. The CMF Treasurer added that the disclosure reports will be 

amended. 

6. Audit Hearing 

At the audit hearing, the CMF Treasurer described how the telephone calls that CMF 

made had a dual purpose of providing a political message and soliciting a 

contribution, and stated that the costs of telephone calls should be allowed to be 

allocated as such. The CMF Treasurer also referred to the October 2014 Journal of 

Accountancy article that mentioned how not-for-profit committees could allocate 

joint costs using a rational and systematic allocation methodology. The CMF 

Treasurer concluded that he acted in good faith and in accordance with the American 

Institute of Certified Public Accountants by allocating joint costs in a reasonable 

manner and applying those costs consistently throughout the audit period. Therefore, 

the difference between the Audit staffs determination of apparent independent 

expenditures and CMF' s allocated determination of independent expenditures should 

not result in a fine. 

Commission Conclusion 

On October 25, 2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission adopt a finding that CMF failed to file 24/48-hour reports for apparent 

independent expenditures totaling $273,297; and that 24-hour reports totaling 

$90,260 were filed untimely. 

The Commission approved the Audit staffs recommendation. 

I Finding 4. Reporting of Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff identified debts totaling $67,800 that were not 

disclosed on Schedule D (Debts and Obligations) as required. CMF contended that it was 

not liable for a portion of the expenses, as they were incurred by another committee. In 

response to the Interim Audit Report recommendation, the CMF Treasurer provided a 

check copy (front only) written by a 527 organization for payment of $93,990 along with 

ten invoices billed to the 527 organization, and concluded that all debts and obligations 
20 

owed have been properly reported. The Audit staff did not consider this adequate 

documentation to demonstrate that the debts totaling $67,800 did not require disclosure 

by CMF. In response to the Draft Final Audit Report, CMF stood by its Interim Audit 

Report response. CMF did not provide documentation to support whether or not CMF 

received the services on the invoices. Absent further documentation, the amount of debts 

required to be disclosed on Schedule D remained as $67,800. 

The Commission approved a finding that CMF failed to disclose debts and obligations 

totaling $67,800. 

Legal Standard 

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

and nature of outstanding debts and obligations until those debts are extinguished. 

52 U.S.C. §30104(b)(8) and 11 CFR §§104.3(d) and104.l l(a). 

B. Itemizing Debts and Obligations. 

• A debt of $500 or less must be reported once it has been outstanding 60 days from 

the date incurred (the date of the transaction); the committee reports it on the next 

regularly scheduled report. 

• A debt exceeding $500 must be disclosed in the report that covers the date on 

which the debt was incurred. 11 CFR §104.1 l(b). 

C. Reporting Disputed Debts. A political committee shall report a disputed debt in 

accordance with 11 CFR 104.3(d) and 104.11 if the creditor has provided something 

of value to the political committee. Until the dispute is resolved, the political 

committee shall disclose on the appropriate reports any amounts paid to the creditor, 

any amount the political committee admits it owes and the amount the creditor claims 

is owed. The political committee may also note on the appropriate reports that the 

disclosure of the disputed debt does not constitute an admission of liability or a 

waiver of any claims the political committee may have against the creditor. 11 CFR 

§116.lO(a). 

Facts and Analysis 

A. Facts 

The Audit staff reviewed invoices and disclosure reports for proper reporting of debts and 

obligations. During the election cycle, CMF over-reported debt owed to one vendor 

except for the 2012 Year-End Report, which did not include $67,80015 owed to the 

vendor. This vendor provided media services for CMF. 

15 The Audit staff identified payments owed to this vendor totaling $328,250. See Finding 3 - Reporting of 

Apparent Independent Expenditures, p. 11. Only $67,800 of the $328,250 would be required to be 

disclosed as debt, since CMF disclosed debt owed to this vendor totaling $260,450 on its 2012 year-end 

report. CMF contended that invoices totaling $92,411 of the $328,250 billed were incurred by another 

committee. 
21 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided a schedule and discussed the debt 

reporting matter with the CMF Treasurer. In response to the exit conference, the CMF 

Treasurer provided an email showing that June 2012 expenses totaling $92,411 that were 

billed to CMF were actually incurred by another committee and should have been paid by 

that committee. However, no further documentation or explanation was provided to 

associate these expenses with another committee. The Audit staff was not able to verify 

that the other committee is actually liable for the debt. As a result, the debt that CMF did 

not report on its Schedule D remained as $67,800. 

The Interim Audit Report recommended that CMF provide documentation demonstrating 

that these expenditures did not require reporting on Schedule D and documentation to 

support that the expenses totaling $92,411 were billed erroneously to CMF. Absent such 

documentation, it was further recommended that CMF amend its reports to disclose the 

unreported debts totaling $67,800. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, the CMF Treasurer stated that 

CMF's executive director was also the Treasurer of a 527 organization16 and that ten 

invoices should have been billed to the 527 organization in July 2012 when the 527 

organization was terminating17 and CMF was just beginning. The CMF Treasurer 

maintained the vendor mistakenly billed the ten invoices to CMF instead of the 527 

organization. A check copy (front only) written by the 527 organization for payment of 

the ten invoices totaling $93,99018 was provided, and CMF concluded that all debts and 

obligations owed to the vendor were properly reported. 

In a conference held after the Interim Audit Report response, the CMF Treasurer stated 

that he had requested the front and back of the check copy written by the 527 

organization and would request the 527 organization's bank statements in an attempt to 

demonstrate that the 527 organization received the benefit of the services provided on the 

ten invoices. Subsequent to the conference, CMF provided ten more invoices. The 

invoices were identical to the invoices previously provided totaling $93,990, except that 

the new invoices now contained the 527 organization's name and address instead of 

CMF's name and address. 

16 Entities organized under section 527 of the tax code are considered "political organizations," defined 

generally as a party, committee or association that is organized and operated primarily for the purpose of 

influencing the selection, nomination or appointment of any individual to any federal, state or local 

public office, or office in a political organization. All political committees that register and file reports 

with the FEC are 527 organizations, but not all 527 organizations are required to file with the FEC. 

Some file reports with the Internal Revenue Service (IRS). 17 IRS records indicated that the 527 organization dissolved on August 29, 2012. 18 The CMF Treasurer stated that only $92,411 of the $93,990 billed was incurred by the 527 organization. 

And that the difference of$1,579 ($93,990 - $92,411) was a CMF media expense that would be 

considered to be an in-kind contribution from the 527 organization, with the excessive portion of$579 

($1,579 - $1,000) payable as a refund. 
22 

The Audit staff maintained the invoices provided by CMF and correctly billed to CMF 

contained the same descriptions, the same costs, and used the same calendar dates of 

service for billing purposes as services on the invoices CMF claimed should have been 

billed to the 527 organization. If CMF continues to contend it did not receive the service 

on the invoices in question and that the $92,411 is the debt of the 527 organization, then 

CMF could report it as disputable debt per 11 CFR §116.lO(a). 

The Audit staff concluded that although the amount of the check copy provided agreed 

with the total of the 10 invoices in question, CMF had not demonstrated that this check 

was successfully negotiated and that the $92,411 billed to CMF was not incurred by 

CMF. Absent further documentation, such as a bank statement supporting the check in 

question was negotiated or a statement from the vendor that the 10 invoices in question 

should have been billed to the 527 organization or documentation that CMF did not 

receive the services noted on the invoices, the debt CMF did not report on Schedule D 

remains as $67,800. 

D. Draft Final Audit Report 

The Draft Final Audit Report reiterated that CMF has not reported debt totaling $67,800 

on Schedule D. 

E. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, the CMF Treasurer stated that CMF stood by 

its response to the Interim Audit Report, and acknowledged that amended reports were 

not filed. The CMF Treasurer added that the disclosure reports will be amended. 

F. Audit Hearing 

CMF did not address this finding during the Audit Hearing. 

Commission Conclusion 

On October 25, 2017, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission adopt a 

finding that CMF failed to disclose debts and obligations totaling $67,800. 

The Commission approved the Audit staffs recommendation. 

I Finding 5. Recordkeeping 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. The Audit 

staff identified $304,399 for which sufficient records were not provided. Without a copy 

of the invoices and the associated communications, the Audit staff was unable to 

determine how CMF should have reported these disbursements. In response to the 

Interim Audit Report recommendation, the CMF Treasurer provided two media vendor 

invoices, four television advertisements, and stated that CMF believed that all 
23 

documentation needed by the Audit staff has been provided. In response to the Draft 

Final Audit Report, CMF stood by its Interim Audit Report response. The Audit staff 

concluded that the records provided by CMF demonstrated that disbursements totaling 

$224,768 were operating expenditures and disbursements totaling $79,631 were 

insufficiently documented. In addition, disbursements totaling $38,302, which were 

originally included in the apparent independent expenditure finding, were not sufficiently 

documented. Absent further documentation, the Audit staff considered the remaining 

disbursements totaling $117,933 ($79,631 + $38,302) to be insufficiently documented. 

The Commission approved a finding that CMF did not provide the necessary records 

pertaining to disbursements totaling $117,933. 

Legal Standard 

A. Formal Requirements Regarding Reports and Statements. Each political 

committee shall maintain records with respect to the matters required to be reported 

which shall provide in sufficient detail the necessary information and data from which 

the filed reports may be verified, explained, clarified, and check for accuracy and 

completeness. 11 CFR §104.14(b)(l). 

B. Preserving Records and Copies of Reports. The treasurer of a political committee 

must preserve all records and copies of reports for 3 years after the report is filed. 52 

U.S.C. §30102(d). 

Facts and Analysis 

A. Facts 

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

the information reported on the disclosure reports. 

The Audit staff's analysis resulted in the following: 

1. Disbursements -No Invoices or Copies of Communications Provided 

($79,631) 

CMF made two disbursements to a media vendor totaling $79,631 19 for which 

documentation was insufficient to make a determination of how these 

disbursements should be reported. Available documentation included the 

disbursement database, canceled check copies, and bank statements. Without a 

copy of the invoices and the associated communications, the Audit staff was 

unable to determine how CMF should have reported these disbursements. The 

Audit staff requested the invoices, payment documentation, and copies of the 

communications. 

19 This amount is a part of the expenditures not reported which is addressed in Finding I - Misstatement of 

Financial Activity, p. 6. 
24 

11. Disbursements - Invoices Provided - Incomplete Copies of Communication 

Provided ($224,768) 

Disbursements totaling $224,768 for television advertisements were paid to one 

media vendor. The invoices provided by CMF indicated there was an additional 

television advertisement not provided to the Audit staff. Without a copy of the 

communication, the Audit staff was unable to verify CMF's reporting of these 

costs. The Audit staff requested copies of the associated communication. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff presented a schedule of the disbursements for 

which further records were necessary. The CMF Treasurer did not provide any 

comments. 

The Interim Audit Report recommended that CMF provide the necessary records so the 

Audit staff could determine the proper reporting for the disbursements totaling $304,399 

($79,631 + $224,768) on the recommended amendments. Such records should have 

included copies of invoices, along with identification of the associated communication, 

and if the communication had already been provided, information associating each 

communication with an invoice(s). 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, the CMF Treasurer provided 

the two missing invoices for the disbursements for which no invoices or copies of 

communications were provided ($79,631). Although the two invoices were provided, the 

invoices did not indicate what advertisements were run and CMF did not provide a copy 

of the relative communications. Therefore, the Audit staff still considered the 

disbursements for which originally no invoices or copies of communications were 

provided ($79,631) to be insufficiently documented. 

Also, the CMF Treasurer provided four television advertisements for the disbursements 

for which invoices were provided but the Audit staff questioned whether there was an 

additional television advertisement ($224,768). Of the four television advertisements 

provided, three advertisements had already been provided to the Audit staff during audit 

fieldwork. CMF did not provide the fifth advertisement implied in an invoice.20 The 

CMF Treasurer stated that the media vendor had confirmed that there was only one 

Obama-care television advertisement, even though the invoices indicated that there was 

an Obama-care advertisement and a Repeal Obamacare advertisement. Therefore, 

according to the CMF Treasurer, there were only four television advertisements, and 

CMF had provided all four of the advertisements. After review of the television 

advertisements provided, the Audit staff deemed expenditures totaling $224,768 as 

operating expenditures, and that the costs for all of the television advertisements have 

been sufficiently documented. 

In addition, the Audit staff moved to this finding expenditures totaling $38,302 that it had 

previously considered to be apparent independent expenditures (See Finding 3 -

20 See Footnote 8. 
25 

Reporting of Apparent Independent Expenditures). The expenditures included web 

related expenses totaling $28,901, interactive voice response telephone call costs of 

$9,276, a sample premium charge of $25, and a prospecting-other charge of $100. 

Although invoices had been provided for these expenditures, the documentation was not 

sufficient to determine how these expenditures should have been reported. 

The Audit staff concluded that CMF has provided documentation for disbursements 

totaling $224,768 that demonstrated that the disbursements were operating expenditures 

and should have been reported as operating expenditures. The Audit staff considered the 

remaining disbursements totaling $117,933 ($79,631 + $38,302) to be insufficiently 

documented. 

D. Draft Final Audit Report 

The Draft Final Audit Report restated that disbursements totaling $117,933 were 

insufficiently documented. 

E. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, the CMF Treasurer stated that CMF stood by 

its response to the Interim Audit Report. 

F. Audit Hearing 

CMF did not address this finding during the Audit Hearing. 

Commission Conclusion 

On October 25, 2017, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission adopt a 

finding that CMF did not provide the necessary records pertaining to disbursements 

totaling $117,933. 

The Commission approved the Audit staffs recommendation.