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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 matter 

discussed in this report. 

1 52 u.s.c. §3011 l(b). 

Interim Audit Report of the 

Audit Division on the 

Conservative Campaign 

Committee 

(April 5, 2011 - December 31, 2012) 

About the Committee (p. 2) 

The Conservative Campaign Committee is a non-connected 

committee headquartered in Willows, California. For more 

information, see the chart on Committee Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Independent Expenditures 

o Refund of Contributions 

o Other Disbursements 

Total Disbursements 

$3,871,317 

28,994 

$3,900,311 

$2,519,567 

1,339,170 

20,110 

6,512 

$3,885,359 

Findings and Recommendations (p. 3) 

• Failure to File Reports and Properly Disclose Independent 

Expenditures (Finding I) 

• Recordkeeping for Communications (Finding 2) 
Interim Audit Report of the Audit 

Division on the 

Conservative Campaign 

Committee 

(April 5, 2011 - December 31, 2012) 
Table of Contents 

Part I. Background 

Authority for Audit 

Scope of Audit 

Limitations 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Recommendations 

Finding 1. Failure to File Reports and Properly Disclose 

Independent Expenditures 

Finding 2. Recordkeeping for Communications 

Page 

I 

I 

I 

2 

2 

3 

4 

8 
Part I 

Background 

1 

Authority for Audit 

This report is based on an audit of the Conservative Campaign Committee2 (CCC), 

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 consistency between reported figures and bank records; 

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

3. the disclosure of independent expenditures; 

4. the disclosure of debts and obligations pertaining to independent expenditures; 

5. the completeness of disbursement records; and 

6. other committee operations necessary to the review. 

Limitations 

CCC satisfied the recordkeeping requirements of 11 CFR§ I 02.9 concerning 

disbursements. However, testing of disbursements was limited due to the available 

copies of communications that could be associated to disbursements (See Finding 2-

Recordkeeping for Communications). Absent review of information associated with 

campaign communications, the Audit staff was unable to determine whether 

disbursements totaling $357,998 were properly classified as operating expenditures and,if 

not, whether possible additional reporting was necessary. (See Finding 2, p.8). 

2 On December 18, 2012, the Commission received a Statement of Organization from the Campaign to 

Defeat Barack Obama officially changing its name to the Conservative Campaign Committee. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Re11istration April 11, 2011 

• Audit Covera11e April 5, 2011'- December 31, 2012 

Headauarters Willows, California 

Bank Information 

• Bank Deoositories One 

• Bank Accounts One Checking and One Savings 

Treasurer 

• Treasurer When Audit Was Conducted Kelly Lawler 

• Treasurer During Period Covered bv Audit Kelly Lawler 

Manae:ement Information 

• Attended Commission Campaign Finance No 

Seminar 

• Who Handled Accounting and Paid Staff 

Recordkeeping Tasks 

Overview of Financial Activity 

(Audited Amounts4 ) 

Cash-on-hand cal Anril 5, 2011 $0 

Receiots 

o Contributions from Individuals 3,871,317 

o Other Receipts 28,994 

Total Receints $ 3.900,311 

Disbursements 

o Ooeratinl! Exoenditures 2,519,567 

o Independent Exoenditures 1,339,170' 

o Refund of Contributions 20,110 

o Other Disbursements 6,512 

Total Disbursements $3,885,359 

Cash-on-hand (ii) December 31, 2012 $ 14,952 

2 

3 CCC opened its first bank account April 5, 2011. 4 Audited amounts may differ from reported amounts; however, the differences were not material enough to result 

in a misstatement of financial activity finding. 5 This amount, as well as the amount for operating expenditures, may change as a result of the Commission's final 

consideration of the audit Finding 1. 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Failure to File Reports and Properly Disclose 

Independent Expenditures 

3 

During audit fieldwork, the Audit staff ascertained that CCC disclosed independent 

expenditures, totaling $1,339,170, on Schedule E (Itemized Independent Expenditures). 

Of these expenditures, CCC did not properly disclose independent expenditures totaling 

$12,168 that were publicly disseminated prior to payment and therefore required 

reporting as memo entries on Schedule E and reporting as debt on Schedule D (Debts and 

Obligations). Additionally, the Audit staff identified disbursements disclosed as 

operating expenditures on Schedule B, Line 21b (Operating Expenditures), totaling 

$294,036, which appear to be independent expenditures. 

Of the $1,339,170 independent expenditures reported on Schedule E, CCC did not file 

24-hour reports for $12,302 of them in a timely manner and did not file any 24-hour 

reports for $3,774 of them. Additionally, for the $294,036 disclosed as operating 

expenditures which appear to be independent expenditures, CCC did not file 24/48-hour 

reports totaling $270,210. 

If CCC believes that the apparent independent expenditures, totaling $294,036, did not 

require reporting as independent expenditures, the Audit staff recommends that CCC 

provide evidence to support its conclusion. Absent such evidence, the Audit staff 

recommends that CCC amend its reports to disclose these disbursements as independent 

expenditures on Schedule E and submit revised procedures for reporting independent 

expenditures. Lastly, the Audit staff recommends that CCC provide documentation to 

support that the 24/48-hour reports were timely filed or provide documentation to support 

the date of public dissemination for each communication to determine whether a filing of 

24/48-hour report was required. (For more detail, seep. 4.) 

Finding 2. Recordkeeping for Communications 

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

the information reported on the disclosure reports. CCC reported 134 expenditures 

totaling $357,998 on Schedule B, Line 21 (Operating Expenditures) with purposes such 

as "fundraising blast emails", "media consulting and commissions" and "online 

advertising". Documentation that was provided by CCC was insufficient to make a 

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

operating expense. The Audit staff recommends that CCC provide the missing copies of 

communications and invoices for the Audit staff to verify proper reporting of the 

communications. (For more detail, seep. 8.) 
Part IV 

Findings and Recommendations 

Finding 1. Failure to File Reports and Properly Disclose 

Independent Expenditures 

Summary 

4 

During audit fieldwork, the Audit staff ascertained that CCC disclosed independent 

expenditures, totaling $1,339,170, on Schedule E (Itemized Independent Expenditures). 

Of these expenditures, CCC did not properly disclose independent expenditures totaling 

$12,168 that were publicly disseminated prior to payment and therefore required 

reporting as memo entries on Schedule E and reporting as debt on Schedule D (Debts and 

Obligations). Additionally, the Audit staff identified disbursements disclosed as 

operating expenditures on Schedule B, Line 21b (Operating Expenditures), totaling 

$294,036, which appear to be independent expenditures. 

Of the $1,339,170 independent expenditures reported on Schedule E, CCC did not file 

24-hour reports for $12,302 of them in a timely manner and did not file any 24-hour 

reports for $3,774 of them. Additionally, for the $294,036 disclosed as operating 

expenditures which appear to be independent expenditures, CCC did not file 24/48-hour 

reports totaling $270,210. 

If CCC believes that the apparent independent expenditures, totaling $294,036, did not 

require reporting as independent expenditures, the Audit staff recommends that CCC 

provide evidence to support its conclusion. Absent such evidence, the Audit staff 

recommends that CCC amend its reports to disclose these disbursements as independent 

expenditures on Schedule E and submit revised procedures for reporting independent 

expenditures. Lastly, the Audit staff recommends that CCC provide documentation to 

support that the 24/48-hour reports were timely filed or provide documentation to support 

the date of public dissemination for each communication to determine whether a filing of 

24/48-hour report was required. 

Legal Standard 

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

expenditure made for a communication expressly advocating the election or defeat of a 

clearly identified candidate that is not made in cooperation, consultation, or concert with, 

or at the request or suggestion of, a candidate, a candidate's authorized committee, or 

their agents, or a political party or its agents. 

A clearly identified candidate is one whose name, nickname, photograph or drawing 

appears, or whose identity is apparent through unambiguous reference, such as "your 

Congressman," or through an unambiguous reference to his or her status as a candidate, 

such as "the Democratic Presidential nominee" or "Republican candidate for Senate in 

this state." 
Expressly advocating means any communication that: 

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

communications of campaign slogan(s) or individual word(s), which in context 

can have no other reasonable meaning than to urge election or defeat of one or 

more clearly identified candidates; or 

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

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

advocating the election or defeat of one or more clearly identified candidates. I I 

CFR §§100.16(a), 100.17 and 100.22. 

s 

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) on Schedule E. 11 CFR §§ I 04.3(b )(3)(vii), I 04.4(a) and I 04.11. 

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 2o•h 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$l,000. 11 CFR §§104.4(!) and 104.S(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(!) and 104.S(g)(I). 

E. 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 checked for accuracy and 

completeness. 11 CFR § 104. l 4(b )(I). 
Facts and Analysis 

A. Reporting of Independent Expenditures 

1. Facts 

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

independent expenditures were disclosed correctly on Schedule E, including 

disclosing the correct memo and debt entry, if required. The Audit staff noted that 

CCC disclosed independent expenditures totaling $1,339,170 on Schedule E; 

however, CCC made additional media-related expenditures totaling $294,036 and 

disclosed them as operating expenditures. A review and analysis of these 

expenditures revealed the following: 

a) Apparent Independent Expenditures Reported as Operating 

Expenditures (Copy of Communication Made Available) 

6 

CCC made 39 apparent independent expenditures totaling $294,036 for 

which it provided invoices, television and radio advertisements, 

fundraising blast emails, and additional supporting documents to the Audit 

staff. All of these communications totaling $294,036 contained language 

expressly advocating the election or defeat of a clearly identified 

candidate, as defined under 11 CFR §I00.22(a). The television and radio 

advertisements included statements such as: "Defeat Obama Tele-than", 

"Defeat Obama Radio-thon" and "Rebuild America, Defeat Obama Tour". 

The fundraising blast emails included links to television and radio 

advertisements, as well as express advocacy language within the body of 

the email. The emails included express advocacy phrases such as: 

"Defeat Barack Obama" and "We're going to stop Barack Obama from 

getting Wisconsin's 10 Electoral Votes". 

b) Independent Expenditures Reported on Schedule E 

(Independent Expenditure Schedule) 

CCC made 240 independent expenditures totaling $1,339,170 which were 

reported on Schedule E. CCC did not properly disclose seven independent 

expenditures totaling $12,168 that were publicly disseminated prior to 

payment and therefore required reporting as memo entries on Schedule E. 

CCC should have disclosed memo entries on Schedule E when the 

communications were disseminated in addition to the reporting at the time 

of payment. This amount should also be reported as a corresponding debt 

on Schedule D (Debts and Obligations). 

2. Interim Audit Report & Audit Division Recommendation 

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

independent expenditures. In response to the exit conference, CCC provided 

additional documentation including copies of seven major fundraising blast emails 

totaling $100,374. Upon review, the Audit staff determined these email 
communications included express advocacy, but were not properly reported as 

independent expenditures. The cost of these fundraising emails is part of the 

$294,036 in section A. I (a) above. 

7 

The Audit staff recommends that, within 30 calendar days of service of this report, 

CCC provide documentation and evidence that apparent independent expenditures 

totaling $294,036 did not require reporting as independent expenditures. Evidence 

should include invoices with the corresponding communications and, where 

applicable, CCC's payment information. Absent such evidence, the Audit staff 

recommends that CCC amend its reports to disclose these disbursements as 

independent expenditures on Schedule E and submit revised procedures for reporting 

independent expenditures. The Audit staff also recommends CCC amend its reports 

to include the reporting of $12,168 in independent expenditures as memo entries 

based on the date in which the materials were disseminated. This amount should 

also be reported as a corresponding debt on Schedule D. 

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

1. Facts 

The Audit staff reviewed independent expenditures reported by CCC, as well as the 

apparent independent expenditures noted above, to determine whether additional 

reporting of a 24/48-hour report was required.6 The following was noted: 

a) Independent Expenditures Reported on Schedule E (Independent 

Expenditure Schedule) 

Of the $1,339,170 repo1ted on Schedule E: 

i) CCC failed to file 24-hour reports for three disbursements totaling 

$3,774. 

ii) CCC untimely filed 24-hour reports for ten disbursements totaling 

$12,302, which were generally two to three days late and were 

prior to the general election. 

b) Apparent Independent Expenditures Reported as Operating 

Expenditures 

Of the $294,036 in apparent independent expenditures reported on 

Schedule B, CCC did not file 24/48-hour reports totaling $270,2107

• 

' The date the expenditure is publicly distributed serves as the date that the independent expenditure is 

made for purposes of the additional 24/48-hour report filing requirement. In the absence of a known date 

for public dissemination, the Audit staff used the invoice date or date of incurrence to determine if a 

24/48-hour report was required. The Audit staff used the invoice date for 15 of the payments, totaling 

$125,582, to detennine if a 24/48-hour report was required. 7 There was $23,826 ($294,036. $270,210) in apparent independent expenditures reported as operating 

expenditures that did not require 24/48-hour reports. Based on the available documentation, these 

expenses were publicly disseminated outside of the 24/48-hour report requirement periods for 

California's Primary Election (1/1/12 · 6/3/12) and General Election (1/1/12 · 11/4/12). 
8 

2. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided the CCC representative with a 

schedule of undisclosed or late filed 24/48-hour reports. The CCC representative did 

not provide any comments. 

Absent documentation and evidence that apparent independent expenditures noted 

above in section A. l (a) did not require reporting as independent expenditures, the 

Audit staff recommends that, within 30 calendar days of service of this report, CCC 

provide documentation to support that the 24/48-hour reports, totaling $286,286 

($3,774+ $12,302 + $270,210) were timely filed or that the report was not required. 

Such documentation should include support for the date of public dissemination for 

the Audit staff to determine whether or not a 24/48-hour report was required. 

[ Finding 2. Recordkeeping for Communications 

Summary 

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

the information reported on the disclosure reports. CCC reported 134 expenditures 

totaling $357,998 on Schedule B, Line 21 (Operating Expenditures) with purposes such 

as "fundraising blast emails", "media consulting and commissions" and "online 

advertising". Documentation that was provided by CCC was insufficient to make a 

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

operating expense. The Audit staff recommends that CCC provide the missing copies of 

communications and invoices for the Audit staff to verify proper reporting of the 

communications. 

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. CCC made 134 expenditures totaling 

$357,998 for which documentation was insufficient to make a determination pertaining to 

whether these disbursements were correctly reported on Schedule B, Line 21 b (Operating 

Expenditures). 
The Audit staffs analysis of the documentation that was provided, including CCC's 

disbursement database, invoices and bank statements, determined the following: 

9 

1. Disbursements - Invoices Provided - No Copies of Communication Provided 

($353.323) 

Disbursements totaling $353,323 were paid to vendors for services such as 

fundraising communications and disclosed on Schedule B with purposes of 

"fundraising blast emails", "media consulting and commissions" and "online 

advertising". For these 133 disbursements, CCC provided payment 

documentation and invoices, some invoices contained titles of candidates or 

issues including one titled "paulryan" and another titled "waronwomen". 

However, CCC did not provide the associated communication. Without a copy of 

the communications, the Audit staff is unable to verify CCC's reporting of these 

amounts as operating expenditures. The Audit staff requested copies of the 

associated communication. To date this information has not been provided. 

ii. Disbursements - No Invoices or Copies of Communication Provided 

($4,675) 

There was one disbursement for newsletters with missing invoices and missing 

communications totaling $4,675. The disbursement was reflected on CCC's 

database as a payment to one vendor and disclosed on Schedule B with the 

purpose of "email list and newsletter". Without a copy of the invoices and 

communications, the Audit staff is unable to verify CCC's reporting of this 

amount as operating expenditures. The Audit staff requested the invoices, 

payment documentation, and copies of the communications. To date this 

information has not been provided. 

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 to verify the accuracy ofCCC's reporting (with the 

discussion of independent expenditures at Finding I above). The CCC representative did 

not provide any comments. 

The Audit staff recommends that, within 30 calendar days of service of this report, CCC 

provide the necessary information from which the reported operating expenditures 

totaling $357,998 may be verified or explained. Such records should include copies of 

communications, invoices with the corresponding communications and, where 

applicable, CCC' s payment information.