FEDERAL ElECTI()N COf\.ltvllSSION

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AJC:007986

April 26, 1996

£~MORANDUM

TO:

FROM:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE ~~

ROBERT J. COSTA /~ ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

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SUBJECT: PUBLIC ISSUk~CE OF THE FINAL AUDIT REPORT ON

WEST VIRGINIA STATE DEMOCRATIC EXECUTIVE COMMITTEE

Attached please find a copy of the final audit report

and related documents on the West Virginia State Democratic

Executive Committee, which was approved by the Commission on

April 18, 1996.

Informational copies of the report have been received by

all parties involved and the report may be released to the

public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Reports Analysis Division

FEC Library

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REPORT OF THE AUDIT DIVISION

ON

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West Virginia State Democratic

Executive Committee

Approved April 18. 1996

FED[R.~L ELECTIO!' CO!\I~tISSIO~

999 E STREET. !,.\".

\\'ASHI~GTO!\.D.C.
TABLE OF CONTENTS

WEST VIRGINIA STATE DEMOCRATIC EXECUTIVE COMMITTEE

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Executive Summary

Final Audit Report

Background

Findings

Transmittal to Committee

Chronology

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FINAL AUDIT REPORT

ON

WEST VIRGINIA STATE DEMOCRATIC EXECUTIVE COMMITTEE

EXECUTIVE SUMMARY

West Virginia State Democratic Executive Committee (the

Committee) registered with the Federal Election Commission on

October 12, 1982, as the State Committee for the Democratic

Party of Charleston, West Virginia.

The audit was conducted pursuant to 2 U.S.C. S438(b), which

states, that the Commission may conduct audits of any political

committee whose reports fail to meet the threshold level of

compliance set by the Commission.

The findings of the 3udit were presented to the Committee

after the audit fieldwork (September 29, 1995) and later in an

interim audit report. The Committee·s responses have been

included in the findings set forth in this summary.

The following is an overview of the findings contained in

the final audit report .

Misstatement of Financial Activity - 2 U.S.C.

§434(b)(1),(2) and (4). The Committee overstated its receipts

by a net amount of $43,409, overstated disbursements by a net

amount of $200, and overstated ending cash by $43,170. The

Committee responded by filing amended reports, which materially

corrected the misstatements.

Reporting of Disbursements - 2 U.S.C. §434(b)(S)(A) and 11

CFR l04.10(b) (4). The Committee did not file Schedule H-4

(Joint Federal/Non-federal Activity Schedule) for the last half

of 1994. The Committee reported 74 items on Schedule B's

totaling $47,672, which were all allocable expenses and should

have been reported on Schedule H-4's. Furthermore, the

Committee did not file one Schedule H-2 (Allocation Ratios for

Individual Fundraising Events, Exempt Activities and Shared

Direct Candidate Support) for this period. The Committee

materially corrected these problems by filing the necessary

schedules.

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Page 2, Approved 4/18/96
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AK007927

ARt96-69

REPORT OF THE AUDIT DIVISION

ON

WEST VIRGINIA STATE DEMOCRATIC EXECUTIVE CO~~ITTEE

I. Background

A. Audit Authority

This report .l.s based on an audit of the West Virginia

State Democratic Executive Committee (the Committee) undertaken

by the Audit Division of the Federal Election Commissior in

accordance with the provisions of the Federal Election L~paign

Act of 1971, as amended (the Act). The audit was conducted

pursuant to Section 438(b) of Title 2 of the United States Code

which states, in part, that the Commission may conduct audits

and field investigations of any political committee required to

file a report under Section 434 of this title. Prior to

conducting any audit under this subsection, the Commission shall

perform an internal review of the 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.

B. Audit ~overage

The audit covered the period from J~nuary 1, 1993

through December 31, 1994. The Cow~ittee reported a beginning

cash balance at January 1, :~93 of $73,165; total receipts for

the period of $253,365; tu~al disbursements for the period of

$204,403i and an ending cash balance on December 31, 1994 of

$56,097.

c. Committee Organi~ation

The Comrni~tee registered with the Federal Election

Commission on October 12, 1982, and maintains its headquarters

in Charleston, West Virginia. The Treasurer of the Committee is

Ms. Marie Prezioso.

1. All figures in this report have been rounded to the nearest

dollar. The amounts do not foot due to adjustments explained

in Finding II.A. of this report.

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To manage its financial activity during 2he audit

cycle, the Committee maintained five bank accounts. The

Committee's rn; :rts indicated that 33% of receipts were

transfers from~the non-federal bank account, 49\ were

contributions from ind:viduals, 18\ from Party and other

political committees, and the remainder from other receipts such

as interest.

D. Audit Scope and Procedures

The audit included the testing of the following

general categories:

1. The receipt of contributions or loans in excess

of the statutory limitation;

2. the receipt of contributions from prohibited

sources, such as those from corporations or l~bor

organizations;

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3.

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5.

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proper disclosure of contributions from

individuals, political committees and other

entities, to include the itemization of

contributions when required, as well as, the

completeness and accuracy of the information

disclosed;

proper disclosure of disbursements including the

itemization of disbursements when required, as

well as, the completeness and accuracy of the

information disclosed;

review of expenditures made on behalf of federal candidates~

proper disclosure of campaign debts and

obligations:

the accuracy of total reported receipts,

disbursements and cash balances as compared to

campaign bank records (see Finding II.A.):

8. adequate recordkeeping for campaign transactions;

9. proper disclosure of the allocation of cost

associated with administrative expenses and

activities conducted jointly on behalf of federal

and non-federal elections and candidates and (see

Finding I I . B. ) ;

2. Three of the accounts were closed early in 1993.

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10. other audit procedures that were deemed necessary

in the situation.

Unless specifically discussed below, no material

non-compliance was detected. It should be noted that the

Commission may pursue further any of the matters discussed in

this report in an enforcement action.

II. Audit Finding and Recommendations

A. Misstatement of Financial Activity

Sections 434(b)(1), (2) and (4) of Title 2 of the

United States Code state, in part, that a political committee

shall disclose the amount of cash on hand at the beginning of

the reporting period and the total amount of all receipts and

all disbursements for the reporting period and calendar year.

The Audit staff's reconciliation of the Committee's

reported activity to its bank activity for calendar years 1993

C) and 1994 revealed the following misstatement:

1. Beginning Cash on Hand

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The Committee reported a beginning cash on hand

balance of $73,165 for January l~ 1993. The Audit staff's

review of the Committee's bank records indicated the correct

amount to be $7,173. According to the Committee's legal

counsel, Steven White, the difference was due in large part to

1992 expenditures made from a separate federal transfer account

which were inadvertently not reported. The Committee provided

check copies totaling $39,009 to substantiate this claim. In

addition, Mr. White mainta;ned that most of the remaining errors

appeared to be attributable to mathematical errors from the 1992

reporting cycle.

The Committee made two adjustments to beginning

cash in an attempt to correct the error in its cash on hand

balance. The first, in the amount of $62,038 was made on the

July Quarterly (4/1/94-6/30/94) report, and the second for

$3,964 was made on the October Quarterly (7/1/94-9/30/94)

report.

2. Receipts

The Committee reported total receipts of $253,365

for the 1993 and 1994 audit period. Utilizing Committee

records, the Audit staff determined that the Committee should

have reported total receipts of $209,956. Therefore, the

Committee's reported receipts were overstated by $43,409. This

overstatement resulted from the following:

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In the interim audit report the Audit staff

recommended that the Committee file amended disclosure reports

for 1993 and 1994 to correct the misstatements noted above and

to properly reflect aggregate year to date totals.

In response to the interim audit report the

Committee file amended disclosure reports for 1993 and 1994

which corrected the misstatements nt:~ed. In addition these

amendments included correct aggregate year to date totals.

B. Reporting of Disbursements

Section 434(b)(5)(A) of Title 2 of the United States

Code scates, in part, that each report shall disclose the name

and address of each person to whom an expenditure in an

aggregate amount or value in excess of $200 within the calendar

year is made by the reporting committee, together with the date,

amount, and purpose of such expenditure.

Section l04.10(b)(4) of Title 11 of the Code of

Federal Regulations requires a political committee that pays

allocable expenses in accordance with 11 CFR 106.5(g) to also

report each disbursement from its allocation account in payment

for a joint federal and non-federal expense or activity. In the

report covering the period in which the disbursement occurred,

the committee shall state the full name and address of each

person to whom the disbursement was made, and the date, amount

and purpose of each such disbursement. If the disbursement

includes payment for allocable costs of more than one activity,

the committee shall itemize the disbursement, showing the

amounts designated for payment of administrative expenses and

generic voter drives, and for each fundraising program or exempt

activity, as described in 11 CFR 106.5(a)(2)- The committee

shall also report the total amount expended by the committee

that year, to date, for each category of activicy.

The Committee did not file allocation schedules

(Schedule H-4) for the last half of 1994. The Committee

reported 74 items on Schedule B's totaling $47,672 which were

all allocable expenses and should have been reported on Schedule

H-4's. Further, the Committee did not file one Schedule H-2 for

this time period.

To facilitate preparati~n of amending H-4 schedules,

the Audit staff met with a Committee representative prior to the

end of fieldwork. Disbursements ~ere reviewed and categorized

as fundraising or administra~~Vl&. The Schedule B's for the

period were marked accord'Lgly and the Committee was provided

with a copy. The Committ~E dgreed to file H-4 schedules to

correct the problems note~.
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In the interim audit report the Audit staff

recommended that the Committee file amended disclosure reports

to correctly itemize the allocable expense. on H-4 schedules and

Schedule H-2 for the report periods covering 7/1/94 - 12/31/94.

In response to the interim audit report the Committe.

filed amendments which materially corrected the problems noted

above.

Page a, Approved 4/18/96
FEDERAL ElECTI()' COf\'#'\1SSI0~

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April 19, 1996

Ms. Marie L. Prezioso

West Virginia State Democratic

Executive Committee

405 Capitol Street, Suite 501

Charleston, WV 25301

Dear Ms. Prezioso

AK007960

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Attached please find the Final Audit Report on West

Virginia State Democratic Executive Committee. The Commission

approved the report on April 18, 1996.

The Commission approved Final Audit Report will be placed

on the public r~cord on April 26, 1996. Should you have any

questions regarding the public release of the report, please

contact the Commission's ~tess Office at (202) 21'-4155. Any

questions you have related to .atters covered during the audit

or in the report should be directed to Rhonda Simmons or Russ

Bruner of the Audit Division at (202) 219-3720 or toll free at

(800) 424-9530.

Sincerely,

~--/K~ Robert J. Costa

Assistant Staff Director

Audit Division

Attachment as stated

cc: Larry LaCorte

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CHRONOLOGY

WEST VIRGINIA STATE DEMOCRATIC EXECUTIVE COMMITTEE

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Audit Fieldwork

Interim Audit Report to

the Conunittee

Response Received to the

Interim Audit Report

Final Audit Report Approved

9/19/95 - 9/27/95

2/1/96

4/5/96

4/18/96

Page 11, Approved 4/18/96