Final Audit Report of the 

Commission on the Colorado 

Republican Committee 

(January 1, 2011 - December 31, 2012) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial compliance 

with the Act.' The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Committee (p. 3) 

The Colorado Republican Committee is a state party committee 

headquartered in Greenwood Village, Colorado. For more 

information, see the chart on the Committee Organization, p. 3. 

Financial Activity (p. 3) 

• Receipts 

o Contributions from Individuals 

o Contributions from Political 

Committees 

o Transfers from Affiliated and 

Other Party Committees 

o Transfers from Non-Federal 

Accounts 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Federal Election Activity 

o Refunds of Contributions 

Total Disbursements 

$ 1,975,834 

61,630 

8,332,317 

1,940 

235,765 

$ 10,607,486 

$ 8,863,660 

1,374,497 

3,050 

S 10,241,207 

Commission Findings (p. 4) 

• Misstatement of Financial Activity (Finding 1) 

• Reporting of Apparent Independent Expenditures (Finding 2) 

• Recordkeeping for Communications (Finding 3) 

• Failure to Itemize Debts and Obligations (Finding 4) 

Additional Issue (p. 26) 

• Misstatement of Financial Activity - Unreported Bank Account 

' 52 U.S.C. §30111(b). 
Final Audit Report of the 

Commission on the 

Colorado Republican Committee 

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

Page 

Part I. Background 

Authority for Audit I 

Scope of Audit 1 

Commission Guidance 1 

Limitations 2 

Audit Hearing 2 

Part II. Overview of Committee 

Committee Organization 3 

Overview of Financial Activity 3 

Part III. Summaries 

Findings and Recommendations 4 

Part IV. Commission Findings 

Finding 1. Misstatementof Financial Activity 7 

Finding 2. Reporting of Apparent Independent Expenditures 11 

Finding 3. Recordkeeping for Communications 19 

Finding 4. Failure to Itemize Debts and Obligations 22 

Part V. Additional Issue 

Misstatement of Financial Activity - Unreported bank Account 26 
Parti 

Background 

Authority for Audit 

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

undertaken by the Audit Division of the Federal Election Commission (the Commission) 

in accordance with the Federal Election Campaign Act of 1971, as amended (the Act). 

The Audit Division conducted the audit pursuant to 52 U.S.C. §30111(b), which permits 

the Commission to conduct audits and field investigations of any political committee that 

is required to file a report under 52 U.S.C. §30104. Prior to conducting any audit under 

this subsection, the Commission must perform an internal review of reports filed by 

selected committees to determine if the reports filed by a particular committee meet the 

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

Scope of Audit 

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

factors and as a result, this audit examined: 

1. the receipt of contributions from prohibited sources; 

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

3. the disclosure of disbursements, debts and obligations; 

4. the disclosure of expenses allocated between federal and non-federal accounts; 

5. the consistency between reported figures and bank records; 

6. the completeness of records; and 

7. other committee operations necessary to the review. 

Commission Guidance 

Request for Early Commission Consideration of a Legal Question 

Pursuant to the Commission's "Policy Statement Establishing a Program for Requesting 

Consideration of Legal Questions by the Commission," CRC requested early 

consideration of a legal question raised during the audit. Specifically, CRC questioned 

whether the requirement under 11 CFR § 104.3(d) to disclose outstanding debt on 

Schedule D (Debt and Obligations) violated attorney - client privilege when the debt 

related to outstanding legal representation services. 

The Commission concluded, by a vote of 6-0, that the Colorado rules of confidentiality 

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

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

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

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

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

representative. (See Finding 4, p. 22.) 
Limitations 

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

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

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

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

period pertaining to that account. Without these statements, the Audit staff could not 

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

Audit Hearing 

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

hearing was held on December 6, 2016. At the hearing, CRC addressed two issues 

related to the Convention Account and disclosure of disputed debts. (For more detail. 

See Audit Hearing at Finding 4, p. 25 and Additional Issue, p. 28, respectively.) 
Part 11 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration February 17,1976 

• Audit Coverage January 1,2011 - December 31,2012 

Headquarters Greenwood Village, Colorado 

Bank Information 

• Bank Depositories Two 

• Bank Accounts 9 Federal, 8 Non-federal 

Treasurer 

• Treasurer When Audit Was Conducted Marty Neilson (11/20/2015 - present) 

Robert Balink (5/9/2014 - 11/19/2015) 

Christine Mastin (6/10/2013 - 5/8/2014) 

• Treasurer During Period Covered by Audit Richard A. Westfall (8/15/2007 -

6/9/2013) 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand ® January 1,2011 $70,571 

Receipts 

o Contributions from Individuals 1,975,834 

o Contributions from Political Committees 61,630 

o Transfers from Affiliated and Other Party 

Committees 

8,332,317 

o Transfers from Non-Federal Accounts 1,940 

o Other Receipts 235,765 

Total Receipts $ 10,607,486 

Disbursements 

o Operating Expenditures 8,863,660 

o Federal Election Activity 1,374,497 

o Refunds of Contributions 3,050 

Total Disbursements S 10,24U07 

Cash-on-hand @ December 31,2012 $ 436,850 
Part III 

Summaries 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

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

audit revealed materia! misstatements in both 2011 and 2012. In addition, a comparison 

of CRC's bank activity with its original reports for 2011 and 2012 also revealed material 

misstatements. In response to the Interim Audit Report recommendation, CRC stated that 

the misstatements were inadvertent and agreed to file amendments to the relevant reports. 

CRC subsequently amended its reports to materially correct the misstatements identified 

for 2011. In response to the Draft Final Audit Report, CRC filed amended reports and 

materially corrected the misstatements for 2012. However, CRC has not made an 

adjustment to reconcile the cash balance on its most recent report. 

The Commission approved a finding that CRC misstated its financial activity for calendar 

years 2011 and 2012. The Commission further approved a finding that CRC materially 

misstated its financial activity in its original reports files for calendar years 2011 and 

2012. (For more detail, see p. 7.) 

The Commission did not approve by the required four votes the portion of the Audit 

staffs recommendation related to the Republican National Convention Expense Account. 

As such, this portion of the finding is presented in the "Additional Issue" section. (For 

more detail, see p. 26.) 

Finding 2. Reporting of Apparent Independent 

Expenditures 

During audit fieldwork, the Audit staff reviewed operating expenditures totaling 

$357,895 that CRC disclosed on Schedule B, Line 21b (Operating Expenditures) that 

appeared to be direct mail or media-related independent expenditures that should have 

been disclosed on Schedule E (Itemized Independent Expenditures). 

Additionally, of the $357,895 appeared to be independent expenditures, CRC did not 

provide sufficient documentation pertaining to dissemination dates to verify whether 

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

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

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

(b). 

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

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

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

possession to substantiate application of the volunteer materials exemption. 

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

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

determined the disbursements were not independent expenditures. For the remaining 

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

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

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

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

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

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

After Audit fieldwork, CRC submitted four new direct mail communications and two 

new invoices which associated some of the direct mail communications to the invoices 

not previously provided. This new documentation increased the total amount of 

independent expenditures to $931,594 and reduced the number of direct mailers 

containing express advocacy that did not have associated invoices to 68. No additional 

volunteer materials exemption documentation was provided. 

The Commission's approved finding was subject to the following amendments. The 

Commission approved a finding that CRC failed to properly disclose independent 

expenditures totaling at least $694,682. The Commission further approved a finding that, 

of the 68 mailers not correlated with invoices, CRC failed to properly disclose 

independent expenditures for at least 51 direct mailers. Finally, the Commission 

approved a finding that CRC failed to file 24/48-hour reports for independent 

expenditures totaling at least $694,682 and at least 51 mailers for which the Commission 

does not have invoices. (For more detail, see p. 11.) 

Finding 3. 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. CRC 

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

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

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

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

operating expense. 

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

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

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

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

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

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

the matter a violation of the recordkeeping requirements at 11 CFR §104.14(b)(l). 
After Audit fieldwork, CRC submitted four new direct mail communications and two 

new invoices which associated some of the direct mail communications to the invoices 

not previously provided. This new documentation associated some of the previously 

provided invoices with direct mail communications. This new documentation and 

information resulted in a $1,376,698 reduction in missing records. Therefore, CRC did 

not provide the necessary records pertaining to disbursement totaling $4,435,750. 

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

pertaining to disbursements totaling $4,435,750. (For more information, see p. 19.) 

Finding 4. Failure to Itemized Debts and Obligations 

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

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

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

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

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

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

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

reports to include the debt owed to the GOTV vendor, the Audit staff considered the 

matter unresolved. CRC requested a hearing before the Commission to discuss this 

matter. (For more detail, see Audit Hearing, p. 25.) 

The Commission approved a finding that CRC failed to itemize debts and obligations 

totaling $235,968. (For more detail, see p. 22.) 

Additional Issue 

Misstatement of Financial Activity - Unreported Bank 

Account 

During audit fieldwork, CRC provided bank statements and other related documentation 

for a Republican National Convention Expense Account, an apparent federal account. 

CRC did not report any receipt and disbursement activity pertaining to this account on its 

disclosure reports. In response to the Interim Audit Report recommendation pertaining to 

the Republican National Convention Expense Account, CRC stated it has previously 

provided documentation that this account was not controlled by CRC and, as such, is not 

an unreported federal account. CRC requested a hearing before the Commission to 

discuss this matter. (For more detail, see p. 28.) 

The Commission did not approve by the required four votes the portion of the Audit 

staffs misstatement finding related to the unreported bank account. Pursuant to 

Commission Directive 70,^ this bank account is discussed in the "Additional Issue" 

section. (For more detail, see p. 26.) 

^ Directive 70 is available at https://www.fec.gov/about/Ieadership-and-structure/#comniission-directivesand-policy. 
Part IV 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

Summary 

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

audit revealed material misstatements in both 2011 and 2012. In addition, a comparison 

of CRC's bank activity with its original reports for 2011 and 2012 also revealed material 

misstatements. In response to the Interim Audit Report recommendation, CRC stated that 

the misstatements were inadvertent and agreed to file amendments to the relevant reports. 

CRC.subsequently amended its reports to materially correct the misstatements identified 

for 2011. In response to the Draft Final Audit Report, CRC filed amended reports and 

materially corrected the misstatements for 2012. However, CRC has not made an 

adjustment to reconcile the cash balance on its most recent report. 

The Commission approved a finding that CRC misstated its financial activity for calendar 

years 2011 and 2012. The Commission further approved a finding that CRC materially 

misstated its financial activity in its original reports files for calendar years 2011 and 

2012. 

The Commission did not approve by the required four votes the portion of the Audit 

staffs recommendation related to the Republican National Convention Expense Account. 

As such, this portion of the finding is presented in the "Additional Issue" section. 

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 (S). 

Facts and Anal3rsis 

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

Audit 

1. Facts 

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

calendar years 2011 and 2012. The following charts outline the discrepancies 

between CRC's disclosure reports and its bank records. Succeeding paragraphs 

explain why the discrepancies occurred. 
2011 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand @ 

January 1,2011 

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

Overstated 

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

Overstated 

Disbursements $634,792 $673,321 ($38,529) 

Understated 

Ending Cash-on-Hand @ 

December 31,2011 

$ 159,422 $114,991 ($ 44,431) 

Overstated 

The beginning cash balance was overstated by $1,174 and the discrepancy is 

unexplained, but likely resulted from prior period discrepancies. 

The understatement of disbursements resulted from the following: 

• Transfers to non-federal accounts, not reported $3S,80S 

• Disbursements not reported 2,448 

• Unexplained difference 276 

Understatement of Disbursements $38.529 

The overstatement of $44,431 of the ending cash balance was a result of the reporting 

discrepancies for disbursements described above as well as the $4,728 overstatement 

of receipts. 

2012 Committee Activity 

Reported Bank Records^ Discrepancy 

Beginning Cash-on-Hand @ 

January 1,2012 

$159,422 $114,991 ($44,431) 

Overstated 

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

Understated 

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

Understated 

Ending Cash-on-Hand @ 

December 31,2012 

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

Understated 

^ Coirect reportable activity includes an adjustment to the bank account for S9,146 itemized by CRC on 

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

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

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

• Ih-kind contributions, not reported as receipts^ $162,099 

• Receipts from an individual and a PAC, not reported 25,000 

• Unexplained difference 23.897 

Understatement of Receipts $210.996 

The understatement of disbursements resulted from the. following: 

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

• Disbursements in bank, not on reports 27,666 

• Disbursements on reports, not in bank (13,336) 

• Incorrect or duplicate disbursement amounts reported (23,228) 

• Unexplained difference f8.000'>. 

Understatement of Disbursements $145.201 

The $21,364 understatement of the ending cash balance was a result of the reporting 

discrepancies noted above. 

2. Interim Audit Report '& Audit Division Recommendation 

The Audit staff provided workpapers and discussed the misstatement of financial 

activity at the exit conference. CRC representatives asked questions for clarification 

during the discussion, however, they did not provide a response to either the 

disbursements or receipts misstatements. 

The Interim Audit Report recommended that CRC amend its disclosure reports to 

correct the misstatements noted above and reconcile.the cash balance on its most 

recent report to identify any subsequent discrepancies that may have affected the 

recommended adjustments. 

3. Committee Response to the Interim Audit Report 

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

the Audit Division's recommendations regarding Finding 1 A. CRC explained that 

the misstatements were inadvertent and that it would file amendments to the relevant 

reports consistent with the recommendation. CRC subsequently amended its reports 

to materially correct the misstatements identified for 2011. However, CRC did not 

materially comply with the recommendations to correct the misstatements in 2012, 

nor did it make an adjustment to reconcile the cash balance on its most recent report. 

4. Draft Final Audit Report 

The Draft Final Audit Report reiterated that CRC failed to file amended reports 

pertaining to the 2012 misstatements and did not make an adjustment to reconcile the 

cash balance on its most recent report. 

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

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

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

contributions made to CRC. 
10 

5. Committee Response to the Draft Final Audit Report 

In its response to the Draft Final Audit Report, CRC restated that it agreed with the 

Audit staffs recommendation regarding Finding 1 A. CRC further stated that it 

inadvertently failed to file amendments for 2012; that it would file these amendments 

on or before October 31,2016; and that it would complete its compliance with the 

Audit staffs recommendations. CRC subsequently filed amended reports and 

materially corrected the misstatements for 2012. The Audit staff noted that, to date, 

CRC did not adjust its ending cash as recommended above. 

6. Audit Hearing 

CRC did not address this finding during the Audit hearing. 

Commission Conclusion 

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

Memorandum in which the Audit staff recommended that the Commission find that 

CRC misstated its financial activity for calendar years 2011 and 2012. 

The Commission approved the Audit staffs recomthendation. 

B. Misstatement of Financial Activity - Originai Reports Filed 

1. Facts 

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

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

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

the degree to which CRC had misstated its original filings. 

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

the original reports filed by $803,097 and the sum of the reported disbursements on 

the original reports filed by $637,688 over the two-year period (2011-2012). These 

figures include the $4,728 and $38,529 understatement of receipts and disbursements, 

respectively from 2011, and the $210,996 and $145,201^ of the understatement of 

receipts arid disbursements, respectively, from 2012 discussed in Section A above 

(Misstatement of Financial Activity - Most Recent Reports Filed Prior to the Audit). 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the understatement of receipts and disbursements on its 

original reports during the exit conference and provided copies of relevant schedules 

detailing the receipts and disbursements not reported. CRC representatives asked 

questions for clarification, and stated they understood the finding, but related that 

they inadvertently filed incorrect original reports. 

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

Recent Reports Filed Prior to the Audit), totaling $9,686, were correctly disclosed on the original reports 

in 2012. 
11 

The Interim Audit Report recommended that CRC provide any additional comments 

it deemed necessary with respect to this matter. 

3. Committee Response to the Interim Audit Report 

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

the Audit staffs recommendations regarding Finding IB but provided no further 

comments. 

4. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that CRC materially misstated its 

financial activity for the original reports filed. 

5. Committee Response to the Draft Final Audit Report 

In its response to the Draft Final Audit Report, CRC restated that it agreed with the 

Audit staffs recommendation regarding Finding IB and provided no further 

comments. 

6. Audit Hearing 

CRC did not address this finding during the Audit hearing. 

Commission Conclusion 

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

Memorandum in which the Audit staff recommended that the Commission find that 

CRC materially misstated its financial activity in its original reports filed for calendar 

years 2011 and 2012. 

The Commission approved the Audit staffs recommendation. 

Finding 2. Reporting of Apparent Independent 

Expenditures, 

Summary 

During audit fieldwork, the Audit staff reviewed operating expenditures totaling 

$357,895 that CRC disclosed on Schedule B, Line 21b (Operating Expenditures) that 

appeared to be direct mail or media-related independent expenditures that should have 

been disclosed on Schedule E (Itemized Independent Expenditures). 

Additionally, of the $357,895 appeared to be independent expenditures, CRC did not 

provide sufficient documentation pertaining to dissemination dates to verify whether 

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

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

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

(b). 

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

the recommendation. CRC reiterated its belief that the communications at issue were not 
12 

reportable as independent expenditures because they were subject to the volunteer 

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

possession to substantiate application of the volunteer material exemption. 

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

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

determined the disbursements were not independent expenditures. For the remaining 

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

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

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

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

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

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

After Audit fieldwork, CRC submitted four new direct mail communications and two 

new invoices which associated some of the direct mail communications to the invoices 

not previously provided. This new documentation increased the total amount of 

independent expenditures to $931,594 and reduced the number of direct mailers 

containing express advocacy that did not have associated invoices to 68. No additional 

volunteer materials exemption documentation was provided. 

The Commission's approved finding was subject to the following amendments. The 

Commission approved a finding that CRC failed to properly disclose independent 

expenditures totaling at least $694,682. The Commission further approved a finding that, 

of the 68 mailers not correlated with invoices, CRC failed to properly disclose 

independent expenditures for at least 51 direct mailers. Finally, the Commission 

approved a finding that CRC failed to file 24/48-hour reports for independent 

expenditures totaling at least $694,682 and at least 51 mailers for which the Commission 

does not have invoices. 

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." 
13 

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. 

11 CFR §§100.16(a), 100.17 and 100.22. 

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

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

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

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

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

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

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

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

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

threshold reporting amount of $1,000. 11 CFR §§ 104.4(f) and 104.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(f) and 104.5(g)(1). 

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 §104.14(b)(1). 

F. Volunteer Activity. The payment by a state committee of a political party of the 

costs of campaign materials (such as pins, bumper stickers, handbills, brochures, posters, 

party tabloids or newsletters, and yard signs) used by such committee in connection with 

volunteer activities on behalf of any nominee(s) of such party is not a contribution, 

provided that the following conditions are met: 

1. Such payment is not for cost incurred in connection with any broadcasting, 

newspaper, magazine, bill board, direct mail, or similar type of general public 
14 

communication or political advertising. The term direct mail means any 

mailing(s) by a commercial vendor or any mailing(s) made from commercial lists. 

2. The portion of the cost of such materials allocable to Feder&l candidates must be 

paid from contributions subject to the limitations and prohibitions of the Act. 

3. Such payment is not made from contributions designated by the donor to be spent 

on behalf of a particular candidate for Federal office. 

4. Such materials are distributed by volunteers and not by commercial or for-profit 

operations. 

5. If made by a political committee, such payments shall be reported by the political 

committee as a disbursement in accordance with 11 CFR §104.3 but need not be 

allocated to specific candidates in committee reports. 

6. The exemption is not applicable to campaign materials purchased by the national 

party committees. 11 CFR §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR 

§100.147 (a). (b),(c),(d).(e) and (g). 

Facts and Anal3rsis 

A. Reporting of Apparent Independent Expenditures 

1. Facts 

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

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

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

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

communications, as well as others that are not associated with invoices, were 

identified as possible independent expenditures. A breakdown analysis of these 

expenditures is as follows: 

a. Independent Expenditures Reported as Operating Expenditures 

(Associated Invoice Provided) 

CRC made nine apparent independent expenditures totaling $357,895 that 

were documented as follows: 

i. CRC made six disbursements for apparent independent expenditures for 

direct mail totaling $203,995 for which it provided a copy of the direct 

mailer with an associated invoice. According to the Audit staff, each of 

these direct mailers contained language expressly advocating the election 

or defeat of a clearly identified candidate as defined under 11 CFR 

§ 100.22(a). 

ii. CRC made three disbursements for apparent independent expenditures 

for radio ads totaling $153,900 for which it provided supporting 

documentation such as payment reconciliations, airing dates, scripts and 

audio files. The beginning of one of the audio files included the voice of 

an opposition federal candidate. Based upon this portion of the audio 

file, and the associated script, it appeared this radio ad expressly 

advocated the election or defeat of a clearly identified candidate as 

defined under II CFR 100.22(b). 
15 

b. Independent Expenditures Reported as Operating Expenditures (No 

Invoice Associated) 

CRC provided 77 different direct mail communications that contained 

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

communications are as follows: 

i. 72 direct mail communications contained language expressly 

advocating the election or defeat of clearly identified candidates, as 

defined under 11 CFR 100.22(a). 

ii. Five direct mail communications contained language that encouraged 

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

various reasons why Obamacare was bad for Colorado and/or 

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

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

interpreted by a reasonable person as advocating the election or defeat 

of clearly identified candidates. 

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

communications to be associated with an invoice. Without this additional 

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

for each communication. (See Finding 3.) 

c. Volunteer Material Exemption 

In response to the Audit staffs request during fieldwork for documentation 

to support that volunteers participated in exempt activity,^ CRC provided 

forms signed by 22 different mail processing volunteers. These forms 

reflected the volunteer's name, site location, and on most forms, the date. 

The mail piece section was left blank on all forms with one exception, in 

which a candidate's last name was specified. Based on the dates on the 

forms, it appeared most of this volunteer activity occurred immediately prior 

to the 2012 General Election. 

The Commission has addressed the applicability of the volunteer materials 

exemption in the Final Audit Reports of the Arizona Republican Party, the 

Democratic Executive Committee of Florida, and the Tennessee Republican 

Party. In these reports, the Commission recognized a lack of clarity 

regarding the application of the volunteer materials exemption. The 

Commission had attempted to formulate a consensus policy regarding what 

constitutes substantial volunteer involvement for the purpose of applying the 

exemption,^ but this was never achieved. Since a lack of clarity exists 

conceming the application of the volunteer materials exemption, it follows 

that the type and amount of documentation needed to support volunteer 

involvement is also unclear. 

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

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

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

In view of the uncertainty regarding the amount of volunteer involvement 

needed to qualify for the volunteer materials exemption, as well as the 

amount of documentation required to support such an exemption, the Audit 

staff recommended at the conclusion of fieldwork that CRC provide more 

detailed information and documentation for any volunteer involvement 

associated with each mailer. 

2. Interim Audit Report and Audit Division Recommendation 

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

errors for independent expenditures. CRC representatives provided a listing 

of additional invoice numbers and invoice amounts in response to the exit 

conference but did not provide any copies of communications or further 

information that would allow the available invoices to be associated with the 

copies of the communications. 

The Interim Audit Report recommended that CRC: 

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

communications containing express advocacy with an invoice; and 

• Provide documentation and evidence that apparent independent expenditures 

totaling S3S7,89S and the 77 direct mail communications containing express 

advocacy, did not require reporting as independent expenditures. Evidence 

should have included any documentation such as volunteer timesheets and 

photographs to support the involvement of volunteers in the processing or 

distribution of the communications noted above. 

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

disbursements as independent expenditures on Schedule E and submit revised 

procedures for reporting independent expenditures. 

3. Committee Response to the Interim Audit Report 

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

with the recommendation. CRC reiterated its belief that the communications at issue 

were not reportable as independent expenditures because they were subject to the 

volunteer material exemption. CRC further stated it has provided all documentation 

in its possession substantiating volunteer involvement including the volunteer names, 

the location where the work was done and the date of the volunteer involvement. 

CRC stated it had never been requested to provide volunteer timesheets and 

photographs, and that it did not collect such information. CRC further stated that 

"...it has provided enough information to substantiate application of the volunteer 

material exemption" and that it would not make any amendments to disclose the 

disbursements in question as independent expenditures. 

The Audit staff maintains that the $153,900 spent on radio communications should be 

reported as independent expenditures since the volunteer materials exemptions does 

not apply to those communications. 
17 

With respect to the 22 volunteer forms signed by volunteers on direct mailers of 

$93,090, the Audit staff has reexamined the documentation and believes the 

documentation provided in support of the volunteer materials exemption is consistent 

with such evidence provided in past audits. As a result, these disbursements are not 

considered independent expenditures. For the remaining communications (consisting 

of $110,905 and 77 direct mailers without invoices) that CRC claims the .volunteer 

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

provide further evidence to support the application of the volunteer materials 

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

Commission in determining if the volunteer materials exemption is applicable to 

these communications. 

4. Draft Final Audit Report 

The Draft Final Audit Report reiterated that CRC provide further evidence to support 

the application of the volunteer materials exemption to the specific communications 

involved. Such evidence would have assisted the Commission in determining if the 

volunteer materials exemption is applicable to these communications. 

5. Committee Response to the Draft Final Audit Report 

In its response to the Draft Final Audit Report, CRC stated it partially disagreed with 

the Audit staffs recomrhendation and continued to claim that the communications at 

issue were not reportable as independent expenditures because they were subject to 

the volunteer materials exemption. CRC stated it believed that it previously provided 

all necessary documentation. 

On March 20,2017, CRC submitted 121 pages of additional documentation that 

included four new direct mail communications and two new invoices. The 

documentation also associated some of the direct mail communications to the 

invoices that had been provided during fieldwork. This new documentation increased 

the total amount of independent expenditures to $931,594 and reduced the number of 

direct mailers containing express advocacy that did not have associated invoices to 

68. No additional volunteer materials exemption documentation was provided. 

6. Audit Hearing 

CRC did not address this finding during the Audit hearing. 

Commission Conclusion 

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

Memorandum in which the Audit staff recommended that the Commission find that 

CRC failed to properly disclose independent expenditures totaling $931,594. Further, 

the Audit staff recommended that the Commission find that CRC failed to properly 

disclose independent expenditures associated with 68 direct mailers which contained 

expressed advocacy. 

The Commission approved the Audit staffs recommendation with the following 

amendments. The Commission found that CRC failed to properly disclose 
18 

independent expenditures totaling at least $694,682^ and, that of the 68 direct mailers 

not correlated with invoices, CRC failed to properly disclose independent 

expenditures for at least 51^ direct mailers. 

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

1. Facts 

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

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

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

may also have required such a filing. 

2. Interim Audit Report & Audit Division Recommendation 

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

undisclosed 24/48-hour reports. CRC representatives did not offer any comments 

regarding this matter. 

The Interim Audit Report recommended that, absent documentation and evidence that 

apparent independent expenditures totaling $3S7,89S and the 77 direct mailer 

communications containing express advocacy did not require reporting as 

independent expenditures (per Part A above), CRC provide documentation to support 

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

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

3. Committee Response to the Interim Audit Report 

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

with the recommendation. CRC reiterated its belief that the communications at issue 

were not reportable as independent expenditures because they were subject to the 

volunteer material exemption. For that reason, CRC did not believe any 24 or 48-

hour reports were necessary for these disbursements. 

The Audit staff maintains the $153,900 in radio advertisements are independent 

expenditures that required 24-hour reports totaling $32,164. 

The Audit staff maintained that unless further evidence of the volunteer involvement 

with the specific communications is provided, the Commission may have concluded 

the remaining direct mailers totaling $110,905 as well as the 77 direct mailers without 

invoices may be reportable as independent expenditures and may require 24 or 48-

hour reports. 

This number reflects further reduction of $236,912 which resulted from the removal of five direct mail 

communications totaling SI 15,176 and three radio ads totaling $121,736 due to a lack of consensus as to 

whether these ads constituted express advocacy. $694,682 = $931,594 - $236,912. All numbers rounded 

to the nearest dollar. 

The Commission removed 17 additional ads with no associated invoices due to the lack of consensus as 

to whether these ads constitute an express advocacy. 51 = 68 -17. 
19 

4. Draft Final Audit Report 

The Draft Final Audit Report reiterated that $153,900 in radio advertisements were 

independent expenditures that required 24-hour reports totaling $32,164, and, that 

unless further evidence of the volunteer involvement with the specific 

communications is provided, the Commission may determine that the remaining 

direct mailers totaling $110,905 as well as the 77 direct mailers without invoices 

might be reportable as independent expenditures and may require 24 or 48-hour 

reports. 

5. Committee Response to the Draft Final Audit Report 

In its response to the Draft Final Audit Report, CRC stated it would not make any 

amendments to disclose the disbursements in question as independent expenditures 

and continued to believe that 24/48-hour reports were not necessary. 

On March 20,2017, CRC submitted 121 pages of additional documentation that 

included four new direct mail communications and two new invoices. The 

documentation also associated some of the direct mail communications to the 

invoices that had been provided during fieldwork. This new documentation increased 

the total amount of independent expenditures to $931,594 and reduced the number of 

direct mailers containing express advocacy that did not have associated invoices to 

68. No additional volunteer materials exemption documentation was provided. 

6. Audit Hearing 

CRC did not address this folding during the Audit hearing. 

Commission Conclusion 

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

Memorandum in which the Audit staff recommended that the Commission find that 

CRC did not file 24/48-hour reports totaling $32,164 for apparent independent 

expenditures totaling $153,000. Further, the Audit staff recommended that the 

Commission find that CRC did not file 24/48-hour reports for additional apparent 

independent expenditures totaling $931,594 as well as 68 mailers with no invoices. 

The Commission approved the Audit staffs recommendation with the following 

amendment. The Conimission found that CRC failed to file 24/48-hour reports for 

independent expenditures totaling at least $694,682 and at least 51 direct mailers. 

Finding 3. Reieordkeeping for Communications 

Summary 

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

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

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

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

mail." Documentation that was provided by CRC was insufficient to make a 
20 

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

operating expense. 

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

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

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

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

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

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

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

After Audit fieldwork, CRC submitted four new direct mail communications and two 

new invoices which associated some of the direct mail communications to the invoices 

not previously provided. This new documentation associated some of the previously 

provided invoices with direct mail communications. This new documentation and 

information resulted in a $1,376,698 reduction in missing records. Therefore, CRC did 

not provide the necessary records pertaining to disbursement totaling $4,435,750. 

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

pertaining to disbursements totaling $4,435,750. 

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 checked for accuracy and 

completeness. 11 CFR §104.14(b)(1). 

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 Anal3rsis 

A. Facts 

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

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

28 expenditures totaling $5,812,448 for which documentation was insufficient to make a 

determination pertaining to whether these disbursements were correctly reported on 

Schedule B, Line 21b (Operating Expenditures). 
21 

The Audit staffs analysis resulted in the following: 

i. Disbursements- No Invoices or Copies of Communications Provided 

ffl2.156.415^ 

Disbursements totaling $2,1 S6,41S were paid to two direct mail vendors, and 

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

advertising" or "party direct mail", but no invoices or associated communications 

were provided. Without sufficient details, the Audit staff is unable to verify 

CRC's reporting of these amounts as operating expenditures. The Audit staff 

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

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

payments to a particular communication have not been provided. 

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

Communications (83.656.0331 

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

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

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

not provide information about the related mail communications. Without 

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

of these amounts as operating expenditures. The Audit staff requested 

information that would allow an association between the invoice and the 

communication, however, CRC has not responded to this request. 

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 of CRC's reporting. The 

Audit staff again requested that CRC provide additional invoices and information that 

would associate each invoice to the corresponding communication. CRC representatives 

provided a listing of additional invoice numbers and invoice amounts in response to the 

exit conference but did not provide any copies of communications or further information 

that would allow the available invoices to be associated with the copies of the 

communications. 

The Interim Audit Report recommended that CRC provide, in sufficient detail, the 

necessary information from which the reported operating expenditures totaling 

$5,812,448 may be verified or explained. Such records should have included: 

• Copies of invoices and identification of the associated communication, and 

• If the communication has already been provided, information associating each 

communication with an invoice(s). 

C. Committee Response to the Interim Audit Report 

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

the recommendation and explained that it has provided all the requested documentation in 

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

Audit staff. CRC was working to associate the provided invoices and communications 

with each other and would provide the final record associating all communications with 
22 

invoices as soon as the record is complete. Absent the provision of records, the Audit 

staff considered the matter a violation of the recordkeeping requirements at 11 CFR 

§104.14(b)(l). 

D. Draft Final Audit Report 

In its response to the Draft Final Audit Report, CRC continued to disagree with the 

Audit's staff assertion. CRC restated that it has previously provided all documentation in 

its possession in a series of letters, USB thumb-drives and online file site links between 

January 31,2014 and August 11,2014. CRC further stated that it continued to work to 

associate the already provided invoices and communications with each other. According 

to CRC, this was a time-consuming task that has not been possible in advance of 

November 8,2016 election. CRC stated it would complete this work and provide a final 

record associating all communications with invoices on or before December 31,2016. 

On March 20,2017, CRC submitted additional vendor invoices for $39,483. The Audit 

staff was able to associate these invoices with the corresponding mail pieces totaling 

$1,337,215. As such, the Audit staff adjusted the amount of disbursements for which 

CRC provided no records, to $4,435,750. 

E. Audit Hearing 

CRC did not address this finding during the Audit hearing. 

Commission Conclusion 

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

Memorandum in which the Audit staff recommended that the Commission find that CRC 

did not provide the necessary records pertaining to disbursements totaling $4,435,750. 

The Commission approved the Audit staffs recommendation. 

I Finding 4. Failure to Itemize Debts and Obligations 

Summary 

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

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

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

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

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

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

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

reports to include the debt owed to the GOTV vendor, the Audit staff considered the 

matter unresolved. CRC requested a hearing before the Commission to discuss this 

matter. 

"> $4,435,750 = $5,812,448 - ($39,483 + $1,337,215) 
23 

The Commission approved a finding that ORG failed to itemize debts and obligations 

totaling $235,968. 

Legal Standard 

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

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

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

104.11(a). 

B. Separate Schedules. A political committee must file separate schedules for debts 

owed by or to the committee, together with a statement explaining the circumstances and 

conditions under which each debt and obligation was incurred or extinguished. 11 CFR 

§104.11(a). 

C. Itemizing Debts and Obligations. 

• A debt of $500 or less, not including rent, salary or other regularly reoccurring 

administrative expenses, 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. 

• Regularly recurring administrative expenses, like rent, do not have to be treated as 

debts until payment is due. 

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

. which the debt was incurred. 11 CFR §104.11(b). 

D. Disputed Debts. A disputed debt is a bona fide disagreement between the creditor 

and the committee as to the existence of a debt or the amount owed by the committee. 

Until the creditor and committee resolve the dispute (assuming the creditor did provide 

something of value), the committee must disclose; 

• The amount the committee admits it owes; 

• The amount the creditor claims is owed; and 

• Any amounts the committee has paid the creditor. 11 CFR § 116.10. 

Facts and Analysis 

A. Facts 

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

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

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

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

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

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

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

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

over multiple reporting periods. 

" There was no debt reported during the audit period for any of these three vendors. 
24 

audit period of S13,S41. A second vendor that provided accounting services had an 

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

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

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

contract for a GOTV program. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed these disclosure errors with CRC 

representatives and provided them with schedules detailing the debts that were not 

reported. CRC representatives disagreed with the Audit staffs determination with 

respect to the disclosure of debts owed to the vendor that provided legal services. 

Subsequent to the exit conference, CRC requested the consideration of a legal question 

by the Commission regarding the disclosure of the debt for legal services prior to 

payment. CRC contended the disclosure would violate confidential attorney/client . 

privileges.'^ CRC representatives also disagreed with the requirement to disclose debt 

for the GOTV program, stating that CRC had terminated the contract before the vendor 

provided all contracted services. CRC representatives provided a copy of an unsigned 

letter, sent by CRC to the GOTV program vendor, which advised this vendor of an 

immediate termination of the contract. 

Based on the teims of contract, its termination does not release CRC from the obligation 

to make pro rata payments of fees for the services provided by the vendor. CRC stated ' 

that it terminated the contract before the vendor provided all of the contracted services 

which suggests that the vendor provided at least some of the contracted services before 

the termination of the contract. Available disbursement documentation provided by CRC 

did not indicate as to whether CRC paid the vendor for services that the vendor provided 

to CRC prior to the termination. 

The Interim Audit Report recommended that CRC provide documentation demonstrating 

that expenditures totaling $235,968 did not require reporting on Schedule D. As for the 

GOTV program vendor, the Interim Audit Report further recommended that CRC 

provide information and documentation relating to debt remaining for any services that 

the vendor provided before the termination of the contract. Since the termination letter 

was not signed, CRC should have submitted documentation such as a signed letter to the 

vendor, e-mails or telephone logs regarding the termination. Absent such documentation, 

the Interim Audit Report recommended that CRC amend its reports to disclose these 

debts and obligations. 

C. Committee Response to the Interim Audit Report 

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

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

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

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

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

termination of the contract. CRC provided the previously submitted unsigned 

" See Part I Background, Commission Guidance at p. 1. 
25 

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

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

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

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

matter unresolved. 

D. Draft Final Audit Report 

The Draft Final Audit Report concluded that absent the filing of amended reports to 

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

matter unresolved. 

E. Committee Response to the Draft Final Audit Report 

CRC responded to the Draft Final Audit Report by requesting a hearing on this matter. 

CRC stated that: 

1. It has appropriately declined to amend its reports to the amounts allegedly owed 

to its former GOTV vendor, as that the contract was terminated and the amounts 

were disputed by CRC. 

2. These amounts were never paid and the statute of limitations for any breach of the 

agreement has run out. CRC therefore believes it cannot amend its reports as any 

amounts allegedly owed to the vendor were and are not properly debt. 

F. Audit Hearing 

During the Audit hearing, CRC reiterated its position that it would not amend its reports 

due to the termination of contract. CRC argued that the statute of limitation under the 

Colorado law has expired. CRC did not provide any further documentation, nor any new 

legal arguments. 

Commission Conclusion 

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

Memorandum in which the Audit staff recommended that the Commission find that CRC 

failed to itemize debts and obligations totaling $235,968. 

The Commission approved the Audit staffs recommendation. 
26 

Part V 

Additional Issue 

Misstatement of Financial Activity - Unreported Bank 

Account 

Summary 

During audit fieldwork, CRC provided bank statements and other related documentation 

for a Republican National Convention Expense Account, an apparent federal account. 

CRC did not report any receipt and disbursement activity pertaining to this account on its 

disclosure reports. In response to the Interim Audit Report recommendation pertaining to 

the Republican National Convention Expense Account, CRC stated it has previously 

provided documentation that this account was not controlled by CRC and, as such, is not 

an unreported federal account. CRC requested a hearing before the Commission to 

discuss this matter. 

The Commission did not approve by the required four votes the portion of the Audit 

staffs misstatement finding related to the unreported bank account. Pursuant to 

Commission Directive 70,'^ this bank account is discussed in the "Additional Issue" 

section. 

Legal Standard 

The legal standard in the Finding 1, p. 7> above is incorporated herein. 

Facts and Anal3rsis 

1. Facts 

During audit fieldwork, CRC representatives provided bank statements and other banking 

documentation for a bank account that was identified on the bank statements as the 

Colorado State Republican Central Committee Republican National Convention Expense 

Account (Convention Account).'^ This account was maintained at the same financial 

depository used by CRC for other federal and non-federal bank accounts. The bank 

statements reflected that the Convention Account was active in January 2012, although it 

had a zero balance until April 20,2012, at which time a deposit of $1,000 was made.'^ 

Although CRC provided copies of bank statements, deposit tickets and cancelled checks 

pertaining to this account, none of the receipts or disbursements appeared to have been 

DirectiveTO is available at https;//www.fec.gov/about/leadership-and-structure/#coininission-directivesand-policy. 

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

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

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

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

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

occurred on August 10,2012 ($10,000). 
27 

reported. For the calendar year 2012, the total activity and the cash balance were as 

follows: receipts, $87,354; disbursements, $86,428; and ending cash-on-hand, $926.'^ 

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

financial activity from this account did not need to be reported since it was a bank 

account that belonged to a separate legal entity identified as the Colorado Chairman's 

Host Committee for the Republican National Convention (Colorado RNC Host) and 

neither CRC or any of its officers or agents managed or controlled that committee's 

activities. The Chairman also provided a copy of the Articles of Incorporation that 

reflected the Colorado RNC Host was incorporated in the state of Colorado as a Nonprofit SO I (c)(4) corporation on June 26,2012 and was established independently to 

accept contributions and pay for certain events and promotion items for delegates and 

their guests from Colorado and other states in connection with the 2012 Republican 

National Convention in Tampa, Florida. The Chairman provided a link to Ae Colorado 

Secretary of State website and related any additional questions pertaining to the Colorado 

RNC Host should be directed to that committee's legal representatives. The Chairman 

did not explain how CRC came to be in possession of the bank statements and other 

banking documentation. Likewise, the Chairman did not explain why the bank 

statement's name included the Colorado State Republican:Central Committee, indicating 

CRC was an accountholder of this account. Although requested, CRC did not authorize 

the Audit staff to submit a request to the bank to confirm the Employee Identification 

Number (EIN)'^ that was associated with this account, nor did CRC provide any 

documentation from the bank that would clarify this matter. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the Convention Account during the exit conference and 

provided relevant schedules detailing the financial activity pertaining to this account. At 

that time, the Audit staff again requested that CRC provide documentation from the bank 

or give the Audit staff authority to contact the bank to confirm the EIN associated with 

this account. The CRC representatives provided documentation pertaining to the EIN for 

the Colorado Chairman's Host Committee for the Republican National Convention, but 

did not provide additional documentation from the bank to verify that the Convention 

Account was assigned to this EIN. 

The Interim Audit Report recommended that CRC provide additional documentation to 

resolve the question of ownership and control of the Convention Account. To support its 

position, CRC should have obtained pertinent bank documentation confirming that the 

CRC's EIN was not associated with the Convention Account and, therefore, CRC was 

not required to report the financial activity associated with this account. 

The tables and charts presented in Finding I .A (Most Recent Reports Filed Prior to the Audit), p. 8, do 

hot include an analysis of the Convention Account. 

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

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

EIN. 
28 

3. Committee Response to the Interim Audit Report 

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

disagreement regarding this finding. CRC stated that it has previously provided 

documentation demonstrating that the account in question was not controlled by CRC 

and, as such, was not an unreported federal account. CRC's position is that it has, by its 

prior correspondence, sufficiently demonstrated that it does not control the Convention 

Account. With its response, CRC enclosed a copy of the prior correspondence. 

The Audit staff maintained that previously provided documentation did not resolve the 

question of ownership and control of the Convention Account. Absent bank 

documentation that would confirm CRC was not associated with the Convention 

Account, the Audit staff considered this matter unresolved. 

4. Draft Final Audit Report 

The Draft Final Audit Report reiterated that absent bank documentation that would 

confirm that CRC was not associated with the Convention Account, the Audit staff 

considered this matter unresolved. 

5. Committee Response to the Draft Final Audit Report 

CRC responded to the Draft Final Audit Report by requesting a hearing on this matter. 

CRC stated that: 

1. It disagreed with the Audit staffs recommendation and conclusion that the matter 

was unresolved. 

2. It previously provided documentation that it did not control the Convention 

Account and therefore it was not an unreported federal account. 

3. By its prior correspondence, CRC has sufficiently demonstrated that it did not 

control the Convention Account. 

6. Audit Hearing 

During the Audit hearing, CRC reiterated its position that it previously provided 

documentation that it did not control the Convention Account. CRC did not consider this 

account to be a federal account and, that by its prior correspondence, CRC has 

sufficiently demonstrated that it did not control the Convention Account. CRC did not 

provide any further documentation, nor any new legal arguments. 

Commission Conclusion 

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

Memorandum in which the Audit staff recommended that the Commission find that 

based on the documentation provided by CRC, the Convention Account was a federal 

account and that CRC should have reported the financial activity associated with this 

account. 

The Commission did not approve by the required four votes the Audit staffs 

recommendation. The Commission could not agree as to whether it had sufficient 

evidence to substantiate an unreported Convention Account owned and maintained by 
29 

CRC. Some Commissioners noted that CRC should not allow its EIN to be used by other 

organizations. 

Pursuant to Commission Directive 70, this matter is presented as an "Additional Issue".