FEDERAL ELECTI()' C()\lt\.\ISSIOl\:

June 19. 1996

MEMORANI)Lli\,1

TO:

FRO~1:

RON M_ HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERT J. COSTA #

ASSISTA~T ST.~FF DIRECTOR

~~UDIT DIVISIOt\

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

THE t\MERICAN HOSPITAL ASSOCIATION POLITICAL

\() ACTION COMMITIEE

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.-\tt3chcd please find a cop~' ofthe final audit report and related documents on the

..\mcrican Hospital Association Political ..\clion Comminee which ,,-as approved by the

Commission on June 10.19960

Infonnauonal copies ofthe repon ha\'c been receivcd by all panics in\'olved and

the repon ma~ be relcased to the pubhc.

.-\ttachmcnt as stated

cc: Office of Gt:neral Counsel

Office of Public Disclosure

Repons AnalySIS Dl\OISIOn

FEe Librar:

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REPORT OF THE AUDIT DIVISION

ON

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The American Hospital Association

Political Action Committee

Approved June 10, 1996

FEDERAL F:LECTIO~ COr\ll\tISSIO~

999 E STREET.. ~.\\ ..

\\·ASHI~GT()' .. D.C.
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FEDER.~L ELECTI()' C()~'\~"ISSIO~

FINAL AUDIT REPORT

ON THE

AI\1ERICAN HOSPITAL ASSOCIATION

POLITIC..\L ACTION COl\tMllTEE

EXECtTTI"'E SUl\IMAR\'

The American Hospital Association Political Action Committee (the Committee)

registered \\,'ith the Federal Election Commission on November 22. 1978.

The audit was conducted pursuant to 2.LT.S.C §438(b)~ which states that the

Commission may conduct audits of any political committee whose repons fail to meet the

threshold level of compliance set by the Commission

The findings ofthe audit were presented to the Comminee at an exit conference

held at the completion offieldwork on October 16, 1995 and later in an interim audit

repon The Commiuee·s response to those findings is included in this final audit report.

!\tISSTATE~tE~IOF FlNA~CIAL AcrlVITY - 2 U.S.C. §§434(b)(I),(2) and (4).

For 19Q4. the Committee·s reponed totals for receipts and disbursements were

understated by approximately 5500 and S1:!.500 respectively. primarily as a result of not

reponing interest earned. not reponing S:!:!.OOO in disbursements. and not adjusting for

S13.500 in checks issued but later "oided Beginning and ending cash were also

misstated ! response to the exit conference~ the Committee filed an amendment which

materially co~ected these misstatements

DISClOSl:RE OF OCCl'PATIO' ASD SA~tE OF EMPLOYER - 2 USC.

&~43 H 13)(.\). 432(i). 434(b)(3)(.~) and 11 CFR 104 7(a) and (b) The audit identified

1Q 1 contributions. totahng S49~ 1:0, for \\'hich the contributors' occupation and/or name

of employer \\3S not dIsclosed The necessary infonnation "'as present in the Committee's

r~cords for about a third ofthe Items. ho\\'ever. no amendments had been filed

Subsequent to the exit conference, the Committee filed amended Schedules .A. which

materially corrected the public record

REPORTl~G oFTRA~SF[RS FRO'1 AFFILIATED CO"t~nrr[ES-:USC

§*431( 13 )(8) and 434(b)(3 )(D) The audn identified nine transfers tota~ing $56,34: that

were not itemized as requIred, although the value ofthese transfers was included in

reponed totals In response to the c,at conference. the Committee filed Schedules A

""hlch matenall~ corrected these dl~crepancles

Pace 1, Ap;.:·oveC 6/10/96
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Page 2, Approved 6/10/96
TABLE OF CONTEl'.'TS

THE A.\fERICAN HOSPITAL ASSOCIATION

POLITICA.L ACTION COMlvllTTEE

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Executive Sult1ll1ar)·

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FinaJ Audit Repon

82ckground

Findings

Transmittal to Committee

Chronology

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FEDERAL ElECTI()!\. C()''-'1\1ISSION

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REPORT OF THE AUDITDIJ·1SIO."·

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TilE .4.\fERIC4"· HOSPITAL .4SS0CI.4TIO."· POLITICAL ACTIO."·

C04"t,.IITTEE

:\. .-\l:OIT AlrrHORITY

This repon is based on an audit ofThe American HospitaJ Association

Pollucal Action Committee (the Committee) undenaken by the Audit Division ofthe

Federal Election Commission in accordance with the provisions ofthe Federal Election

Campaign .A.ct of 1971. as amended (t! _ •·..:t) The audit was conducted pursuant to

Section 438(b) ofTitle 2 ofthe United States Code which states9 in pan9 that the

('ommission may conduct audits and field investigations ofany political cotnminee required

to file a repon under section 434 ofthis title Prior to conducting any audit under this

subsection. the Commission shall perform an internal review ofrepons filed by selected

committees to determine ifthe repons filed by a particular committee meet the threshold

requirements for substantial compliance with the Act

B. Al.~DIT COVERACE

The audit covered the period January I, 1993 throsJgh December 31, )994

The ("ommlttee reponed a begInning cash balance ofS332,757, total receipts for the period

ofSJ.OQ:.666. lotal disbursements for the period 0(51.354,305 and an ending cash balance

of $71.118 1

C. CAl\1PAIGN ORGA!'iIl.ATIO'

The Committee regIstered \\lth the Federal EJection Commission on

!\.ovember ::. 1978 The Treasurer ofthe Committee is Mr Sidney Jacob. who was also

the Treasurer during the audit penod The ("ommittee maintains its headquaners in

ChIcago. illinois

All amounts presented In thiS repon ~1\e been rounded to the nearest dollar The Commntc~

understated liS reponed rccclplC\ and disbursements ,sec Finding II A )

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Pa9€ 3, Approved 6/10/96
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To handle its federal fi:Wlciai activity, the Committee maintained three bank

accounts (2 checking and 1 money market). The Committee made 908 disbursements

totaling approximately $1.364,441 2 The Committee received approximately 2,580

contributions from individuals. totaling S263.117, 39 transfers from affiliated committees,

totaling S29~.725 and 261 contributions from other political committees. totaling $524.672

D. AUDIT SCOPE AND PROCEDURES

The audit included testing ofthe following general categories

The receipt of contributions or loans in excess ofthe sta~..:~,,· ~:: .!mitations~

.., the receipt of contributions from prohibited sources. such as tho:ie from

corporations or labor organizations~

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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 ofthe information disclosed (see

Findings II Band C ).

proper disclosure of disbursements including the itemization of

disbursements when required. as well as. the completeness and accuracy of

the information disclosed.

proper disclosure ofCommittee debts and obligations:

the accuracy oftotal reponed receipts, disbursements and cash balances as

compared to Committee bank records (see Finding II A ),

adequate recordkeeping for Committee transactions,

other audit procedures that were deemed necessary in the situation

Unless specifically discussed below, no material non-compliance with

statutory or regulatory requirements "as detected It should be noted that the Commission

may pursue any of the matters discussed In thIs repon in an enforcement action

2 Thc \ ast m~Jont\ of dlsbursemcnts \\cre for conlnbutlon~ to federal candldatcs and other pohtlcal

commlttccs E'\pcnscs for fundr.uslOg 3Ctl\"11ICS and admlmstraU\C costs \\crc paid by the

Commlttcc's connected or~;tnl/.ltlon

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D. AUDIT FINDINGS AND RECOMMENDATIONS

A. MISSTATErttENT OF FINANCIAL Acr""TI'

Sections 434(b)( 1), (2), and (4) ofTitle 2 ofthe United States Code state, in

pan, that each report shall disclose the amount of cash on hand at the beginning ofthe

reponing ~"~.~ and the total amount of all receipts and disbursements received or made

during the repon~:lg period and the calendar year

The Audit staffs reconciliation ofthe Committee's reponed activity to its

bank activity for the audit period revealed a misstatement offinancial acti"ity for 1994

Beginning Cash on Hand

The reponed beginning cash on hand balance at January I, 1994 was

understated by $17.518. primarily due to disbursements made and reponed in 199~ and

1993. totaling S13.250. that were not negotiated by the bank~ adjusting entries for these

o items were not included in the Committee's repons

Receipts

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RepOned receipts were understated by $489. This net

understatement was primarily due to the Committee not reponing interest earned. totaling

S236

3 Disbursements

Reponed disbursements were understated by S12.493 This net

understatement w·as mostly due to the Committee not reponing four disbursements totaling

S:~.OOO. and reponing disbursements totaling S13.500, that were later voided but not

adjusted for on the Committee's disclosure repons

Ending Cash on Hand

The reponed cndlng cash on hand balance at December 31, 1994 was

understated b~ $5.5 14 ThiS net understatement \\'as primarily due to the errors detailed

above

At the eXit conference the Committee \\'as provided with schedules detailing

the misstatements The Commntee agreed to file amended disclosure repons

Subsequent to the exit conference. the Committee filed amended repons that

materiallv corrected the misstatements discussed above

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In the interim audit repon~ the Audit staffrecommended no funher action.

The Committee did not provide any additional information or comments regarding this

matter

B. DISCLOSURE Of OCCUPATION AND NAr.fE OF EMPLOVER

Section 434(b)(J)(A) ofTitle 2 ofthe United States Code states that each

report shall disclose the identification of each person (other than a political committee) who

makes a contribution to the reponing commIttee during the reponing period. whose

contribution or contributions have an aggregate amount or value in excess of 5200 \\;thin

the calendar year tocether v.1th the date and amount of an\' such contribution . ' .

Section 431( 13)( A) ofTitle of the United States Code defines the term

"identification" as. in the case of any individual. the name. the mailing address. and the

occupation ofsuch individual. as \vell as the name of his or her employer

Sec:ion 43~(i) ofTitle 2 ofthe United States Code states. in pan. that when

the treasurer of a political committee sho""s that best effons have been used to obtain.

maintain. and submit the information required by this .-\et for the political committee. any

repon or any records ofsuch committee shall be considered in compliance \\1th this Act.

Sections 104 7(a) and (b) ofTitle 11 ofthe Code of Federal Regulations

state. in part that when the treasurer of a political committee shows that best efforts have

been used to obtain. maintain. and submit the infonnation required by the Aet~ any repon of

such committee shall be considered in compl\ance with the .;\ct. The treasurer and the

committee will only be deemea to have exercised best efforts if all ofthe following are

present all "nuen solicitations for contributions include a clear request for the

contributor's full name. mailing address. occupation and name ofemployer. and include the

statement that such reponing is required by Federalla,,'~ the treasurer makes at least one

etTon after the receipt ofthe contribution. in either a "ntten request or documented oral

request. wlthln thlny days ofthe receipt ofthe contribution. to obtain the information: and.

the treasurer repons all contributor information not pro\ided by the contributor. but in the

committee's possession. including Information in contributor records. fundraising records

and pre~;ously filed fepons. in the same ty.o year election cycle (The effective date ofthis

regulation \\'as ~1arch 3. 19(4)

The AudIt staff conducted a revlev. of contributions from indIviduals which

identified 191 contribUtions. totaling $-lq. 120. for \\ hlch the contributors' occupation andlor

name of employer \\'as not disclosed ThIS accounted for 31°"0 ofthp dollar total of

contributions requiring itemIzation The vast maJonty of these errors (185 of 191 items)

resulted from the Committee not disclOSing the contnbutors' occupation It should be noted

that the Commlttee had obtatned the reqUired Information for 6~ of the 191 errors. but had

not amended Its repon s

Page E" ~~proveC 6/10 / 96

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Funhennore. the Comminee provided two sample solicitations and a

contribution card which the Audit staffreviewed The solicitations did not include either a

request for occupation and name of employer or language stating the reponing ofsuch

information is required by law 3

At the exit conference. the Committee was presented with a schedule

detailing the occupation and name of employer errors Although Committee officials stated

that the\' did not knO\\' whv this information was not maintained and disclosed~ thev atrreed

to file a~ended Schedules'A (Itemized Receipts) to disclose the infonnation requi;ed ~nd to

obtain the infonnation not maintained in its files

Subsequent to the exit conference. the Committee filed amended Schedules

A \\'hich materially corrected the discrepancies noted above ~1oreover. the Committee

pro"ided us y.;th copies ofletters requesting the required infomu:. ;on and copies of

documentation obtained

In the interim audit repon. the Audit staff recommended no further action

The Committee did not provide any additional information or comments regarding this

matter

c. REPORTINC OF TRANSFERS FRO"" AFFILIATED COMMITTEES

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Section 434(b)(3)(D) ofTitle 2 ofthe United States Code states~ in part.. that

each repon under this section shall disclose the identification of each affiliated committee

y.hich makes a transfer to the reponing committee during the reponing period.. together

Y.-ith the date and amount ofsuch transfei

Section 431( 13)(8) ofTitle 2 ofthe United States Code states that the term

"identification" means. in the case of any other person.. the fun name and address ofsuch

person

The Audit staff re\,e~'ed transfers received from affiliated committees. OUf

re\;e,,' Identified 9 transfers. received between February 8. 1993 and December 5.. 1994~

totahng $56.342 (transfers from affihated committees totaled $291.725). that were not

itemized as reqUired on Schedule A (itemized Receipts) The Committee included these

amounts In Its unitemized receipt totals (hne 11atii») Committee officials Slated that they

dId not knov.' '-"hy these transfers "'erc not itemized

At the exit conference. the Committee was provided v.;th a schedule

detaihng the items discussed above Committee offiCials agreed to file Schedules A for line

11 (Transfers From AlliliatedJOther Pany CommIttees) itemizing the transfers noted above

3 Thc crrors lO\ohcd contnbullons d.1tcd both beforc and aftcr thc efTeetl\'c datc of changc to 11

CFR lO~ '7 Th' Commlttcc did not s.atlsf~ the best eITons prO\"lslon of either thc current or

former regulation

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Subsequent to the exit conference.. the Committee filed Schedules A which

materially corrected the discrepancies.

In the imerim audit repon. the Audit staffrecommended no funher action.

The Committee did not provide any additional infonnation or comments regarding this

matter

Page 8, Approved 6/10/96
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June t:. 1QQ6

\ 1r Sldnc~ .lacob. 1 rcasur~r

--'mencan Hospital }\ssoclation

Political Action Committ~

One 'onh Frankhn Street

Chlcago. IL 60606

Ilc.lT \1T Jil~nb

·\ttach~d rlca~~ find the FInal ·\udlt Repon on the American Hospital .~ssociation

Pl'''!lea! '\C1I00 ("ommtttcc The: COtlUlltS'lnn apprc"\-ed the repon on June 10. 1996

t itt' C Pt1llH"'IPn .'r;,,' 1'\ l'd , InJI -\udn R~r('n \\ ill ~e placed on the puhlic rcc0rd on

.hl!~\. I\I. 1q,)(, Sh(\uIJ ~l'U h:l\ an\ t\uc~lIun~ I\..~ardln!! the puh1i~ release ofthe Tep('M.

ricase C0ntact the Conlml~~lnn's Pless Otlice at .:0:): 19-4155 or toll-free at (800)

..::.J_o~ _~,-. ·\n\ quc~ti(\n~ \(\U ha\"e rela1ed to matters covered during the audit or in the

fl't'C"r'l ~tl\'uld be directed to "an\ I-a\ In C'fthe '\udit Division at C202l =1q·3720 or at the

J~"{'\ l' H :i free nunlher

Rnhcn J ("qa

·\.....I ..t(ln~ ~ta1r Dlf\-'ctnr

\udlt !)I\I~I()n

-\ttachn,ent as stated

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Page 10, Approved 6/10/96
CHRONOLOGY

THE AMERICAN HOSPITAL ASSOCIATION

POLITICAL ACTION COMMITTEE

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Audit Fieldwork

Interim Audit Repon to

the Committee

Final Audit Repon Approved

Page 11, Approved 6/10/96

9/18/95 - 10/6/95

518196

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