MW004739

December 29, 1992

MEMORANDUM

TO:

FROM:

FRED EILAND

CHIEF, PRESS OFFICE

ROBERT J. COSTA

ASSISTANT STAFF DIRECTOR .

AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT

ON DAVE EMERY FOR CONGRESS

Attach-ed pIease find- -aco-py-of --the- Final--A-udit--Re-port----on-Da-veEmery for Congress, which was approved by the Commission on

December 15, 1992.

Informational copies of the report have been received by all

parties involved and the report may be released to the public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Reports Analysis Division

FEe Library
FEDERAL ELECTION CQ1\1i\.lISSION

REPORT OF THE AUDIT DIVISION

ON

DAVE EMERY FOR CONGRESS

MW003904

A91-24

I~ Background

A. Overview

This report is based on an audit of Dave Emery for

Congress ("the Committee"), undertaken by the Audit Division Qf_

the Federal Election Commission in accordance with the provisions

of the Federal Election C.apaign Act of 1971, as a.ended ("the

Act"). The audit was conducted pursuant to Section 438(b) of - Title---2- _of th.lJJ~!~~_d States Code which states, in part, that the

Comaission a.y conduct:-- audits artd-- tt-eldi-nve-st.-i-.a-ti-e-n-s-of anypolitical coaaittee required to file a report under section 434 of

this title. Prior to conducting any audit und.r this section, the

Co.-ission shall perfora an internal review of reports filed by

selected coaaittees to deter.ine if the reports filed by a

particular co.-itt•••••t the threshold require.ents for

substantial coapliance with the Act.

The Co..itte. registered with the Clerk of the u.s.

House of Representative. on Deceabet 19, 1989 as the principal

caapaiqn coaaitt.e for David F. a••ry, ••publican candidate for

the u.s. Hous. of .epre.entativ•• fro. the state of Maine. The

Committee maintains its headquarters in Tenants Harbor, Maine.

The audit covered the period fro. Noveaber 7, 1989, the

date of the Coaaitt••'s first recorded transaction, throuqh

December 31, 1990. The Committee reported a beginning cash

balance of $0; total receipts for the period of $465,5S3.85;~/

~/ Total receipts and total disbursements were derived by

summing the current period totals for each reporting

period. This differs from the figures for total receipts

and total disburse.ents ($469,973.55 and $462,333.95,

respectively) derived by summing the amounts reported as

calendar year-to-date for 1989 and 1990. The reported

figures were determined to be misstated (See Finding

II.A.).
2

total disbursements for the period of $463,876.86; and a closing cash balance on necember 31, 1990 of $1,676.99.

This report is based on documents and workpapers which

support each of its factual statements. They form part of the

record upon which the Commission based its decisions on the

matters in the report and were available to the Commissioners and

appropriate staff for review.

B. Key Personnel

The Treasurer of the Committee during the period covered

by the audit was Mr. P. James Nicholson.

c. Scope

The audit included such tests as verification of total

reported receipts and disbursements and individual transactions;

review of required supporting documentation: analysis of Committee

debts and obli9ations; and such other audit procedures as dee~ed

necessary under the circumstance., except that althouqh the -- Co.-itt••'. recordk••ping with respect to receipts appears to be

in coapliance with 2 u.s.c. S432(c), much of the supporting

-docwaentati9n reviewed vas internally q.netated.

II~ Audit Pindings and aecoaaendations

A. Misstate••nt of Financial Activity

Sections 434(b) (l}, {2} and (4) of Title 2 of the

United State. Code require a political eoaaitt•• to report the

a.ount of cash on hand at the beginning of each reportinq period and the total a.ount of all receipts and disbur••••nt. for the

reportin9 period and calendar year.

The Audit Itaff's reconciliation of the Coaaitt••'.

reported activity to ita bank activity revealed the following

aisstate••nts:

Receipts

By suaaing the current period totals for each reporting

period, it was deterained that the Committee reported total

receipts of $449,711.85 for 1990.*/ The Audit staff's bank

reconciliation deterained that the Committee should have reported

total receipts of $431,511.79. Therefore, the Committee's

reported receipts were overstated by a net amount of $18,200.06.

~/ On its 1990 Vear End aeport the Committee reported calendar

year to date receipts for 1990 of $454,131.55. The

difference ia an apparent matheaatical error within its

1990 Post-General Election report.
3

The Audit staff's analysis of Committee bank deposits by reporting

period identified a significant discrepancy with respect to the

1990 post-General Election report within which receipts were

overstated by $15,537.64. This resulted mainly from the inclusion

of: a deposit ($8,635) which had been included on the Pre-General

Election report; and, a portion of a deposit {$6,102.64l recorded

by the Committee on 10/18/90 which was also included in its

entirety on the Pre-General Election report. In the absence of

workpapers which detail the preparation of its disclosure reports,

the Audit staff was unable to explain the remaining differences.

Disbursements

The Committee reported total disbursements of

$448,376.76 for 1990.*/ The Audit staff's bank reconciliation

determined that the Committee should have reported total

disbursements of $431,694.69. Therefore, the Co~~ittee's reported

disbursements were overstated by a net amount of $16,682.07. The

Audit staff's analysis of Committee disbursements by reporting

period indicated the largest discrepancies occurred with respect

to the 1990 October Ouarterly and Pre-General Election reports

within which disbursements were overstated by $6,198.83 and

$11,537.14 respectively. The difference ($6,198.83) with respect

to the October Quarterly report resulted mainly from the inclusion

of disbursements from outside the reportinq period ($26,472.66), ~n apparent overstatement of unitemized disbursements ($1,697.69)

and an understatement wi th respect to reporting t~he ~a.ounts -of ~tWQ

disbursements ($21,531). In the absence of workpapers which

detail the preparation of its disclosure reports, the Audit staff

was unable to explain the remaininq $440.52 difference in the

October Quarterly Election Report or any of the $11,531.14

difference in the Pre-General Election report.

Ending Cash on Band Balance

The Committee reported an endin9 cash on hand balance on

Dec••ber 31, 1990 of $1,676.99. The Audit staff deterained this

was overstated by a net amount of $1,507.17 which resulted from

the misstatements detailed above. The correct endin9 balance was

determined by the Audit staff to be $169.22.

Copies of workpapers detailing the above noted

differences were provided to Committee representatives at the eXlt

conference.

that,

~/

In the interim audit report, the Audit staff recommended

within 30 calendar days of service of that report, the

On its 1990 Year End Report the Committee reported calendar

year to date disbursements for 1990 totaling $446,833.85.

The difference is an apparent mathematical error within its

1990 Post General report.
4

Co.mittee file amendments for calendar year 1990 correcting the

misstatements of financial activity noted above.

The Committee responded and submitted documentation on

January 30, February 10, March 10, and March 19, 1992 ("the

response"}. In its response to the interim audit report, the

Committee provided amended disclosure reports that materially

corrected the above noted misstatements.

Recommendation t1

The Audit staff recommends no further action with respect to

this matter.

B. Failure to Itemize Contributions from Individuals

Section 434(b)(3)(Al of Title 2 of the United States

Code states that each report shall disclose the identification of

each person who makes a contribution to the reporting committee

during the reportin9 period, whose contribution or contributions

have an aggregate amount or value in excess of $200 within a

calendar year, or in any lesser amount if the reporting commi~tee

should so elect, together with the date and a~ount of any such

contribution.

Section 431(11)(A) of Title 2 of the United States Code

states that the term "identification" means, in the ease of any

individual, the naa., the .ailing address, and the occupation of

such individual, as vell as the naa. of his or her ••ployer.

The Audit staff's review of the available records for

contributions froa individuals indicated that a material number of

the•• contributions vere not iteaized as required. Our analysis

deterained that the aajority of contributions fro. individuals

which were not it••ized, related to the 1990 October Quarterly

report. The Audit staff reviewed contributions from individuals

within this ti•• fea•• and noted that the Coaaitt•• failed to

itemize 33 contributions totalin9 $20,650.

Committee representatives were prOVided with schedules

of the contributions from individuals requirin9 it@aization at the

exit conference. A Committee representative stated that the

Committe.'. computer had "crashed" twice and that was probably the

reason for so many errors.

In the interim audit report, the Audit staff recommended

that, within 30 calendar days of service of that report, the

Committee file amended Schedules A (Itemized Receipts) for the

1990 October Quarterly report as part of a comprehensive amendment

to disclose the contributions not itemized as noted above.

In its response to the interim audit report, the

Committee submitted amended Schedules A which disclosed the above

noted contributions.
"

5

Recommendation 12

The Audit staff recommends no further action with

respect to this matter.

c. Itemization of Receipts from Political Committees

Section 434(bl(3)(Bl of Title 2 of the United States

Code states that each report shall disclose the identification of

each political committee which makes a contribution to the

reporting committee during the reporting period, together with the

date and amount of any such contribution.

Section 431(13l(B} of Title 2 of the United States Cede

states the term "identification" means, in the case of any other

person, the full name and address of such person. In addition, :

u.s.c. S431(11) defines "person" to include an individual,

partnership, association, corporation, labor organization or

committee.

The Audit staff's review of the available records for

contributions from political committees determined that the

Committee failed to itemize 2S such contributions totaling

$18,550.

Committee representati'/es were provided with a schedule

of the contributions at the exit conference. They $~ated that

they had believed that the contributions had been reported, but

agreed to file the necessary amended reports.

In the interim audit report, the Audit staff reco••ended

that, within 30 calendar days of service of that report, the

Coaaitte. file •••nded Schedules A (It.aized Receipts) by

reporting period, as part of a comprehensive a.endment, to

disclose the contributions noted above.

In its r••ponse to the interia audit report, the

Coamittee submitted Schedules A to a.end its reports which

materially disclo••d the above noted contributions.

Recommendation 13

The Audit staff recommends no further action with respect t~

this matter.

Os Itemization of Disbursements

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

Code states, in part, that each report under this section shall

disclose the name and address of each person to whom an

expenditure in an ag9regate amount or value in excess of S200

within the calendar year is made by the reporting committee
6

to ••et a candidate or committee operatinq expense, toqether with

the date, amount, and purpose of ,such operatinq .xpenditure~

The Audit staff's review of those Committee

disbursements required to be itemized indicated that 49

disbursements totaling $43,634.63, were not itemized.

In addition, the Audit staff's review of itemized

disbursements identified 29 disbursements totaling $43,893.23, for

which the proper disclosure information was either incomplete or

omitted. Most of the errors resulted from either an incomplete

address being disclosed or, no purpose, or an inadequate purpose

being disclosed.

At the exit conference Committee representatives were

made aware of the above problems and stated that they would amend

their disclosure reports.

In the interim audit report, the Audit staff recommended ~, that within 30 calendar days of service of that report, the

Committee file amended Schedules B by reportinq period as par~ ~f

a comprehensive ••endment to correct the disclosure of

disbursements as noted above.

In ~ts response to the interia audit report, the

COllJlittee submitted Schedules B to amend its reports which

materially corrected the above noted disclosure problems~ .

Recommendation .4

The Audit staff recoamends no further action with respect to

this lIlatter.

E. Debts and Obligations

Section 434(b)(8) of Title 2 of the United States Code,

in part, requir•• each report filed under this ••ction, by the

treasurer of a political coaaitt.e to disclose the .mount and

nature of outstanding debts and obligations owed by the Coaaitt.e.

Section 104.11(a) of Title 11 of the Code of Federal

Requlations state., in relevant part, that debts and obligations

owed by a political coamittee which remain outstanding shall be

continuously reported until extinguished. In addition, 11 c.r.R.

S104.11(b) states, in part, that a debt which is $500 or less

shall be reported as of the time payment is made or no later than

60 days after such obligation is incurred and that any debt in

excess of $500 shall be reported as of the time of the

transaction.

The Audit staff performed a review of all Committee

disbursements to identify debts and obligations which reqUired

disclosure on Schedule 0 of reports filed by the Coaaittee during
i

the audit period. The auditor'. review indicated that reportable

debts with respect to three vendors were understated by $50,974.35

on disclosure reports filed for the latter half of 1990.

At the exit conference, Committee representatives Wire

prOVided copies of the auditor's workpapers detailinq these

discrepancies. Committee representatives stated that they would

amend their reports to properly disclose the above noted debts.

In the interim audit report, the Audit staff recommended

that, within 30 calendar days service of that report, the

Committee file amendments to correct the disclosure of debts on

Schedule 0 and line 10 of the Summary Page by reporting period as

part of a comprehensive amendment.

In its response to the interim audit report, the

Committee submitted Schedules D to amend its reports which

materially disclosed the debts and obligations noted above.

Recommendation IS

The Audit staff recommends no further action with respect to

this matter.

F.~ Failure to Kaintain Receipts Records

Sections 432(c)(1), (2), (3) and (d) of Title 2 of the

United States Code state that the treasurer of a political

co.-itt•• shall keep an account of all contributions received by

~r on behalf of such political co.-itte.; the n••• and address of

any person who makes any contribution in exce.s of $50, toqether

with the date and a.ount of such contribution by any person; and,

the identification of any person who aake. a contribution or

contributions aggregating aore than $200 durinq a calendar year,

together with the date and ••ount of any such contribution. The

tr••surer shall pr•••rve all records required to be kept by this ••ction and copi•• of all reports reqUired to be filed by this

subchapter for 3 years after the report ia filed.

Section 431(13) of Title 2 of the United Stat.s Code

stat.s that the tee. "identification" ••anl: in the ca•• of any

individual, the na••, the aailin9 addresl, and the occupation of

such individual, .s well as the na•• of his or her ••ployer; and

in the ca•• of any other person, the full name and address of such

person.

Section 431(8)(A)(i) of Title 2 of the United States

Code states that the term "contribution" includes any gift, loan,

advance, or deposit of .on8Y or anything of value aad. by any

person for the purpose of influencing any election for Federal

office.

The Audit staff's analysis of Committee receipt records

indicated that 13.6\ of correct reportable rec.ipts lacked
8

adequate documentation. Further, the Audit staff was able to

identify 89 deposits totalin9 $60,116.77 for which no recorda that

id.ntified the source of the funds were maintained. A significant number of these undocumented deposits occurred durinq the period

January to April 17, 1990. This was the period durin9 which the

records were maintain by Maine-ly Marketing (a marketing firm

hired by the Committee).

Further, the Audit staff reviewed available records and

determined that 69\ were externally generated (ie. copies of

checks or response devices) and 31' were internally generated <ie.

by a card file or computer listing). The incompleteness of the

receipt records limited the extent of the testing the Audit staff

was able to perform.

At the exit conference, Committee representatives were

prOVided with a schedule listing the deposits for which receipts

documentation was considered incomplete or unavailable.

Committee representatives stated that they would contact

the bank and explore other possibilities for satisfying the

documentation requirements for the receipts noted above. - -

In the interia audit report, the Audit staff recesmended

-that, withi-n30 calendar days of s_ervice of that report, the

Committee provide for the Audit staff'. review, receipt

docuaentation to fully support the deposits noted above.

The Audit staff also noted that, further recoaaendations

may be forthcoainq based on a review of the records provided.

In its response to the interim audit report the

Coaaitte. stated that the anticipated cost of obtaining the

docu.entation reque.ted above is in excess of $5,000. In

addition, the Coaaitt•• stated that faced with the $36,000 worth

of debt */, the need to refund the exc•••ive contributions, and no

cash **/; it waa not in a position to u•• the ••rvic•• of the bank,

to obtain the docu.entation requested above. Bowever, as part of

its re.pon••, the Coaaitt•• provided a contributor listing ("the

list") detailing $410,639.57 in receipts for the period 1989-1990.

In addition, the Coamittee provided contributor

printouts, deposit batches and aiscellaneous bank documentation.

The Audit staff's review of the list indicated that with

respect to 1990, the list contained entries for receipts totaling

$401,839.57, which represents 93' of correct reportable receipts

and appears to be aaterially coaplete. The Audit staff was able to

reconcile the dollar total ($401,839.57) of the list to the

~/ At year-end 1991, the Committe. reported $35,498.88 of debt.

~/ At year-end 1991, the Committee reported ending cash of $77.65.