FEDERAL ELECTION COMMISSION 

WASHINCTC)N. IXC. 20461 

OCT 1 6 2114 

MEMQRAWPUM 

TO: PBtridaC.Oiiock 

Chkf Comidiaiice OSteer 

Thomai E. Hintcniuiter 

Aanstant Stiff Difeetor 

AiidhDIviiiaa 

FROM: LiatJ.Stevemoa l^/h 

Deputy Genenl Coiniiel - Liw ^ 

LOICDZO Hollowly 

Attiitant OcDenl CounaSt"^ 

ConipUaiice Advice 

MargvetJ.Fonnan 

Attamey 

SURJECT: PiofKMedPnUniiniiy Audit Report on CooiiidtteefbrCbailodfl/ClnilolteDNC 

Hoet CoumiitlBe (LRA 965) 

L INTRODUCnON 

The Office of die Oenenl Counirt hM nviewed the prapooed PnUmiiHiy Audit Report 

Cpropoeed RqiotO on die Committee Ibr ClMriotto^Cheriotte PNC Hoet Ccmmlttce ("CF^. 

The pnqmeed Report eoBAniis two liiiifiiigi: ReooidkaqifaiglbrbipKindCoaliliailioiiiCFIiidliigl) 

•idDiecloeuieofDMbuneniena(Findiqg2)»* WeeoacurwIdithBfiiidiiifcwrioonimMirondiB 

cover memoiandum to die Office of the OeneMlCounicl. lfyouhwiinyqiiBrtiGBe,plBiW 

eontict Mttgnet J. Fonmn. the itlaniey anisBed to ddi audit 

miyovwitiallydeeide to punutMiBVBMigAionofmMwscialrtMd in dwprapoMd Report llC.FX|f 2.4(i)Hd 

(bX6). 
LRA96S 

Commhtea ftr ChtrioOB/Chnloiie DNC HoM OoagnlttN 

PAR Commenti 

Pi|e2of4 

n, CONVENTION PRODUCTION CONTRACT AND ADDITIONAL, SPEOnC 

INVOICES 

In the cover memonnulum to the Office of the Oenenl Counsel, the Audit OiviiioD raises 

the issue of vdiBtfaer CFC nude inqiennisslble aqtendhures lelslBd 10 a Gonvcntion pioduciian 

contract lira Audit Division decided not to include this issue est finding in the Plriiniiniiy Audit 

Report fTAR"). We concur wilfatfais8|iproaclk We, however, icconmimdtfastae Audit 

niviMMi ifieliMto in itm IWHMT nAwi tM—mittifig llie PAR in ttia rnwrniiadmi • Hi«wi—Snn 

rim wnmifftri^ Mid IwH't'ff'y!' f'lPg flp ftf 

the Audit Division is applying leflindsagsinst the two invoices. We start with backgiound 

informetion about this issue end the reasons ibr te Audit Division's derision not to include this 

issue as a finding in the PAR. 

A. BACKGROUND 

The Audit Division previously advised this Office that it was reviewing whether the 

Conunittee may have nude hnpeimissihle expenditures lelsted to the production of the 2012 

Democratic Nadonsl Convention Mher than for promoting the host city and hs conuneree or 

defiaying convention cxpODsesL IfsOb foe cs^enditURSCOuhloonstitule in-kind contributions to 

the cmvention committee that are sii^ect to the convention expenditure limitation. The 

regulations pronnilgated under the Presidential Election Campaign Fhiid Act provide that 

et^enditures nude by a host conunhiee riiall not be considered expendhuies hy a nationBl 

committee and iball not count against foe expenditure limitation provided the funds are 

permissible under 11C.FJL{ 9008.52. &e lie JJt.§ 9008J(bXl). Punuant to section 

900g.520>). the cetegorieiofpeimiasiblehoetuummitteeeaqunditume generally relate to 

disbursements ibr promoting foe convention dty and its oommerce and defraying conventian 

expenses (i.e., infraslnictnre triated expendltnies made to prqure foe convendan hall to host the 

convention). For exam^ the host oommitlne can incur expenses to promote foe suilebUity of foe 

city as a convention she a^ it Gin incur expenses for conslniction at the convention locatiatL 11 

CF.R.S9008.S20)XI)>ni(5). Byooiitmit,fiwCc»miiasionhaafbundthBtcxpenditucBa 

primarily related to and for the purpose of p^ingfbn Odeeonriona and muric, 39 closed rircuit 

teteviaion eiqunaea, 3) emeriainnNnt etqunaea in an aiee outside foe nuhi convention hall but 

within the convention center where convention attendeei could wateh convention proceedings on 

large tdevision screens, 4) produoera, dfaecton and produedon atafffin aervicea provided duing 

impetmisrible boat committee eiqMnam whn they are incntred during the oonvcntion on behalf of 

attendees or the general public. SwCommiarion Amended Certiflcation, In the Matter of foe 

ConmutteeoaAnangementsfintfae 1996 RepuUican National Convention (ccrtifled Apr. 30, 

1998); m a/jD Stc Rqurt of the Andh Divirion on Sn Diego Host Commhlee/Seii to Vietety'96 

("San Diego HosfO- TheConmuaaionnudetliiafindliigbecsusethecKpendituiesfelatotD 

mwiigiyitig mmA iwli^wg « iti nif SfiflwiMiriiig thiirriiHe tn lypnrt rfie 

party ho^ng the conventian and its pierideDtia] candidate Sire Rqxut of tha Audit Division on 

San Diego Host Committee/SaU to Victoiy'96 ("San Diego HbafO' 
LRA96S 

CooMlIlM Ibr ChvloitaClHrioni DNC H<M OooBklM 

PARCommcaii 

PiBB3of4 

Here, the Audh IMvision CKplamed that tbcre GouU be specified Mivicei Alt mqr not 

relate to promoting the host dty cr defteying convention expenses. Aecordiiig to die Audit 

Division, RK Productions CWCO bed been te vendor cQotncted liy the CoDunittee for ChariotiB 

[aka CFQ on behalf of the 2012 Democntie National Convention Comnutlee, Inc.," to produce 

tfaeDemocwIic National Convention since 1996^ and the Dqnowallc host committees bave paid 

an8verageof98%ofthetotalRKproductiancostsintliecanventiaiisfiam 1996topresenL SM 

Agreement for the Afiangemeat aiid Superoision of Pioduction Related Services.^ 

The Audit Division fiuther explained that CFC made disbunements puisuant to a 

convention production contract wifli RK, totaling $11,700^000, which Is not in question, and, in 

addition to the production contract, RK billed and CFC paid fbr seven additional invoices lotiding 

$619,533. Bas^ on a review of siiiiilar expenditures flmn past boat cnmniitlBe audita, the Audh 

Division concluded that five of these invoices fbr $372,762 were pemdssible. 

For the $246,771 remaining fin the two other invoices, however, the Audit Division could 

not find donimcntiition flom past host commlttBC audits indicating wfaether fiieae diabureementi 

were permissible. For one invoice of$167,12l, CFC rehnbiined production crew's air ftre^ per 

diem and bousing costs. This crew's duties included band staging, beauty, grqihics,pyrotedmlcs, 

mrftnitiviT prmlii^ffn, wmmmrtrr, talwit, and The seccmd invoice of $79,650 

was fin pyrotechnics and a confetdcfibMpaekage. Thereflbre, there is a question u to wlidher 

these expenses were incurred fin the purpose ofpresenting the television image of the convention 

-simihv to those fire ConmdasionfiiiindiinpennisBibie in file San Diego Host audh.' /i 

Based on the inftmnation and documentation the Audit Division currently possesses in this 

audit, it cannot confirm that the Committee's $246,771 in dlabuiieniBnts fbr these two invoices to 

RK were made in accordance with llCJJLi 9008.52(b). The Audit Divisioii, nevertheleas, 

decided not to reconuiiend a finding fbr possible impermissible mqienditures hy CFC fin two 

reasons. First, as to five ofthe invoices fin $372,7^ die same or similar expenditures had been 

deemed permtesible by the Audit Division based on past host committee aw^^ Second, the 

possible impeimissiblecxpendituRS of S246b771 identified by the audit is less than an amount of 

' Wviscoiiiawnd at die sudiian Include thhcoBlilteAsw—It In die nfMiprovidadte thy 

rommiwInB in die Vollna Billot mucn Mdar. 

'file 1996 SmPligDHwtenpcudlliiei wow fcrwndcBi dm lnclndcd|nudueni,diwctow,pmduction 

iodt nniilc/iDfilnini i, limhii mgi leber, ulllto tputUi effccn, nakeyp end InSdieMliifc video opowthnn, eound 

cpendloiii video ivestreli» edUnSi red 9tehlm> 

* In die Tmpi Bqr HM Connlnee udh; Ike Audit Divtahni ndvtaed dw Oflloe of the Oenonl OOIBNI dnt die 

Tteipi Boy Hoot CoounlHee nuy hive nnde ibnitarty, powlbty fanpendnlble cnpendXimi fbr rndietlon of Ae 

2012 Republtan Nteonil CuuveuUon to i vendor. We idvbed the Audit DivUaulhtftqrdMeiWilnAmndOB 

dud ihowed dnd dw prior boil ooBnnlnM'onpredlm to thh voador WHO dw inae «in do Sm Dhgo Hon wda; 

dwiddsneysueBietdredwTnnpiBv Hon ConnnatoeinndedinlhreiipendtoEeito teds vendor)." MlnlMiy 

Audit Report on dw 2012 TnpiBqr Hon ConuntaeobliiCvlilfniorandnm to PbtrloliCOnock(Fbb. 3,2014X 

UlUnately, the Audit Dlvlilon denrndned dm, "[b]ind upon ftBdMrieview oftofldhMe doonneittdon piovided by 

theConunlane... nonudnMnonoonplktooe wdlieovwud." liiioaowndpnitoCtonndMloB,fteHndnnyAudit 

Report onlbeTlapi Boy HbtoConmdMee, Inc., liwoowndnm to OwnnlitionCMw. 23,20I4X 
LRA965 

CoBuninee Ibr QTlodBdMrkm DNC Hon CommlBBa 

PARConmentt 

PV4of4 

$S79,929 that RKiefiinded to CFCfiom the S11,700;000 production contnct Weoaacurvdlhtfae 

two icaaona, but diacuH the NGond icam fiiilher bdow. 

B. DISCUSSION; ReAiiidiofdiibuncauutiflromtlwMHCveMlorniqronat 

potcutUSy taupenululbk contribntftou 

We OQUcur that dlsbunenMots leflmded to a hoit oammittee fiom a vendor miy be applied 

to other disbunementi pertainbig to the mne vendor ibr the pupoM of offletttng cxpendilurea 

tbatmaybeimpenidaslblcpuniianttoll CJJL S900S.52. 

The Commiaakm baa petmlued leflmda in ihnihg and analogous cfaeumstaiicee, Inttie 

rnmienrinn ernnmitftBg enwtHirt; tlie rMmtmtmtm ham wengmMtl ptMttee nf petmhrii^ 

convention conunitleee to'oiBiet* in-ldnd contiibulloni r^ved finom boat ooounitteei tbto are 

deemed impcnniarible in poet convention audita" with convcpticnconnnitlBBCipendituiei that the 

boat committee GOUM have flmded. 5M Aplonaltofi auiJiatffhatlOHjbr Other 

CoRvcnrton-Matw/AfMfai 68 Fed. Reg. 47386,47405 (Au^ 8,2003). The Ccmmiiaion baa also 

Improved the application <rf leftmda in Title 26 fteaidentiai campaigna where a preiidential 

committee exceeded the QKoding liinit, and the Audit Diviaion apfdied anionnia due (ceedit) fiom 

other conunitteea and vendora to oflhettbia amount She BinlhCheney'04 Fund Audit Report at 9. 

Additionally, the Commiaiian bu approved the application of lefimda of noo-fedenl flmda fiom 

the ledend account lehded to party conunitteea'allocable admbdalntiveaqMnaea. 5M2010 

Uhautborined Committee Audit Pkogram, Materiality Ihieabolda at 39. We do not aee a legal 

objection to the qiplicatlonofasimilarieflmd made to a boat committee ftom the aame vendor to 

of&et a potentially impenadaaible expenditure. While 11C.FJL| 9008.50 etaeq.doea not 

addieaa reftmda to boat committeea, nothiiig in dieae pioviaiona prahibita ancb a refund aa baaia to 

ofihet fanpenniaaible boat committee expendhurea. Therefore, we concur with the Audit Diviaion'a 

deciaion not to inehide a finding on tfaia iaaue in the propoaed Report.