PC 

• i •• . 

2018 JUL 23 U: i 

THE FEDERAL ELECTION COMMISSION 

Washington, DC 20463 

MEMORANDUM 

To: 

Through: 

From: 

By: 

The Commission 

Alec Palmer < 

Staff Director ' 

Patricia C. Orrock POJO 

Chief Compliance Officer 

Thomas E. Hintermister^^ 

Assistant Staff Director 

Audit Division 

Kendrick Smith 

Audit Manager 

Sheraline Thomas 

Lead Auditor 

July 23,2018 

Subject: Resubmission: Audit Division Recommendation Memorandum on Brian 

Higgins for Congress (A 17-03) 

This office is resubmitting the Audit Division Recommendation Memorandum (ADRM) 

for Brian Higgins for Congress (BHFC). The original ADRM was circulated on June 29, 

20! 8, and rescinded on July 12,2018 to add missing information within Audit staffs 

recommendation for Finding I - Misstatement of Financial Activity and to add clarifying' 

language to Finding 2 - Receipt of Contributions in Excess of the Limit. 

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit Reports), 

the-Audit staff presented the Draft Final Audit Report (DFAR) to BHFC on June 7,2018 

(see attachment). In response to the DFAR, BHFC did not provide any additional 

comments or request an audit hearing. 

/ 

This memorandum provides the Audit staffs recommendation for each finding outlined in 

the DFAR. The Office of General Counsel has reviewed this memorandum and concurs 

with the recommendations. 

' As per a discussion held on July 12,2018 with a Commissioner, executive assistants and Ofrice- of 

Compliance personnel. 
Finding 1. Misstatement of Financial Activity 

In response to the Interim Audit Report, BHFC amended its most recently filed 

disclosure reports to correct its cash balance. In 20IS, BHFC overstated its 

beginning and ending cash balances by $36,151 and $38,560, respectively. In 

2016, the beginning cash balance was overstated by $38,560 and the ending cash 

balance was overstated by $36,242. BHFC did not file an. additional response to 

theDFAR. 

The Audit staff recommends that the Commission find that BHFC misstated its 

beginning and ending cash balances for calendar years 2015 and 2016. 

Finding 2. Receipt of Contributions in Excess of the Limit 

In response to the Interim Audit Report, BHFC resolved the remaining excessive 

contributions totaling $5,400 by providing a completed reattribution letter from its 

contributors. As such, BHFC has provided copies of redesignation/reattribution 

letters and evidence of a refund to resolve, albeit untimely, all of the excessive 

contributions identified by the Audit staff totaling $41,424.^ BHFC did not file an 

additional response to the DFAR. 

The Audit staff recommends that the Commission find that BHFC received 

excessive contributions totaling $41,424. 

If this memorandum is approved, a Proposed Final Audit Report will be prepared within 

30 days of the Commission's vote. 

In case of an objection, Directive No. 70 states that the Audit Division 

Recommendation Memorandum will be placed on the next regularly scheduled open 

session agenda. 

Documents related to this audit report can be viewed in the Voting Ballot Matters folder. 

Should you have any questions, please contact Sheraline Thomas or Kendrick Smith at 

694-1200. 

Attachment: 

Draft Final Audit Report of the Audit Division on Brian Higgins for Congress 

cc: Office of General Counsel 

^ BHFC searched its contribution records and identified excessive contributions totaling $41,360. 
Draft Final Audit Report of the 

Audit Division on 

Brian Higgins for Congress 

(January 1, 2015 - December 31, 2016) 

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 Aetion 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Campaign (p. 2) 

Brian Higgins for Congress is the principal campaign committee 

for Brian Higgins, Democratic candidate for the United States 

House of Representatives from the state of New York, 26th 

Congressional District, and is headquartered in Buffalo, New 

York. For more information, see the Campaign Organization 

chart, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Political 

Committees 

o Other Receipts 

Total Reedpts 

• Disbursements 

o Operating Expenditures 

o Transfers to Other Authorized 

Committees 

o Other Disbursements 

Total Disbursements 

$455,744 

338,581 

1,167 

$795,492 

$390,111 

118,500 

111,386 

$619,997 

Findings aiid Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Receipt of Contributions in Excess of the Limit (Finding 2) 

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

Audit Division on 

Brian Higgins for Congress 

! (Januaiy 1, 2015 - December 31, 2016) 
Table of Contenta 

Page 

Part 1. Backgronnd 

Authority for Audit I 

Scope of Audit I 

Partn. Overview of Campaign 

Campaign Organization 

Overview of Financial Activity 2 

i 

i Campaign Organization 2 

Part in. Summaries 

Findinp and Recommendations 3 

Part IV. Findinga and RecommendationB 

Finding 1. Misstatement of Financial Activity 4 

Finding 2. Receipt of Contributions in Excesis of the Limit S 
Part I 

Background 

Authority for Audit 

This report is based on an audit of Brian Higgins for Congress (BHFC), undertaken by 

the Audit Division of the Federal Election Commission (the Commission) in aooorda^ 

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 r^rts 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 excessive contributions; 

2. die receipt of contributions from prohibited sources; 

3. the disclosure of contributions received; 

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

5. the consistency between reported figures and bank records; 

6. the completeness of records: and 

7. other committee operations necessary to the review. 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Renistration May 17.2004 

• Audit Coverage January 1,201S - December 31,2016 

Headquarters Bumilo. New York 

Bank Information 

• Bank Depositories One 

• Bank Accounts Two federal checking, one savings 

Treasurer 

• Treasurer When Audit Was Conducted Gary Kanaiey (June 3,200S - August 23, 

2017) 

Holiy Giarraputo (August 24,2017 -

Present) 

• Treasurer During E*eriod Covered by Audit Gary Kanaiey (June 3,2005 - August 23, 

2017) 

Management Information 

• Attended FEC Campaign Finance Seminar No 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff and Volunteer 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand ^ Januaiv 1,2015 $584,769 

Receipts • 

o Contributions from Individuals 455,744 

o Contributions finm Political Committees 338,581 

o Other Receipts 1.167 

Total ReceiDts S 795,492 

Disbursements 

o Operating Expenditures 390.111 

o Transihrs to Other Authorized Committees 118.500 

o Other Disbursements 111,386 

Total Disbursements $619,997 

Cash-oa-band @ December 31,2016 $760,264 
Part m 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comjrarison of BHFC's reported financial activity with its bank 

records revealed a misstatement of the beginning and ending cash balances for calendar 

years 201S and 2016. In 201S, BHFC overstated its beginning and ending cash balances 

by $36,151 and $38,560, respMtively. In 2016, BHFC overstated its beginning and 

ending cash balances $38,5i60 and $36,242, respectively. In response to the Interim 

Audit Report recommendation, BHFC amended its most recently filed disclosure report 

to correct the cash balance. (For more detail, see p. 4.) 

Finding 2. Reeelpt of Contributions In Bxeess of the Limit 

i During audit fieldwork, the Audit staff reviewed contributions from individuals to 

determine if any exceeded the contribution limit. This review indicated that BHFC 

received apparent excessive contributions totaling $41,424. These errors occurred as a 

result of BHFC not resolving die excessive portions of contributions by forwarding 

presumptive redesignation or reattribution letters to its contributors, obtaining signed 

redesignation or reattribution letters from its contributors, or issuing refunds of the 

excessive portions of contributions in a timely manner. In response to the exit 

conference, BHFC untimely resolved excessive contributions from individuals totaling 

$36,024. In response to the Interim Audit Report recommendation, BHFC provided a 

completed reattribution letter from the contributors which untimely resolved the 

remaining excessive contributions. (For more detail, see p. 5.) 
Part IV 

Findings and Recommendations 

I Finding 1. Mtostatement of Financial Activity 

Summary 

During audit fieidwork, a comparison of BHFC's repotted financial activity with its bank 

records revealed a misstatement of the beginning and ending cash baiances for calendar 

years 201S and 2016. In 201S, BHFC overstated its beginning and ending cash balances 

by $36,151 and $38,560, respectively. In 2016, BHFC overstated its beginning and 

ending cash balances by $38,560 and $36,242, respectively. In response to the Interim 

Audit Report recommendation, BHFC amended its most recently filed disclosure report 

to correct the cash balance. 

Legal Standard 

Contents of Reports. Bach 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 election cycle; and 

• The total amount of disbursements for the reporting period and for the election cycle; 

52 U.S.C. §30104(b)(l). (2), and (4). 

Faeta and Analyais 

A. Facts 

During audit Beldwork, the Audit staff reconciled BHFC's reported financial activity 

with its bank records for calendar years 2015 and 2016. This review indicated that, in 

2015, the beginning and ending cash balances were overstated by $36,151 and $38,560, 

respectively. Further, the review indicated that, in 2016, the beginning and ending cash 

balances wme overstated by $38,560 and $36,242, respectively. The cash balance 

discrepancies for 2015 and 2016 resulted primarily from prior period adjustments, as well 

as, minor misstatements of both receipts and disbursements during the audit period. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the misstatements for 2015 and 2016 with BHFC 

representatives during the exit conference and provided copies of relevant workpapers 

detailing the misstatements. In response, BHFC representatives stated that it interiided to 

file amendments. 

The Interim Audit Report recommended that BHFC amend its most recently filed 

disclosure report to correct the cash balance with an explanation that the change resulted 

from prior period adjustments. It was further recommended that BHFC reconcile the 

ending cash balance of its most recent report to identify any subsequent discrepancies 

that would affect the adjustment recommended by the Audit staff. 
C. Committee ResponM to Interim Audit Report 

In response to the Interim Audit Report recommendation, BHFC amended its most 

recently filed disclosure report to correct the cash balance. 

Finding 2. Receipt of Contributions in Excess of the Limit | 

Suannaxy 

During audit Heldwork, the Audit staff reviewed contributions from individuals to 

determine if any exceeded the contribution limit. This review indicated that BHFC 

received apparent excessive contributions totaling $41,424. These errors occurred as a 

result of BHFC not resolving the excessive portions of contributions by forwarding 

presumptive rcdcsignation or reattribution letters to its contributors, obtaining signed 

redesignation or reattribution letters from its contributors, or issuing refunds of the 

excessive portions of contributions in a timely manner. In response to the exit 

conference, BHFC untimely resolved excessive contributions from individuals totaling 

$36,024. In response to the Interim Audit Report recommendation, BHFC provided a 

completed reattribution letter from the contributors which untimely resolved the 

remaining excessive contributions. 

Legal Standard 

A. Authorized Committee Limits. An authorized committee may not receive more 

than a total of $2,700 per election from any one person or $5,000 per election from a 

miilticandidate political coirnnittee. 52 U.S.C §30116; 11 CFR §§110.1(a) and (b) 

and 110.9(a). 

B. Handling Contributions That Appear Excessive. If a committee receives a 

contribution that appears to be excessive, the committee must either; 

• Return the questionable check to the donor; or 

• Deposit the check into its federal account and: 

• Keep enough money in the account to cover all potential refunds or 

establish a separate account in a campaign depository for such 

contributions: 

• Keep a written record explaining why the contribution may be illegal; 

• Include this explanation on Schedule A if the contribution has to be 

itemized before its legality is established; 

' • Seek a reattribution or a redesignation of the excessive portion, following 

the instructions provided in the Commission regulations (see below for 

explanations of reattribution and redesignation); and 

• If the committee does not receive a proper reattribution or redesignation 

within 60 days after receiving the excessive contribution, refund the 

excessive portion to the donor. 11 CFR §§103.3(b)(3), (4) and (5) and 

lI0.](k)(3)(iiXB). 

C. Joint Contributions. Any contribution made by more than one person, except for a 

contribution made by a partnership, must include the signature of each contributor on 

the check, money order, or other negotiable instrument or in a separate writing. A 
6 

joint contribution is attributed equally to each donor unless a statement indicates that 

the funds should be divided differently. 11 CFR §liO.I(lc)(I) and (2). 

D. Reattribudon of Excessive Contributions. The Commission regulations permit 

committees to ask donors of excessive contributions (or contributions that exceed the 

committee's net debts outstanding) whether they had intended their contribution to be 

a Joint contribution fiom more than one person and whether they would like to 

reattribute the excess amount to the other contributor. The committee must inform 

the contributor that; 

• The reattribudon must be signed by both contributors; 

• The reattribution must be received by the committee within 60 days after the 

committee received the original contribution; and 

• The contributor may instead request a refund of the excessive amount 11 CFR 

§il0.1Ck)(3). 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper reattribution or refund the excessive portion to the donor. 11 CFR 

§§103.3(b)(3) and 110.1(kX3)(ii)(B). Further, a political committee must retain 

written records concerning the reattribution in order for it to be effective. 11 CFR 

§110.1(I)(5). 

Notwithstanding the above, any excessive contribution that was made on a written 

instrument that is imprinted with the names of more tiian one individual may be 

presumptively attributed among the individuals listed unless instructed otherwise by 

the contributDr(s). The committee must inform each contributor: 

• How the contribution was attributed; and 

• The contributor may instead request a refund of the excessive amount. 11 CFR 

§I10.1(kX3XB). 

E. Rcdesignation of Excessive Contributions. When an authorized candidate 

committee receives an excessive contribution (or a contribution that exceeds the 

committee's net debts outstanding), the committee may ask the contributor to 

redesignate the excess portion of the contribution for use in another election. The 

committee must inform the contributor that: 

• The redesignation must be signed by the contributor; 

• The redesignation must be received by the committee within 60 days after the 

committee received the original contribution; and 

• The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.1(b)(5). 

Within 60 days after receiving the excessive contribution, tbe committee must either 

receive the proper redesignation or refund the excessive portion to the donor. 11 CFR 

§§103.3(b)(3) and 110. l(b)(S)(ii)(A). Further, a political committee must retain 

written records concerning the r^esignation in order for it to be effective. 11 CFR 

§1I0.1(I)(5). 
When an individual makes an excessive contribution to a candidate's authorized 

committee, the campaign may presumptively redesignate the excessive portion to the 

general election if the contribution: 

• Is made before that candidate's primary election; 

• Is not designated in writing for a particular election; 

• Would be excessive if treated as a primary election contribution; and 

• As redesignated, does not cause the contributor to exceed any other contribution 

limit. 11 CFR §110.1(bXS)(ii)(B)(l)-(4). 

i 

The committee is required to notify the contributor of the redesignation within 60 

days of the treasurer's receipt of the contribution, and must offer the contributor the 

option to receive a refond instead. 

Facts and Analysis 

A. Facts 

During audit fieldwoik, tiie Audit staff utilized sample testing and a review of other 

contributions not included in the sample population to identify apparent excessive 

contributions from individuals. These reviews revealed that BHFC received apparent 

excessive contributions from individuals totaling $41,424. This included contributions 

that could still be resolved, albeit untimely, via written presumptive reattribution or 

redesignation notifications to the contributors ($35,964^. The remaining excessive 

contributions (SSi46(P) could only be timely resolved tlwugh demonstration that timely 

redesignation and/or reattribution letters were sent and signed by the contributors. If sent 

in response to the audit, these excessive contributions would be untimely resolved by 

BHFC. 

The excessive contributions that could still be resolved by BHFC ($35,964) were the 

result of BHFC not resolving the excessive portion of contributions by timely forwarding 

a presumptive letter to its contributors informing them how their contribution had been 

I redesignated and/or reattributed, or refunding the excessive portion of contributions. 

i 

For the remaining excessive contributions ($5,460), these errors were the result of BHFC 

reattributing the excessive portion of contributions written on checks imprinted with a 

single account holder to another individual without authorization from its contributors. 

BHFC did not maintain a separate account for questionable contributions. However, 

based on its cash-on-hand at the end of the audit period ($760,264), it appears tiiat BHFC 

did nuintain sufficient fiiiids to make refunds of the apparent excessive contributions. 

' The sample error amount ($13,S64) was. projected using a Monetary Unit Sample with a 95 peioent 

confidence level. A review of high dollar contributions not included in the sample cmr population 

identified excessive contributions totaling $22,100. The sample estimate could be as low as $7,638 or as 

high as $23,955. 

' In addition to the $22,100 that could be resolved with a presumptive letter, the review of high dollar 

contributions identified excessive contributions totaling $5,460 that could be resolved via a 

' redesignation, reattribution, and/br reflmd to the contributor. 
B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discus^ this matter with BHFC representatives at the exit conference 

and provided schedules of the apparent excessive contributions. BHFC representatives 

asked questions regarding the presumptive reattribution and/or redesignation letters that 

could be issued. The Audit staff explained that the presumptive letters sent in response to 

the exit conferaice would untimely resolve the excessive contributions of $35,964. 

In response to the exit conference, BHFC representatives submitted presumptive 

reattribution and redesignation letters that were sent to all the contributors identified by 

the Audit staff as having given apparent excessive contributions. In addition, BHFC 

reviewed its contribution records and identified an additional 9 contributions. BHFC sent 

letters to these contributors as well and submitted them to the Audit staff fbr review. As 

such, the Audit staff concludes that BHFC has untimely resolved all excessive 

contributions which could have been remedied with a presumptive reattribution and/or 

redesignation letter. 

For the excessive amount of $5,460, BHFC representatives provided documentation 

demonstrating diat some of the excessive portion ($60) has been refunded, albeit 

untimely. However, the remaining $5,400 had not been reattributed and remained 

unresolved. 

The Interim Audit Report recommended that BHFC provide documentation which 

demonstrated that the unresolved excessive contributions in question, totaling $5,400, 

were resolved through the receipt of authorization from its contributors or refond^. 

Absent such deriionstration, it was further recommended that BHFC refund the 

contributions and provide evidence of such refunds or disgorge the funds. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, BHFC untimely resolved the 

remaining excessive contributions ($5,400) by providing a completed reattribution letter 

from its contributors. As such, all Ae excessive contributions have been resolved by 

BHFC, albeit untimely.