Final Audit Report of the 

Commission on 

Nader for President 2008 

Januaiy 4, 2008 - August 31, 2008 

Why the Audit 

Was Done 

Federal law requires the 

Commission to audit 

every political committee 

established by a candidate 

who receives public fimds 

for the primary 

campaign.' The audit 

determines whether the 

candidate was entitled to 

all of the matching funds 

received, whether tiie 

campaign used the 

matching funds in 

accordance widi die law, 

whether die candidate is 

entitled to additional 

matchmg fimds, and 

whether the campaign 

otherwise complied with 

the limitations, 

prohibitions, and 

disclosure requirements 

of the election law. 

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 Campaign (p. 2) 

Nader for President 2008 is the principal campaign conunittee for 

Ralph Nader, a candidate for the Independent Party's nomination 

for the office of the President of the United States. The 

committee is headquartered in Washington, DC. For more 

mformation, see the chart on the Campaign Organization, p. 2. 

Financial Activity (p. 3) 

• Receipts 

o Contributions from Individuals $1,761,530 

o Matchmg Funds Received 753,535 

o Candidate Contributions 40,000 

o Loans Received 300,000 

0 Offsets to Operating Expenditures 4,339 

o Total Receipts $ 2,859,404 

Disbursements 

o Operating Expenditures $ 2,058,691 

o Transfers to Nader General 103,408 

o Fimdraising Disbursements 85,606 

o Loan Repayments 300,000 

o Refunds of Contributions 13,485 

0 Total Disbursements $2,561,190 

Commission Findings (p. 3) 

• Net Outstanding Campaign Obligations (Finding 1) 

• Misstatement of Financial Activity (Fmding 2) 

• Disclosure of Loans (Finding 3) 

26U.S.C. §9038(a). 
Final Audit Report of the 

Commission on 

Nader for President 2008 

January 4, 2008 - August 31, 2008 
Table of Contents 

Page 

Parti. Background 

Authority for Audit 1 

Scope of Audit 1 

Inventory of Campaign Records 1 

Audit Hearing 1 

Part II. Overview of Campaign 

Campaign Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Fmdmgs and Recommendations 3 

Amount Owed to the U.S. Treasury 4 

Part IV. Commission Findings 

Fmding 1. Net Outstanding Campaign Obligations 4 

Finding 2. Misstatement of Financial Activity 14 

Findings. Disclosure of Loans 16 
Parti 

Backgroimd 

Authority for Audit 

This report is based on an audit of Nader for President 2008 (NFP), undertaken by the 

Audit Division of the Federal Election Commission (the Commission) as mandated by 

Section 9038(a) of Titie 26 of die United States Code. That section states, "After each 

matching payment period, the Commission shall conduct a thorough examination and 

audit of the qualified campaign expenses of every candidate and his authorized 

committees who received [matching] payments imder section 9037." Also, Section 

9039(b) of die United States Code and Section 9038.1(a) (2) of die Conunission's 

Regulations state that the Commission may conduct other examinations and audits from 

time to time as it deems necessary. 

Scope of Audit 

This audit examined: 

1. the receipt of excessive contributions and loans; 

2. the receipt of contributions from prohibited sources; 

3. the receipt of transfers from other authorized committees; 

4. the disclosure of contributions and transfers received; 

5. the disclosure of disbursements, debts and obligations; 

6. the recordkeeping process and completeness of records; 

7. the consistency between reported figures and bank records; 

8. the accuracy of the Statement of Net Outstanding Campaign Obligations; 

9. the campaign's compliance with spending limitations; and 

10. other campaign operations necessary to the review. 

Inventory of Campaign Records 

The Audit staff routinely conducts an mventory of campaign records before it begins the 

audit fieldwork. The Audit staff determined the NFP records were materially complete 

and the fieldwork began immediately. 

Audit Hearing 

NFP decluied the opportunity for an audit hearing. 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration March 4,2008 

• Eligibility Period^ July 15,2008 - September 4,2008 

• Audit Coverage January 4,2008 - August 31,2008 

Headquarters Washington, DC 

Bank Information 

• Bank Depositories Four 

• Bank Accounts Seven checking accounts 

Treasurer 

• Treasurer When Audit Was Conducted Carl J. Mayer 

• Treasurer During Period Covered by Audit Carl J. Mayer 

Management Infonnation 

• Attended FEC Campaign Finance Seminar No 

• Who Handled Accounting and Recordkeeping 

Tasks 

Paid staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand @ January 4,2008 $0 

o Contributions from Individuals $ 1,761,530 

o Matching Funds Received 753,535' 

o Candidate Contributions 40,000 

o Loans Received 300,000 

o Offsets to Operating Expenditures 4,339 

Total Receipts $2,859,404 

o Operating ExiTenditures $2,058,691 

o Transfers to Nader General 103.408 

o Fundraising Disbursements 85.606 

o Loan Repayments 300.000 

o Refunds of Contributions 13,485 

Total Disbursements $2,561,190 

Cash-on-hand @ August 31,2008 $298,214 

^ The Candidate was eligible for matching funds beginning on the date of certification of eligibility and ending on the date the 

Candidate announced his withdrawal from the campaign. See 11 CFR §9033. 

^ NFP received an additional $127,959 after September 4,2008 for a total of $881,494. This represents four percent of the 

maximum entitlement ($21,025,000) a Presidential candidate was eligible to receive in 2008. 
Part III 

Summaries 

Commission Findings 

Finding 1. Net Outstanding Campaign Obligations 

A review of NFP's financial activity through August 31,2008 and estimated winding 

down costs indicated that the Candidate received matching fiinds of $27,315 m excess of 

his entitiement. In response, NFP Counsel contended that: (1) 11 CFR §9034.11(d) was 

not fair to minor party or independent committees such as NFP because it did not allow 

qualified, primary-related wmding down costs until 31 days after the general election and 

NFP incurred $90,479 m costs related to the Commission's audit durmg this period, and 

(2) 11 CFR §9032.6 was unfair to Mr. Nader because it resulted in his date of meligibility 

(DOI) being September 4,2008, the last day of the last major convention, as opposed to a 

later date. 

The Commission approved this findmg. (For more detail, see p. 4.) 

Finding 2. Misstatement of Financial Activity 

A comparison of NFP's reported figures with its bank records revealed that from January 

4,2008 tfurough August 31,2008, NFP overstated receipts by $17,106, understated 

disbursements by $74,599 and overstated ending cash by $91,705. Most of the 

understatement of disbursements was due to transfers that NFP made to its general 

committee but did not report. NFP clarified some differences and filed amended reports, 

correcting the remaining misstatements. 

The Commission approved this finduig. (For more detail, see p. 14.) 

Finding 3. Disclosure of Loans 

NFP secured a $500,000 line of credit on June 25,2008, but did not file the requured 

Schedule C-P-1, or a copy of the Ime of credit agreement, until November 21,2008, after 

the Audit staff made NFP officials aware of this omission. NFP complied with the Audit 

staffs recommendation. 

The Commission approved this finding. (For more detail, see p. 16.) 

Amount Owed to the U.S. Treasury 

Finding 1 Federal Funds Received in Excess of Entitiement $27,315 

Total Due to U.S. Treasury $27,315 
Part IV 

Findings and Recommendations 

Finding 1. Net Outstanding Campaign Obligations 

Summaiy 

A review of NFP's financial activity through August 31,2008 and estimated winding 

down costs mdicated that the Candidate received matchmg funds of $27,315 in excess of 

his entitiement. hi response, NFP Counsel contended tiiat: (1) 11 CFR §9034.11(d) was 

not fair to mmor party or mdependent committees such as NFP because it did not allow 

qualified, primary-related winding down costs until 31 days after the general election and 

NFP incurred $90,479 m costs related to the Commission's audit during this period, and 

(2) 11 CFR §9032.6 was unfau: to Mr. Nader because it resulted in his date of ineligibility 

(DOI) being September 4,2008, the last day of the last major convention, as opposed to a 

later date. 

The Conunission approved this finding. 

Legal Standard 

A. Net Outstanding Campaign Obligations (NOCO). Witiiin 15 days of the 

candidate's date of ineligibility (see definition below), the candidate must submit a 

statement of "net outstandmg campaign obligations." This statement must contain, 

among other things: 

• the total of all committee assets including cash-on-hand, amounts owed to the 

committee and capital assets listed at their fair market value; 

• the total of all outstanding obligations for qualified campaign expenses; and 

• an estimate of necessary winding-down costs. 11 CFR §9034.5(a). 

B. Date of Ineligibility (DOI). The date of ineligibility is whichever of the following 

dates occur first: 

• the day on which the candidate ceases to be active in more than one state; 

• the 30th day following the second consecutive primary m which the candidate 

receives less than 10 percent of the popular vote; 

• the end of the matching payment period, which is generally the day when the 

party nommates its candidate for the general election; or 

• in the case of a candidate whose party does not make its selection at a national 

convention, the last day of the last national convention held by a major party in 

die calendar year. 11 CFR §§9032.6 and 9033.5. 

C. Qualified Campaign Expense. Each of the followmg expenses is a qualified 

campaign expense. 

• An expense that is: 

o mcurred by or on behalf of the candidate (or his or her campaign) durmg the 

period begiiming on the day the individual becomes a candidate and 
continumg through the last day of the candidate's eligibility under 11 CFR 

§9033.5; 

o made in connection with the candidate's campaign for nomination; and 

o not incurred or paid in violation of any federal law or the law of the state 

where the expense was incurred or paid. 11 CFR §9032.9. 

• An expense incurred for the purpose of determining whether an mdividual should 

become a candidate, if that individual subsequentiy becomes a candidate, 

regardless of when that expense is paid. 11 CFR §9034.4. 

• An expense associated with winding down the campaign and terminatmg political 

activity. 11 CFR §9034.4(a)(3). 

D. Value of Capital Assets. The fau: market value of capital assets is 60 percent of 

the total original cost of the assets when acquured. Assets received after the date of 

ineligibility must be valued at their fair market value on the date received. A 

candidate may claim a lower fair market value for a capital asset by listing the asset 

separately on the NOCO statement and demonstrating, through documentation, the 

lower fau: market value. 11 CFR §9034.5(c)(l). 

E. Entitlement to Matching Payments after Date of Ineligibility. If, on tiie date of 

ineligibility (see above), a candidate has net outstanding campaign obligations as 

defined under 11 CFR §9034.5, the candidate may continue to receive matching 

payments provided that he or she still has net outstanding campaign debts on the day 

the matchmg payments are made. 11 CFR §9034.1(b). 

F. Allocation of Primary and General Election Winding Down Costs. A 

candidate who runs m both the primary and general election may divide winding 

down expenses between his or her primary and general election committees using any 

reasonable allocation method. An allocation method is reasonable if it divides the 

total windmg down costs between the primary and general election committees and 

results m no less than one thu:d of total windmg down costs allocated to each 

committee. A candidate may demonstrate diat an allocation metfaod is reasonable 

even if either the primary or the general election conimittee is allocated less than one 

diird of die total winding down costs. 11 CFR §9034.11(c). 

G. Primary Winding Down Costs During the General Election Period. A primary 

election candidate who does not run in the general election may receive and use 

matching funds for these purposes either (1) after he or she notifies the Commission 

Ul writmg of his or her withdrawal from the campaign for nomination or (2) after the 

date of the party's nominatmg convention, if he or she has not withdrawn before the 

convention. A primary election candidate who runs in the general election, regardless 

of whether the candidate receives public funds for the general election, must wait 

until 31 days after the general election before using any matching funds for winding 

down costs related to the primary election. No expenses incurred by a primary 

election candidate who runs in the general election prior to 31 days after the general 

election shall be considered primary winding down costs. 11 CFR §9034.11(d). 
Facts and Analysis 

A. Facts 

The Audit staff prepared a Statement of Net Outstanding Campaign Obligations (NOCO) 

as of September 4,2008, the Candidate's date of ineligibility (DOI). ^ After becoming 

meligible due to die application of 11 CFR §9033.5(b), die Candidate continued to 

campaign in the general election. For purposes of determining NOCO, the Audit staff 

considered oidy winding down costs incurred after December 5,2008, the end of the 

general election expenditure report period and 31 days after the general election. In 

accordance witii 11 CFR §9034.11(d), that date begins die period m which NFP was 

eligible to use matching fimds for winding down costs related to the primary election. 

Winding down costs originally were allocated between NFP (Primary Committee) and 

Nader for President 2008 General Committee (Nader General) using a 70/30 ratio, 

respectively, as agreed upon between NFP and the Audit staff during audit fieldwork. 

These allocation percentages were later revised to a 95/5 ratio, respectively, for windmg 

down costs incurred after December 5,2008, based upon the Audit staffs agreement with 

a detailed analysis provided by NFP in response to the Draft Final Audit Report. The 

Audit staff reviewed NFP's financial activity through June 30,2011, analyzed estimated 

winding down costs and prepared an updated Statement of Net Outstandmg Campaign 

Obligations, which appears on the next page: 

^ This was the last day of the last national convention held by a major party. 
Nader for President 2008 

Statement of Net Outstanding Campaign Obligations 

As of September 4,2008 

Prepared on June 30,2011 

Assets 

Cash-on-Hand 

Cash in Bank 

Accounts Receivable 

Capital Assets 

Inventory - Merchandise 

Total Assets 

Liabilities 

Accounts Payable for Qualified Campaign Expenses 

9/4/08 

Winding Down Costs (9/5/08 - 12/5/08) 

Actual Winding Down Costs (12/6/08 - 6/30/11) 

Estimated Winding Down Costs (7/1/11 -10/31/11) 

Total Liabilities 

$ 893 [a] 

123.908 

8.921 

10,298 

500 

$ 98.884 

-0- [b] 

141,800 

8.145 [c] 

$144,520 

$ 248.829 

Net Outstanding Campaign Obligations (Deficit) as of September 4,2008 ($104.309) 

Footnotes to NOCO Statement; 

[a] Amount includes contributions dated prior to DOI and deposited after DOI. 

[b] Winding down costs were not allowed during this period because a candidate running in the general election 

must wait until 31 days after the general election before using any matching funds for winding down costs 

related to the primary election, pursuant to 11 CFR §9034.11(d). 

[c] Estimated winding down costs will be compared to actual winding down costs and adjusted accordingly. 
Shown below are adjustments for fimds received after September 4,2008, through 

October 3,2008, based on the most current financial information: 

Net Outstanding Campaign Obligations (Deficit) as of 9/4/08 ($104,309) 

Private Contributions and Other Receipts Received 9/5/08 

tiu-ough 10/3/08 

3,665 

Matching Funds Received on 10/3/08 127,959 

Federal Funds Received in Excess of Entitlement $27^15 

As presented above, NFP received matching funds totalmg $27,315 in excess of the 

amount to which the Candidate was entitied. This amount includes adjustments made to 

the NOCO after the Audit staffs review of the NFP's responses to bodi the Preliminary 

Audit Report and Draft Final Audit Report discussed below. 

B. Preliminary Audit Report and Audit Division Recommendation 

At the exit conference held at the conclusion of audit fieldwork, the Audit staff presented 

a NOCO and informed NFP of a calculated repayment to the U.S. Treasury of $62,698. 

In response to the exit conference, the NFP Counsel stated that NFP takes issue with the 

NOCO statement because of how the Commission currentiy interprets the winding down 

rules as applied to a candidate who receives primary matching fiinds and goes on to the 

general election, but does not receive general election public fimding. He noted that the 

bright line cut-off rule regarding post-DOI expenditures, which does not count primary 

expenditures from DOI through the end of the general expenditure report period 

(December 5,2008), was unfau: to a minor party candidate who received primary 

matching fimds and who had to go througfa ballot access hurdles, even after the major 

parties held theu- nominating conventions. Counsel added that primary-related expenses 

incurred after DOI are disqualified solely according to when they were incurred, whereas 

state-determined ballot access requu:ements for minor party candidates result in 

indisputably primary-related expenses such as ballot access expenditures, being incurred 

after the nommation date of the last major party to hold its convention. 

NFP Counsel pointed out that the Nader 2000 Primary Committee argued this issue in its 

response to the Preliminary Audit Report, which the Commission rejected in part at the 

time. Counsel contended that if the Commission were to reconsider its bright line rule, 

NFP could identify and submit documentation for expenses that should be considered 

primary expenses, mcurred from September 5 through November 4,2008. 

As noted in the Legal Standard section above, the Commission's regulations specify that 

qualifled campaign expenses must be mcurred between the date the uidividual becomes a 

candidate and the last day of the candidate's eligibility under 11 CFR §9033.5. In Mr. 

Nader's case, he has been given the benefit of the longest possible primary period 

(26 U.S.C. 9036.2(6)). Therefore, expenses between September 5 and November 4,2008 

caimot be considered primary election expenses. 

Counsel also noted tiiat NFP followed 11 CFR §9034.11(d), and as a result, did not use 

primary matchmg fimds or private money for any expenses incurred m the ''general 
election" period through December 5,2008. However, Counsel noted, "clearlyidentifiable primary winding down expenses were mcurred during this period, especially 

after November 4 and through December 5." He stated that even if NFP is not given 

credit for any primary expenses through November 4, it should be given credit for 

obvious windmg down expenses incurred November 5 througfa December 5,2008, and 

tfaat the expenses related to the Commission's audit on NFP's premises from November 

13 through December 9,2008, were undeniably primary winding down expenses. 

NFP calculated at least $88,137 in winding down expenses from November 5 through 

December 5,2008, which it believes should be considered legitimate windmg down 

expenses. Apart from its request for the Commission to reconsider the bright line rule in 

NFP's situation, NFP proposed two solutions to adjust the NOCO: 

(1) Apply full credit in the amount of $88,137 for November 5 througfa December 5, 

2008 for expenses NFP can document as primary wmdmg down expenses, due to the 

timing of the audit. At a minimum, 70 percent, or $61,696, should be allowed. 

(2) If the Commission does not accept the first proposal, all actual expenses from 

December 5 through termination should be credited on the NOCO 100 percent as primary 

expenses, as opposed to the 70/30 percent primary/general allocation. 

NFP Counsel stated tiiat based on 11 CFR §9004.11(c) [note: identical to 11 CFR 

§9034.11(c)], the Audit staff has the flexibility to allow a candidate who runs in both the 

primary and general to divide winding down expenses between the primary and general 

using any reasonable allocation method. He said further that. .there is nothing in 11 

C.F.R. §9034.11(d) that prohibits crediting the Committee as havmg expended its general 

election winding down costs during the post-general election period withm tfae 31 days." 

He added that the regulation solely refers to not usmg primary matchmg funds for 

winding down costs related to the primary election. 

The Audit staff notes tiiat tiie Explanation and Justification for 11 CFR §9034.11(d) -

Candidates Who Run in Both Primary and General Elections states that: 

.. .a candidate who nms in the general election must wait until the day 

following the date 30 days after the general election before usmg matchmg 

fimds for primary wmding down costs, regardless of whether the candidate 

receives public funds for the general election. This rule clarifies that no 

expenses incurred prior to 31 days after the general election by candidates 

who run in the general election may be considered primary winding down 

costs or paid with matchmg funds. 

The Explanation and Justification also notes the following: 

Although this revised rule may result in general election campaigns 

incurring a small amount of administrative costs related to terminating the 

primary campaign during the general election period, in practice, these 
10 

expenses are offset by general election start up costs that are incurred and 

paid by the primary conunittee prior to the candidate's DOI. This 

approach is also consistent with the Commission's bright line mles for 

allocating expenses between primary and general campaigns at 11 CFR 

§9034.4(e), which allow some primary related expenses to be paid by the 

general election committee and vice versa. 

The 70 percent primary 30 percent general election allocation ratio is already less than 

the suggested minimum ratio in the regulation and was the allocation that NFP and the 

Audit staff agreed upon during audit fieldwork. The ratio reflects that the primary 

winding down effort was the major share of the activity, but also recognizes that the 

general election campaign required attention at the same time. 

NFP Counsel's final point was that. .public policy should not penalize a political 

committee through the application of the FEC's regulations for being extraordinarily 

efficient, for being prepared for immediate audit, for paying its bills in a timely fashion, 

and for being able to termmate quickly." 

In the Preliminary Audit Report, the Audit staff recommended that NFP provide evidence 

that it did not receive matchmg fimd payments in excess of entitiement. It was further 

noted that absent such evidence, the Audit staff would recommend that the Commission 

determine that $62,698 was repayable to the U.S. Treasury. 

C. Committee Response to the Preliminary Audit Report 

In response to the recommendation in the Prelimmary Audit Report, NFP noted that some 

adjustments were necessary for the winding down costs category on the NOCO. The 

Audit staff discussed these revisions with NFP representatives and made the necessary 

adjustments. In addition, the Audit staff updated the winding down costs total in the 

NOCO statement by replacmg estimated costs with actual costs through March 31,2011, 

from subsequent reports filed witii the Commission and by obtaming updated financial 

data from NFP. As a result, die Audit staff revised die NOCO deficit from $68,926 to 

$75,459 and reduced the amount of federal fimds received in excess of entitiement from 

$62,698 to $56,165. 

NFP Counsel reiterated in his written response to the Preliminary Audit Report that "[t]he 

Commission should not apply the 31-day rule, which excludes clearly identified, 

primary-related winding down costs incurred by the Conunittee while the audit was being 

conducted." He stated that he understands that pursuant to 11 CFR §9034.11(d), the 

NOCO should not contain primary election winding down costs for the 31-day period 

after the general election, but proposed that the Commission should reconsider the 

"bright-line" rule in NFP's case. He added that of the $252,475 in expenses incurred 

during this period for both primary and general expenditures, NFP paid all expenditures 

with generd fimds as required by the rule, but tiiat $90,479 (36 percent) of tiie 

expenditures were actually primary-related costs. 

NFP Counsel contended that the application of this rule resulted m punishmg NFP for 

quickly and efficientiy dealing with the Commission audit. He pointed out that NFP 
11 

provided preliminary records to the Audit staff in September 2008, and provided space 

for the Audit staff to conduct audit fieldwork between November 17,2008, and 

December 9,2008. He added that "[d]urmg both the general election period of 

September 4,2008 to November 4,2008 and the post general period from November 5, 

2008 to December 5,2008, the Committee uicurred substantial expenses for primary 

election winding down compliance mcluding office space, overhead, phones, fax and 

compliance related personnel, counsel, and support staff expenses." Counsel stated that 

"[i]t is because of the reality tfaat such primary election winding costs are incurred by a 

general election candidate during the general election campaign that the Commission 

should revisit the rule prohibiting primary winding down expenses imtil 31 days after the 

general election. It makes littie policy sense to prohibit a general election candidate from 

promptly settimg primary matters until 31 days cfter the general election (italics in 

original); such practice merely delays the settlement of primary related issues." 

NFP Counsel noted that as indicated by the Explanation and Justification for 11 CFR 

§9034.11(d) discussed in the Preliminary Audit Report, the reason for the 31-day rule is 

two-fold. Fu:st, a small amount of administrative costs related to termmating the primary 

campaign during the general election would be offset by general campaign start-up costs 

incurred by the primary committee. Second, the rule is consistent with other Commission 

bright-line rules for allocatmg expenses between the primary and general campaigns. He 

furdier stated tfaat neitfaer of tfaese applies to the NFP scenario because 36 percent of the 

total expenditures withm the period cannot be characterized as de minimis administrative 

costs offset by general election start-up costs. He added that although the costs . .may 

be de mmimus in the context of a major party campaign they represent a far larger and 

more burdensome proportion of an independent candidate's total campaign expenditures 

and the operation of the rule imposes a material hardship on minor party or independent 

committees." 

NFP Counsel noted tiiat in October 2009, NFP submitted records in support of $90,479 in 

primary winding down expenses spent during tfae 31-day period after the general election 

and tfaat if not given full credit for tfaese costs, NFP sfaould at least be given credit for 70 

percent of this total as primary windmg down costs. He argued that these expenses were 

related to the audit fieldwork and should therefore be considered primary-related. If not, 

he concluded that. .the Committee could be put in the untenable position of having to 

raise fimds to make a repayment for not being credited for expeditiously seekmg to 

terminate." 

NFP Counsel also argued that the rule on settmg the DOI date as the last day of the last 

national convention held by a major party is unfau: to minor party and mdependent 

candidates such as Mr. Nader who receive primary matcfamg fimds and run in tfae general 

election, but do not receive general election public funding. He agreed witfa the DOI date 

of September 4,2008, but contended that this date is unfair because state law imposes 

continuing ballot access hurdles that last beyond that date. For example, he cited seven 

states that had ballot access deadlmes of September 5,2008 or later and six more that had 

a deadline of September 2,2008. He said it is unfau: that a committee such as NFP incurs 

primary-related ballot access expenses that the DOI rule disqualifies because the major 

parties' conventions are over. He noted that NFP spent almost $4,000 on primary ballot 
12 

access expenses between September 5 and November 4,2008. NFP Counsel referred to 

Advisory Opinion 1995-45, whicfa treats ballot access expenditures as primary qualified 

expenditures and fae urged tfae Commission to establisfa a fairer DOI policy tfaat captures a 

larger percentage of sucfa costs. 

NFP Counsel also contended tfaat primary-related expenses incurred after December 5, 

2008 sfaould be credited 100 percent to tfae primary as opposed to tfae 70 percent primary 

expense allocation agreed upon by NFP and tfae Audit staff during audit fieldwork. He 

agreed tfaat for the entke campaign, NFP spent approximately 70 percent of its fimds on 

the primary election, but that the $90,479 spent on primary expenses durmg the 31-day 

period after tfae general election was allocated as general despite being spent on tfae 

primary election, because of tfae 31-day rule. He added tfaat if one applies 70 percent of 

tfae $301,593 spent by the primary and general committees combmed from November 5, 

2008 forward, the amount allocable to the primary is $211,115. NFP is credited only 

with $132,000 due to die DOI and 31-day rules, whicfa results in only 30 percent being 

applied for primary winding down costs. NFP Counsel fiirtfaer noted tfaat in tfae Nader 

2000 Audit Report, all expenditures after June 1,2001 were credited 100 percent for tfae 

primary election because tfae Commission audit began in August 2001, and said tfaat 

precedent sfaould be carried forward to tfae 2008 situation by allowing primary wmding 

down expenses during November 2008. He added tfaat any expenses incurred after 

December 5,2008 should therefore be considered primary winding down costs based on 

such precedent. 

The Audit staff notes that 11 CFR §9034.11(d) provides that a primary election candidate 

who nms in the general election, regardless of whetfaer tfae candidate receives fimds for 

tfae general election, must wait 31 days following tfae general election before using 

matcfaing fimds for winding down costs related to the primary election and no expenses 

mcurred prior to 31 days after the general election shall be considered primary winding 

down costs. The fact that the audit of the primary campaign began during the 31-day 

period has little bearing on this issue because NFP incurred the majority of the $90,479 m 

costs during this period and would faave incurred tfae costs even if audit fieldwork faad 

begun after December 5,2008. Tfae Audit staff notes diat 66 percent of die $90,479 went 

toward payroll-related costs and 17 percent towards faeadquarters rent. Committee 

officials and tfae Audit staff togetfaer determine wfaen audit fieldwork is to begin. In tfais 

case, we agreed to begm fieldwork early, after NFP officials requested an early start to 

enable members of tfaeir staff to sfaut down tfaeu: faeadquarters so they could relocate to 

tfaeir respective homes prior to the holidays. 

Bodi NFP officials and die Audit staff agree diat applying 26 U.S.C. §9032(6) to Mr. 

Nader's situation resulted m a September 4,2008 DOI, the last day of die 2008 

Republican convention, whicfa was tfae second of tfae two major conventions faeld. We 

agree that NFP had ballot access expenses after the date that would have been considered 

primary qualified expenses if they had been incurred prior to DOI, but that based on this 

provision tfaese costs are not allowed to be treated as primary expenses. 
13 

Tfae Audit staff notes tfaat it applied tfae treatment of primary winding down costs 

consistentiy to tfae Conunission audits of Mr. Nader m 2000,2004 and 2008. No primary 

winding down costs were allowed until 31 days after tfae general election in all three 

cases. The only difference is that the audit fieldwork began withm 30 days of the general 

election in 2008, ratfaer tfaan in tfae year following tfae election in tfae otfaer election cycles. 

D. Draft Final Audit Report 

The Draft Fmal Audit Report concluded that NFP received $56,165 in excess of the 

Candidate's entitiement and should pay that amount to the United States Treasury. 

In the Draft Final Audit Report, the Audit staff notified NFP that if it could demonstrate a 

reasonable allocation method, pursuant to 11 CFR §9034.11(c), for winding down costs 

mcurred after December 5,2008, resulting in a faigfaer percentage tfaan the 70 percent 

primary allocation agreed upon during audit fieldwork, the Commission would consider 

allowing a larger winding down total for NFP. 

E. Committee Response to the Draft Final Audit Report 

In response to die Draft Final Audit Report, NFP provided a detailed analysis of its 

allocation of post-December 5,2008 winding down expenses. NFP officials noted that 

they began providing records to the Audit staff in September 2008 in preparation for the 

Commission audit and that audit fieldwork concluded m December 2008. NFP sold all 

its assets from its headquarters that were uimecessary for the audit and placed all of its 

records and remaming assets in storage. As of December 31,2008, NFP had virtually 

completed its windmg down for the general election. The committee included a listmg of 

five primary-related staff involved in the NFP audit from December 6 through December 

31,2008, along with their roles and responsibilities. NFP also included a list of the 

names, roles and responsibilities of seven additional staff paid during both tfae primary 

and general cycles to assist in sfautting down botfa tfae primary and general election 

fimctions from December 6 througfa December 31,2008. The officials also explained 

that after January 1,2009, NFP had no offices and tfae only payroll/consulting payments 

were to tfae five primary-related staff. After Marcfa 1,2009, only two of tfaese staff 

remained on payroll; for more tfaan a year, no one faas been on tfae payroll. 

NFP officials presented a proposed allocation metfaod in response to tfae Draft Final Audit 

Report. The committee allocated all expenses from December 6,2008 through December 

31,2008 at a rate of 70 percent to die primary totaling $45,938 ($65,625 x .70). This 

resulted in no change in the amount allocated to the primary election for this period. 

However, NFP allocated all expenses from January 1,2009 througfa June 30,2011 at 95 

percent (instead of 70 percent) to die primary election totalmg $95,862 ($100,907 x .95). 

Tfaerefore, primary winding down costs totaled $141,800 ($45,938 + $95,862) for die 

period December 6,2008 tfarougfa June 30,2011. Tfais results m a revised overall 

primary wmding down percentage of 85 percent ($141,800/$166,532). In addition, NFP 

Counsel referenced its previous response to tfae Preliminary Audit Report relative to its 

disagreement witfa tfae application of tfae 31-day rule to NFP. 
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NFP also provided additional documentation updating estimated wuidmg down costs 

from July 1,2011 tfarougfa October 31,2011 and broke tfaem down mto various categories 

sucfa as legal fees, records management, finance, software and storage. Based on NFP's 

response to tfae Draft Final Audit Report, tfae Audit staff made adjustments to tfae NOCO, 

resulting in a decrease to tfae federal fiinds received m excess of entitlement from $56,165 

to $27,315. 

Commission Conclusion 

On August 3,2011, die Commission considered tfae Audit Division Recommendation 

Memorandum in whicfa tfae Audit Division recommended tfaat tfae Commission determine 

that NFP received $27,315 in matching fimds in excess of the Candidate's entitlement 

and must repay that amount to die United States Treasury. 

The Commission approved the Audit staffs recommendation. 

Finding 2. Misstatement of Financial Activity 

Summary 

A comparison of NFP's reported figures with its bank records revealed that from January 

4,2008 tiu:ough August 31,2008, NFP overstated receipts by $17,106, understated 

disbursements by $74,599 and overstated ending casfa by $91,705. Most of tfae 

understatement of disbursements was due to transfers tfaat NFP made to its general 

committee but did not report. NFP clarified some differences and fded amended reports, 

correcting tfae remaining misstatements. 

The Commission approved this findmg. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• the amoimt of cash on hand at the begiiming 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 tfae reporting period and for tfae calendar 

year; and 

• certain transactions tfaat require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 2 U.S.C. §434(b)(l), (2), (3), (4) and (5) 

Facts and Analjrsis 

A. Facts 

The Audit staff reconciled NFP's reported fmancial activity with its bank records and 

determined tiiat tfaere was a misstatement of cash-on-faand, receipts and disbursements. 

The following chart outlines the discrepancies and succeedmg paragraphs explain, to the 

extent possible, the reasons for the misstatements. 
15 

2008 Activity 

Reported Banlc Records Discrepancy 

Opening Cash Balance 

@ January 4,2008 

$0 $0 $0 

Receipts $2,977,570 $2,960,464 $17,106 

Overstated 

Disbursements $2,587,452 $2,662,051 $74,599 

Understated 

Ending Cash Balance 

@ August 31,2008 

$390,118 $298,413 $91,705 

Overstated 

The overstatement of receipts resulted from the followmg: 

• Earmarked contributions double-counted m 

receipts total 

• Overreported receipts 

• In-kind contributions not reported on Schedules A 

• Unexplained difference 

Net Overstatement of Receipts 

The overstatement of disbursements resulted from the following: 

• Unreported transfers to Nader General 

• Net reported bank debit adjustments, never adjusted 

(voided checks; contributions retumed for insufficient 

fimds; stop payments; over/under reported items) 

• In-kind contributions not reported on Schedules B 

• Unexplained difference 

Net Understatement of Disbursements 

( 13,725) 

( 4,225) 

838 

6 

$ (17.106^ 

101,391 

(22,213) 

251 

(4.830) 

$74.599 

The overstatement of ending cash-on-faand m tfae amount of $91,705 resulted from tfae 

misstatements described above. 

NFP did not report tfae majority of transfers of contributions m excess of tfae limitations it 

made to tfae Nader General committee, totalmg $101,391. Tfaese transfers were mainly 

contributions to NFP by contributors wfao faad exfaausted tfaeir contribution limits to NFP 

and the committee properly redesignated the excessive portion of the contribution to the 

Nader General conunittee. 

B. Preliminary Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff explained the misstatements and subsequentiy 

provided NFP representatives with schedules detailing these discrepancies. In response, 

the NFP representatives agreed to amend NFP's reports. 

In the Prelimmary Audit Report, the Audit staff recommended that NFP: 

• amend its 2008 reports to correct the misstatements; and 
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• amend the casfa balance on its most recently filed report witfa an explanation tfaat 

tfae misstatement faad resulted from audit adjustments from a prior period. Audit 

staff fiirtfaer recommended tfaat NFP reconcile the cash balance on its most recent 

report to identify any subsequent discrepancies that may impact adjustments 

recommended. 

C. Committee Response to the Preliminary Audit Report 

In response to the Prelimmary Audit Report, NFP Counsel correctly noted that it made 

clarifications with the Audit staff for some differences and NFP fded amended reports, 

correcting the remaming misstatements. In addition, NFP amended the cash balance on 

its most recentiy filed report with an explanation that the misstatement had resulted from 

audit adjustments from a prior period. 

D. Draft Final Audit Report 

In tfae Draft Final Audit Report, tfae Audit staff acknowledged that it and NFP 

representatives agreed upon clarifications and tfae committee filed corrective 

amendments. 

E. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, NFP Counsel reiterated that clarifications 

were made with the Audit staff and corrective amendments were filed. 

Commission Conclusion 

On August 3,2011, the Commission considered the Audit Division Recommendation 

Memorandum in whicfa tfae Audit Division recommended tfaat the Commission adopt a 

finding tiiat NFP misstated its financial activity. 

The Commission approved the Audit staffs recommendation. 

I Finding 3. Disclosure of Loans 

Summary 

NFP secured a $500,000 Ime of credit on June 25,2008, but did not file die required 

Schedule C-P-1, or a copy of the Ime of credit agreement, until November 21,2008, after 

the Audit staff made NFP officials aware of this omission. NFP complied witfa tfae Audit 

staffs reconunendation. 

Tfae Commission approved this findmg. 

Legal Standard 

Loans. When a political committee obtams a loan from, or establishes a Ime of credit at, 

a lending institution as described in 11 CFR §§100.82(a) tiu-ough (d) and 100.142(a) 

through (d), it shall disclose in the report covering the period when the loan was obtained 

the following information on Schedule C-1 or C-P-1: 
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(i) tfae date and amount of tfae loan or line of credit; 

(ii) the interest rate and repayment scfaedule of tfae loan, or of eacfa draw on tfae line 

of credit; 

(iii) the types and value of traditional collateral or other sources of repayment that 

secure the loan or the line of credit, and if that security interest is perfected;. 

(iv) an explanation of the basis upon which the loan was made or the line of credit 

established, if not made on the basis of either traditional collateral or the other 

sources of repayment described mi l CFR §§100.82(e)(1) and (2) and 

100.142(e)(1) and (2); and 

(v) a certification from the lending institution that tfae borrower's responses to 

paragrapfas (d)(l)(i)-(iv) of tfais section are accurate, to the best of the lending 

mstitution's knowledge; that the loan was made or the line of credit established 

on terms and conditions (including interest rate) no more favorable at the time 

tfaan tfaose imposed for similar extensions of credit to otfaer borrowers of 

comparable creditwortfainess; and tfaat tfae lenduig mstitution is aware of tfae 

requirement tfaat a loan or a line of credit must be made on a basis tfaat assures 

repayment and tfaat the lendmg institution has complied with Commission 

regulations at 11 CFR §§ 100.82(a) tiirough (d) and 100.142(a) tiu:ough (d). 

11 CFR § 104.3(d)(1). 

In addition, a political committee shall submit: (1) a copy of the loan or line of credit 

agreement, whicfa describes the terms and conditions of the loan or Ime of credit when it 

files Schedule C-1 or C-P-1; and, (2) a Scfaedule C-1 or C-P-1 each time a draw is made 

on a line of credit. 11 CFR § 104.3(d)(2) and (3) 

Facts and Analsrsis 

A. Facts 

NFP secured a line of credit totaling $500,000 on June 25,2008. The loan agreement 

stipulated that repayment was due by September 3,2008. A total of $300,000 was drawn 

against this Ime of credit, and disclosed on Schedules C-P, m amounts of: $200,000 on 

June 27,2008; $50,000 on July 10,2008; and, $50,000 on August 22,2008. NFP repaid 

the first two draws with interest on July 18,2008 and repaid the third draw witfa interest 

on August 29,2008. 

B. Preliminary Audit Report & Audit Division Recommendation 

NFP filed Scfaedules C-P for eacfa of tfae tfaree lines of credit draws but did not file tfae 

required Schedule C-P-1 or a copy of the line of credit agreement until November 21, 

2008, after the Audit staff made NFP officials aware of this omission. No fiirther 

amendments will be necessary for the line of credit disclosure. 

The Audit staff recommended that NFP provide any relevant comments it had on tiiis 

issue. 
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C. Committee Response to the Preliminary Audit Report 

In response to the Prelimmary Audit Report, NFP Counsel stated that staff was unaware 

of the requu:ement to file a Schedule C-P-1 and a copy of the line of credit agreement in 

addition to filing a Schedule C-P, and that as soon as it was made aware of this omission, 

NFP filed the missing items. NFP Counsel added that NFP took inunediate corrective 

action to address tfais unintentional oversigfat. 

D. Draft Final Audit Report 

In the Draft Final Audit Report, the Audit staff acknowledged that NFP filed a Schedule 

C-P-1 and a copy of the Ime of credit agreement as soon as it was notified of tfae 

omission. 

E. Committee Response to the Draft Final Audit Report 

In response to die Draft Final Audit Report, NFP Counsel reiterated that corrective 

amendments were filed as soon as NFP was made aware of its madvertent omission. 

Commission Conclusion 

On August 3,2011, the Coinmission considered the Audit Division Recommendation 

Memorandum, in which the Audit Division recommended that the Coinmission adopt a 

findmg that NFP did not frle the required C-P-1 or a copy of the line of credit agreement 

until the Audit staff made it aware of this omission. 

Tfae Commission approved tfae Audit staffs recommendation.