·'

FE[)ER,-\l ELECTIC), COf\..11\-\ISSION AK00700S

September 27, 1995

MEMORANDUM

TO:

FROM:

RON M. HARRIS

PRESS OFPICER

PRESS OFPICE ~~

ROBERT J. COSTA I\..r"-

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

PEOPLE FOR ENGLISH

Attached please find a copy of the final audit report and related documents on People for Enqlish-which was

approved by the Commission on September 21, 1995.

Informa·tional 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

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REPORT OF THE AUDIT DIVISION

ON

People for English

Approved September 21, 1995

FEDERAL ELECI10N COMMISSION

999 E STREET. N.W.

W AStDNGTON, D.C.
TABLE OF COR'l'Elft'S

PEOPLE FOR ENGLISH

Executive Summary

Final Audit Report

Background

Findings

Transmittal to C~ttee

Chronology

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- FEDERo\L ELECTIO'l (0'\'1\115510,*

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FINAL AUDIT REPORT

ON

PEOPLE FOR ENGLISH

EXECUTIVE SUMMARY

people For English (the Committee) re9istered with the

United States House of Representatives on September 7, 1993 as

the principal campaign committee for Philip S. English,

Republican candidate for the U.S. House of Representatives from

the Commonwealth of Pennsylvania, 21st District.

The audit was conducted pursuant to Section 438(b) of Title

2 of the United States Code, which states, in part, th.t the

Commission may conduct audits and field investigations of any

political committee required to file a report under Section 434

of this title. The audit covered the period from August 26,

1993, through December 31, 1994.

The findings were presented to the Committee at an exit

conference held at the conclusion of audit fieldwork (May 12,

1995) and in the interim audit report, which was forwarded to

the Committee on July 26, 1995. The Committee's respon8e to the inter~ audit report has been incorporated in the final audit

report findings.

The findings contained in the final audit report are

summarized below.

Receipt of Excessive Contributions - 2 U.S.C.

S441a(a)(I)(A), 11 CFR SI03.3(b)(3) and (4). The Committee

received a total of $4,065 in apparent excessive contributions

from nine individual contributors. The Committee issued refund

checks for all excessive contributions, although not timely. In

response to the interim audit report, the Committee provided

copies of the refund checks. One refund check in the amount of

$1,000 has not been negotiated.

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Receipt of Prohibited Contributions - 2 U.S.C. S441b(a), 11

eFR Sl03.3(b)(1) and (4). The Committee received a total of

$3,200 in apparent corporate contributions from eight

contributors. In response to the interim audit report, the

Committee issued refund checks for all corporate contributions,

although not timely, and provided copies of the refund checks.

One refund check in the amount of $200 has not been negotiated.

Recordkeeping for Disbursements - 2 u.s.c. S432(C)(S). The

Committee's disbursement records were missing a number of vendor

addresses, and a number of reported disbursements were a180

disclosed without addresses. In response to the interim audit

report, the Committee prOVided the missing information and filed

Schedules B which disclosed most of the vendor addresses.

Disclosure of OCcupation and Name of Employer - 2 u.s.c.

S434(b)(3)(A), 2 U.S.C. S431(13)(A), 11 CFR Sl04.7{a) and (b).

The Committee itemized a number of contributions from

individuals without disclosure of occupation and/or name of

employer. Best efforts were not demonstrated.

In response to the interim audit report, the Ca..ittee • provided copies of letters sent to those individuals whose

contributions aggregated over $200 in a calendar year and whose

occupation and na.e of employer information was inca.plete. The

Committee a180 filed Schedules A which disclosed the occupation

and name of employer of the individuals who responded to the

letters.

Itemization of Offsets to Operating Exoenditure8 - 2 u.s.c.

S434(b)(3)(F), 2 u.s.c. 1431(13)(B). The Ca.aittee failed to

itemize one offset to operating expenditure in the .-aunt of

$13,964. The Committee filed an amended Schedule A to correct

the public record.

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AK006894

FEDERAL ELECTION COMMISSION

REPORT OF THE AUDIT DIViSION

ON

PEOPLE FOR ENGLISH

I • Background

A. Audit Authority

This report is based on an audit of People For English (the COIIDittee), undertaken by the Audit Division of the Federal

Election Comaission in accordance with the Federal Election

Caapaign Act of 1971, as aaended (the Act). The audit was

conducted pursuant to Section 438(b) of Title 2 of the United

States Code which states, in part, that the Coamission may

conduct audits and field investigations of any political ~ittee required to file a report under Section 434 of this

title. Prior to conducting any audit under this subsection, the C~88ion shall perfoEJI an internal review of reports filed by

selected c~ittee8 to deteDline if the reports filed by a

particular co.aittee ...t the threshold requirelM!nt8 for

substantial ca-pliance with the Act.

B. Audit Coverage

The audit covered the period froa August 26, 1993,

through Dec.-ber 31, 1994. The Ce-ittee reported a beginning cash balance on August 26, 1993 of $0; total receipts for the

period of $438,288; total disburse.ents for the period of

$421,988; and an ending cash balance of $16,300.!1

c. Committee Organization

The Committee registered with the United States House

of Representatives on September 7, 1993, and maintained its

headquarters in Erie , Pennsylvania. The Ca.aittee served as the

principal campaign co.-ittee for Philip S. English, Republican candidate for the u.s. House of Representatives from the

!/ The figures cited in this report were rounded to the

nearest dollar.

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Commonwealth of Pennsylvania, 21st District. The Treasurer of

record during the period covered tst the audit was Gail F. Sherred.~/

To manage its financial activity, the Cam..tt•• maintained two bank accounts and one investment account. Pram

these accounts the Committee made approximately 557

disbursements. Approximately 1,554 contributions ($236,687)

from individuals were received. In addition, the Committee

received 228 contributions ($175,116) from other political committees, two loans ($5,000) made by the Candidate, four

offsets to operating expenditures ($14,313) and one other

receipt ($4,189).

D. Audit Scope and Procedures

The audit covered the following general categories:

1. The receipt of contributions or loans in excess of the

statutory l~itation6 (See Finding II.A.);

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3.

4.

the receipt of contributions from prohibited sources,

such as those from corporations or labor organizations

(see Finding II.B.);

proper disclosure of contributions froa individualsI •

political ca.aitt...s and other entities, to include

the itemization of contributions or other receipts

when required, as well a8, the ca.pletenea8 and

accuracy of the inforllation disclosed (see Pindings

11.0., E.);

proper di8clo8ure of dieburaeaents including the

it-.ization of disburse.ents when required, a8 well

a8, the completene.s and accuracy of the information

disclosed =

5. proper disclo8ure of Committee debts and obligations;

6. accuracy of total reported receipts, disbursements and

cash balances as compared to Cam-ittee bank records;

7. adequate recordkeeping for Committee tran8actions (See

Finding II.C. );

"l./ According to Edwin H. Lund, the Comaittee'8 accountant, Ms.

Sherred served as Treasurer until September 6, 1994; at

which time Mr. Lund became Treasurer. An aaendJlent to the

Committee'. State.ent of Organization was filed on February 14, 1995 to correct the public record. Mr. Lund was

replaced as Treasurer by Mr. E~~ard E. SJaith on August 17,

1995. An amendment to the Committee's Statement of

Organization was filed to correct the public record.

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8. other audit procedures deemed necessary per the

circumstances.

Unless specifically discussed below, no material

non-compliance with statutory or regulatory requirements was

detected. It should be noted that the Commission may pur8ue

further any of the matters discussed in this report in an

enforcement action.

II. Audit Findings and Recommendations

A. Receipt of Excessive Contributions

Section 441a(a)(1)(A) of Title 2 of the United States

Code states that no person shall make contributions to any

candidate and his authorized political committees with respect

to any election for Federal office which, in the aggregate,

exceed $1,000.

Section 103.3(b)(3) of Title 11 of the Code of Federal

Regulations states, in part, that contributions which exceed the

contribution l~itations may be deposited into a campaign

depository or returned to the contributor. If any such

contribution is deposited, the treasurer may request

redesignation or reattribution of the contribution by the

contributor in accordance with 11 CPR 110.1(b). If a

redesignation or reattribution is not obtained, the treasurer

shall, within 60 days of the treasurer's receipt of the

contribution, refund the contribution to the contributor.

Section 103.3(b)(4) of Title 11 of the Code of Pederal

Regulations states, in part, that any contribution which ~ppears

to be illegal under 11 CFR 103.3(b)(3), and which is deposited

int.o cuapaign depository ehall not be used for any

disbursements by the political comaittee until the contribution

has been deterained to be legal. The political ca.aittee must

either establish a separate account in a campaign depository for

such contributions or maintain sufficient funds to .ake all such

refunds.

The Audit staff's review of contributions received

from individuals indicated that nine contributors exceeded their l~itation by $4,065. Excessive contributions from five

contributors, totaling $3,275, were refunded but not tt.ely.

One of the contribution refund checks for $1,000 remains

outstanding. The excessive contributions fro. the remaining

four contributors, totaling $790, were unresolved. The

Committee did not establish a separate account in a ca.paign

depository for such contributions; however it has maintained

sufficient funds to make the refunds pursuant to 11 CFR

103.3(b)(4).

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The Audit staff discuss€d this matter with the

Committee's representatives at the exit conference and provided

a schedule detailing these excessive contributions. The

Committee's representatives agreed to refund the remaining

exc9ssive contributions.

Subsequent to the exit conference, the Committee's

representatives provided the Audit staff photocopies of the

front of checks refunding the four unresolved excessive

contributions noted above.

In the interim audit report the Audit staff

recommended that the Committee provide evidence of refunds of

all unresolved excessive contributions in the fo~ of

photocopies of the front and back of the negotiated refund

checks.

In response to the inter~ audit report, the Ca..ittee

provided evidence of refunds, which materially caaplied with the

Audit staff's recommendation. However, for one excessive

contribution in the amount of $1,000, the refund check has not

been negotiated and it remains unresolved.

Section 441b(a) of Title 2 of the United Stateli Code

states, in part, that it i. unla~ul for any corporation

organized by authority of any lav of Congres., to IIIlke a

contribution in connection with any election to any political

office, or for any candidate, political ca..ittee, or other

person knowingly to accept or receive any contribution

pronibited by this section.

Section 103.3(b)(1) of Title 11 of the Code of Pederal

Regulations sta~e8, in part, that contributions that present

genuine questio~5 ~s to whether they were aade by corporations

may be, within ten days of the treasurer's receipt, either

deposited or re~,-=~n8d to the contributor. If the contribution

cannot be dete' _.ined to be legal, the treasurer shall, within

thirty days of ~he t~ea8urer's receipt of the contribution,

refund the c~ntr~bution to the contributor.

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B. Receipt of Prohibited Contributions

Section l03.3(b)(4) of Title 11 of the Code of Pederal

Regulations states that any contribution which appears to be

illegal under 11 CFR 103.3(b)(1), and which is deposited into a

campaign depository shall not be used for any di.bur....nts by

the political ca-aittee until the contribution has been

dete11lined to be legal. The political ca-ittee !lUst either

establish a separate account in a caapaign depository for such

contributions or ..intain 8ufficient funds to .ake all 8uch

refunds.

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During fieldwork, the Ad8it staff identified eight

apparent corporate contributors that made 14 contributions

totaling $3,200. None of these contributions had been refunded.

Each contributor's corporate status vas verified with the

appropriate Secretary of State's Corporate Division. The

Committee did not establish a separate account in a campaign depository for such contributions, but has maintained sufficient

funds to make the refunds pursuant to 11 CPR Sl03.3{b)(4).

The Committee'. representatives were informed of the

results of this review and provided a schedule detailing these

items. The Committee's representatives agreed to refund the

prohibited contributions.

Subsequent to the exit conference, the Committee'S

representatives prOVided the Audit staff photocopies of the

front of checks refunding the corporate contributors noted

above.

In the inter~ audit report the Audit staff

recommended that the C~ittee provide photocopies of the front

and back of the negotiated refund checks.

In response to the interiJD audit report, the Ca.aittee

provided evidence of refunds vhich Jlaterially coaplied with the

Audit staff's rec~ndation. However, for one prohibited

contribution in the aaount of $200, the refund check has not

been negotiated and it re.ains unresolved.

c. Recordkeepinq for Disburseaent8

Section 432(c)(S) of Title 2 of the United States Code

states that the treasurer of a political ca..ittee shall keep an ac~ount of the na.e and address of every person to any

disburseaent i8 ..de, the date, aaount, and purpose of the

disbursement, and the name of the candidate and the office

Bought by the candidate, if any, for wha. the disburs...nt was

made, including a receipt, invoice, or canceled check for each

disbursement in excess of $200.

The Audit staff conducted a smaple review of the

Committee's disbursements. This review indicated that

approximately 8' of the Committee'S disburse.ent records did not

include the vendor'. addres8. The Audit staff noted that

several of the errors occurred during the July 1, 1994 through

the Septeaber 30, 1994 report period. The Co.aittee'8 canceled

checks, check stubs, and general ledger did not contain

addresses; and corresponding invoices for these disbur....nts

were not available to 8atisfy the recordkeeping requi~nt.

The Audit staff a180 noted a number of reported disburaeaents

for which no address va. disclosed.

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At the exit conference, ~he Audit staff informed the

Committee's representatives of its recordkeepinq problem. The

Committee's representatives agreed to obtain the missing

information and disclose the information on amended Schedules B.

In the inter~ audit report, the Audit staff

recommended that the Committee review its records and identify

those vendors for which no address h~s been recorded. It was

further recommended that the Committee obtain the missing

addresses and provide the Audit staff with the information

obtained. The Audit staff also recommended that the Committee

file amended Schedules B to fully disclose the above noted

disbursements.

In response to the interim audit report, the Committee

provided a record of vendor addresses which materially complied

with the Audit staff's recommendation. The Committee also filed

amended Schedules B, disclosing the vendor addresses, as

recommended.

D. Disclosure of OCcupation and Name of Employer

cSection 434(b)(3)(A) of Title 2 of the United States

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

disclose the identification of each person who makes a

contribution to the reporting committee during the reporting

period, whose contribution or contributions have an aggregate

amount or value in excess of $200 within the calendar year

together with the date and amount of any such contribution.

Section 431(13)(A) of Title 2 of the United Stat•• Code states that the term -identification- means in the ca•• of

any individual, the name, the mailing address, and occupation of

such individual, 8S well as the name of his or her employer.

Sections 104.7(a) and (b) of Title 11 of the Code of

Federal Regulations state, in part, that when the treasurer of a

political ce-ittee shows that best efforts have been used to

obtain, maintain, and submit the information required by the Act

for the political committee, any report of such c~ittee shall

be considered in compliance with the Act. With regard to

reporting the identification of each person whose

contribution(8) to the political committee and its affiliated

committees aggregate in exceS8 of $200 in a calendar year, the

treasurer will only be deemed to have exercised best efforts to

obtain, maintain and report the required information if; (1) All

written solicitations for contributions include a clear request

for the contributor'S full name, mailing address, occupation and

name of employer, and include the following statement: -Federal

law requires political cOlIIIDittees to report the nuae, aailing

address, occupation and name of employer for each individual

whose contributions aggregate in excess of $200 in a calendar

year.-: and (2) For each contribution received aggregating in

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excess of $200 per calendar year which lacks required contributor information, the treasUrer makes at least one effort

after the receipt of the contribution to obtain the missing

information. Such effort shall consist of either a written

request sent to the contributor or an oral request to the

contributor documented in writing. The writing must be made no

later than thirty (30) days after receipt of the contribution.

The Audit staff reviewed contributions from

individuals on a sample basis and determined that for approx~ately 40' of these contributors, the occupation and/or

name of employer was not disclosed as required. Some of the

information was available on the Committee's receipts data base,

but was not discloaed on its reports.

A review of some of the Committee's 8oli~itation

devices showed that the Committee did request occupation and

name of employer information and that the Committee did inform

the contributors that the information was required by law.

However, the Committee could not produce evidence that

documented its attempts to contact contributors for the info~ation subsequent to the receipt of the contribution.

The Audit staff spoke to former treasurer, Gail

Sherred, who stated that she had only made telephone calls to

obtain the info~tion, and that any information obv-.ned would

have been written on the original reports. A review of the

original reports did not reduce the number of errors and no

written record of the telephone contacts was ..intained.

At the exit conference, the Audit staff info~ the

Committee'S representatives of this aatter. The Ca..itt..•• representatives agreed to contact contributor. to request the

mis8ing occupation/name of employer information and would keep a

written journal to document the contact8.

In the inter~ audit report, the Audit staff

recommended that the Committee take the following action:

• produce doc~nt8 to de.onstrate best efforts has been

satisfied: or

o ab.ent such demonstration, make an effort to contact

those individuals whose contributions aggregate in

excess of $200 in a calendar year and whose occupation and name of employer information i8 incoaplete. The

contributors should be requested to provide the

necessary information and be info~ that Federal law

requires the Committee to report such inforaation;

o maintain documentation or a written log of such

contacts;

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o file amended memo Schedules A to disclose any

occupation and/or name of employer information

obtained from those contacts.

In response to the inter~ audit report, the Committee

filed memo Schedules A, which provided additional disclosures of

occupation and name of employer. Based on our analysis of the

Committee's response, the Audit staff determined that for

approximately 24' of contributions from individuals, the

occupation and name of employer remained undisclosed.

The Committee also provided copies of the letters sent

to contributors which requested their occupation and name of

employer. The letters were not sent within 30 days after the

receipt of each contribution, as required by 11 CFR 104.7(b).

Further, the language in the letters is not 1n accordance with

11 CFR S104.7(b). The Committee's letters state "Federal

Election Commission law requires... " rather than Federal law

requires.

E. Itemization of Offsets to Operating Expenditures

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

Code states that each report under this section shall disclose

the identification of each person who provides a rebate, refund,

or other offset to operating expenditures to the reporting

committee in an aggregate amount or value in excess of $200

within the calendar year, together with the date and amount of

such receipt.

Section 431(13)(8) of Title 2 of the United States

Code states, in part, that the term "identification" means in

the case of any other person, other than an individual, the full

name and address of such person.

During fieldwork, the Audit staff identified four

offsets to operating expenditures totaling $14,313. One offset,

an advertising refund from Optima Direct, Inc. in the amount of

$13,964, was not itemized as required on Schedule A.

At the exit conference, the Audit staff advised the

Committee's representatives on this matter. The Committee's

representatives agreed to file the required amendment.

Subsequent to the exit conference, the Committee's

representatives filed the required amendment to correct this

matter.

Page 10, Approved 9/21/95
FEDERAL ELECTION COMMI~ION

WASHINCTON. D.C 20463

AK006986

~~~tember 22, 1995

Mr. Edward E. Smith

People for English

P.o. Box 1840

Erie, PA 16512

Dear Mr. Smith:

Attached please find the Final Audit Report on People for

English. The COIDlission approved the report on September 21,

1995.

The Commission approved Final Audit Report will be on the

public record on September 27, 1995. Should you have any

questions regarding the public release of the report, please

contact the Coeeission'8 Press Office at (202) 219-4155. Any questions you have related to matters covered during the' audit

or in the report should be directed to Bill Antosz or Joe Stoltz

of the Audit Division at (202) 219-3720 or toll free at (800)

424-9530.

incerelY'h!2' 1f%t1:J. '~' 11l/~- Ro rt J. Costa

J Assistant Staff Director , Audit Division

Attachment as stated

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Page 12, Approved 9/21/95
CHRONOLOGY

PEOPLE POR ENGLISH

Audit Fieldwork 5/1/95 - 5/12/95

c

Interim Audit Report to

the C01lllllittee

Response Received to the

Interim Audit Rep-: ":t

Final Audit Report Approved

7/26/95

8/28/95

9/21/95

Page 13, Approved 9/21/95