.... ', ... ~.. ... ..

AK004384

November 29~ 1993

MeKOR..~DUM

TO:

FROM:

FRED E I LA..~D

CHIEF, PRESS OFFICE

ROBERT J. COSTA - ASSISTANT STAFF OIREC;ol~ AUDIT DIVISION

,.:"'-

SUBJECT: PUBLIC ISSU~~CE OF THE FINAL AUDIT REPORT ON

NEW YORK '92 HOST COMMITTEE, INC.

Attached please find a copy of _the __ final_~\!dit repor_t_

and related documents on New York '92 Host Committee, Inc.

which was approved by the Commission on November 10, 1993.

Informational copies of the report have been received by

all parties involved and the report may be released to the

public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Reports Analysis Division

FEe Library
REP()RT OF THE ALllIT DI\:"ISIOS

O~

-, ~-..-------",-- -~J

1

New York '92Host Committee, Inc.

, ~-

FEDERAL ELECTl{),\ CO\t\tISSI()'

999 E STREET. '."'.

-:..- ...

l",.,., .N:&::,. ... ._i

-... , .......- .........
REPORT OF THE AlL>IT DI\rISIO~

O~

New York '92 Host Committee, Inc.

NO~'ember to, 1993

FEDERAL ELECTI()~ CO\I\IISSIO~

999 E STREET~ \.\\'.

\\.ASllr\(;T()\. D.C.
CONTENTS

Executive Summary

Final Audit Report

Background

Findings

Legal Analysis

Transmittal to Treasurer

-Chronology

Page

1

3

3

6

11

15

17
AK004:5S

FINAL AUDIT REPORT

ON

NEW YOR~ '92 HOST COMMITTEE, INC.

EXECUTIVE SUKMARY

The New York '92 Host Commit:ee, Inc. ,the C~mmittee:

registe:ed with the Federal E:ection C~mre:ss:c~ =~ July 2:,

1992. ':'he Commi ttee' s primary object: ve was the encourage::.ent

of commerce in New York City in r~:at:~n to the 1992 Democratic

National Convention, as well as to p:cject a favorable image of

the city to convention attendees.~1

The audit was conducted pursuant to 11 C.F.R. S9008.9

which requires an examination and audit of each host committee.

The findings of the audit were p~esented t~ the Committee

at ari ~xit conference held at the conclusion of the audit

fieldwork. (10/9/92) and in an interim audi t report approved -t)y--

:~ the Commission on Kay 2S , 1993. The Committee was given a~

opportunity to respond to the findings both after the exit

conference and after receipt of the interim audit report.

Comments and information received have been included in the

findings.

The foliowing is an overview of the findings contained in

the final audit report.

Apparent Prohibited Contributions - 1: eFR 9008.7Id· 2,

(i) and (iv). Local businesses may make donatio~s to the

Committee provided they are located within the Consolidated

Metropolitan Statistical Area iCMSA' cf the cc~~ention city.

The report questions whether two ~us:ness

enti~ies/organizations, that made dc~a~ionsf ~e:e locate~

withi~ the CMSA of the conventic~ c:~y. :~e :~~~ittee

res~c~1ed by refunding two dc~a::~~5, :::a::~; 33~t5C~.

:: :-:1 v en t :. C:1 R e : a :- e d S xEEo:"". :: :. : '-':_ : s ::-:"':'.::.:----"=-; :. ,,~ :::: :- '-: r: :: -

: FR 9:: 8 . -; : d ' r 3 and l \. :: a ~~: s : : ~:- : : :. :.: ~~:- e :.: :; :-~ =::

*/ ~he Host Comni:tee ~~ d:s::~~~:s~ej ~::~ :~~ pa::~ ::~venti:~

~cmrnittee ~hlCh :s :undej ~y a F~~::: ~=a~: and als: s~bject

::; audl~.

Page ...
a'=ti"'~::es defined as nhas:. expenses," separat.e ta:--.i< accounts

~ust =~ ~ai~ta:~ec for the t~~ types c: expenses. Permissible

s~urces f~r funds dep=slted :~:~ ~hese a:2cunts d:~fe:; funds

:je po S : : e j :i n tot he t1 conv e n tic n a (: '= 0 un t" are 1":1.:; r e :- s t ric ted .

:he re;::t questi~ns the perm:ssib:lity :: tra~s:€:~ing funds :ro~ t~e less :estricted tc :~e ~8re res~~i~ted a:=~unt. The -~mrn~·-~o'r recr-"C O ~~ ~~~s ~l'n~~"- Ac-~"stra~e~ ~ha~ a'th- t - ,...i \. ..... ' c "-' t" -~ .. 1 -... C· -- U "- &; 1......... ".L i ~:- ' .... -- ~"", \- .. .. \- - ........ .l. ... ~JU g l

:he tra~sfers were made as Cescrl~ea l~ the repc~:, the

:rans:e::ing account contai~ed adequate acceptable funds at the

time c: the transfer~ This demonstraticn resolves the

quest:c~.

Disclosure - 11 erR l04.13(a 1 tl , : usc 434:b)(3){G). The

repor: requires the Committee to amend its reports to disclose

the actual value for certain in-kind co~tributions received and

to co~p:ete the public reccrd by itemizing the s~~=ce of

interes~ income.

Page 2
MWOOS423

REPORT OF THE AUDIT C:V:SION

G~ THE

NE~ YORK '92 HOST COMMITTEE, INC.

1. Background

A. Audit Authority

This report is based on an audit of the New York '92

Host Committee, Inc. (the Co~~ittee) to determine whether there

has been compliance with the provisions of the Federal Election

Campaign Act of 1971, as amended (the Act). The audit was

conducted pursuant to 11 C.F.R. S9008.9 which states that the

Commission shall conduct an examination and audit of each host ~ommittee registered under 11 C.r.R. 9008.12(a){1).

The audit seeks to determfne· fr th~e·campai9n has

c~ materially complied with the limitations, prohibitions and

disclosure requirements of the Federal Election Campaign Act of

1971, as amended.

B. Audit Coverage

The audit covered the period from January 1, 1990

through August 31, 1992. During this period, the Committee report

reflects an opening cash balance of $-0-, total receipts of

$6,747,507 total disbursements of $6,66 7 ,222, and a closing cash

balance of S80,286.!1

~. Campaign Organizatio~

The Comm:ttee reglstered with the Federal Election

Comrn:ssion on July 2C, 199C. The Treas~rers of the Commlttee

during the audit period were Robe:: E. Ru~in ~:0m Ju::"y :~. 1??0

thro"Jgh ~ovembe: ::, :99:, ar::i He>:-::y ~.:::..::..-=:- ::::~ ~=:''''·e:'''1.:-e: ~:. >J_

: h ::- -: ''; gh Aug U 5 t. 3: t : s. ? : . ':' e c 'J :: :: e :":: :-: -e 3 S ''; :- -=: :. s E-? =--. :- ::. ~'~:.::"::" i?: .

head~~arters :~ ~e~ YC:K

alsc :n Ne~ y~:~ Ci:y.

.......... " . ....... ... -....

1 Does no~ :cct. due to a ma:he~a~:=a: error; figures lnc~udej

:n th:s r€~o:t are :c~~dej :: t~e ;:eares: dolla~.

Page 3 "l - ," Ii C'" .... _ J.v ""j
7he Comm:ttee use~ s:x bank a22cunts t~ h3~~:e l:S

financial activity. From t~ese accou~:s the Core~:t:e~ made

approximately 1,550 disburse~e~:s. T~~ :~mmittee re=eived

approximately 350 contribu~~c~s :~o~ l~~:\·iduals and :ocal bus:~esses totaling $2,:4:.020. In ad=:~lon, the C~millittee

reported receiving in-kind c2~tr:b~tic~s tatalin? S3,?93,77~ ~se€

Finding II.C.}.

D. Audit Scope and Procedures

The audit included a review 8: the following general

catl?gories:

1. The receipt 0: cc~trib~::ons from p:~hibited

sources (See Finding r!~A~);

2. the itemizatic~ and prc~er disclosure of

contributions from indlv:duals, local businesses,

local municipal corpora:ions and government

agencies, and local lab~: organizations when

required, as well as the completeness and accuracy

of the information disclosed (See Findings II. C.

and D.);

3 • the itemization and prcper- disc!osu--r-e -of

disbursements when required, as well as the

completeness and accuracy of the information

disclosed;

4. proper disclosure of Committee's debts and

obligations;

5. the accuracy of total r~ported receipts,

disbursements and cash balances as compared to the

Committee's bank records;

6. adequate recordkeepin? for the Committee's

transactions;

the Committee's comp::a~2e with the ~egulat:o~s

concerning c~n~r:bu~i~~s and ex~e~=::ures ~~

promote t~e c~~~e~~:c~ ::~y and ::s :~m~e::e;

In the s:~Ja:::~.

Page 4

,- ... ........ _ ....' :: j
:J 1e s s s ;: :: :. :- 1 C a : : ::. d:: s :: ''';' sse --~ r e : :::: y,,' , mat e =.: a :

discre~a~~ies ~ere detectec. ~t shc~:d be noted that the

Commiss:cn may ;~:s~e furt~e: any c! ~~e matte:s ~iscu5sej :~ this

repcrt :~ an e~:2:~eme~t aC::8~.

Section 9008~ 7(d c,:.; i) cf Title 11 of the Code cf

Federal Re9ula~:c~s states, :0 part, that local businesses,

excluding banks, local municipal corporations anj government agenci~s, local labor organizations and individuals may donate

funds or make :~-kind contr:butic~s ~~ a host ccmmittee far

purposes set fort~ at 11 erR 9008.7~dl(2)(iii).

Sectior: 9008. i (d i '2\(iv\ of Title 11 of the Code of

Federa: Regulations states that any business, municipal , corporation, agency or labc:" organ:zation within the Metropolltan

Statistical Area \MSA)2/ of the convention city shall be considered

local. There shall be-a rebuttable presumptio~ that any such

entity located outside the MSA is not local. This presumption may

be rebutted by showing that the volume of business in an area

liiri~ outside the MSA would be directly affecte~_ by the presence

of the convention. - -- -

The Audit staff's review identified 2 contributions,

totaling $35,500 , that appear to have been received from business

entities/organizations outside of the CMSA.

The Ccmmittee received a $35,000 contribution from the

Foundation of Jewish philanthropies of Greater Miami (the

Foundation).

The Foundation is based in Miami, Flo:ida. No evidence

was provided to demonstrate that it has offices ~ithin the CMSA.

Accordingly, it is the opinion of the Audit sta:: that the

contribution 1S prohibited pursuant to 11 C.F.R. S9008.7(d~(2)[i .

The :o~mittee s~a~ed tha~ it had Soll=i~ed a

contribution frcm an indiv:dual who subsequent:; ~ade a

contr:bution ty :~eck dra~~ C~ t~e a~cve rre~::--c~ Fc~nda::~~.

mill:. -2 :1 pee p :. E' I : r. '? SA: s c :: :7:;:' :: :. s e': :': 3 ? _:- :~. ~-~ -:: : :: -: ;: :: :. :. :: a :-.

Sta:.:.s'::~a: Area i?~~S..l;' a:-:j a :c:-:s::::"_:3,:e:: ~:-':::=-::'::a:-:

Stat:s:i.cai Area

Aud:.: staff ·..;se:::

loca: c: n2l:.

~ou~::es ,e.g_. Br=~x Cou~~y, Q~eens :=~~ty, e::.

c e r : :1 :. are as::-, ::;. e : :. :. : ''';' ': a r: j e'"",' __- e r 5 e 1: .

Page _

..... :0 :"j
:992.

The Cc~~:::ee :~:e:~es a S5CC ccntrib~::2~ from Steptce

& :ohnson, a law :i:~ :~~a~e~ :~ ~ash:~;:2~, DC. .~ ~as D2

c : f 1 C e s 10 ::: ate d ...... :.::-:::: ': =--. e = S .:.. Cl: the C 8 :"". 'v' e n tic ::::. t y .

The Committee sta:ed tha: t~e cc~tribu::~~ came from 88

partners of Steptoe b. Johnson. Furthe:, the Com~:ttee provided

dccumentation free S:eF:oe & Jchnscn tha~ states ~he contributlcn

"was made from regular par~nership funds. of whic.~ no indivldua~

partner's share exceeded SlO~. There are n8 prc:essional

~orporations among the pa=~~e~s."

!t should be ~~te~ t~at 11 C.F.F. lOO.l e' states that a

contribution by a partnership s~a:: be attributed to the

partnership and each partne~.

It is our oplnion that the Reg~:ations with respect to

~...., contributions from partnershlps a:e clear. As a result, since

Steptoe & Johnson is not located wlthin the CMSA and does not

maintain offices within the CMSA, it cannot make a contribution to

the Committee.

--In the interim Audit Report the Audit staff recommended

that the Committee demonstrate that the contributions are

permissible or refund the $500 to the contributor and provide

evidence of such refunds within 30 days of service of the report.

In response, the Committee provided the Audit staff with

a copy of the refund check issued to Steptoe & Johnson.

B. Convention-Related Expenditures

Sections 9008.'7I,d l \.3 1 ',i', (ii. and (iii1 of Title 11 of

the Code of Federal Regulatio~s state, 10 part, that local retail

businesses, excluding banks, as well as local municipal

corporations and government agencies ~ay donate funds to a host

committee for use by that c~mmit:ee in defraying convention

expenses. The amount cf the donatic~ under 11 erR 9008.7(d){3!!:

must be pr~portionate t2 t~e :crn~e:::a: ~e~urn :easonably expe::ed

by the business l corpora:ic~ C~ a?ency dU~ing :~e :ife of the

conv e n t ion . The h C' s : C' c ~::1 :. ': ": e e ::::.: s <;: :-::: : a : =--. : ''': .- ::s d ':' na : e d U:i j e :

:. l : FR ? J r: S . _ _ :.:-: 2: s e ; ?: : ::: ~: ~~: .- -

Federa::' Reg~:a:::~s s:a:es 9008.;,d},,3~ :::e ::'::e

days befo:e the :~e;':~j :: ::-.'2 ::::--'.:-?:'"'.': :~~ :=1:-::] .::':":: :~:ee ... :1.:::- a~p~",

:he c:ose of the cc~ven::o~.

Sectic;. 9,:: E. -

acc:~dance ~lth 9~:e.-

-.:: - ...... '"

- - --

Page 6
:;

-- .,:..

- ...... '.

against ~~~ ex~e~~~:~re lim:ta~:on u~de:

C2~~:~=:~~C cf F~nds ..~--- ._. ~---------

T~e C~~m::tee ma:~:ained f=~: checkins a===~n~s

desic~a~ed as :2~vention a=cc~~~s. T~:ee accounts ~ere us~j as

~s~ro~ accounts for specif:c housing :e~tals. The remainin~

a~count was used to make convention-re:ated expenditures. The ~cmmit~ee depositej $343,565.80 into t~:s accou~~.

As stated, 11 C.F.R. S9008.7(d){ 3)(i\ provides that only

~cntributions from local retail businesses, excluding banks, local

municipal corporations and government agencies may donate funds to

the host committee for use by that co~~:ttee in de:raying cQnve~:ion expenses.

The Audit staff noted that during the period Februarv

21, 1992 through August 25, 1992, the Committee transferred -

~~ S135,500 from its money market account (an account used for

host-related expenses) to the convention account.~/ Approximately

16.5 percent4/ of the funds deposited into the money market accoun:

could not be-deposited directly into the convention account and

used to defray convention-related expenses. Further, a portion 0:

the remaining· contr-i-bution-s .in-.. the._.. .money market ac_count were from

local retail businesses and could have been used to defray - convention-related expenses. However, since these funds were not

initially intended to be used for convention-related expenses, the

Committee did not require contributors to document that donations

were proportionate to the commercial return reasonably expected

(by the local retail businesses) over the life of the convention.

The Committee stated that it first deposited specific

contributions from contributors, perm:tted to make contributions

for use in defraying convention-related expenses \local retail

businesses), into its money market account to earn interest and

then transferred the funds to the convention account on an as

needed basis. Further, the Committee provided the Audit staff

with a schedule that identified speci:ic contributions it had

deposited in~o the money market account and subsequently ~~ansferred to its convention account.

~ith respect to t~e Com~i~~ee's s:~e~~:~ c~

-: .:) n t :" :. t;,.1 ': i C 1".. 5 d e pC'S 1 ted :;.:.:- :. :--. e 7. : :-: eo ::. !"" a ~', e:. - - ._" ~.: ~. -:

s'Jbseq'Je:1t.:y t:a:1sferred, '::-'.-? A-...:d:.: 3- 3:: :'::~~'- _,,_ :::--::., .':'~.:::

3/ Subsequer.. :::; the c:':se ,.., .. ~:-:e 2".• ::::: ;:e::. .::.: """'.4. I ::--:-2

C O~~: t: e e t a:1 5 fer e a:-: ad j: : : :~: 3. : s:.. f 3 =' - '-'.:. .~: " .

4 / ': 0 r1 :. r :. t' ': : C :1 S f r c i:1 d : "; :. d u a : 5 f ? A :: S I a ;-: d :- a ::; :: :-

::~an:::a~::;-:s.

Page -;

:.:. :'0 93
~~e Com~::~ee ::a~sfe::ed S:3.2C~ C~ :~:~ - 199~.

A:=c:di~= :0 its ~:rks~ee:, :he :~~~:~:ee transferred

~~~ee c:~:r:b~:ic~s :~=~ lac?: ~~s:~esses that were

=e=e:ve~ :~ April :99: S:3.::: and ~=~ember 199:

, S 2 , ace :-:t e Cc- :':".::': it::. e e ' 5 c:-:; ',' e:; : :. ~:'": a:: C 2:.: ~\ 9"" as n:' t

2~ened ~~::: Septe~~e: 1991. ~:t~ a~ :~:::a: de~~si~

bei~g maje 0ctcbe: 16. 1991.

The fu~ds deposlted :~:~ the h2S: a~cc~~t i~ April 1991

,S13,OO::' were spent ~::in a f:rst i::. first out basis'

long before the July 1992 transfer tc the convention

accoun~ occurred.

c Accordi~g tc the ~~mc::~ee's s~hedu:e, tW0 ether

transfers, $20,00: O~ August ~f 1992 a~d S11,OOO on

August 2~, 1992, conta:ned contributions received in

November, 1991.

e A transfer of S64,SOC on July 8, 1992, contained

contributions received during the period March 1992

through June 1992.

o The initial transfer of $25,000 on February 21, 1992,

represented a contribution received January i~ 1992.

For the reasons stated above, it is the opinion of the

Audit staff that the Committee's worksheet of contributions

supporting its transfers is not representative of the funds

actually transferred.

However, the Audit staff performed an analysis of cash

on hand as of the close of business the day preceding the

transfer. We identified contributors, ccntributions that could

have been viewed as having been used to defray convention-related

expenses, provided the Committee obtain and submit documentation

that demonstrates certain contributors were local retail

businesses and their donations were proportionate to the

commercial return reasonably expected by the contributor during

the life of the convention. See 11 C.F.R. S9008.7td)(3}(ii).

With respect to f~nds transfer:ed subseq~e~: :2 August 31, 1992,

the Committee shou:d perform a~ analys:s s:~::a: !c that perforrne=

by the Audit Div:s:cn.

- - -,... ... --.. - ........ ----"_ ...

trans~e~red I~:~S a~; add::::~a: ~~~~~ ::3~3~e~:~~ s~tse~~e~: ::

August 3:, ~99: ~ere :oca: re:a:: t~s:~ess~s. ~~se d:~a:::~s

were prcpc:ticna: :: :~5 c:~~e:::3:

during the life 2~ :~e conven::~~.

stated :ha: a~se~: ~~:~me~:a:::~ :~

totalin9 S:35,5~: ~~~:d be cha:~ed

§90C8.-:' a'.

Page 8

....... :2 93

~~:~:~ :e3s:~5t:y expe:~ej

~~~ :: : ~l e :-. : -:? .~ '.J j : 5 t. a : =-

:~e :~~::a:y. expendi:~res

:s :~e ~~~::3:~2~ a: :: :.F.R.
:~ ltS :es~onse ~- ~~e :nterlm Au~:: Report the

Committee su~~i:~e~ dccume~:a~~~~ re=e:~ed ~::~ the contrlb~· .. ~.

which demcns::ates that pe:~:s5:ble funds were a~ailable in :~e

acc~~~t when the ::a~5fe:5 ~e:~ ~ade. In ~~~:::2nl t~e Ccm~:ttee

provi~e~ si~i:ar ~::~~enta:::~ ~=: a t~a~sfe: ~~ ? l~ 92 c:

$12,3::.('2.

Acccrd:ngly the S:~St500 and the s~t5eq~ent transfe:

512,300 is net =hargeable t~ the limitation at :: C.F.R.

S9008.7(a:.

c. Disclosure of I~-~ind Contributions

Section 434(b)(2' of Title 2 of the United States code

states, in relevant part, t~at each report S~3:: disclose the

total amount of a:: receipts recei~ed during the reporting p~rioc

and the calendar year.

Section 10C. 7 (a) ,l} of Ti tle 11 af the Code of Fede ral

Regulations states, in part, that the term c~n~ribution includes a

gift, subscription, loan, advance or deposit of money, or anything

of value made by any person fer the purpose cf influencing any

election for Federal officee For the purposes of 11 eFR

lO~.7(a)(1) the term "anyt~~ng of value" inc:udes all in-kind

contributions.

Section l04.13(a' (1) of Title 11 of the Code of Federal

Regulations states, in part, that the amount of an in-kind

contribution shall be equal to the usual and normal value on the

date received.

The Audit staff's review cf receip:s identified 89

instances in which the repcrted dollar values of in-kind

contributions were estimated by the Committee. Letters were sent

to contributors requesting the actual value c: each in-kind

contribution. S~bsequent ~o the filing of i~s disclosure report,

containing the estimates, the Committee received documentation

that provided :he actual va:ues for 39 of t~e In-kind contrlbutio~s. Our review indicated that t~e Committee

understated the values of ~hose contributic~s by $87,025. Prior

to the comple~:c~ c: the ::~ldworki the Cc~~:~:ee had not :e=e:ve=

d acumen '-a":on ,..o"'"'!-ernl·n,...., to ...... ,:) a,'-~ua" ~'a'ucs ,-.~ --"'0 a" =.,...., ... \""J. ............ ":1 _ •• - -- ...... , ... - -- _ •• - rem lnln~ _v

In-~:~d cc~:::~~::0~S.

"* ... .. -

reF C' r: -.,... as F:- -= a :- e:::, C C :: '-.: e :--: : a :. : :- :-'. : '::' -= -= :" :- : --:: - r __ ~-: ?! -: : ~~~: a __ .: S __ ~~ '=

h a= r::' e e :--: : e : : -.- e = : 2 :-: : :-: e ::;. : :- : :~ ~..: +: :- :- ~: : --: ~_~ ; f e s :. :. r-: :1 : e s .~.. e :" ':-

used. Fu t. he::, : :--. e ::.J m~: t : e ex;:: =- '? S S ~: ::-. :.... :..:~: e :-: : : .: r: s :: :::: e

amended :e;:-e::-:s.

:~ :~e :~:e::~ A~j:: Fe~2~: :~~ ~~~:: s:a~f re~c~~ende~

~hat ~he Cc~~:::ee ::le a~ a~e~je~ :e;J:: :: ~:s::cse ~~e a::~a:

val~e 2f :~e ~3 :~-~ind c=~::i~~::c~s dis:~ssej above a~d csntin~e

Page 9
8

~o f::~ a~~~d~ents as ac~umen:a::=~ was ~ecei~ed fro~ the

contributc:s f2t the ~eroal~~~; :~-~:nd :=~~ributlC~S.

In response ~: the :~:e:im Au~:~ Report the C0mm:::ee

filed an a~endment to lts p=s:-:-~~ent::~ rep2r~ which mater:a::~

discicsed t~e actual va:~es c: ~he i~-~:~j ccntributic~s d:scuss~~

above.

D. Itemization cf Interest Income

Section 434(bl\3~,g ~~ Title 2 of the United States

Code states that each report shall disclose the identlfication of

each person who provides any di~idend, interest, or other receipt

to the reporting committee in a~ aggregate value or amount in

excess of $200 within the calendar year. together with the date

and amount of any such receipt.

Our review identifie= 513,628 in interest income not

itemized on the disclosure repcrt filed by the Committeee

The Committee representative stated that the amount of

interest was reported as unitemized (other income on Line 19b) of

the post-convention report. The Committee acknowledged the error

and expressed a willingness to file an amended report.

In the Interim Audit Report the Audit s-taf-f-- recommende-dthat the Committee file an amended report to correct the public

record.

In response, the Co~mittee filed the requested

amendment.

Page 10

...... ::- 93
MEJllORANDUM

TO:

THROUGH:

FROM:

Rebert J. C~s~~~

Assistant StafJ ~i=ectcr

.l\udit Divisi~,I

Jchn c. surlDa~ Staff Dl:ec~)

r

... a fw

....

4. 'I;;

0 n

• -

reMl.. .",,~ '"

-I

,...

':''''

, e --'I~A /i~

General COU:1se;.. I

fir'

Kim Bnght-C:l:'eman (A'~ Associate General Counsel

~crenzo Holloway ~=ting Assistant 3enp r a: ::~nsel "

Gregory R. Baker ~:Ij

Attorney

,

SUBJECT: proposed Final Audit Report for New York '92 HC3t

Comm itte e, I r: c. I LRA • 44 4 AR • 9 3 - 3 4 )

The 0 f fie e 0 f Genera 1 c: 0 U 11 e.;. :- a r t.. "," i :: ·.·;e d h e ~I r c· p '_ -; :

Final Audit Report fer the New Yo~~ '92 Host Committee t T~~

("the Host Committee"i which was :~~~Jrd~d to thlS OffJc~ ~~

August '=>, 1993.. The f,;)llc;",·:.ng "ner'F"l..lnaUfT\ contalns OUt c·rm."!" r'Ior. the propo sed aud i t r e po t t . 1 5 h :'1.3 1d :... 0 U h a v e any que 5 t 1 r j ! : ,

please contact Gregory F. Baker, ~h~ 3tt0rney assigned t= t~:s

matter.

Initially, we note ~~at we c~~c~= ~:th the ~udit s~a::'s

findings with respect to a9~arent rr-~:blted cc~tributio~s

(!I.A.~, disclosure cf In-i<:r.rl C";::':~U~lons ::.'~.\ and

i t e mi z a t ion 0 fin t ere 5 -: :. n .:: rn : n a:' 1 .) s e 5, t ~:: ;.~-

Comm itt e e p r ov ide d the r ': ~'.J S ted ': -- t? "1 tat i en::. f"'l :. t s r (? s;- r'<::

tothe! :": ': e r 1 m Au d 1 R': p:'l :- : . -:r."..: - .'. - : .~: r +: r. e r -3:: ": ian : s

r e q U 1. r e j 9~ i t h res p e :::. :. :' : :'"'. e s e a'- -

1 The parenthe+::~a:s re:er ":~ :~.

~he proposed report. 7hr=~~~=~~

the Federal E:e:~lc~ :a~pa:g~ A~: _.

~S 43:-~::-.

page 11

:'3. '10,93

:::,':::,:ian; s; and page· s . '"

~~~~en~Sr ~:E~A" re:e~s .-

:'::-:, as a:ten'1ed, ... ·:.S"~.
M••orandu. to Robert J. Costa

Final Audit Report for New York '92

Host Committee, Inc. (LRA .444 'AR .93-34)

Page 2

I. CONVENTION-R!LATED EXPENDITURES {II.B.'

The Host Committee transferred 5135,500 from a money market a~count used fer h~st-related expenditures ("host account") into

an account used fcr conventic~-related expenditure. ("convention

account"' betwee~ rebruary 21, 1992 a~d August 25, 1992. The

Interim Audit Report noted tha~ the Host C~mmittee transferred

an additional 51:,300 after the close of the audit period. The

Host Committee stated at the exit conference that contributions

allowed under 11 C.F.R. S 9008.:(d){3)(i) were initially

deposited into the host account to earn interest and transf.rred

to the convention account as needed to defray convention

expenses. The Hest Committee also provided the auditors with a

schedule of specific contributions deposited into the money

market account and subsequen~ly transferred to the convention

account.

Based on the limited information made available by the Host

Committee, the Interim Audit Report recommended that the

Committee demonstrate that the source of the funds transferred

was local retail businesses, whose donations were proportional

to the commercial return reasonably expected during the life of

the convention. Furthermore, the Audit staff r.co...nded that

absent documentation to the contrary, expenditure. totalinq

5135,500 would be- charged to the expenditurelill~tationpursuant

to 11 C.,. R • S 9008. 7 ( a ) . -- -- - - -

In its response to the Interim Audit Report, the Host

Coaaitt.e subaitted documentation from the contributors which

demonstrated that peraissible funds were present in the account

when the transfers vere made. Accordingly, the Audit staff

concluded in the proposed Final Audit Report that the

contributions are no longer chargeable to the expenditure

limitation pursuant to 11 C.F.R. S 9008i.(a). In any event, the

Audit staff requests in its cover memorandum to the proposed

report that this Office specifically address tvo i ••ues: (1)

whether the information provided by the Host Coaaittee

adequately demonstrated that the donations were proportionate to

the commercial return reasonably expected during the life of the

convention; and (2) whether the businesses at issue qualify as

"local retail businesses" pursuant to 11 C.F.R.

SS 9008.7(d)(3)(i), (ii) and 1ii).

We believe that the Host Committee's response sufficien~:y

addresses the Aud1t staff's cc~cerns. The Committee'S response

demonstrates that the funds transferred ~ere frcm permiss:ble

sources. Speclflcally, the C2~rn:ttee's res~onse demonstrates

that the contrlb~tions were made by local retail businesses and

that the contributions did not exceed the commercial retur~

reasonably expected duclng the life cf t~e convention. The Host

Committee submitted informatlon shQw:~g the amount each busi~ess

~~ntributed and how each bus:~ess ca::~:ated the reasonable

Page 12 _.. :2 'j~
... ,

Memorandum to Robert J. Costa

Final Audit Report for Ne~ Y~rk f9:

H0 s teomm itte e, Inc. (LRA t.: 4 4 ,"AR I 9 3 - 3 4 )

Page 3

c~mmercial retu::-:1.~1 Fe:- :",,:s':ance. ~~e Host C::rr:;,,;;.~tee' s response

i~cluded information f==~ :~e Ho~el :"":~~r-C2ntine~ta: ~~:ch

sta~ed that its donaticn of S8,2CC .as ~at least prcpc:ticnate

to the commercial return =eas~nac:y ex~~~te~ [by the H~~e:J

during the Convention pe=:~: July - July 19, 1992: ."2 ~h~

Hotel specifically noted t~a~: ;1 :: ~as asked t~ !eser~e 200

rocres at an average rate cf S235 per ~ight; 12\ 3S,C~O tc 40,000

people would be attendi~g t~e ccnve~::cn, most of whom would

require hotel housing; and \3) the ~~~inee, Bill Clinton, and

his staff stayed at the Hotel. 7hu5, ~e believe that the

information provided by the Host CO~=l~tee satisfies ~he Interim

Audit Report's request for information and the requirements of

li ~.F.R. S 9008.1(d)(3).

We note that neither the FECA, t~e public f~nding statutes

nor the Commission's regulations prohibit the transfer of funds

from a host committee's general accc~~t to a separate account

containing funds to be used to defray convention expenses,

provided that the funds to be transfe:red would qualify under 11

C.F.R. S 9008.7(d)(3) to be used to defray convention expenses.

See also Advisory Opinion (~AO"' 1980-12 (The Commission stated

that transfers by the Civic Host Committee for the 1980

Republican National Convention, Inc. would be permissible if the

funds were donated by local retail businesses and each donation

did not- ex-ce-e-d an amount proportionate to the commercial r~tJJrn

reasonably expected during the life of the convention). The- --

(~ Host Committee's response illustrates that the contributions

deposited into the account were made by local retail businesses

and that the contributions were proportionate to the commercial

return reasonably expected during the life of the convention.

Therefore, it is our opinion that the Committee's response

adequately demonstrates that the fu~ds transferred were

permissible under section 9008.7(d)( 3).

II. SUNSHINE RECOKMENDATION

The Commission's Sunshine Act procedures provide that the

Office of General Counsel ~ake Suns~:ne recommendations on

documents submitted to thlS Offi=e :~r review. Section :.3(b}

of the Commission's Sunshine Act ~e?ulations provides tha:

"every portion of every Cc~miss:cn ~eeting shal: be open t~

2. The Host Committee s~bmlt~ed :~:=rmaticn fr~m ~en

:ontributors demonstrat:~g ~hat t~e ~ransfers i~ quest:c;.

jerived from permissib:e s:~r=es: :. ~ew Y~rk :~lephc~e;

Hotel Inter-Continenta:; 3\ Cc~ E~:son; l Ci~c:e ~:~e -

Statue of Liberty Ferry, :;':.; =~ca-Cola BQ~~l:~g Co~pany ~~

New York (6) Time Warner :able; ~ew Ycrk Newsday; 'S' L~ews

Hot e 1s; (9) the Roo s e'J €'1 t H8 t e:; a 1"'. :: '1 0) New Y r k ? 0 r

A'Jthcrity.

3 The Hotel !nter-C:n~:~en~a: :5 :~cated a: ::1 East ~8th

Street, ~ew Ycrk, ~.Y. ::::-.

Page ... -- .. '"
Memorandum to Robert J. Costa

Final Audit Report for New Yerk '92

Host Ccmmittee, Inc. (LRA 1444 'AR .93-34)

Page 4

publi~ ~bservatio~· ex=ept !~r those matters exempted from

disclosure under section 2.~ of the regulations. This Offic~

beli~v~s that Commission discussion of this document should be

~~nducted in cpen session as it does not ccncern any matters ~xem~te= frem PUCllC disclosure under 11 C.F.R. S :.4.

Page 14

11 '10 93
AKCQ43SS

November 15, 1993

Mr. Henry Miller, Treasurer ~~w York '92 Host Committee, Inc.

412 East 55th Street

Apt. 3-G

New York, NY 10022

Dear Mr .. Miller:

Attached please find the Final Audit Report on New York

'92 Host Committee, Inc. The Commission approved the report

on November 10, 1993.

-The _C_o..Js_sion approved Final Audit Report will be

placed on the publ i c- -rec-ardon N-ovember -1-9 f 1-9-9--3---. -Should_ yo_u

have any questions reqarding the public release of the

report, please contact Fred s. Eiland of the Co••ission's

Press Office at (202) 219-4155. Any questions you have

related to matters covered during the audit or in the report

should directed to Brian Dehoff or Toa Nurthen of the Audi~

Division at (202) 219-3120. These individuals can be reached

toll free at (800) 424-9530.

Sincerely,

... L.t,'-:>-"- t:" .,I

Robert . Costa

Assistant Staff Director

Audit Division

Attachment as stated

Page lS

:1/10,/93
c

-......

Page 16

:J 93
Audit fie:.C·...·:::-\(

Interim A~~:~ Repcrt

committee

Response Rece:~ed .~

Interim Aud:: Re~0rt

Final Audi~ Report Approved

by the Commissic~

page 1"7

:: 'Ie 93

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