11

This matter was presented to FOJC representatives during the exit conference along with
related workpapers. FOJC representatives said that sometimes PAC representatives
carried the contribution checks around for awhile before giving them to the treasurer.
The PACs reported making the contributions within a few days of the check date.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that FOJC provide documentation to demonstrate that the
contributor checks were deposited in a timely manner and/or provide any other comments
it may have relative to this matter. FOJC was not able to provide additional
documentation to show contributor checks were deposited timely.

FOIC stated that during the election cycle several of the individuals involved in the day-
to-day activities were volunteers and were not sufficiently familiar with Commission
regulations. In an effort to comply with the Act in the future, a new principal campaign
committee has been designated for the 2006 election cycle. The new committee has
implemented procedures to improve the timeliness of all deposits. These procedures
include hiring a company to provide professional compliance and accounting services.

[Finding 4. Cash Disbursements

Summary

FOJC made 69 cash withdrawals from one of its bank accounts. The withdrawals totaled
$20,506. The Act requires political committees to make all disbursements, except those
from a petty cash fund, by check or similar draft drawn on a committee account. In
addition, FOJC failed to maintain adequate records for cash withdrawals totaling
$19,586. The Audit staff recommended that FOJC demonstrate it complied with the law
regarding cash disbursements, and obtain and submit the missing disbursement
documentation. FOJC failed to submit the missing disbursement documentation, but
acknowledged that the committee did not comply with the law regarding cash
disbursements and stated that new procedures are in place for future compliance.

Legal Standard

A. Disbursement by Check. A political committee may only make expenditures in
cash, not to exceed $100 from a petty cash fund. A written journal for such cash
expenditures is to be maintained by the treasurer. All other disbursements shall be made
by check or similar draft drawn on account(s) established at the committee’s campaign
depository(ies). 2 U.S.C. §432(h).

B. Petty Cash Fund. A political committee may maintain a petty cash fund out of
which it may make expenditures not in excess of $100 to any person per purchase or
transaction.

It is the duty of the treasurer to keep and maintain a written journal of all petty cash
disbursements. The written journal shall include:


Part II
Overview of Campaign

Campaign Organization

Important Dates

Friends of John Conyers

¢ Date of Registration

July 29, 2002

e Audit Coverage

January 1, 2003 — December 31, 2004

Headquarters

Mitchellville, MD

Bank Information

e Bank Depository

1

e Bank Accounts

2 Checking

Treasurer

¢ Treasurer When Audit Was Conducted

M. Mickey Williams

¢ Treasurer During Period Covered by Audit

M. Mickey Williams

Management Information

¢ Attended FEC Campaign Finance Seminar

No

¢ Used Commonly Available Campaign
Management Software Package

Yes

¢ Who Handled Accounting and
Recordkeeping Tasks

Paid Staff and Volunteers

Overview of Financial Activity

(Audited Amounts)
Cash on hand @ January 1, 2003 $ 25,334
Receipts
o_ From Individuals 151,971
o From Political Party Committees and PACs 400,309
o From Other Receipts 7,822
Total Receipts $ 560,102
Disbursements
o Operating Expenditures 531,346
o Other Disbursements 25,190
Total Disbursements $ 556,536
Cash on hand @ December 31, 2004 $ 28,900



15

This matter was presented to FOJC representatives at the exit conference along with
workpapers. FOJC representatives stated that the purposes and other disclosure issues
would be corrected in the amended reports.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended FOJC submit amended reports to correct the disclosure
problems noted above. FOJC substantially complied with the Audit staff’s
recommendation by filing amended reports with complete addresses and more accurate
purposes.

| Finding 6. Failure to File Form 3Z-1

Summary

FOIC failed to file Form 3Z-1 (Consolidated Report of Gross Receipts for Authorized
Committees) with its 2003 July Quarterly Report and filed Form 3Z-1 with its 2003 Year-
End Report with the wrong financial information. The Audit staff recommended FOJC
demonstrate that the required forms were filed correctly; or provide any relevant
information as to why the forms were not filed or were incorrect. In response, FOJC
acknowledged that the committee failed to file Form 3Z-1 with the 2003 July Quarterly
Report and filed the incorrect amount on the form with the 2003 Year End Report.
Procedures are now in place to ensure future compliance.

Legal Standard

Special Reporting Requirements. Principal campaign committees of candidates for the
U.S. House and the U.S. Senate must file FEC Form 3Z-1 as part of their July Quarterly
and Year-End Reports in the year preceding the year in which the general election for the
office sought is held. The information in this form allows opposing candidates to
compute their “gross receipts advantage” used to determining whether a candidate is
entitled to an increased contribution limit. The following information must be disclosed:

1. Gross receipts to date for the primary and general elections,

2. Aggregate amount of contributions from personal funds of the candidate for the
primary and general elections, and,

3. A calculation of gross receipts less the candidate’s personal contributions for each
election. 11 CFR §104.19.

Facts and Analysis

FOIJC did not file Form 3Z-1 with its 2003 July Quarterly Report. Form 3Z-1 filed with
the 2003 Year-End Report contained incorrect financial information, whereby not all of
the receipts reported on lines 11, 12, 13, and 14 of the Detailed Summary Page were

° This regulation became effective January 27, 2003; as such, this audit period is the first that required
filing of this form.


+

2004 Activity
Reported Bank Records Discrepancy
Opening Cash Balance $70,575 $60,683 $9,892
Overstated
Receipts $280,112 $273,624 $6,488
Overstated
Disbursements $290,634 $305,407 $14,773
Understated
Ending Cash Balance $60,053 $28,900 $31,153
Overstated

Opening Cash Balance - 2004

The net overstatement of beginnin

above.

Receipts — 2004

The overstatement of receipts was the net result of the following:

e Unreported receipts from Individuals and PACs-
FOIC did not report 3% of contributions from

individuals and PACs.

° Unreported in-kind contributions from PACs- FOJC
did not report 4 in-kind contributions from PACs on
Schedules A which were reported by the PACs on their

disclosure reports.

¢ Overstated contributions from Individuals and PACs-
FOIC reported contributions totaling $2,000 in 2004 that
were received in 2003; doubled the amounts reported for
3 contributions totaling $2,500; reported 4 contributions,
totaling $8,500, that were not supported by deposits into
the bank account and not reported by the PACs as
contributions to FOJC; and, reported $1,400 more in
unitemizable contributions than actually were deposited.

e Unexplained difference

Net Overstatement

ig cash on hand was the result of the errors described

$ 8,100

3,099

14,400

3,287

$6,488


Finding 5. Disclosure of Disbursements

A sample review of operating expenditures itemized on Schedules B revealed that FOJC
did not provide adequate disclosure information, such as purpose, for 32% of the items
reviewed. In addition, 77% of disbursements made to other political committees were
inadequately disclosed. The Audit staff recommended that FOIC file amended reports to
correct the public record. In response, FOJC complied with the Audit staff’s
recommendation by filing amended reports that corrected the disclosure information.
(For more detail, see p. 13)

Finding 6. Failure to File Form 3Z-1

FOIC failed to file Form 3Z-1 (Consolidated Report of Gross Receipts for Authorized
Committees) with its 2003 July Quarterly Report and filed Form 3Z-1 with its 2003 Year-
End Report with the wrong financial information. The Audit staff recommended that
FOJC demonstrate that the required forms were filed correctly; or provide any relevant
information as to why the forms were not filed or were incorrect. In response, FOJC
acknowledged that the committee failed to file Form 3Z-1 with the 2003 July Quarterly
Report and filed the incorrect amount on the form with the 2003 Year End Report.
Procedures are now in place to ensure future compliance.

(For more detail, see p. 15)


Part III
Summaries

Findings and Recommendations

Finding 1. Misstatement of Financial Activity

A comparison of FOJC’s reported financial activity to bank records revealed a
misstatement of cash on hand, receipts, and disbursements in calendar years 2003 and
2004. FOJC complied with the Audit staff's recommendations by filing amended reports
for calendar years 2003 and 2004 correcting the misstatements.

(For more detail, see p. 5)

Finding 2. Disclosure of Receipts

A review of all itemized contributions from individuals demonstrated that FOJC failed to
adequately disclose 15% of the contributions totaling $19,250; a sample review of PAC
contributions showed FOJC did not provide adequate disclosure information for 22% of
the items tested. The Audit staff recommended FOJC submit amended reports to correct
the public record. In response, FOJC complied with the Audit staff’s recommendation by
filing amended reports to correct the public record.

(For more detail, see p. 8)

Finding 3. Untimely Deposit of Receipts

A review of all contributions from individuals whose contributions aggregated more than
$200 for the election cycle showed that FOJC did not deposit 55 checks totaling $35,500
within 10 days of the treasurer’s receipt. A sample review of PAC contributions showed
FOIC failed to timely deposit 33% of the contributions reviewed. The Audit staff
recommended FOJC provide documentation to show the contributor checks were
deposited timely or provide any other comments it may have relative to this matter. In
response, FOJC did not provide any documentation to dispute the finding but stated that
new procedures have been implemented to ensure timely deposits of contributions in the
future.

(For more detail, see p. 10)

Finding 4. Cash Disbursements

FOJC made 69 cash withdrawals from one of its bank accounts. The withdrawals totaled
$20,506. The Act requires political committees to make all disbursements, except those
from a petty cash fund, by check or similar draft drawn on a committee account. In
addition, FOJC failed to maintain adequate records for cash withdrawals totaling
$19,586. The Audit staff recommended FOJC demonstrate it complied with the law
regarding cash disbursements, and obtain and submit the missing disbursement
documentation. FOJC failed to submit the missing disbursement documentation but
acknowledged that the committee did not comply with the law regarding cash
disbursements and stated that new procedures are in place for future compliance.

(For more detail, see p. 11)


16

disclosed. The Audit staff presented this matter to FOJC representatives at the exit
conference; FOJC representatives had no comment.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that FOJC demonstrate that Forms 3Z-1 were correctly
filed, or provide any relevant information as to why the forms were not filed or were
incorrect. In response, FOJC acknowledged that the committee did not file Form 3Z-1
with the 2003 July Quarterly Report and filed the incorrect amount on the form with the
2003 Year End Report. FOJC stated that the new Principal campaign committee has
procedures in place to ensure future compliance.


Opening Cash Balance - 2003

The overstatement of beginning cash on hand was the result of an unexplained

misstatement of ending cash at December 31, 2002 in the amount of $13,090.

Receipts - 2003
The net understatement of receipts was the result of the following:

¢ Unreported in-kind contributions from PACs- FOJC + §$
did not report 5 in-kind contributions from PACs on
Schedules A (Itemized Receipts) which were reported by
the PACs on their disclosure reports.

+

e Unreported receipts from Individuals and PACs-
FOIC did not report 15% of contributions from
individuals and PACs.

e Overstated contributions from PACs- FOJC reported 5
contributions from PACs that were not deposited in the
bank account. Further, the PACs did not report making
the contributions to FOJC.

e Unexplained difference

631

42,796

6,500

4,245

Net Understatement $ 32,682

Disbursements — 2003
The net understatement of disbursements was the result of the following:

e Unreported in-kind contributions from PACs- FOJC + $
did not report 7 in-kind contributions from PACs on
Schedules B (Itemized Disbursements) which were
reported by the PACs on their disclosure reports.

e Disbursements Not Reported — FOJC did not report +
29% of operating expenditures, including cash
withdrawals.

¢ Disbursements Overstated - FOJC overstated operating -
expenditures by $10,550; reported an unsupported
disbursement in the amount of $38,246 on April 1, 2003
as “unitemized adjust” for a prior period; and reported
$17,782 more in unitemizable disbursements than
actually went through the bank account.

e Unexplained difference -

Net Understatement $

2,802

71,889

66,578

718

7,395


FEDERAL ELECTION COMMISSION
WASHINGTON, D.C. 20463

May 12, 2006

MEMORANDUM

TO: ROBERT W. BIERSACK
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ
ASSISTANT STAFFIRECTOR
AUDIT DIVISION /

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON
FRIENDS OF JOHN CONYERS

Attached please find a copy of the final audit report and related documents on
Friends of John Conyers, which was approved by the Commission on May 4, 2006.

Informational copies of the report have been received by all parties involved and
the report may be released to the public on May 15, 2006.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
C Library
Web Manager


Legal Standard

A. Itemization Required for Contributions from Individuals. An authorized
candidate committee must itemize any contribution from an individual if it exceeds $200
per election cycle, either by itself or when combined with other contributions from the
same contributor. 2 U.S.C. §434(b)(3)(A).

B. Election Cycle. The election cycle begins on the first day following the date of the
previous general election and ends on the date of the next general election. 11 CFR
§100.3(b).

C. Required Information for Contributions from Individuals. For each itemized
contribution from an individual, the committee must provide the following information:
© The contributor’s full name and address (including zip code);
¢ The contributor’s occupation and the name of his or her employer;
The date of receipt (the date the committee received the contribution);
The amount of the contribution; and
The election cycle-to-date total of all contributions from the same individual. 11
CFR §§100.12 and 104.3(a)(4) and 2 U.S.C. §434(b)(3)(A).

D. Required Information for Contributions from Political Committees. For each
contribution from a political committee, the reporting committee must provide the
following information:

¢ The committee’s name and address;

¢ The date of the receipt;

¢ The amount of the contribution; and

e The election cycle-to-date total. 11 CFR §104.3(a)(4) and 2 U.S.C.

§434(b)(3)(B).

Facts and Analysis

A review of all itemized contributions from individuals determined that FOJC did not
completely report disclosure information for 15% of the contributions totaling $19,250.
The errors included not disclosing addresses and reporting the wrong election-cycle-to-
date amounts.

A sample review of itemized contributions from PACs demonstrated that FOJC did not
adequately provide disclosure information for 22% of the contributions reviewed. Most
of the errors were due to reporting the wrong election-cycle-to-date amounts, as well as
missing or incomplete addresses’.

The wrong election-cycle-to-date amounts appear to be attributed to FOJC using the
wrong election cycle date in the electronic filing software used to file the disclosure

> FOJC’s records included contribution check copies from PACs and individuals which contained the
addresses; however, the information was not reported.


Disbursements — 2004
The net understatement of disbursements was the result of the following:

¢ In-kind contributions from PACs - FOJC did not + $ 3,099
report 4 in-kind contributions from PACs on Schedules B
which were reported by the PACs on their disclosure
Teports.

¢ Disbursements Not Reported- FOJC did not report 15% + 47,141
of operating expenditures that cleared the bank account.

¢ Disbursements Overstated- FOJC overstated operating - 33,807
expenditures by $24,924 and reported $8,883 more in
unitemized disbursements than actually went through the
bank account.

. Unexplained difference - 1,660
Net Understatement $14,773

Ending Cash Balance - 2004

FOJC misstated the cash balance throughout 2003 and 2004 due to the errors described
above and other reporting discrepancies, such as overstating the beginning cash balance
for the 2003 October Quarterly report by $22,088. On December 31, 2004 the cash
balance was overstated by $31,153.

During the exit conference the Audit staff provided FOJC representatives a workpaper
detailing the misstatements of financial activity. FOJC representatives had no comments.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended FOJC file amended reports for calendar years 2003 and
2004 to correct the misstatements detailed above and amend its most recently filed report
to correct the cash on hand balance. In response, FOJC filed amended reports for
calendar years 2003 and 2004 correcting the misstatements, as well as amending all
reports through the current reporting period to correct the cash on hand balance.

| Finding 2. Disclosure of Receipts

Summary
A review of all itemized contributions from individuals demonstrated that FOJC failed to

adequately disclose 15% of the contributions totaling $19,250; a sample review of PAC
contributions showed FOJC did not provide adequate disclosure information for 22% of
the items tested. The Audit staff recommended FOJC submit amended reports to correct
the public record. In response, FOJC complied with the Audit staff’s recommendation by
filing amended reports to correct the public record.


Part IV
Findings and Recommendations

[Finding 1. Misstatement of Financial Activity

Summary

A comparison of FOJC’s reported financial activity to bank records revealed a
misstatement of cash on hand, receipts, and disbursements in calendar years 2003 and
2004. FOJC complied with the Audit staff's recommendations by filing amended reports
for calendar years 2003 and 2004 correcting the misstatements.

Legal Standard

Contents of Reports. Each Teport must disclose:

¢ The amount of cash on hand at the beginning and end of the reporting period;

¢ The total amount of receipts for the reporting period and for the election cycle;

¢ The total amount of disbursements for the Teporting period and for the election cycle;
and

¢ Certain transactions that require itemization on Schedule A (Itemized Receipts) or
Schedule B (Itemized Disbursements). 2 U.S.C. §434(b)(1), (2) and (4).

Facts and Analysis

The Audit staff reconciled the reported activity to the bank records and determined there
was a misstatement of cash on hand, receipts, and disbursements in calendar years 2003
and 2004. The following chart outlines the discrepancies between the totals on FOJC’s

disclosure reports and the bank records.

2003 Activity
Reported Bank Records Discrepancy
Opening Cash Balance $38,424 $25,334 $13,090
Overstated
Receipts $253,797 $286,479 $32,682
Understated
Disbursements $243,734 $251,129 $7,395
Understated
Ending Cash Balance $70,576 $60,684 $9,892
Overstated

? The reported ending cash does not match the ending cash that is determined by adding beginning cash
and receipts, and subtracting disbursements. The difference is due to an unexplained change in cash
between the July quarterly report ending cash and the October quarterly beginning cash.



Part I
Background

Authority for Audit

This report is based on an audit of Friends of John Conyers, undertaken by the Audit
Division of the Federal Election Commission (the Commission) in accordance with the
Federal Election Campaign Act of 1971, as amended (the Act). The Audit Division
conducted the audit pursuant to 2 U.S.C. §438(b), which permits the Commission to
conduct audits and field investigations of any political committee that is required to file a
report under 2 U.S.C. §434. Prior to conducting any audit under this subsection, the
Commission must perform an internal review of Teports filed by selected committees to
determine if the reports filed by a particular committee meet the threshold requirements
for substantial compliance with the Act. 2 U.S.C. §438(b).

Scope of Audit

This audit examined:

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

The disclosure of contributions received.

The disclosure of disbursements, debts and obligations.
The consistency between reported figures and bank records.
The completeness of records.

Other committee operations necessary to the review.

NAW WN

Scope Limitations

Although FOJC’s records for disbursements technically met the recordkeeping
requirements of the Act, invoices were not available for 29% of operating expenditures.
For these disbursements, the Audit staff was unable to test for adequate reporting of debts
or personal use of campaign funds.


12

Name and address of every person to whom any disbursement is made,

Date,

Amount,

Purpose, and

If disbursement is made for a candidate, the journal shall include the name of that
candidate and the office (including State and Congressional district) sought by
such candidate. 11 CFR §102.11.

C. Required Records for Disbursements. For each disbursement, the treasurer of a
political committee must keep records on the:

Amount;

Date;

Name and address of the payee’;

Purpose (a brief description of why the disbursement was made); and

If the disbursement was made on behalf of a candidate, the candidate’s name and
the office sought by the candidate.

If the disbursement was in excess of $200, the records must include a receipt or
invoice from the payee, or a cancelled check or share draft to the payee. If the
disbursement was by credit card, the record must include the monthly statement
or customer receipt and the cancelled check used to pay the credit card bill. 2
U.S.C. §432(c)(5) and 11 CFR §§102.9(b).

D. Preserving Records and Copies of Reports. The treasurer of a political committee
must preserve all records and copies of reports for 3 years after the report is filed. 2
U.S.C. §432(d).

Facts and Analysis

A. Cash Disbursements

Our examination of bank records and related information identified 69 cash withdrawals
totaling $20,506 during the audit period. According to committee officials, FOJC did not
maintain a petty cash fund but withdrew cash from one of its checking accounts to
reimburse staff members for some travel and non-travel expenses related to campaign
events and fundraisers. Political committees may only make cash expenditures, not
exceeding $100, from a petty cash fund; otherwise all disbursements must be made by

check.

* The payee is usually the person providing the goods or services to the committee. In the case of travel
advances, however, the payee is the person receiving the advance. 11 CFR §102.9(b)(2).


14

¢ Name and address of the payee®; and
¢ Purpose (a brief description of why the disbursement was made—see below). 11
CFR §104.3(b)(4)(i).

B. Itemizing Transfers to Affiliated Committees. Political party committees must
itemize all transfers (i.e., the full name, address, date, amount, and purpose) regardless of
amount to other political party committees. 11 CFR §104.3(b)(4)(ii).

C. Examples of Purpose.

¢ Adequate Descriptions. Examples of adequate descriptions of “purpose” include
the following: dinner expenses, media, salary, polling, travel, party fees, phone
banks, travel expenses, travel expense reimbursement, catering costs, loan
repayment, or contribution refund. 11 CFR §104.3 (b)(4)(@)(A).

¢ Inadequate Descriptions. The following descriptions do not meet the requirement
for reporting “purpose”: advance, election day expenses, other expenses, expense
reimbursement, miscellaneous, outside services, get-out-the-vote, and voter
registration. 11 CFR §104.3 (b)(4)()(A).

D. Special Rule for Reporting Reimbursements to Staff (for Travel and Subsistence
Advances). If the total amount reimbursed to the staff member is $500 or less, the
committee should report the staff member as the payee. If the total amount exceeds $500
and payments to any one vendor used for the expenses total over $200 for the election
cycle, the committee must:

e Report the staff member as payee; and

¢ Report the payments aggregating over $200 to any one vendor as memo entries on

Schedules B. Advisory Opinion 1996-20, footnote 3.

Facts and Analysis

A sample review of operating expenditures resulted in a 32% error rate for disclosure
information. The errors consisted of reporting unacceptable purposes (such as
reimbursement, consulting fees) and not reporting complete addresses or memo entries
for staff travel and non-travel reimbursements.

When reimbursing staff members and volunteers for travel/subsistence expenses
exceeding $500 and non-travel expenses exceeding $200, FOJC was required to itemize
as memo entries on Schedules B, payments to the original vendors which aggregated over
$200 in the election cycle. FOJC did not report any memo entries for reimbursements that
met the requirement. All of the reimbursements were made within the same reporting
period as the incurrence of the expense.

A review of all disbursements made to other political committees showed that FOJC did
not provide adequate disclosure information for 77% of the disbursements. The errors
were due to FOJC not reporting a purpose and reporting the wrong amount.

* Payee means the person who Provides the goods or services to the committee. 11 CFR
§102.9(6)(2)(i)(A)


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Limitations

Part II. Overview of Campaign
Campaign Organization
Overview of Financial Activity

Part III. Summaries
Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Misstatement of Financial Activity
Finding 2. Disclosure of Receipts
Finding 3. Untimely Deposit of Receipts
Finding 4. Cash Disbursements
Finding 5. Disclosure of Disbursements
Finding 6. Failure to File Form 3Z-1

Page

10
11
13
15


Report of the
Audit Division on

Friends of John Conyers
January 1, 2003 - December 31, 2004

Why the Audit
Was Done

Federal law permits the
Commission to conduct
audits and field
investigations of any
political committee that is
required to file reports
under the Federal
Election Campaign Act
(the Act). The
Commission generally
conducts such audits
when a committee
appears not to have met
the threshold
requirements for
substantial compliance
with the Act.! The audit
determines whether the
committee complied with
the limitations,
prohibitions and
disclosure requirements
of the Act.

Future Action
The Commission may
initiate an enforcement
action, at a later time,
with respect to any of the
matters discussed in this
report.

" 2US.C. §438(b).

About the Campaign (p. 2)

Friends of John Conyers (FOJC) is the principal campaign
committee for John Conyers, Jr., Democratic candidate for the
U.S. House of Representatives from the state of Michigan, 14"
District. FOJC is headquartered in Mitchellville, MD. For more
information, see chart on the Campaign Organization, p. 2.

Financial Activity (p. 2)
¢ Receipts

o From Individuals $ 151,971
© From Political Party Committees

and PACs 400,309
© From Other Receipts 7,822
o Total Receipts $ 560,102

¢ Disbursements

© Operating Expenditures $ 531,346
o Other Disbursements 25,190
© Total Disbursements $ 556,536

Findings and Recommendations (p. 3)
¢ Misstatement of Financial Activity (Finding 1)

¢ Disclosure of Receipts (Finding 2)

¢ Untimely Deposit of Receipts (Finding 3)

e Cash Disbursements (Finding 4)

e Disclosure of Disbursements (Finding 5)

e Failure to File Form 3Z-1 (Finding 6)


10

reports. This matter was presented to FOJC representatives at the exit conference along
with workpapers. FOJC representatives had no comments.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that FOJC submit amended reports to correct the public
record. FOJC substantially complied with the Audit staff’s recommendation by filing
amended reports with complete addresses and correct election-cycle-to-date amounts.

[Finding 3. Untimely Deposit of Receipts

Summary
A review of all contributions from individuals whose contributions aggregated more than

$200 for the election cycle showed that FOJC did not deposit 55 checks totaling $35,500
within 10 days of the treasurer’s receipt. A sample review of PAC contributions showed
FOIC failed to timely deposit 33% of the contributions reviewed. The Audit staff
recommended that FOJC provide documentation to show the contributor checks were
deposited timely or provide any other comments it may have relative to this.matter. In
response, FOJC did not provide any documentation to dispute the finding but stated that
new procedures have been implemented to ensure timely deposit of contributions in the
future.

Legal Standard

A. Deposit of Receipts. The treasurer of a political committee must deposit
contributions (or return them to the contributors without being deposited) within 10 days
of the treasurer’s receipt. 11 CFR §103.3(a).

B. Receipt of Contributions. Every person who receives a contribution for an
authorized political committee shall, no later than 10 days after receipt, forward such
contribution to the treasurer. 11 CFR §102.8(a).

Facts and Analysis

The Audit staff reviewed contributions from individuals whose contributions aggregated
over $200 for the election cycle and determined that FOJC failed to deposit in a timely
manner 55 checks totaling $35,500 (23% of the total dollar value of individual
contributions). A sample review of PAC contributions tevealed FOJC did not timely
deposit 33% of the contributor checks reviewed. Since FOJC did not record the date of
receipt of the checks, the Audit staff used the difference between the contributor check
date and the bank deposit date plus an allowance for transmittal and delivery of the
contribution to determine if FOJC timely deposited the contributions. These checks were
deposited between 24 and 257 days from the check date.

FOJC’s internal procedures for accepting receipts showed most PAC contributions went
directly to FOJC’s fundraiser. The fundraiser made copies of the contribution checks and
forwarded the originals to the treasurer to be deposited in FOJC’s bank account. On
some occasions, the PAC contribution checks went directly to the treasurer.


13

B. Recordkeeping for Cash Disbursements

FOJC’s records consisted of copies of cancelled checks, invoices, receipts, and an
incomplete electronic disbursement database. However, FOJC failed to maintain any
records for cash disbursements totaling $19,586.

FOJC’s procedures for cash disbursements required staff members to complete a
Campaign Money Disbursement Confirmation Form and submit receipts for the
expenses, but the procedures were not always followed. In some cases a journal entry
was recorded in the accounting system. FOJC provided the Audit staff with Campaign
Money Disbursement Confirmation Forms to document $920 of the cash disbursements
and provided no documentation for the remaining $19,586.

These matters were presented at the exit conference along with workpapers. FOJC
representatives had no comment.

Interim Audit Report Recommendation and Committee Response

The Audit staff recommended that FOJC:

¢ Demonstrate it complied with the provisions of 2 U.S.C. §432(h) regarding cash
disbursements;

¢ Provide any comments it deems relevant regarding the cash disbursements; and

¢ Obtain and submit the missing disbursement documentation.

In response to the Audit staff’s recommendations, FOJC failed to submit the missing
disbursement documentation but acknowledged that the committee did not comply with
the law regarding cash disbursements. FOJC stated the new principal campaign
committee has procedures in place for future compliance. These procedures include
processing disbursements through a pre-approval process, providing proper
documentation for each disbursement, and adhering to Commission regulations regarding
petty cash.

| Finding 5. Disclosure of Disbursements

Summary

A sample review of operating expenditures itemized on Schedules B revealed that FOJC
did not provide adequate disclosure information, such as purpose, for 32% of the items
reviewed. In addition, 77% of disbursements made to other political committees were
inadequately disclosed. The Audit staff recommended that FOJC file amended reports to
correct the public record. FOJC complied with the Audit staff’s recommendation by
filing amended reports that corrected the disclosure information.

Legal Standard
A. Reporting Operating Expenditures. When Operating expenditures to the same

person exceed $200 in an election cycle, the committee must report the:
e Amount;
© Date when the expenditures were made;