FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

December 1,2008 

MEMORANDUM 

To:	 Robert W. Biersack 

Press Officer 

From:	 WandaJ. Thomas * 

Acting Assistant Staff Director 

Audit Division 

Subject:	 Public Issuance of the Audit Report on Sharpton 2004 

Attached please find a copy of the audit report on Sharpton 2004, which was 

approved by the Commission on November 13,2008. 

All parties involved have received informational copies of the report and the report 

may be released to the public on December 1, 2008. 

Attachment as stated 

cc:	 Office of General Counsel 

Office of Public Disclosure 

Reports Analysis Division 

FEC Library 

DSDD Website V 
Why the Audit 

Was Done 

Federal law requires the 

Commission to audit 

every political 

committee established 

by a candidate who 

receives public funds for 

the primary campaign. I 

The audit determines 

whether the candidate 

was entitled to all of the 

matching funds 

received, whether the 

campaign used the 

matching funds in 

accordance with the law, 

whether the candidate is 

entitled to additional 

matching funds, and 

whether the campaign 

otherwise complied with 

the limitations, 

prohibitions, and 

disclosure requirements 

ofthe 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. 

Report of the Audit Division on 

Sharpton 2004 

August 27, 2002 - December 31, 2004 

About the Committee (p.3) 

Sharpton 2004 is the principal campaign committee for the 

Reverend Alfred C. Sharpton, a candidate for the Democratic 

Party's nomination for the office ofPresident ofthe United 

States and is headquartered in Alexandria, VA. For more 

information, see the chart on Campaign Organization, p. 3. 

Financial Activity (p.4) 

•	 Receipts 

o	 Contributions from Individuals $ 517,787 

o	 Matching Funds Received 100,000 

o	 Contributions from Political 

Committees 17,925 

o	 Loans Received 187,000 

o	 Total Receipts $ 822,712 

•	 Disbursements 

o	 Operating Expenditures $ 620,633 

o	 Fundraising Disbursements 67,502 

o	 Loan Repayments 100,000 

o	 All Other Disbursements 33,813 

o	 Total Disbursements $ 821,948 

Findings and Recommendations (p. 5) 

•	 Net Outstanding Campaign Obligations (Finding 1) 

•	 Candidate Personal Spending Limit (Finding 2) 

•	 Receipt ofProhibited Contributions (Finding 3) 

•	 Receipt of Contributions that Exceed the Limits 

(Finding 4) 

•	 Misstatement ofFinancial Activity (Finding 5) 

I 26 U.S.C. §9038(a). 
Table of Contents 

Page 

Part I. Background
 

Authority for Audit 1
 

Scope of Audit I
 

Inventory ofCampaign Records I
 

Campaign Background Information 1
 

Part II. Overview of Campaign
 

Campaign Organization 3
 

Overview of Financial Activity 4
 

Part III. Summaries
 

Findings and Recommendations 5
 

Amounts Owed to the U.S. Treasury 7
 

Part IV. Findings and Recommendations 

Finding 1. Net Outstanding Campaign Obligations 8
 

Finding 2. Candidate Personal Spending Limit II
 

Finding 3. Receipt of Prohibited Contributions 16
 

Finding 4. Receipt of Contributions that Exceed the Limits 23
 

Finding 5. Misstatement of Financial Activity 25
 
Part I 

Background 

Authority for Audit 

This report is based on an audit of Sharpton 2004, undertaken by the Audit Division of 

the Federal Election Commission (the Commission) as mandated by Section 9038(a) of 

Title 26 of the 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 under section 9037." Also, Section 9039(b) ofthe United States 

Code and Section 9038.1(a)(2) of the Commission'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: 

I. The receipt of excessive contributions and loans. 

2. The receipt of contributions from prohibited sources. 

3. The disclosure of contributions and transfers received. 

4. The disclosure of disbursements, debts and obligations. 

5. The recordkeeping process and completeness of records. 

6. The consistency between reported figures and bank records. 

7. The accuracy ofthe Statement ofNet Outstanding Campaign Obligations. 

8. The campaign's compliance with spending limitations. 

9. Other campaign operations necessary to the review. 

Inventory of Campaign Records 

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

audit fieldwork. Sharpton 2004 records were sufficiently complete to begin fieldwork. 

Campaign Background Information 

Matching Funds 

In order for the Commission to certify a candidate as eligible to receive public funds 

under the Presidential Primary Matching Payment Account Act (the Matching Payment 

Act), the candidate must satisfy two basic requirements: 1) submit a letter of candidate 

agreement and certifications;' and 2) submit a satisfactory threshold submission of 

contributions that can be matched (11 CFR §§9033.2(a)(1) and (c). On March 11,2004, 

the Federal Election Commission determined that Reverend Alfred C. Sharpton (the 

Candidate) and Sharpton 2004, satisfied the eligibility requirements to receive matching 

funds. On the same date, the Commission authorized an investigation ofthe Candidate 

and Sharpton 2004 under 11 CFR §9039.3(a)(I) to resolve whether Reverend Sharpton 

had exceeded his limitation on expenditures from personal or family funds of $50,000, 

2 The Candidate signed this letter on January 2, 2004. 
2 

(personal spending limit), for the purpose of determining the Candidate's continuing 

eligibility for public funds under the Matching Payment Act. 

Documentation subsequently reviewed by the Audit staff revealed that the Candidate had 

exceeded his personal spending limit and thus on April 29, 2004, the Commission made a 

final determination to suspend further matching funds. (See Finding 2, Candidate 

Personal Spending Limit, pg. 11) On May 14,2004, the Commission determined that 

Sharpton 2004 must repay all matching funds ($100,000) it had received. The Candidate 

paid all monies owed, making four payments of principal and interest, each in the form of 

a cashier's check. The last payment was received on February 23,2006. 

National Action Network 

The Candidate established the National Action Network (NAN) in 1991, with the stated 

goal of fighting to empower people by providing extensive voter education, services 

aiding the poor, supporting economically small community businesses, as well as 

confronting racism and violations of civil and human rights. The Candidate is NAN's 

president. Funds raised by NAN appear to be from corporations, memberships, two 

annual fundraising dinners and Saturday morning rallies. 

Based upon a review of NAN bank records, it is the opinion of the Audit staff that the 

Candidate used funds raised by NAN to promote his presidential campaign. The Audit 

staff noted payments for such expenses as voter registration and fundraising, as well as 

substantial payments to the Candidate's American Express credit card (Amex account). 

(See Finding 3, Receipt of Prohibited Contributions, pg. 16) 
3 

Part II 

Overview of Campaign 

Campaign Organization 

Important Dates , Sharpton 2004 

D ate 0 fR· egistration January 21, 2003

Eligibility Period:' March 11,2004 - March 15,2004 

Audit Coverage August 27,2002 ­ December 31, 20044 

Headquarters Alexandria, VA 

Two 

Six - Checking Accounts 

Bank Information 

Bank Depositories 

Bank Accounts 

Treasurer 

Treasurer When Audit Was Conducted Andrew Rivera 

Treasurer During Period Covered by Audit 

Manazement Information
 

Attended FEC Campaign Finance Seminar
 

Used Commonly Available Campaign
 

Management Software Package
 

Who Handled Accounting and
 

Recordkeeping Tasks
 

Luis A. Miranda, Jr. (January 21, 2003 ­

January 19, 2004 )
 

Andrew A. Rivera (January 20, 2004 ­

Present)
 

No
 

Yes
 

Paid Staff
 

3 This period began with the date the Candidate satisfied matching fund eligibility requirements and ended, 

as determined by the Commission, when the Candidate announced he was no longer actively 

campaigning for the Democratic nomination for President. See 11 CFR §9033.5(1) 

4 Sharpton 2004 has not filed a report with the Commission since its December 2004 Year End report. 
4 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand (tlJ AU2;ust 27, 2002 $0 

0 Contributions from Individuals $ 517,787) 

0 Matching Funds Received 100,000 

0 Contributions from Political Committees 17,925 

0 Loans Received 187,000 

Total Receipts $ 822,712 

0 Operating Expenditures $ 620,633 

0 Fundraising Disbursements 67,502 

0 Loan Repayments 100,000 

0 All Other Disbursements 33,813 

Total Disbursements $ 821,948 

Cash on hand @ December 31,2004 $764 

5 Approximately 2,800 contributions were received from more than 2,500 individuals. 
5 

Part III 

Summaries 

Findings and Recommendations 

Finding 1. Net Outstanding Campaign Obligations 

A review of Sharpton 2004's financial activity indicated that as of March 15,2004, it was 

in a debt position. As noted in the background section, the Candidate has repaid all of the 

matching funds received ($100,000) to the U.S. Treasury. In response to the preliminary 

audit report (PAR), Sharpton 2004 submitted workpapers and a narrative that addressed 

the Statement ofNet Outstanding Campaign Obligations (NOCO) as presented in the 

PAR. After further review and adjustments, it is the opinion of the Audit staff that as of 

March 15,2004, Sharpton 2004 was in a deficit position of $1,426,661. (For more detail, 

see p. 8) 

Finding 2. Candidate Personal Spending Limit 

A review of Sharpton 2004's financial activity revealed that as of December 3,2002, the 

Candidate had exceeded his personal spending limit of$50,000. By the end of February 

2004, the Candidate had exceeded the limit by $500,980. The majority of the 

expenditures were related to expenses for travel charged to the Candidate's Amex 

account. In response to the PAR, Sharpton 2004 submitted its own breakdown of 

expenses from the Amex account, stating that it believed that $338,743 in expenses were 

directly related to the Candidate's presidential campaign. Sharpton 2004 did not provide 

any documentation to support its breakdown. Sharpton 2004 indicated a willingness to 

amend its disclosure reports for those items that had not been previously reported; but to 

date, amended reports have not been filed. The Audit staffs revised analysis indicates 

that the Candidate exceeded his personal spending limit by $446,426, a reduction of 

$54,554 from the original amount. (For more detail, see p. 11) 

Finding 3. Receipt of Prohibited Contributions 

The PAR concluded that Sharpton 2004 received $735,314 in possible prohibited 

contributions from three sources. In response to the PAR, Sharpton 2004 submitted a 

narrative which stated that payments to Amex should be prorated; that many of the 

payments had not cleared the bank and that Sharpton 2004 did not have any information 

to determine the sources of assets and income ofthe Sharpton's or NAN that were used to 

make payments on the account. The Audit staff's revised analysis indicated that 

Sharpton 2004 had received a minimum of $486,803 in prohibited funds. As a result, 

Sharpton 2004 should pay $486,803 to the U.S. Treasury. (For more detail, see p. 16) 

Finding 4. Receipt of Contributions that Exceed the 

Limits 

A review of contributions from individuals indicated that Sharpton 2004 failed to resolve 

excessive contributions totaling $10,500. Ofthese, only one was eligible for presumptive 

reattribution. No copy of a reattribution letter was provided and none ofthe contributions 
6 

were refunded. In response to the PAR, Sharpton 2004 states that it concurred with the 

finding and that it would implement the recommendations made in the report. To date, 

no evidence to show any corrective action regarding these excessive contributions has 

been provided. As a result, Sharpton 2004 should pay $10,500 to the U.S. Treasury. (For 

more detail, see p. 23) 

Finding 5. Misstatement of Financial Activity 

A comparison of Sharpton 2004's reported activity to bank records revealed that receipts 

and disbursements, as well as ending cash on hand, had been materially misstated in 

calendar year 2004. Receipts were understated by $110,279, due primarily to not 

reporting the receipt of $100,000 in matching funds. Disbursements were understated by 

$24,937 for the most part due to payroll and bank fees paid in March 2004 but not 

reported. Ending cash on hand was understated by $96,537. In its response to the PAR, 

Sharpton 2004 concurred that its activity was misstated in 2004 and indicated amended 

reports would be filed. To date, such reports have not been filed. (For more detail, see p. 

25) 
7 

Amounts Owed to the u.s. Treasury
 

Finding 3 Receipt of Prohibited Contributions $486,803 

Finding 4 Receipt ofContributions that Exceed 

the Limits 

10,500 

Total Due U.S. Treasury $497,303 
8 

Part IV
 

Findings and Recommendations
 

IFinding 1. Net Outstanding Campaign Obligations 

Summary 

A review of Sharpton 2004's financial activity indicated that as of March 15,2004, it was 

in a debt position. As noted in the background section, the Candidate has repaid all ofthe 

matching funds received ($100,000) to the U.S. Treasury. In response to the preliminary 

audit report (PAR), Sharpton 2004 submitted workpapers and a narrative that addressed 

the Statement ofNet Outstanding Campaign Obligations (NOCO) as presented in the 

PAR. After further review and adjustments, it is the opinion ofthe Audit staffthat as of 

March 15,2004, Sharpton 2004 was in a deficit position of$I,426,661. 

Legal Standard 

Net Outstanding Campaign Obligations. Within 15 days after the candidate's date of 

ineligibility (see definition below), the candidate must submit a statement of "net 

outstanding 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. II CFR §9034.5(a). 

Date of Ineligibility. The date of ineligibility is whichever ofthe following dates occurs 

first: 

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

•	 The 30th day following the second consecutive primary in which the candidate 

receives less than 10 percent ofthe popular vote; 

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

party nominates 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 

the calendar year. II CFR §§9032.6 and 9033.5. 

Qualified Campaign Expense. Each ofthe following expenses is a qualified campaign 

expense. 

•	 An expense that is: 

o	 Incurred by or on behalfofthe candidate (or his or her campaign) during the 

period beginning on the day the individual becomes a candidate and 

continuing through the last day ofthe candidate's eligibility under II 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 ofthe state 

where the expense was incurred or paid. II CFR §9032.9. 
9 

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

become a candidate, ifthat individual subsequently becomes a candidate, 

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

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

activity. 11 CFR §9034.4(a)(3). 

Value of Capital Assets. The fair market value of capital assets is 60% ofthe total 

original cost of the assets when acquired, except that assets that are 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 on 

the NaCO statement separately and demonstrating, through documentation, the lower 

fair market value. 11 CFR §9034.5(c)(l). 

Facts and Analysis 

The Audit staff prepared a NaCO as of March 15,2004, the Candidate's date of 

ineligibility. Sharpton 2004 did not include any estimated costs for winding down on its 

NaCO and had very little activity after the date of ineligibility. The audited statement 

was presented in the PAR and showed Sharpton 2004 to be in a deficit position of 

$1,719,225. 

In response to the PAR, Sharpton 2004 submitted a narrative and a worksheet disputing 

the $735,314 in possible prohibited contributions included in the accounts payable 

section of the NaCO. Sharpton 2004 also contends that several of the companies that 

paid campaign expenses are solely owned entities of Reverend Al Sharpton and thus the 

money from them was in fact personal, not a prohibited contribution. No comments were 

made concerning the remainder ofthe NaCO. After further review ofthe workpapers 

and narrative submitted, the Audit staff adjusted the Accounts Payable figure for by 

$54,554 (See Finding 2, Candidate Personal Spending Limit) and Amounts Payable to the 

U.S. Treasury by $238,012 (See Finding 3, Receipt of Prohibited Contributions and 

Finding 4, Receipt of Contributions that Exceed the Limit). 

The audited NaCO that appears on the next page was based on the audit of Sharpton 

2004's financial activity through February 3, 2006. 6 

6 The NaCO is based upon incomplete documentation for 2005 and 2006.
 

The Audit staff has requested missing bank statements, but to this date, they have not been received.
 
10
 

Sharpton 2004
 

Statement of Net Outstanding Campaign Obligations
 

As of March 15,2004
 

Prepared on December 26, 2007
 

Cash on Hand 

Cash in Bank 

Capital Assets 

$ 50 

110,703 

4,881 

[a] 

Total Assets $ 115,634 

Liabilities 

Accounts Payable for Qualified Campaign Expenses	 $ 844,037 [b] 

Winding Down Costs: 

Paid 3/16/04 - 2/3/06 13,955 

Loans Payable at 3/15/04 187,000 [c] 

Amounts Payable to U.S. Treasury for: 

Receipt of Prohibited Contributions	 486,803 

Receipt ofContributions that Exceed the Limits 10,500 

Total Liabilities 1,542,295 

Net Outstanding Campaign Obligations (Deficit) as of March 15,2004	 ($ 1,426,661) 

Footnotes to NOCO Statement: 

[a]	 Amount includes contributions dated before DOl but deposited after DOL 

[b]	 Includes an additional $326,392 in under-reported debt determined by the Audit staffto be owed by 

Sharpton 2004 for additional charges on the Candidate's Amex account. (See Finding 2, p.l 1) 

[c]	 Loans from banks, the Candidate and various individuals. 
11 

IFinding 2. Candidate Personal Spending Limit 

Summary 

A review of Sharpton 2004's financial activity revealed that as of December 3,2002, the 

Candidate had exceeded his personal spending limit of $50,000. By the end of February 

2004, the Candidate had exceeded the limit by $500,980. The majority ofthe 

expenditures were related to expenses for travel charged to the Candidate's Amex 

account. In response to the PAR, Sharpton 2004 submitted its own breakdown of 

expenses from the Amex account, stating that it believed that $338,743 in expenses were 

directly related to the Candidate's presidential campaign. Sharpton 2004 did not provide 

any documentation to support its breakdown. Sharpton 2004 indicated a willingness to 

amend its disclosure reports for those items that had not been previously reported; but to 

date, amended reports have not been filed. The Audit staffs revised analysis indicates 

that the Candidate exceeded his personal spending limit by $446,426, a reduction of 

$54,554 from the original amount. 

Legal Standard 

Limitation on expenditures from personal or family funds. No candidate who has 

accepted matching funds shall knowingly make expenditures from his or her personal 

funds, or funds of his or her immediate family, in connection with his or her campaign for 

nomination for election to the office of President which exceed $50,000, in the aggregate. 

11 CFR §9035.2 (a) (1). 

Expenditures made using a credit card for which the candidate is jointly or solely liable 

will count against the limits ofthis section to the extent that the full amount due, 

including any finance charge, is not paid by the committee within 60 days after the 

closing date ofthe billing statement on which the charges first appear. 11 CFR §9035.2 

(a)(2). 

Allocation of Travel Expenditures. For a trip which is entirely campaign-related, the 

total cost of the trip shall be a qualified campaign expense and a reportable expenditure. 

For a trip which included campaign-related and non-campaign related stops, that portion 

ofthe cost ofthe trip allocable to campaign activity shall be a qualified campaign 

expense and a reportable expenditure. Such portion shall be determined by calculating 

what the trip would have cost from the point of origin of the trip to first campaign-related 

stop and from that stop through each subsequent campaign-related stop, back to the point 

oforigin. If any campaign activity, other than incidental contacts, is conducted at a stop, 

that stop shall be considered campaign-related. Campaign activity includes soliciting, 

making, or accepting contributions, and expressly advocating the election or defeat ofthe 

candidate. Other factors, including the setting, timing and statements or expressions of 

the purpose of an event and the substance ofthe remarks or speech made, will also be 

considered in determining whether a stop is campaign-related. 
12 

For each trip, an itinerary shall be prepared and such itinerary shall be made available by 

the committee for Commission inspection. The itinerary shall show the time of arrival 

and departure and the type of event held. 11 CFR §9034.7 (b)(I)(2)&(3). 

Continuous Reporting Required. A political committee must disclose the amount and 

nature of outstanding debts and obligations until those debts are extinguished. 2 V.S.C 

§434(b)(8) and 11 CFR §§104.3(d) and 104.1 I(a). 

Itemizing Debts and Obligations. 

•	 A debt of $500 or less must be reported once it has been outstanding 60 days from 

the date incurred (the date of the transaction); the committee reports it on the next 

regularly scheduled report. 

•	 A debt exceeding $500 must be disclosed in the report that covers the date on 

which the debt was incurred. II CFR §104.11(b). 

Facts and Analysis 

The Audit staff conducted two reviews prior to the start of audit fieldwork, and each 

review showed that the Candidate had exceeded his personal expenditure limit. The first 

review, based solely upon disclosure reports showed that the Candidate had exceeded his 

personal expenditure limit by $51,802. The second review, based upon disclosure reports 

and partial documentation, comprised primarily ofthe Candidate's personal Amex 

account statements made available by Sharpton 2004 in response to subpoenas, showed 

that the limit had been exceeded by $119,198 as of March 2, 2004. It should be noted 

that this review was hindered because documentation was incomplete. Credit card 

statements were incomplete. There were no credit card statements for the period before 

August 2003 and none after December 2003, thus the Audit staff was unable to determine 

if any additional amounts incurred before or after this period should have been included. 

In addition, there were relatively few invoices or receipts to support charges on the credit 

card summaries, no explanation of how payments to the Candidate were applied to 

outstanding amounts, and no expense reimbursement requests submitted by the 

Candidate. Without this documentation it was not possible to determine how the amounts 

listed on Sharpton 2004's disclosure reports were determined, or what campaign related 

expenses were incurred in 2004, although the disclosure reports reflect additional 

amounts had accumulated by the end of February 2004. 

During fieldwork, the Audit staff reviewed additional documentation relating to 

disbursements and debts owed to the Candidate. Although a complete set of the Amex 

account statements was available for review, detailed documentation such as hotel 

receipts or travel itineraries were not provided. 

Loans made to Sharpton 2004 by the Candidate, as well as unreported debt owed to the 

Candidate listed on budget documents; make up part ofthe amounts exceeding the limit. 

Any payments the Candidate received from Sharpton 2004 were deducted from this 

amount. The majority of expenses that exceeded the limit were charges to the 

Candidate's personal Amex account and were primarily for travel related expenses 
13 

starting in October 2002 7 and running through the last statement covering February 2004. 

Comments obtained from a Sharpton 2004 staff person indicated that most, ifnot all of 

the travel expenses charged, were for presidential activity and thus, should have been 

reported. Other staff noted that NAN and presidential itineraries were often very blurred 

and it became increasingly difficult to separate the activity. Newspaper articles reported 

that often the Candidate would campaign during his NAN events. The final review ofthe 

expenditures to be applied to the Candidate's personal expenditure limit revealed that by 

December 3,2002, the Candidate had exceeded the limit of$50,000 and by the end of 

February 2004, the Candidate had exceeded the limit by $500,980. 

Debt Reporting 

Sharpton 2004 reported some debt to the Candidate; however, based on the Audit Staff's 

review ofthe Candidate's Amex account, the debt to the Candidate was understated on 

disclosure reports filed in 2004 by $380,947 to $431,709. On its 2004 Year End Report, 

Sharpton 2004 disclosed debt of$145, 147; the Audit staff determined the debt to be 

$526,093. 

At the exit conference, the Audit staff informed Sharpton 2004's treasurer of these 

matters and supplied related workpapers, which included a schedule of debts and 

obligations that detailed amounts for the Amex account. At that time, Sharpton 2004's 

treasurer did not concur with the Audit staff's opinion that all Amex account travel 

charges were attributable to presidential activity and stated that he would submit 

information to prove his position. The treasurer also stated that they would not amend 

the reports to disclose the Audit staff's calculated amounts of debt for each report. 

Preliminary Audit Report Recommendation and Committee 

Response 

The Audit staff recommended that Sharpton 2004 submit documentation demonstrating 

that the Amex account charges are not presidential in nature and any additional 

comments it may have relating to the Candidate's personal spending limit. In addition, 

the Audit staff recommended that if Sharpton 2004 did not provide documentation to 

disprove the assessment of the Audit staff concerning the Amex account charges, it 

should amend its reports to correctly disclose the debt to the Candidate on Schedules D-P 

(Debts & Obligations excluding Loans). 

In response to the PAR, Sharpton 2004 submitted a spreadsheet which listed by Amex 

statement period, each charge the Audit staff had noted as possible presidential expenses. 

To the side, it noted the category it had determined for each expense. Sharpton 2004 did 

not provide any documentation to support its categorization. The categories used and 

total amounts listed by Sharpton 2004 are summarized as follows: 

7 The Commission determined that the Candidate was deemed to be running for President at least as early 

as October 2002. Based on this determination the Audit staff included expenses incurred from this date 

on. 
14 

Campaign [More than likely related to Sharpton 2004] $338,743 

NAN [More than likely related to NAN] $132,877 

Mixed [More than likely related to both NAN & Sharpton 20041 $27,768 

Personal [More than likely related to Rev. Sharpton1 $36,943 

Canceled [Expenditures that were reversed or disallowed] $4,871 

"?" [purpose of travel unknown to Sharpton 20041 $56,875 

Totals $598,077~

Sharpton 2004 also submitted a written response in addition to the spreadsheet noted 

above, which stated in part, that it reviewed documents that it had provided to the 

Commission for the audit, matching fund inquiries and other issues to analyze expenses. 

It noted that problems had been encountered in the analysis due to the long lapse of time 

since the incurrence of the expenditures; and the fact that persons most familiar with the 

facts of individual trips were no longer available to provide assistance. Sharpton 2004 

indicated that it was difficult to categorize Rev. Sharpton's travel expenses on a case-bycase basis. 

The response cited instances where travel categories could be confused or had combined 

activities such as traveling for rallies, church services, meetings and non-partisan 

addresses that Sharpton 2004 had not considered campaign related even though they may 

have had partisan consequences. The response cited examples such as attending an event 

to celebrate the release by the Navy, ofVieques Island to the people of Puerto Rico or 

preaching at a funeral for a soldier killed in the war in Iraq, a war on which political 

opinion is divided. 

For cases such as these, Sharpton 2004 explained that all relevant factors were 

considered, including the event sponsor, whether the speech delivered by the Candidate 

was partisan or political in nature or whether it was a factual or advocacy presentation of 

NAN's and/or the Candidate's position as a civil rights or religious leader. Sharpton 

2004's response added that generally, if the purpose of the event during a trip was to 

promote Rev. Sharpton's candidacy, then it would consider the expenses incurred as 

campaign related. 

When allocating expenses, Sharpton 2004 stated that the analysis was decided in favor of 

charging NAN or Rev. Sharpton less and Sharpton 2004 more; if other than incidental 

campaign activity occurred, it considered the expense as campaign related. Sharpton 

2004 contends that mixed travel (travel with campaign, NAN and Rev. Sharpton 

business/personal) trips ought to be allocated by percentage and mileage. 

As for expenses for people traveling with the Candidate during his candidacy, Sharpton 

2004 stated that it believes that employees and consultants of NAN accompanied the 

Candidate on trips in order to provide him those services which were essential to his 

The actual amount of charges for Amex expenses per its review was $604,476. The difference of 

$6,398 is comprised of net charges the Audit staff did not consider in its evaluation and various 

charges through the period that Sharpton 2004 did not consider in its evaluation. The amount is 

considered immaterial. 

8 
15 

NAN functions whether the trip was NAN related or non-NAN related. Therefore, 

Sharpton 2004 believes the allocation of NAN and consultant work for the Candidate 

while he was a candidate could be 100% allocable to NAN or his personal account if 

those persons did not perform campaign related activities on a trip. Sharpton 2004 did 

admit however, that it had, with certain trips, reimbursed Rev. Sharpton for the travel and 

expenses for several NAN employees and consultants, for example, Marjorie Harris, the 

Executive Director of NAN, Mr. Edward Harris and Rev. Divest Toon. Given that 

precedent and with an abundance of caution, Sharpton 2004 designated most oftheir 

travel and expenses as campaign related. Sharpton 2004 indicated a willingness to amend 

its disclosure reports for those items that had not been previously reported; but to date, 

amended reports have not been filed. 

Audit Staff Assessment of Committee Response 

In its response, Sharpton 2004 classified $338,743 in Amex expenses as campaign 

related. As for items that Sharpton 2004 categorized as "Mixed," no documentation was 

supplied showing how it had made the determinations. As previously stated, Sharpton 

2004 staff and consultants noted that NAN and presidential itineraries were often very 

blurred and it became increasingly difficult to separate the activity. Newspaper articles 

reported that often the Candidate would campaign during his NAN events. Given the 

above, the Audit staff believes 11 CFR §9034.7(l)(2) and (3) is applicable and considers 

the $27,768 in "Mixed" travel as campaign related. 

With respect to those items designated as "Canceled," the Audit staff has taken into 

consideration expenses that were credited on the Amex account. However, no adjustment 

has been made for related charges (baggage & travel insurance) which Sharpton 2004 

states it "disallowed." No documentation was provided to demonstrate these were other 

than presidential campaign related expenses; the fact that the trip was cancelled does not 

change the nature ofthese associated expenses which remained on the Amex account. 

Although Sharpton 2004 did not provide the documentation to support decisions on 

expenses, such as event sponsors or copies of speeches, the Audit staff attempted to 

verify the charges categorized as NAN, Personal or "?"(Unknown). The internet was 

utilized to search for news articles or information concerning the Candidate's location, 

the purpose of each trip or any possible comments the Candidate or his staff had made at 

the location. 

The Audit staff was able to determine that $25,152 in expenses marked as either NAN or 

Personal were not campaign related. Conversely, the Audit staff found that for $18,730 

in expenses marked as either NAN or Personal, the expenses were at best mixed. 

Based upon the above, the Audit staff reduced expenditures subject to the Candidate's 

personal spending limit by $54,554; $25,152 for the NAN and Personal items noted 

above and the remaining $29,402 for expenses that were credited on the Amex account 

not previously deducted. 
16 

As for the loans from the Candidate, Sharpton 2004 did not dispute the amounts, nor did 

it make any comments about other expenses applied to the limit. 

The Audit staff's revised analysis indicates that the Candidate exceeded his personal
 

spending limit by $446,426 and under-reported debt owed to the Candidate.
 

IFinding 3. Receipt of Prohibited Contributions 

Summary 

The PAR concluded that Sharpton 2004 received $735,314 in possible prohibited 

contributions from three sources. In response to the PAR, Sharpton 2004 submitted a 

narrative which stated that payments to Amex should be prorated, that many of the 

payments had not cleared the bank and that Sharpton 2004 did not have any information 

to determine the sources of assets and income ofthe Sharpton's or NAN that were used to 

make payments on the account. The Audit staff's revised analysis indicated that 

Sharpton 2004 had received a minimum of $486,803 in prohibited funds. As a result, 

Sharpton 2004 should pay $486,803 to the U.S. Treasury. 

Legal Standard 

Receipt of Prohibited Corporate Contributions. Political campaigns may not accept 

contributions made from the general treasury funds of corporations. This prohibition 

applies to any type of corporation including a non-stock corporation, an incorporated 

membership organization, and an incorporated cooperative. 2 U.S.c. §44I b. 

Questionable Contributions. If a committee receives a contribution that appears to be 

prohibited (a questionable contribution), it must follow the procedures below: 

1.	 Within 10 days after the treasurer receives the questionable contribution, the
 

committee must either:
 

•	 Return the contribution to the contributor without depositing it; or 

•	 Deposit the contribution (and follow the steps below). II CFR §I03.3(b)(l). 

2.	 If the committee deposits the questionable contribution, it may not spend the 

funds and must be prepared to refund them. It must therefore maintain sufficient 

funds to make the refunds or establish a separate account in a campaign 

depository for possibly illegal contributions. II CFR §103.3(b)(4). 

3.	 The committee must keep a written record explaining why the contribution may 

be prohibited and must include this information when reporting the receipt of the 

contribution. II CFR §103.3(b)(5). 

4.	 Within 30 days of the treasurer's receipt of the questionable contribution, the 

committee must make at least one written or oral request for evidence that the 

contribution is legal. Evidence of legality includes, for example, a written 

statement from the contributor explaining why the contribution is legal or an oral 

explanation that is recorded by the committee in a memorandum. II CFR 

§103.3(b)(l). 

5.	 Within these 30 days, the committee must either: 

• Confirm the legality of the contribution; or 
17 

•	 Refund the contribution to the contributor and note the refund on the report 

covering the period in which the refund was made. 11 CFR §103.3(b)(1). 

Facts and Analysis 

During fieldwork, the Audit staffs review of Sharpton 2004 financial records indicated it 

received as much as $735,314 in possible prohibited contributions from, at a minimum, 

three sources. Each ofthe three is discussed below. 

1.	 National Action Network 

As stated above, the Candidate established NAN in 1991, with the stated goal of fighting 

to empower people by providing extensive voter education, services aiding the poor, 

supporting economically small community businesses, as well as confronting racism and 

violations of civil and human rights. The Candidate is NAN's president. Funds raised by 

NAN appear to be from corporations, memberships, two annual fundraising dinners and 

Saturday morning rallies. NAN is a not for profit corporation. 

Based upon a review of NAN bank records, the Candidate's Amex account statements, 

commentary by Sharpton 2004 staff and vendors associated with the campaign; it is the 

opinion ofthe Audit staff that the Candidate used money raised by NAN to promote his 

presidential campaign. As previously stated in Finding 2, the Candidate used his 

personal Amex account for travel. The Audit staffwas able to identify a total of 

$121,996 in payments from Sharpton 2004 for the Amex account, but the review also 

noted that NAN made payments on the Candidate's Amex account totaling $268,076 

either: 

o	 directly in the form of NAN checks made payable to Amex, 

o	 indirectly by NAN checks made payable to the Candidate annotated to indicate 

the purpose was for payment on the Amex account or 

o	 indirectly by NAN checks made payable to cash, Rev-A1s Production Inc., or Rev 

Al Entertainment Inc. with annotations such as "deposit on Amex overdue 

expense," "pay Amex travel" or "Arnex charges." 

In addition to payments to the Amex account, NAN paid other vendors for activity which 

appears related to the presidential campaign. A total of$84,611 was paid for items such 

as voter registration services, fundraising and plane tickets. The Archer Group (Archer) 

received payments of$45,266 for what appears to be voter registration activity. When 

questioned about the work Archer performed for NAN, a representative for the vendor 

stated NAN hired Archer to develop, write and implement a voter registration plan for 

NAN. In addition, Archer was to support NAN in "scheduling" and "advance" logistics. 

However, it appears that any limited voter registration activity undertaken by the Archer 

Group was coordinated with the Sharpton 2004 campaign. The Archer Group stated that 

it was retained for the work performed at NAN's expense by the Sharpton 2004 campaign 

manager, who had no role or position with NAN. The NAN Executive Director, who was 

responsible for NAN's voter registration effort, stated that she had no role in retaining or 

managing the Archer Group effort, and that its work was not part of NAN's overall voter 

registration effort. Further, the Archer Group stated that it actually did very little voter 
18 

registration work during the time it was being paid by NAN. The Archer Group focused 

its efforts on the scheduling and advance logistics services for Sharpton in his role as a 

candidate. Approximately one month after being retained, its work was placed under the 

formal control ofthe Sharpton 2004 campaign manager. There appears to be little 

change in the nature of the responsibilities being performed when its billing arrangements 

moved from NAN to Sharpton 2004. Given the statements made by the Archer Group, 

the Sharpton 2004 campaign manager, and the NAN Executive Director, as well as the 

lack of records to contradict their accounts, it appears that the Archer Group services paid 

for by NAN were coordinated with, and were for the benefit of Sharpton 2004. 

Other presidential expenses in the amount of $21,765, such as travel to South Carolina 

and Washington D.C., for NAN's Executive Director, were noted. The Executive 

Director had previously stated that she had traveled there on behalf of the campaign. 

Finally, a total of $6,480 was paid by NAN for miscellaneous expenses in South 

Carolina. 

2. Payments from Rev-Als Production Inc. and Other Unknown 

Sources 

The Audit staffs review of the Candidate's Amex account statements noted that there 

were additional payments totaling $343,127 for which the source was either unknown or 

appeared to be from prohibited sources. 

There were two payments totaling $29,928 from Rev-Als Production Inc. to NAN for 

Amex reimbursements. Very little is known about Rev-Als Production Inc., however, 

based on check copies, it appeared to be an incorporated entity", 

In addition, there is a payment in the amount of $53,669 which was noted on the account 

statement as being a "Corporate Remittance Payment" 10 for which the Audit staff has no 

further information. Also, there is a total of$259,530 in payments on the Candidate's 

Amex account for which the Audit staffhas no information concerning the source of the 

payments. Finally, the Audit staff noted numerous checks written on the NAN account 

made out to cash that were negotiated by the Candidate. As previously stated, in at least 

one instance, a check made out to cash was annotated to indicate that it was for an Amex 

credit card reimbursement. Therefore, the Audit staff believes it is probable that other 

NAN checks made payable to cash and negotiated by the Candidate could have been used 

to pay for campaign activity charged on the Candidate's Amex account. While the total 

is not known, the payments could represent prohibited contributions. The Audit staff 

requested information from Sharpton 2004 as to the source of all payments on the Amex 

account; but, as of the date of the PAR, that information had not been provided. 

9 A search with the New York Secretary of State's office and other sources did not find any evidence that 

Rev-Als Production Inc. is a corporation. Subsequent to the PAR, Sharpton 2004 provided redacted 

copies of Rev. Sharpton's tax returns for 2003-2005, none of which specifically mention this entity. 

10 This does not appear to be a charge reversal, which is easily distinguished on the Amex account 

statements. A representative from the corporate service center of American Express stated that a 

corporate remittance means that a payment was from a corporate source. 
19 

3. Loans from the Candidate 

During the Audit staff's review, it was noted that the Candidate loaned $39,500 to 

Sharpton 2004. Ofthis, $10,000 came in the form of cashiers checks obtained from 

Amalgamated Bank ofNew York. There are several hand-written annotations on the 

deposit documentation that state either, "Rev.'s Cashiers Check" or "From Rev Al 

Sharpton." No information has been made available as to the source of these funds. 

Another $19,500 in loans was received in the form ofa wire and a check from Rev-Als 

Production Inc., a company whose corporate status has not yet been confirmed. 

In October of2005, there appears to have been $10,000 loaned or contributed to Sharpton 

2004. Sharpton Media Group LLC appears to have loaned Sharpton 2004 $5,000 on 

October 14, 2005. Another $5,000 was deposited on October 21, 2005 from an unknown 

source. Although Sharpton 2004 has not filed disclosure reports for 2005 through 2007, 

the bank statement shows that four days after the deposit from Sharpton Media Group 

LLC, October 18,2005, a principal and interest payment of$4,000 was made on a loan 

with Amalgamated bank Another check in the amount of $5,500 cleared the account just 

five days after the second deposit on October 21, 2005, but no information is available 

concerning the payee or purpose of the payment. 

At the exit conference, Sharpton 2004's treasurer was provided a list of possible 

prohibited contributions. At that time, the treasurer made no response. 

Preliminary Audit Report Recommendation and Committee 

Response 

The Audit staff recommended that Sharpton 2004 submit documentation to demonstrate 

that the source offunds noted by the Audit staff is not prohibited or refund $735,314 to 

the U.S. Treasury. If funds are not available to make the necessary refund, the Audit staff 

recommended that the amount be disclosed on Schedules D-P (Debts and Obligations) 

until funds become available. 

In its response to the PAR, Sharpton 2004 stated in part that its review of payments to the 

Candidate's Amex account indicates the payments were made to pay both Mrs. and Rev 

Sharpton's charges. Also, a substantial number ofthe payments to the Amex account 

were returned for insufficient funds. Sharpton 2004 believes that a portion of the charges 

remain unpaid and there is pending litigation over the unpaid charges. Sharpton 2004 

stated that this makes it difficult to attach payments to transactions since the Sharpton's 

were continuously in arrears. Finally, the response notes that Sharpton 2004 does not 

have any information concerning the sources of the assets and income used by the 

Sharpton's or NAN to make payments on the account. 

In addition to Sharpton 2004's response, Counsel for NAN submitted through the 

Commission's Office of General Counsel, a spreadsheet listing payments on the 

Candidate's Amex account for the time period in question. The spreadsheet notes that a 

total of$167,717 was paid by NAN and $335,327 was paid by Rev-Als Production Inc. 

With the exception of one payment of $100,000 on April 19, 2004 the list appears 
20 

complete. It should be noted that no documentation supporting payments made by RevAls Production Inc. has been provided to date. 

Concerning NAN's payments to vendors for goods and services provided to the 

campaign, Sharpton 2004 states in part, that it does not have substantive knowledge about 

these payments. Further, it can neither confirm nor deny whether these payments were 

for activity related to the presidential campaign. For example, Sharpton 2004 states that 

it believes Archer was hired by Rev. Sharpton to develop a written voter registration 

program for NAN. In conjunction with that program, Archer scheduled Rev. Sharpton 

for NAN activities. Sharpton 2004 contends that the program was separate and 

independent of the voter registration activities managed by the Executive Director of 

NAN, as discussed above. Sharpton 2004 also contends that Archer was contracted by 

Sharpton 2004 to conduct scheduling and other campaign related fieldwork. Sharpton 

2004 is unsure if campaign related services were provided prior to when Sharpton 2004 

retained Archer (from November 2003 - February 2004). Sharpton 2004 "cannot 

confirm or deny Archer Group's services to [NAN] were 'in-kind' to the committee." 

With respect to loans from the Candidate, Sharpton 2004 states that upon information and 

belief, the $39,500 of loans/contributions made by Rev. Sharpton to the committee came 

from his personal assets and income as defined by 11 CFR 100.33. The written response 

did not supply any documentation about $15,000 of the $39,500 in loans for which the 

Audit staff was unable to determine the source of funds. 

Audit Staff Assessment of Committee Response 

The PAR indicated that Sharpton 2004 had received $735,314 in possible prohibited 

contributions. Based on information provided by Sharpton 2004, the Audit staff has 

reduced the amount of possible prohibited contributions from $735,314 to $486,803 as 

discussed below. 

Payments to Amex 

The Audit staff accepts Sharpton 2004's statement that payments on the Amex account 

were for all expenses that comprise the balance, not just for presidential expenses. In 

order to allocate the payments on the Amex account, the percentage of presidential versus 

non-presidential charges on each monthly statement was determined and each payment 

was prorated based upon that percentage. 

Concerning Sharpton 2004's comments that a substantial number of the payments to the 

Amex account did not clear the bank, with one exception noted below, the Audit staff's 

analysis only considered those payments that actually cleared. 

However, payments on the Amex account included in the PAR analysis were adjusted for 

two payments made prior to the timeframe determined to include presidential activity and 

one additional payment that never cleared the bank. After these adjustments, $603,044 in 

payments is prorated between presidential and non-presidential activity. 
21 

Of the $603,044 in payments, $167,717 is acknowledged and partially documented as 

having come from NAN, an incorporated entity. Of the remaining $435,327, the 

spreadsheet from NAN's Counsel implies that $335,327 was paid by Rev-Als Production 

Inc. No information from any source is available concerning the source of funds for a 

$100,000 payment on April 19,2004 payment. Since no documentation was provided to 

support the source of funds for payments other than those made by NAN, the Audit staff 

considers the entire $603,044 to have been made with prohibited funds. 

By applying the percentages discussed above to the payments totaling $603,044, it is 

concluded that $387,192 of the payments are for presidential activity and the remaining 

$215,852 are for non-presidential activity. Of this $387,192, $107,615 appears to have 

been paid by NAN. Of the remaining prorated amount, $279,577, Counsel for NAN 

indicates $209,577 was made by Rev-Als Production Inc. No information is available for 

the remainder. 

Regardless of whether Rev-Als Production Inc. made the payments, a question arises 

concerning the source ofthe money used to fund them. During the Audit staffs review it 

discovered payments made by NAN to Rev-Als Production Inc. Inc. for Amex expenses 

($40,000). Also noted was a payment of$21,000 to Rev. Al Sharpton which indicated on 

the memo line of the check that it was for "Rev-A Is Production Inc. for Amex 

reimbursements." Additionally the Audit staff noted a NAN payment to cash ($7,600) 

for Amex travel as well as an $8,000 payment to Rev. Al Entertainment Inc. 11 for Amex 

charges on which Sharpton 2004 has made no comment. 12 The Audit staff contends that 

even if Rev-Als Production Inc. had made the payments, there is considerable evidence to 

question the acceptability of the funds used. 

Finally, neither NAN's Counsel nor Sharpton 2004 have made any comment concerning 

$121,996 in payments that Sharpton 2004 made for Amex reimbursements. Since these 

payments went directly to the Candidate 13 the Audit staff is unable to determine if any of 

the money actually was used to make payments on the Amex account. 

In conclusion, it is the opinion ofthe Audit staffthat Sharpton 2004 accepted at least 

$387,192 ($107,615 - NAN, + $279,577 - unknown source) in prohibited contributions 

in the form of payments for campaign expenses charged on the Candidate's Amex 

account. 

Indirect Paymentsfrom NANfor PresidentialActivity 

Sharpton 2004 argues in its response that $84,611 in payments by NAN primarily to 

Archer were for a voter registration program for NAN. 

11 Tax returns provided by Sharpton 2004 indicate this is a subchapter S corporation. 

12 These amounts were included in the preliminary audit report's table under NAN - Amex Payments 

($268,076). The Audit staff has removed them from that category and notes that they may have funded 

Amex account payments through Rev-Als Production Inc. 

13 One payment, for $30,000 was reported as a payment to the Candidate, but documentation suggests it 

went to Rev-Als production Inc. As such, it is unclear to the Audit staffwho actually received the 

money 
22 

The Audit staffis not persuaded by Sharpton 2004's response. As stated above, the 

Audit staff had questioned the Executive Director of NAN concerning voter registration 

programs and had been assured that she was the only person who had conducted any such 

program. The contract language available for review indicates that the work performed 

by Archer could be construed as presidential activity. With respect to the remaining 

expenses for scheduling and traveling, campaign staff mentioned that NAN and 

presidential itineraries were often very blurred and it became increasingly difficult to 

separate the activity. Newspaper articles reported that often the Candidate would 

campaign during his NAN events. 

Given this information, it seems reasonable to conclude that the scheduling and travel 

expense included in the $84,611 may have been mixed activity. However, under 11CFR 

§9034.7(l)(2) and (3) such expenses are considered entirely campaign. 

Loans from the Candidate 

Sharpton 2004's response states that the $39,500 of loanslcontributions made by Rev. 

Sharpton to his presidential campaign, came from his personal assets and income as 

defined by 11 CFR §100.33. Of the $39,500, the Audit Staff notes that $24,500 in loans 

appear to have come from Rev-Als Production Inc. and Sharpton Media Group LLC. No 

evidence was found to indicate that these companies are corporations and tax information 

provided indicates that Sharpton Media Group LLC is wholly owned by Rev Sharpton. It 

is therefore concluded the $5,000 loan drawn on the Sharpton Media Group LLC is from 

the Candidate's personal funds. 

However, for $15,000 ofthe loans, no documentation as to the source ofthe funds has 

been provided. and the Audit staff continues to view this amount as impermissible funds. 

In summation, as shown in the chart below, it is the opinion ofthe Audit staffthat 

Sharpton 2004 has received at least $486,803 in possible prohibited contributions. 

NAN - Amex Payments $107,615 

Unknown Source Amex 279,577 

Payments 

NAN - Other Vendors 84,611 

Unknown Source Loans 15,000 

Total $486,803 

Recommendation 

The Audit staffrecommends that, within 30 days ofservice ofthis report, Sharpton 2004 

pay $486,803 to the U.S. Treasury. 
23 

Finding 4. Receipt of Contributions that Exceed the 

Limits 

Summary 

A review of contributions from individuals indicated that Sharpton 2004 failed to resolve 

excessive contributions totaling $10,500. Of these, only one was eligible for presumptive 

reattribution. No copy of a reattribution letter was provided and none ofthe contributions 

were refunded. In response to the PAR, Sharpton 2004 stated that it concurred with the 

finding and that it would implement the recommendations made in the report. To date, 

no evidence to show any corrective action regarding these excessive contributions has 

been provided. As a result, Sharpton 2004 should pay $10,500 to the U.S. Treasury. 

Legal Standard 

Authorized Committee Limits. An authorized committee may not receive more than a 

total of$2,000 per election from anyone person or $5,000 per election from a 

multicandidate political committee. 2 V.S.c. §44la(a)(l)(A), (2)(A) and (f); 11 CFR 

§§1I0.I(a) and (b) and 11 0.9(a). 

Handling Contributions That Appear Excessive. If a committee receives a 

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

•	 Return the questionable check to the donor; or 

•	 Deposit the check into its federal account and: 

o	 Keep enough money in the account to cover all potential refunds; 

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

o	 Include this explanation on schedule A if the contribution has to be itemized 

before its legality is established; 

o	 Seek a reattribution or a redesignation of the excessive portion, following the 

instructions provided in Commission regulations (see below for explanations 

ofreattribution and redesignation); and 

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

within 60 days after receiving the excessive contribution, refund the excessive 

portion to the donor. 11 CFR §§I03.3(b)(3), (4) and (5) and 

110.1 (k)(3)(ii)(B). 

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

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

check or in a separate writing. A joint contribution is attributed equally to each donor 

unless a statement indicates that the funds should be divided differently. 11 CFR 

§llO.l(k)(I) and (2). 

Reattribution of Excessive Contributions. Commission regulations permit committees 

to ask donors of excessive contributions (or contributions that exceed the committee's net 

debts outstanding) whether they had intended their contribution to be ajoint contribution 

from more than one person and whether they would like to reattribute the excess amount 

to the other contributor. The committee must inform the contributor that: 

1.	 The reattribution must be signed by both contributors; 
24 

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

committee received the original contribution; and 

3.	 The contributor may instead request a refund ofthe excessive amount. 11 CFR 

§110.1(k)(3)(A). 

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

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

§§103.3(b)(3) and 11O.1(k)(3)(ii)(B). Further, a political committee must retain written 

records concerning the reattribution in order for it to be effective. 11 CFR §110.1(1)(5). 

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

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

among the individuals listed unless instructed otherwise by the contributor(s). The 

committee must, within 60 days of receipt, inform each contributor: 

1.	 How the contribution was attributed; and 

2.	 The contributor may instead request a refund ofthe excessive amount. 11 CFR 

§110.1(k)(3)(B). 

Facts and Analysis 

The Audit staff's review of contributions from individuals noted that Sharpton 2004 

received contributions from six individuals that exceeded the limitation by $10,500. 

Sharpton 2004 presumptively reattributed five ofthe contributions, but failed to notify 

contributors of its actions by a written notification that offered a refund. Further, only 

one of those contributors was eligible for presumptive reattribution. For two of the 

contributions, there was a memo on a disclosure report which stated that a $1,000 refund 

would be made. To date, Sharpton 2004 has neither provided evidence that a 

reattribution letter has been sent, nor that the refunds have been made. 

At the exit conference, the Audit staff discussed the matter with Sharpton 2004' s 

treasurer and provided a schedule of the excessive contributions. The treasurer had no 

comment at that time. 

Preliminary Audit Report Recommendation and Committee 

Response 

The Audit staff recommended Sharpton 2004: 

•	 Provide evidence that the identified contributions were not excessive; or, 

•	 For the one excessive contribution that could have been resolved by sending the 

notification specified at 11 CFR §110.1(k)(3)(ii)(B), Sharpton 2004 could have 

sent such a letter to inform the contributor how the contribution was attributed 

and offer a refund. That letter might have obviated the need for a contribution 

refund or payment to the U.S. Treasury. For the notification sent to the 

contributor, Sharpton 2004 should have provided a copy of the notification and 

evidence that it had been sent. Such notification should have demonstrated that 

both the contributor and the individual to whom the contribution was reattributed 

to were notified; or 
25 

•	 For any excessive contribution, Sharpton 2004 could have refunded the excess 

portion to the contributor in lieu of paying the amount to the U.S. Treasury. 

Sharpton 2004 should have provided evidence of the refunds (i.e. - copies of the 

front & back ofthe negotiated refund check). Such refunds would have reduced 

the payment required to the U.S. Treasury. 

•	 If funds were not available to make the necessary refunds, Sharpton 2004 should 

have reported the amounts to be refunded as debts on Schedules D-P until funds 

became available to make the refunds. 

In response to the PAR Sharpton 2004 states that it concurs with the finding and that it 

would implement the recommendations made in the report. Sharpton 2004 has provided 

no evidence to show any corrective action regarding these excessive contributions. 

Recommendation 

The Audit staffrecommends that, within 30 days ofservice ofthis report, Sharpton 2004 

pay $10,500 to the U.S. Treasury. 

IFinding 5. Misstatement of Financial Activity 

Summary 

A comparison of Sharpton 2004's reported activity to bank records revealed that receipts 

and disbursements, as well as ending cash on hand, had been materially misstated in 

calendar year 2004. Receipts were understated by $110,279, due primarily to not 

reporting the receipt of$100,000 in matching funds. Disbursements were understated by 

$24,937 for the most part due to payroll and bank fees paid in March 2004 but not 

reported. Ending cash on hand was understated by $96,537. In its response to the PAR, 

Sharpton 2004 concurred that its activity was misstated in 2004 and indicated amended 

reports would be filed. To date, such reports have not been filed. 

Legal Standard 

Contents of Reports. Each report must disclose: 

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

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

•	 The total amount of disbursements for the reporting 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)(l), (2), (3), (4), and (5). 

Facts and Analysis 

The Audit staff reconciled the reported activity to the bank records and determined there 

was a misstatement of receipts and disbursements in calendar year 2004, as well as 

ending cash on hand. The following chart details the discrepancies between the totals on 

Sharpton 2004's disclosure reports and bank records. Succeeding paragraphs address the 

reasons for the misstatements. 
26 

2004 Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance 

at January 1, 2004 

$ 7,535 $ 7,548 $ 13 

Understated 

Receipts $ 290,594 $ 400,873 $ 110,279 

Understated 

Disbursements $ 382,720 $ 407,657 $ 24,937 

Understated 

Ending Cash Balance at 

December 31, 2004 14 

$ (95,773) $ 764 $ 96,537 

Understated 

The understatement of receipts was the result of the following: 

• Matching Funds Received, but not Reported $ 100,000 

• Net Unreported Contributions 451 

• Unreported Loans 9,500 

• Unexplained Difference 328 

• Understatement of Receipts $110.279 

The understatement of disbursements was the net result of the following: 

• March Payroll and Bank fees not Reported $ 16,886 

• Miscellaneous Disbursements not Reported 9,150 

• Reported Loan repayment not Supported by Check or Bank Debit ( 3,500) 

• Unexplained difference 2,401 

• Understatement of Disbursements $ 24,937 

Ending cash on hand was misstated by $96,537, as a result of the errors noted above, as 

well as an unexplained $11,182 decrease to the beginning cash on hand for the March 

2004 report period. 

The Audit staff provided Sharpton 2004's treasurer with a workpaper detailing the 

misstatement of financial activity. The treasurer stated that the person who had 

previously compiled and filed reports for Sharpton 2004 had left suddenly and that he had 

to take over filing the reports as of the 2004 April zo" report. He was still learning and 

had mistakenly not reported some amounts. As for the matching funds, the treasurer 

seemed surprised that they were not reported and asked how he would have known to 

report them. The treasurer made no comment on why Sharpton 2004 made the change to 

the March 2004 report's beginning cash on hand. Sharpton 2004's treasurer stated that 

he was willing to make the necessary changes and would file amended reports as needed. 

Subsequent to the exit conference, the treasurer met with the Audit staff and made 

recommended adjustments to the Sharpton 2004 electronic records. 

In addition, Sharpton 2004 has failed to file any disclosure reports from 2005 forward. 

14 Sharpton 2004's ending cash on hand does not foot due to an unexplained change in beginning cash on 

hand for the March 2004 report period. 
27 

Preliminary Audit Report Recommendation and Committee 

Response 

The Audit staff recommended that Sharpton 2004 amend its reports to correct the 

misstatements noted above; as well as file appropriate disclosure reports from 2005 

forward. In response to the PAR, Sharpton 2004 states that it concurred with the finding 

that it misstated its receipts and disbursements in 2004 and was implementing the 

recommendations ofthe Audit Division to amend its disclosure reports. As noted above, 

a Sharpton representative met with the Audit staff on several occasions to work on 

amended reports and indicated a willingness to file them as well as disclosure reports 

from 2005 forward, but, these reports have not been filed.