Interim Audit Report of the 

Audit Division on the Colorado 

Republican Committee 

(January 1, 2011 - December 31, 2012) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and fleld 

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.' 'Hie 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. 

About the Committee (p. 3) 

The Colorado Republican Committee is a state party committee 

headquartered in Greenwood Village, Colorado. For more 

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

Financial Activity (p. 3) 

• Receipts 

o Contributions from Individuals 

o Contributions from Political 

Committees 

o Transfers from Affiliated and 

Other Party Committees 

o Transfers from Non-Federal 

Accounts 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Federal Election Activity 

o Refunds of Contributions 

Total Disbursements 

$ 1,975,834 

61,630 

8,332,317 

1,940 

235,765 

S 10,607,486 

$ 8,863,660 

1,374,497 

3,050 

S 10,241,207 

Findings and Recommendations (p. 4) 

• Misstatement of Financial Activity (Finding 1) 

• Reporting of Apparent Independent Expenditures (Finding 2) 

• Recordkeeping for Communications (Finding 3) ' 

• Failure to Itemize Debts and Obligations (Finding 4) 

52 U.S.C. §30111(b). 
Interim Audit Ruport of th@ Audit 

Division on the 

Colorado Republican Ckmttnittee 

(January 1, 2011 - December 31, 2012) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Commission Guidance 1 

Limitations 2 

Part II. Overview of Committee 

Committee Organization 3 

Overviewof Financial Activity 3 

Part III. Summaries 

Findings and Recommendations 4 

Part IV. Findings and Recommendations 

Finding!. Misstatement of Financial Activity 6 

Finding 2. Reporting of Apparent Independent Expenditures 11 

Finding 3. Recordkeeping for Communications IS 

Finding 4. Failure to Itemize Debts and Obligations 17 
Parti 

Biackgraund 

Authority for Audit 

This report is based on an audit of the Colorado Republican Committee (CRC), 

undert^en 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 52 U.S.C. §30111 (b), which permits 

the Commission to conduct audits and field investigations of wy political committee that 

is required to file a report under 52 U.S.C. §30104. Prior to conducting any audit under 

this subsection, the Commission must perform an internal review of reports filed by 

selected committees to determine if the reports filed by a particular committee meet the 

threshold requirements for substantial compliance with the Act. 52 U.S.C. §30111(b). 

Scope of Audit 

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined; 

1. the receipt of contributions from prohibited sources; 

2. the disclosure of individual contributors' occupation and name of employer; 

3. the disclosure of disbursements, debts and obligations; 

4. the disclosure of expenses allocated between federal and non-federal accounts; 

5. the consistency between reported figures and bank records; 

6. the completeness of records; and 

7. other committee operations necessary to the review. 

Commission Guidance 

Request for Early Commission Consideration of a Legal Question 

Pursuant to the Commission's "Policy Statement Establishing a Program for Requesting 

Consideration of Legal Questions by the Commission," CRC requested early 

consideration of a legal question raised during the audit. Specifically, CRC questioned 

whether the requirement under 11 CFR § 104.3(d) to disclose outstanding debt on 

Schedule D (Debt and Obligations) violated attorney - client privilege when the debt 

related to outstanding legal representation services. 

The Commission concluded, by a vote of 6-0, that the Colorado rules of confidentiality 

do not preclude the Commission from requiring CRC to report an outstanding debt and/or 

obligation owed by or to CRC from its legal counsel under 52 U.S.C. §30104(b)(8) and 

11 C.F.R. § 104.3(d). The Audit staff informed CRC's Counsel of the Commission's 

decision on CRC's request. This audit report includes findings and recommendations 

with respect to CRC's failure to disclose outstanding debt owed to its legal 

representative. (See Finding 4, p. 17.) 
Limitations 

CRC satisfied the minimum disbursement recordkeeping requirements of 11 CFR§ 102.9. 

However, in response to the Internal Control Questionnaire (ICQ) presented by the Audit 

staff at the beginning of the audit, CRC representatives identified a federal bank account 

titled "Federal Transfer Account" but did not provide bank statements fix)m the audit 

period pertaining to that account. Without these statements, the Audit staff could not 

determine if federal activity related to this account was properly reported. 
Part II 

Overview of Committee 

Committee Organizatioa 

Important Dates . . 

• DateofRegistrntiOn February 17,1976 

• Audit |]^o.yeFige Jatfijary l, 2011 - December 31,2012 

Headquarters Greenwood Village, Colorado 

Bank Information "* • 

• Bank I^'epesitoi'ies Two 

• Bank Accounts 9 Federal, 8 Non-federa! 

Treasurer 

• Treasurer When Audit Was Conducted Marty Neilson (11/20/2015 - present) 

Robert Balink (5/9/2014 - 11/19/2015) 

Christine Mastin (!6/10/2013 - 5/8/2014)^ 

• Treasurer During Period Covered by Audit Richard A. Westfall (8/15/2007 -

6/9/2013) 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-handJanuary 1,2011 S 70,571 

Receipts 

o Contributions from Individuals 1.975.834 

o Contributions from Political Committees 61,630 

o I'ransfers from Affiliated and Other Party 

Committees 

8,332,317 

o Transfers from Non-Federal Accounts l:.9f40 

o Other Receipts 235,765 

TotalReccipts. S 10,607,486 

Disbursements 

o Operafihg Expenditures 8.863,660 

o Federal Election Activity 1.374,497 

o Refunds of Contributions . 3.i050 

Total Disbursements S 10^41.207 

Cash-on-hand @ December 31,2012 S 436,850 
Part HI 

Summaries 

Findings and RecaidiLmeiidations 

Finding 1. Misstatement of Financial Activity 

A comparison of CRC's bank activity with its most recent amended reports prior to the 

audit revealed material misstatements in both 2011 and 2012. In addition, a comparison 

of CRC's bank activity with its original reports for 2011 and 2012 also revealed material 

misstatements. Regarding the misstatement pertaining to the most recent amended 

reports, the Audit staff recommends that CRC amend its disclosure reports to correct the 

misstatements identified in 2011 and 2012. As for the misstatement pertaining to the 

CRC's original reports, the Audit staff recommends that CRC provide any comments it 

deems necessary with respect to this matter. 

During audit fieldwork, CRC also provided bank statements and other related 

documentation for a Republican National Convention Expense Account, an apparent 

federal account. CRC did not report, however, any receipt and disbursement activity 

pertaining to this account on its disclosure reports. CRC took a position that such 

reporting was not required. 1lie Audit staff recommends that CRC provide pertinent 

bank documentation relating to the ownership of this account. (For more detail, see p. 6.) 

Finding 2. Reporting of Apparent Independent 

Expenditures 

During audit fieldwork, the Audit staff reviewed operating expenditures totaling 

$357,895 that CRC disclosed on Schedule B, Line 21b (Operati^ Expenditures) that 

appeared to be direct mail or media-related independent expenditures that should have 

been disclosed on Schedule E (Itemized Independent Expenditures). 

Additionally, CRC did not provide sufficient documentation pertaining to dissemination 

dates to verify whether 24/48-hour reports were required to be filed for the apparent 

independent expenditures totaling $357,895. CRC also did not provide invoices 

associated with 77 direct mail communications that contained express advocacy as 

defined under 11 CFR 100.22 (a) or (b). 
If CRC believes that the apparent independent expenditures, including the $357,895, and 

the 77 direct mail communications above, did not require reporting as independent 

expenditures, the Audit staff recommends that CRC provide evidence to support its 

conclusion. Absent such evidence, the Audit staff recommends that CRC amend its 

reports to disclose these disbursements as independent expenditures on Schedule E and 

submit revised procedures for reporting independent expenditures. Lastly, the Audit staff 

recommends that CRC provide documentation to support the date of public dissemination 

for each communication to determine whether a filing of a 24/48 hour report was 

required. (For more detail, see p. 11.) 

Finding 3. Recordkeeping for Communications 

During audit fieldwork, the Audit staff reviewed disbursements to verify the accuracy of 

the information and proper classification of transactions disclosed on reports. CRC 

reported 28 expenditures totaling $5,812,448, on Schedule B, Line 21b (Operating 

Expenditures) with purposes of "direct mail," "direct mail advertising" or "party direct 

mail." Documentation that was provided by CRC was insufficient to make a 

determination pertaining to the purpose for these disbursements and verification as an 

operating expense. The Audit staff recommends that CRC provide, in sufficient detail, 

the necessary information from which the reported operating expenditures totaling 

$5,812,448 may be verified or explained. Such records should include copies of invoices 

and identification of the associated communication, and, if the communication has 

already been provided, information associating each communication with an invoice(s). 

(For more detail, see p. 15.) 

Finding 4. Failure to Itemized Debts and Obligations 

During audit fieldwork, the Audit staff noted that CRC had failed to disclose debts and 

obligations owed to three vendors totaling $235,968. The Audit staff recommends that, 

absent documentation demonstrating that these expenditures did not require reporting on 

Schedule D, CRC amend its disclosure reports to disclose these debts. (For more detail, 

seep. 17.) 
Part: IV 

Findings and RecoinnK^dations 

Finding 1. Misstatement of Financial Actlyity Ji 

Summaiy 

A comparison of CRC's bank activity with its most recent amended reports prior to the 

audit revealed material misstatements in both 2011 and 2012. In addition, a comparison 

of CRC's bank activity with its original reports for 2011 and 2012 also revealed material 

misstatements. Regarding the misstatement pertaining to the most recent amended 

reports, the Audit staff recommends that CRC amend its disclosure reports to correct the 

misstatements identified in 2011 and 2012. As for the misstatement pertaining to the 

CRC's original reports, the Audit staff recommends that CRC provide any comments it 

deems necessary with respect to this matter. 

During audit fieldwork, CRC also provided bank statements and other related 

documentation for a Republican National Convention Expense Account, an apparent 

federal account. CRC did not report, however, any receipt and disbursement activity 

pertaining to this account on its disclosure reports. CRC took a position that such 

reporting was not required. The Audit staff recommends that CRC provide pertinent 

bank documentation relating to the ownership of this account. 

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 calendar year; 

• The total amount of disbursements for the reporting period and for the calendar year; 

and 

• Certain transactions that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 52 U.S.C. §30104(b)(1), (2), (3), (4) and (5). 

Facts and Analysis 

A. Misstatement of Financial Activity- Most Recent Reports Filed Prior to the 

Audit 

1. Facts 

The Audit staff reconciled CRC's reported financial activity with its bank records for 

calendar years 2011 and 2012. The following charts outline the discrepancies 

between CRC's disclosure reports and its bank records. Succeeding paragraphs 

explain why the discrepancies occurred. 
2011 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand @ 

January 1,2011 

$71,745 $70,571 ($ 1,174) 

Overstated 

Receipts $722,469 $717,741 ($4,728) 

Overstated 

Disbursements $634,792 $673,321 ($38,529) 

Understated 

Ending Cash-on-Hand @ 

December 31,2011 

$ 159,422 $114,991 ($ 44,431) 

Overstated 

The beginning cash balance was overstated by $1,174 and the discrepancy is 

unexplained, but likely resulted from prior period discrepancies. 

The understatement of disbursements resulted from the following: 

• Transfers to non-federal accounts, not reported $35,805 

• Disbursements not reported 2,448 

• Unexplained difference , 276, 

Understatement of Disbursements $18.529: 

The overstatement of $44,431 of the ending cash balance was a result of the reporting 

discrepancies for disbursements described above as well as the $4,728 overstatement 

of receipts. 

2012 Committee Activity 

' Reported Bank Records' Discrepancy 

Beginning Cash-on-Hand @ 

January 1,2012 

$159,422 $114,991 ($44,431) 

Overstated 

Receipts $9,678,749 $9,889,745 $210,996 

Understated 

Disbursements $9,422,685 $9,567,886 ($145,201) 

Understated 

Ending Cash-on-Hand @ 

December 31,2012 

$415,486 $ 436,850 $21,364 

Understated 

^ Correct reportable activity includes an adjustment to account for $9,146 itemized by ORG on Schedule A 

(Itemized Receipts) to correct the cash balance as recommended in a prior audit of ORG. See the Final 

Audit Report on the Colorado Republican Federal Campaign Committee, 2008 election cycle. Finding 1 

- Misstatement of Financial Activity, Audit Division Recommendation, page 8. 
The understatement of receipts resulted from the following: 

• In-kind contributions, not reported as receipts^ $ 162,099 

• Receipts from an individual and a PAC, not reported 25,000 

• Unexplained difference 23.897 

Understatement of Receipts 

The understatement of disbursements resulted from the following: 

• In-kind contributions, not reported as disbursements^ $ 162,099 

•. Disbursements in bank, not on reports. 27,666 

• Disbursements on reports, not in bank (13,336) 

« Incorrect or duplicate disbursement amounts reported (23,228) 

•! Unexplained difference (8,000) 

Understatement of Disbursements 

The $21,364 understatement of the ending cash balance was a result of the reporting 

discrepancies noted above. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff provided workpapers and discussed the misstatement of financial 

activity at the exit conference. CRC representatives asked questions for clarification 

during the discussion, however, they did not provide a response to either the 

disbursements or receipts misstatements. 

The Audit staff recommends that, within 30 calendar days of service of this report, 

CRC amend its disclosure reports to correct the misstatements noted above and 

reconcile the cash balance on its most recent report to identify any subsequent 

discrepancies that may affect the recommended adjustments. 

B. Misstatement of Financial Activity - Original Reports Filed 

1. Faets 

During audit fieldwork, in addition to examining CRC's most recent reports filed 

prior to audit notification, the Audit staff compared CRC's originally filed reports 

with its bank records. The purpose of this additional reconciliation was to identify 

the degree to which CRC had misstated its original filings. 

The Audit staff calculated that CRC understated the sum of the reported receipts on 

the original reports filed by $803,097 and the sum of the reported disbursements on 

the original reports filed by $637,688 over the two-year period (2011-2012). These 

figures include the $4,728 and $38,529 understatement of receipts and disbursements. 

The unreported in-kind transactions discussed above were for disbursements paid on behalf of the CRC 

for equipment and software licensing by the Republican National Committee (RNC) and tbe Republican 

Party of Wisconsin (RPW). Both the RNC and the RPW repotted these transactions as in-kind 

contributions made to CRC. 
respectively from 2011, and the $210,996 and $145,201^ of the understatement of 

receipts and disbursements, respectively, from 2012 discussed in Section A above 

(Misstatement of Financial Activity - Most Recent Reports Filed Prior to the Audit). 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the understatement of receipts and disbursements on its 

original reports during the exit conference and provided copies of relevant schedules 

detailing the receipts and disbursements not reported. CRC representatives asked 

questions for clariiication, and stated they understood the finding, but related that 

they did not intentionally file incorrect original reports. The Audit staff recommends 

that, within 30 calendar days of service of this report, CRC provide any additional 

comments it deems necessary with respect to this matter. 

C. Misstatement of Financial Activity - Unreported Bank Account 

1. Facts 

During audit fieldwork, CRC representatives provided bank statements and other 

banking documentation for a bank account that was identified on the bank statements 

as the Colorado State Republican Central Committee Republican National 

Convention Expense Account (Convention Account).® This account was maintained 

at the same financial depository used by CRC for other federal and non-federal bank 

accounts. The bank statements reflected that the Convention Account was active in 

January 2012, although it had a zero balance until April 20,2012, af which time a. 

deposit of $ 1,000 wa^ made.** Although CRC provided copies of bank statements, 

deposit tickets and cancelled checks pertaining to this account, none of the receipts or 

disbursements appeared to have been reported. For the calendar year 2012, the total 

activity and the cash^balance vMSrC as follows: receipts, $87,354; disbursements, 

$8j$,428; and ending:cash-on4iand, $926.^ 

In response to an Audit staff query, CRC's Chairman (Chairman) explained that the 

financial activity from this account did not need to be reported since it was a bank 

account that belonged to a separate legal entity identified as the Colorado Chairman's 

Host Committee for the Republican National Convention (Colorado RNC Host) and 

neither CRC or any of its officers or agents managed or controlled that committee's 

activities. The Chairman also provided a copy of the Articles of Incotporation that 

reflected the Colorado RNC Host was incorporated in the state of Colorado as a NonNet disbursement adjustments identified in Section A above (Misstatement of Financial Activity - Most 

Recent Reports Filed Prior to the Audit), totaling $9,686, were correctly disclosed on the original reports 

1112012. 

As noted in the scope section of this report, CRC representatives also identified an additional federal 

bank account in its written response to the Internal Control Questionnaire, but have not yet provided 

bank statements or other documentation pertaining to this account to indicate whether there was 

reportable activity during the audit period. See p. 2. 

The next deposit into this account was not made until June 13,2012 ($S,2S0). The first debit (by wire) 

occurred on August 10,2012 ($10,000). 

The tables and charts presented in Part A (Most Recent Reports Filed Prior to the Audit) do not include 

an analysis of the Convention Account. 
10 

Profit SO I (c)(4) corporation on June 26,2012 and was established independently to 

accept contributions and pay for certain events and promotion items for delegates and 

their guests from Colorado and other states in connection with the 2012 Republican 

National Convention in Tampa, Florida. The Chairman provided a link to the 

Colorado Secretary of State website and related any additional questions pertaining to 

the Colorado RNC Host should be directed to that committee's legal representatives. 

The Chairman did.not explain how CRC came to be in possession of the bank 

statements and other banking documentation. Likewise, the Chairman did not explain 

why the bank statement's name included the Colorado State Republican Central 

Committee, indicating CRC was an accountholder of this account. Although 

requested, CRC did not authorize the Audit staff to submit a request to the bank to 

confirm the Employee Identification Number (BIN)* that was associated with this 

account, nor did CRC provide any documentation ^m the bank that would clarify 

this matter. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the Convention Account during the exit conference and 

provided relevant schedules detailing the financial activity pertaining to this account. 

At that time, the Audit staff again requested that CRC provide documentation from 

the bank or give the Audit staff authority to contact the bank to confirm the BIN 

associated with this account. The CRC representatives provided documentation 

pertaining to the BIN for the Colorado Chairman's Host Committee for the 

Republican National Convention, but did not provide additional documentation from 

the bank to verify that the Convention Account was assigned to this BIN. 

The'Audit staff recommends that, within 30 c^endar days of service of this report, 

CRC provide additional documentation to resolve the question of ownership and 

control of the Convention Account. To support its position, CRC should obtain 

pertinent bank documentation confirming that die CRC's BIN was not associated with 

the Convention Account and, therefore, CRC was not required to report the financial 

activity associated with this account. 

I The EIN is a unique nine-digit number that the Internal Revenue Service and other federal agencies use 

to identify a business. Banks will not allow a business entity to open an account without providing an 

BIN. 
n 

Finding 2. Reporting of Apparent Independent 

Expenditures 

Summary 

During audit fieidwork, the Audit staff reviewed operating expenditures totaling 

$357,895 that CRC disclosed on Schedule B, Line 21b (Operating Expenditures) that 

appeared to be direct mail or media-related independent expenditures that should have 

been disclosed on Schedule E (Itemized Independent Expenditures). 

Additionally, CRC did not provide sufficient documentation pertaining to dissemination 

dates to verify whether 24/48-hour reports were required to be filed for the apparent 

independent expenditures totaling $357,895. CRC also did not provide invoices 

associated with 77 direct mail communications that contained express advocacy as 

defined under 11 CFR 100.22 (a) or (b). 

If CRC believes that the apparent independent expenditures, including the $357,895 and 

the 77 direct mail communications above, did not require reporting as independent 

expenditures, the Audit staff recommends that CRC provide evidence to support its 

conclusion. Absent such evidence, the Audit staff recommends that CRC amend its 

reports to disclose these disbursements as independent expenditures on Schedule £ and 

submit revised procedures for reporting independent expenditures. Lastly, the Audit staff 

recommends that CRC provide documentation to support the date of public dissemination 

for each communication to determine whether a filing of a 24/48 hour report was 

required. 

Legal Standard 

A. Definition of Independent Expenditures. An independent expenditure is an 

expenditure made for a communication expressly advocating the election or defeat of a 

clearly identified candidate that is not made in cooperation, consultation, or concert with, 

or at the request or suggestion of, a candidate, a candidate's authorized committee, or 

their agents, or a political party or its agents. 

A clearly identified candidate is one whose name, nickname, photograph or drawing 

appears, or whose identity is apparent through unambiguous reference, such as "your 

Congressman," or through an unambiguous reference to his or her status as a candidate, 

such as "the Democratic presidential nominee" or "Republican candidate for Senate in 

this state." 

Expressly advocating means any communication that: 

• Uses phrases such as "vote for the President" or "re-elect your Congressman" or 

communications of campaign slogan(s) or individual word(s), which in context 

can have no other reasonable meaning than to urge election or defeat of one or 

more clearly identified candidates; or 

• When taken as a whole and with limited references to external events, such as 

proximity to the election, could be interpreted by a reasonable person only as 
12 

advocating the election or defeat of one or more clearly identified candidates. 11 

CFR §§100.16(a), 100.17 and 100.22. 

B. Disclosure Requirements - General Guidelines. An independent expenditure shall 

be reported on Schedule £ if, when added to other independent expenditures made to 

the same payee during the same calendar year, it exceeds $200. Independent 

expenditures made (i.e., publicly disseminated) prior to payment should be disclosed 

as memo entries on Schedule £ and as a debt on Schedule D. Independent 

expenditures of $200 or less need not be itemized, though the committee must report 

the total of those expenditures on line (b) on Schedule £. 11 CFR §§104.3(b)(3)(vii), 

104.4(a) and 104.11. 

C. Last-Minute Independent Expenditure Reports (24-Hour Reports). Any 

independent expendifums aggmgating $1,PQQ or more, with respect given 

election, and made hftfer the 26''' da^ hut morethan 24 hours befttreihe4ay ipf an 

election, must be reported and the report must be received by the Commission within 

24 hours after the expenditure is made. A 24-hour report is required each time 

additional independent expenditures aggregate $1,000 or more. The date that a 

communication is publicly disseminated serves as the date that the committee must 

use to determine whether the total amount of independent expenditures has, in the 

aggregate, reached or exceeded the threshold reporting amount of $1,000. 11 CFR 

§§ 104.4(f) and 104.5(g)(2). 

D. Independent Expenditure Reports (48-Hour Reports). Any independent 

expenditures aggregating $10,000 or more with respect to any given election, at any 

time during a calendar year, up to and including the 20th day before an election, must 

be disclosed within 48 hours each time the expenditures aggregate $10,000 or more. 

The reports must be filed with the Commission within 48 hours after the expenditure 

is made. 11 CFR §§ 104.4(f) and 104.5(g)(1). 

E. Formal Requirements Regarding Reports and Statements. £ach political 

committee shall maintain records with respect to the matters required to be reported 

which shall provide in sufficient detail the necessary information and data from which 

the filed reports may be verified, explained, clarified, and checked for accuracy and 

completeness. CFR § 104.14(b)(1). 

Facts and Analysis 

A. Reporting of Apparent Independent Expenditures 

1. Facts 

During audit fieldwork, the Audit staff reviewed disbursements to ensure proper 

reporting. The Audit staff noted that CRC did not disclose any independent 

expenditures on Schedule £, however, made apparent media-related expenditures 

totaling $357,895 and disclosed them as operating expenditures. These 

communications, as well as others that are not associated with invoices, were 
13 

identified as possible independent expenditures. A brcakdoAvn analysis of these 

expenditures is as follows: 

a. Independent Expenditures Reported as Operating Expenditures 

(Associated Invoice Provided) 

CRC made nine apparent independent expenditures totaling $357,895 that 

were documented as follows: 

i. CRC made six disbursements for apparent independent expenditures for 

direct mail totaling $203,995 for which it provided a copy of the direct 

mailer with an associated invoice. According to the Audit staff, each of 

these direct mailers contained language expressly advocating the election 

or defeat of a clearly identified candidate as defined under 11 CFR 

§ 100.22(a). 

ii. CRC made three disbursements for apparent independent expenditures 

for radio ads totaling $153,900 for which it provided supporting 

documentation such as payment reconciliations, airing dates, scripts and 

audio files. The beginning of one of the audio files included the voice of 

an opposition federal candidate. Based upon this portion of the audio 

file, and the associated script, it appeared this radio ad expressly 

advocated the election or defeat of a clearly identified candidate as 

defined under 11 CFR 100.22(b). 

b. Independent Expenditures Reported as Operating Expenditures (No 

Invoiee Associated) 

CRC provided 77 different direct mail communications that contained 

express advocacy, as defined under 11 CFR 100.22(a) or (b). The 

coinmunications are as follows : 

i. 72 direct mail communications contained language expressly 

advocating the election or defeat of clearly identified candidates, as 

defined under 11 CFR 100.22(a). 

ii. Five direct mail communications contained language that encouraged 

the reader to vote for Republicans and help repeal "Obamacare", with 

various reasons why Obamacare was bad for Colorado and/or 

America's economy. Based on the definition of express advocacy 

under 11 CFR 100.22(b), these communications could only be 

interpreted by a reasonable person as advocating the election or defeat 

of clearly identified candidates. 

CRC did not provide sufficient information to allow each of the 77 

communications to be associated with an invoice. Without this additional 

information, the Audit staff is unable to calculate the disbursement amount 

for each communication. (See Finding 3.) 
14 

c. Volunteer Material Exemption 

In response to the Audit stafTs Truest duEih'g;field)MOrie.for documentation 

to supporf;that volunteers participated in aixjempt laeUvJty/ CRC 

forms signed by 22 different mail processing volunteers. These forms 

reflected the volunteer's name, site location, and on most forms, the date. 

The mail piece section was left blank on all forms with one exception, in 

which a candidate's last name was specified. Based on the dates on the 

forms, it appeared most of this volunteer activity occurred immediately prior 

to the 2012 General Election. 

The Commission has addressed (he applicability of the volunteer materials 

exemption in the Final Audit Reports of the Arizona Republican Party, the 

Democratic Executive Committee of Florida, and the Tennessee Republican 

Party. In these reports, the Commission recognized a lack of clarity 

regarding the application of the volunteer materials exemption. The 

Commission had attempted to formulate a consensus policy regarding what 

constitutes substantial volunteer involvement for the purpose of applying the 

exemption,'" but this was never achieved. Since a lack of clarity exists 

concerning the application of the volunteer materials exemption, it follows 

that the type and amount of documentation needed to support volunteer 

involvement is also unclear. 

In view of the uncertainty regarding the amount of volunteer involvement 

needed to qualify for the volunteer materials exemption, as well as the 

amount of documentation required to support such an exemption, the Audit 

staff recommends that, as recommended below, CRC provide more detailed 

information and documentation for any volunteer involvement associated 

vnth each mailer. 

2. Interim Audit Report and Audit Division Recommendation 

At the exit conference, the Audit staff presented the schedule of disclosure errors for 

independent expenditures. CRC representatives provided a listing of additional 

invoice numbers and invoice amounts in response to the exit conference but did not 

provide any copies of communications or further information that would allow the 

available invoices to be associated with the copies of the communications. 

The Audit staff recommends that, within 30 calendar days of the service of this 

report, CRC provide: 

• Additional invoices and/or information associating the 77 direct mail 

communications containing express advocacy with an invoice; and 

• Documentation and evidence that apparent independent expenditures totaling 

$357,895 and the 77 direct mail communications containing express 

' CRC has not claimed that any exemptions apply with respect to any expenditures discussed above such 

as, for example, volunteer material exemption, slate cards exemptions, etc. 

Proposed Interim Enforcement Policy, Agenda document No. 10-16. 
15 

advocacy, did not require reporting as independent expenditures. Evidence 

should include any documentation such as volunteer timesheets and 

photographs to support the involvement of volunteers in the processing or 

distribution of the communications noted above. 

Absent such evidence, the Audit staff recommends that' CRC amend its reports to 

disclose these disbursements as independent expenditures on Schedule E and submit 

revised procedures for reporting independent, expenditures. 

B. Failure to File 24/48 Hour Reports for Apparent Independent Expenditures 

1. Facts 

In addition to not reporting any independent expenditures during the audit period, 

CRC also did not file 24 or 48-hour reports for any independent expenditures. 

Therefore, the apparent independent expenditures identified above by the Audit staff 

may also have required such'a filing. 

2. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided CRC with a schedule of possible 

undisclosed 24/48-hour reports. CRC representatives did not offer any comments 

regarding this matter. 

Absent documentation and evidence that apparent independent expenditures totaling 

$357,895 and the 77 direct mailer communications containing express advocacy did 

not require reporting as independent expenditures (per Part A above), the Audit staff 

recommends that, within 30 calendar days of service of this report, CRC provide 

documentation to support the date of public dissemination for each communication to 

determine whether a filing of a 24/48-hour report was required. 

Finding 3. Recordkeeping for Comnmnications 

Summary 

During audit fieldwork, the Audit staff reviewed disbursements to verify the accuracy of 

the information and proper classification of transactions disclosed on reports. CRC 

reported 28 expenditures totaling $5,812,448, on Schedule B, Line 21b (Operating 

Expenditures) with purposes of "direct mail," "direct mail advertising" or "party direct 

mail." Documentation that was provided by CRC was insufficient to make a 

determination pertaining to the purpose for these disbursements and verification as an 

operating expense. The Audit staff recommends that CRC provide, in sufficient detail, 

the necessary information from which the reported operating expenditures totaling 

$5,812,448 may be verified or explained. Such records should include copies of invoices 

and identification of the associated communication, and, if the communication has 

already been provided, information associating each communication with an invoice(s). 
16 

Legal Standard 

A. Formal Requirements Regarding Reports and Statements. Each political 

committee shall maintain records with respect to the matters required to be reported 

which shall provide in sufficient detail the necessary information and data from which 

the tiled reports may be verified, explained, clarified, and checked for accuracy and 

completeness. 11 CFR §104.14(b)(l). 

B. 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 tiled. 52 

U.S.C. §301.02(d). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reviewed disbursements to verity the accuracy of 

the information and proper classification of transactions disclosed on reports. CRC made 

28 expenditures totaling $5,812,448 for which documentation was insufficient to make a 

determination pertaining to whether these disbursements were correctly reported on 

Schedule B, Line 21b (Operating Expenditures). 

The Audit staffs analysis resulted in the following; 

i. Disbursements-Wdlnvblces.or Cdiiiia BfjCom.tfiul>icatibns Pgqvided 

($2,156,415) 

Disbursements totaling $2,156,415 were paid to two direct mail vendors, and 

were disclosed on Schedule B with purposes of "direct mail", "direct mail 

advertising" or "party direct mail", but no invoices or associated communications 

were provided. Without sufficient details, the Audit staff is unable to verify 

CRC's reporting of these amounts as operating expenditures. The Audit staff 

requested copies of the invoices and the associated direct mail piece for each of 

the disbursements. To date, these invoices or other information to associate the 

payments, to a particular communication have not been provided. 

ii. Disbursements- Invoices Provided.-:Nd't.Able to A-ssoci'ate'withiCo'nies b'f 

Cnmmunic"alibns.f$3;656.033V 

Disbursements totaling $3,656,033 were paid to direct mail vendors and were 

disclosed on Schedule B with purposes of "direct mail," "direct mail advertising" 

or "party direct mail." For these disbursements, CRC provided invoices but did 

not provide information about the related mail communications. Without 

sufficient details, the Audit staff is unable to verify CRC's reporting itemization 

of these amounts as operating expenditures. The Audit staff requested information 

that would allow an association between the invoice and the communication, 

however, CRC has not responded to this request. 
17 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff presented a schedule of the disbursements for 

which further records were necessary to verify the accuracy of CRC's reporting. The 

Audit staff again requested that CRC provide additional invoices and information that 

would associate each invoice to the conesponding communication. CRC representatives 

provided a listing of additional invoice numbers and invoice amounts in response to the 

exit conference but did not provide any copies of communications or further information 

that would allow the available invoices to be associated with the copies of the 

communications. 

The Audit staff recommends that, within 30 calendar days of the service of this report, 

CRC provide, in sufficient detail, the necessary information from which the reported 

operating expenditures totaling $5,812,448 may be verified or explained. Such records 

should include: 

• Copies of invoices and identification of the associated communication, and 

• If the communication has already been provided, information associating each 

communication with an invoicc(s). 

Finding 4. Failure to Itemize Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff noted that CRC had failed to disclose debts and 

obligations owed to three vendors totaling $235,968. The Audit staff recommends that, 

absent documentation demonstrating that these expenditures did not require reporting on 

Schedule D, CRC amend its disclosure reports to include these debts. 

Legal Standard 

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

and nature of outstanding debts and obligations owed by or to the reporting committee 

until those debts are extinguished. 

52 use §30l04(b)(8) and 11 CFR §§104.3(d) and 104.11(a). 

B. Separate Schedules. A political committee must file separate schedules for debts 

owed by or to the committee, together with a statement explaining the circumstances and 

conditions under which each debt and obligation was incurred or extinguished. 11 CFR 

§104.11(a). 

C. Itemizing Debts and Obligations. 

. • A debt of $500 or less, not including rent, salary or other regularly reoccurring 

administrative expenses, must be reported once it has been outstaying 60 days 

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

next regularly scheduled report. 

• Regularly recurring administrative expenses, like rent, do not have to be treated as 

debts until payment is due. 

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

which the debt was incurred. 11 CFR §104.11(b). 
18 

D. Disputed Debts. A disputed debt is a bona fide disagreement between the creditor 

and the committee as to the existence of a debt or the amount owed by the committee. 

Until the creditor and committee resolve the dispute (assuming the creditor did provide 

something of value), the committee must disclose: 

• The amount the committee admits it owes; 

• The amount the creditor claims is owed; and 

• Any amounts the committee has paid the creditor. 11 CFR §116.10. 

Facts and Analysis 

A. Facts 

During audit ficldwork,.the Audit staff used, available disbursement.reponds to reconcile 

the accounts" of three CRC vendors. This 'rfeview identified debts oi^d.ld these' three 

vendors totaling $235,968 that should have been disclosed on Schedule D.'^ 

One of the vendors provided legal services and had debt outstanding at the end of four 

reporting periods totaling $100,197, including an outstanding balance at the end of the 

audit period of $13,541. A second vendor that provided accounting services had an 

outstanding balance at the end of one reporting period for $2,284, but did not have an 

outstanding balance at the end of the audit period. The last vendor had debt outstanding 

at the end of the audit period of $133,487 that pertained to the unpaid balance of a 

contract for a Get-Out-the-Vote (GOTV) program. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed these disclosure errors with CRC 

representatives and provided them with schedules detailing the debts that were not • 

reported. CRC representatives disagreed with the Audit staffs determination with 

respect to the disclosure of debts owed to a vendor that provided legal services. 

Subsequent to the exit conference, CRC requested the consideration of a legal question 

by the Commission claiming the disclosure of the debt for legal services prior to payment 

would violate confidential attorney/client privileges. CRC representatives also disagreed 

with the requirement to disclose debt for the GOTV program, stating that CRC had 

terminated the contract before the vendor provided all contracted services. CRC 

representatives provided a copy of an unsigned letter, sent by CRC to the GOTV program 

vendor, which advised this vendor of an immediate termination of the contract. 

Based on the terms of contract, its tennination does not release CRC from the obligation 

to make pro rata payments of fees for the services provided by the vendor. CRC stated 

that it terminated the contract before the vendor provided all of the contracted services 

which seems to suggest that the vendor provided at least some of the contracted services 

" The reconciliation consisted of calculating invoiced and paid amounts for individual reporting periods in 

the 2011 - 2012 election cycle. The Audit staff then determined whether outstanding debts were 

correctly disclosed on Schedule D. Each debt amount was counted once, even if it required disclosure 

over multiple reporting periods. 

" There was no debt reported during the audit period by any of these three vendors. 
19 

before the termination of the contract. Available disbursement documentation provided 

by CRC did not indicate as to whether CRC paid the vendor for services that the vendor 

provided to CRC prior to the termination. 

The Audit staff recommends that, within 30 calendar days of service of this report, CRC 

provide documentation demonstrating that expenditures totaling $235,968 did not require 

reporting on Schedule D. As for the GOTV program vendor, the Audit staff further 

recommends that CRC provide information and documentation relating to debt remaining 

for any services that the vendor provided before the termination of the contract. Since the 

termination letter was not signed,'CRC should submit documentation such as a signed 

.j letter to the vendor, e-mails or telephone logs regarding the termination. Absent such 

• documentation, the Audit staff recommends that CRC amend its reports to disclose these 

I debts and obligations.