FEDERAL ELECTION COMMISSION

WASHINGTON, DC. 20463

March 13, 2000

MEMORANDUM

•

TO:

FROM:

SUBJECT:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERTI. COSTA

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

DAVID WU FOR CONGRESS

Attached please find a copy ofthe final audit report and related documents on

David Wu for Congress which was approved by the Commission on February 28, 2000.

Informational copies ofthe report have been received by all parties involved and

the repDrt may be released to the public.

Attachment as stated

cc: Office ofGeneraI Counsel

Office of Public Disclosure

Reports Analysis Division

FEC Library
REPORT OF THE AUDIT DIVISION

ON

DAVID WU FOR CONGRESS

Approved February 28, 2000

FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

WASHINGTON, D.C.
•

TABLE OF CONTENTS

DAVID WU FOR CONGRESS

PAGE

Executive Summary

Final Audit Report 3

Background 3

Findings 5

Transmittal to Committee 17

Chronology 19
A99-16

FEDERAL ELECTION COMMISSION

Washington, DC 20463

"

DAVID WU FOR CONGRESS

EXECUTIVE SUMMARY

David Wu for Congress (the Committee) registered with the Commission on

August 18, 1997. On that same date, the Candidate filed a Statement ofCandidacy

designating the Committee as the principal campaign committee ofDavid Wu,

Democratic candidate for the U.S. House ofRepresentatives from the state of Oregon,

First District, for the 1998 election. The audit was conducted pursuant to 2 U.S.C.

§438(b), which states that the Commission may conduct audits of any political committee

whose reports fail to meet the threshold level of compliance set by the Commission.

The findings oftheaudit were presented to the Committee at an exit conference

held at the completion offieldwork on August 16, 1999 and later in the interim audit

report. The relevant parts ofthe Committee's response to those findings are included in

this audit report.

The following is an overview ofthe findings contained in the audit report.

Receipt ofContributions from Individuals in Excess ofthe Limitation - 2 U.S.C.

§441a(a)(1)(A), 11 CPR §110.1(b). The Audit staffidentified 101 contributions from 85

individuals which were in excess ofthe limitation in the amount of$69,117. The

Committee's reported entries on Schedules A (Itemized Receipts) indicated that these

contributions had been reattributed among individuals, such as spouses, or redesignated

to another election. However, the contributions records made available did not support

these reattributions and redesignations. The Committee subsequently provided signed

reattribution or redesignation letters relative to 80 ofthe 85 individuals which the Audit

staffdetermined to be untimely pursuant to 11 CFR §103.3(b)(3). The Committee made

refunds, totalling $3,950, to the remaining five individuals. Therefore, excessive

contributions totaling $65,167 ($69,117 - $3,950) have not been refunded.

Disclosure ofCandidate Loans -11 CFR §104.3(d)(l). The Audit staffidentified

a $70,000 loan provided by the Candidate to the Committee which was determined to be

from a lending institution. The Committee originally disclosed the source ofthis loan to

be from the Candidate's personal funds and, therefore, did not file a Schedule C-1 (Loans

and Line ofCredit from Lending Institutions) or copy ofthe loan agreement, as required.

The Committee stated that they had a misunderstanding ofthe FEC's definition of

"personal loan" and had no intention of concealing the source of funds. The Committee

Page 1 of 20 Approved 2/28/00
•

amended Schedules C (Loans) and Schedule C-I for the appropriate reporting periods and

provided a copy ofthe bank loan agreement to clarify the source offunds loaned to the

Committee.

Misstatement of Financial Activity - 2 U.S.C. §434(b)(l),(2) and (4).

Disclosure reports filed for the period January I, 1998 through December 31,1998

contained material misstatements. For this period, reported receipts were overstated by

$76,337 while disbursements were overstated by $10,268. As a result ofidentified

reporting discrepancies, the cash figure at December 31, 1998 was understated by

$41,331. The Committee filed amended reports which materially corrected these

misstatements.

Itemization and Disclosure ofReceipts from Individuals and Political

Committees- 2 U.S.C. §434(b)(3), 2 U.S.C §431(13)(A). A material number of

contributions from individuals and political committees were not itemized on Schedules

A as required. Many ofthose contributions not itemized should have been included on

the 1998 Year End Report. The Committee stated that several contributions received in

December 1998 were not processed and date stamped until the first business days of

1999. Certain in-kind contributions from political committees were also not itemized on

Schedules A. For these contributions, the Committee stated they did not receive a notice

from the contributing committee oftheir allocable disbursement. The Committee also

incorrectly disclosed the aggregate year-to-date totals for certain contributions. The

Committee filed amended reports which materially corrected the deficiencies noted by

the Audit staff.

Recordkeeping and Disclosure ofDisbursements- 2 U.S.C. §432(c)(5), 2 U.S.C.

§434(b)(5)(A). The Committee did not have sufficient records to support the payee

address and/or purpose for a material number of disbursements. In addition, the Audit

staffidentified a material number ofdisbursements for which no payee address was

disclosed on Schedules B (Itemized Disbursements). The Committee has not provided

any further documentation to support the payee address and/or purpose ofthe identified

disbursements. However, the Committee has amended Schedules B to materially correct

the deficiencies noted by the Audit staff.

Disclosure ofDebts and Obligations-2 U.S.C. §434(b)(8). As part of a limited

review of debts and obligations owed by the Committee, the Audit staffidentified

inconsistencies in the outstanding balance owed to certain committee vendors between

reporting periods. The Committee stated that they performed vendor reconciliations and

made the necessary adjustments to the outstanding debt balances. The Committee also

has amended Schedules D (Debts and Obligations) to materially correct the debts and

obligations owed by the Committee for the public record.

Page 2 of 20 Approved 2/28/00
A99-07

FEDERAL ELECTION COMMISSION

WASHINGTON, DC. 20463

REPORT OF THE AUDITDIVISION

ON

I.

DA VID WU FOR CONGRESS

BACKGROUND

A. AUDIT AUTHORITY

This report is based on an audit ofDavid Wu for Congress (the

Committee), undertaken by the Audit Division ofthe Federal Election Commission (the

Commission) in accordance with the provisions ofthe Federal Election Campaign Act of

1971, as amended (the Act). The audit was conducted pursuant to Section 438(b) ofTitle

2 ofthe United States Code which states, in part, that the Commission may conduct

audits and field investigations ofany political committee required to file a report under

Section 434 ofthis title. Prior to conducting any audit under this subsection, the

Commission shall perform an internal review ofreports filed by selected committees to

determine ifthe reports filed by a particular committee meet the threshold requirements

for substantial compliance with the Act.

B. AUDIT COVERAGE

The audit covered the period from July 15, 1997 through December 31,

1998. The Committee reported a beginning cash balance of$O, total receipts for the audit

period of$I,505,552; total disbursements for the audit period of $1,626,591; and an

ending cash balance of($3,208). 1

I Does not foot due to various reporting errors (see Finding 1I.C,), All figures presented in this report have been

rounded to the nearest dollar.

Page 3 of 20 Approved 2/28/00
2

C. CAMPAIGN ORGANIZATION

The Committee registered with the Commission on August 18, 1997 as the

principal campaign committee for Mr. Dave Wu, Democratic candidate for the U.S.

House ofRepresentatives from the state of Oregon, First District. The Treasurers ofthe

Committee during the period covered by the audit were Ms. Karen L. Rasmussen from

August 18, 1997 through July 16, 1998, Ms. Donna K. Urban from July 17, 1998 to

December 8, 1998 and Mr. Jay Castle from December 9, 1998 through December 31,

1998. Mr. Castle is the current Treasurer as well. The Committee maintains its

headquarters in Portland, Oregon.

To manage its financial activity, the Committee maintained two bank

accounts and one investment account>, from which it made approximately 1,200

disbursements. Into these accounts the Committee deposited contributions from

individuals totaling approximately $931,428, contributions from other political

committees and organizations approximating $407,266, offsets totaling $37,301, and

loans totaling $100,000.

D. AUDIT SCOPE AND PROCEDURES

The audit included such tests as verification oftotal reported receipts and

disbursements; the review ofthe required supporting documentation; and such other audit

procedures as deemed necessary under the circumstances. The audit included testing of

the following general categories, however, the scope ofour testing regarding the

Committee's disbursements and the debts owed by the Committee was limited. Although

the Committee satisfied the minimum recordkeeping requirements of 11 CFR §102.9 in

maintaining its disbursement records, these records were not maintained in a manner

which would have allowed the Audit staffto perform the substantive testing normally

undertaken when reviewing disbursements and debts owed by the Committee because

many ofthese items were not supported by a receipted bill or invoice.

1. The receipt of contributions or loans in excess ofthe statutory

limitations (see Finding ILA.);

2. the receipt of contributions from prohibited sources, such as those

from corporations or labor organizations;

3. proper disclosure ofreceipts from individuals, political committees

and other entities, to include the itemization of contributions or

other receipts when required, as well as, the completeness and

accuracy ofthe information disclosed (see Findings IT.B. and D.);

I Prior to registering with the Commission, an exploratory account was opened on behalf of Dave Wu (the

Candidate) in July 1997 to handle financial activity for a testing-the-waters effort. This account was closed

and the remaining balance, approximately $9,550, was transferred to the Committee'S operating account when

the Committee registered in August 1997.

Page 4 of 20 Approved 2/28/00
3

4. proper disclosure of disbursements, including the itemization of

disbursements when required, as well as, the completeness and

accuracy ofthe information disclosed (see Finding II.E.);

5. proper disclosure of debts and obligations (see Finding ILF.);

6. the accuracy oftotal reported receipts, disbursements and cash

balances as compared to bank records (see Finding II.C.);

7.

8.

adequate recordkeeping for transactions (see Finding ILE.); and

other audit procedures that were deemed necessary in the situation.

•

Unless specifically discussed below, no material non-compliance was

detected. It should be noted that the Commission may pursue further any ofthe matters

discussed in this report in an enforcement action.

II. AUDIT FINDINGS AND RECOMMENDATIONS

A. RECEIPT OF CONTRIBUTIONS FROM INDIVIDUALS IN EXCESS OF THE

LIMITATIONS

Section 441a(a)(1)(A) ofTitle 2 ofthe United States Code states, that no

person shall make contributions to any candidate and his authorized political committees

with respect to any election for Federal office which, in the aggregate, exceed $1,000.

Subsection (b) of 11 CFR §110.1 explains that with respect to any election

means that ifthe contribution is not designated in writing by the contributor for a

particular election then the contribution applies to the next election for that Federal office

after the contribution is made. A contribution is considered made when the contributor

relinquishes control over the contribution by delivering the contribution to the Candidate,

the political committee, or an agent ofthe committee. A contribution mailed is

considered made on the date ofthe postmark.

Sections 103.3(b)(3) and (4) ofTitle 11 ofthe Code ofFederal

Regulations state, in part, that contributions which exceed the contribution limitations

may be deposited into a campaign depository or returned to the contributor. If any such

contribution is deposited, the treasurer may request redesignation or reattribution ofthe

contribution by the contributor in accordance with 11 CFR 11 0.1 (b) or 110.1(k). If a

redesignation or reattribution is not obtained, the treasurer shall, within 60 days ofthe

treasurer's receipt ofthe contribution, refund the contribution to the contributor. Further,

any contribution which appears to be illegal under 11 CFR 103.3(b)(3), and which is

deposited into a campaign depository shall not be used for any disbursements by the

political committee until the contribution has been determined to be legal. The political

Page 5 of 20 Approved 2/28/00
4

committee must either establish a separate account in a campaign depository for such

contributions or maintain sufficient funds to make all such refunds.

Section 110.I(b)(5)(i) and (ii) ofTitle 11 ofthe Code of Federal

Regulations states, in part, that the treasurer of an authorized political committee may

request a written redesignation of a contribution by the contributor for a different election

if: o

o

o

o

the contribution was designated in writing for a particular election, and the

contribution, either on its face or when aggregated with other contributions

from the same contributor for the same election, exceeds the limitation at

11 CFR §110.I(b)(I);

the contribution was designated in writing for a particular election and the

contribution was made after that election and the contribution cannot be

accepted under the net debts outstanding provisions of II CFR

§11 0.1(b)(3);

the contribution was not designated in writing for a particular election, and

the contribution exceeds the limitation on contributions set forth in

11 CFR §110.1(b)(l); or

the contribution was not designated in writing for a particular election,

and the contribution was received after the date of an election for which

there are net debts outstanding on the date the contribution is received.

Further, a contribution shall be considered to be redesignated for another

election ifthe treasurer ofthe recipient authorized political committee requests that the

contributor provide a written redesignation ofthe contribution and informs the

contributor that the contributor may request the refund ofthe contribution as an

alternative to providing a written redesignation and, within sixty days from the date ofthe

treasurer's receipt ofthe contribution, the contributor provides the treasurer with a written

redesignation ofthe contribution for another election, which is signed by the contributor.

Section 110.l(k) ofTitIe 11 ofthe Code ofFederal Regulations states any

contribution made by more than one person, except for a contribution made by a

partnership, shall include the signature of each contributor on the check, money order, or

other negotiable instrument or in a separate writing and if a contribution made by more

than one person does not indicate the amount to be attributed to each contributor, the

contribution shall be attributed equally to each contributor.

If a contribution to a candidate or political committee, either on its face or

when aggregated with other contributions from the same contributor, exceeds the

limitations on contributions setforth in 11 CFR §110.I(b), (c) or (d), as appropriate, the

treasurer ofthe recipient political committee may ask the contributor whether the

contribution was intended to be ajoint contribution by more than one person. A

Page 6 of 20 Approved 2/28/00
5

contribution shall be considered to be reattributed to another contributor ifthe treasurer of

the recipient political committee asks the contributor whether the contribution is intended

to be ajoint contribution by more than one person, and informs the contributor that he or

she may request the return ofthe excessive portion ofthe contribution ifit is not intended

to be ajoint contribution, and within sixty days from the date ofthe treasurer's receipt of

the contribution, the contributors provide the treasurer with a written reattribution ofthe

contribution, which is signed by each contributor, and which indicates the amount to be

attributed to each contributor if equal attribution is not intended.

Section 110.1 (1)(5) Of Title 11 ofthe Code of Federal Regulations states

that if a political committee does not retain the written records concerning redesignation

or reattribution, the redesignation or reattribution shall not be effective, and the original

designation or attribution shall control.

Section 110.9(a) ofTitle 11 ofthe Code of Federal Regulations states that

no candidate or political committee shall accept any contribution or make any

expenditure in violation ofthe provisions of part 110. No officer or employee ofa

political committee shall accept a contribution made for the benefit or use ofa candidate,

or make any expenditure on behalf of a candidate, in violation of any limitation imposed

on contributions and expenditures under this part 110.

During our review ofreceipts, the Audit staffidentified 101 contributions

which were in excess ofthe 2 U.S.C. §441a(a)(1)(A) limitation in the amount of$69,117.

These contributions were from 85 individuals. Many ofthe reported entries on the

Committee's Schedules A (Itemized Receipts) indicated that these contributions had been

reattributed among individuals, such as spouses, or redesignated to another election.

However, the contribution records made available did not support these reattributions and

redesignations. The contribution records examined by the Audit staff consisted ofcopies

ofcontributor checks, batch deposit cover sheets, and some contributor information cards

apparently completed by the contributor.

Nineteen ofthe 101 contributions, totaling $15,250, related to the 1998

primary election; 78 contributions, totaling $51,567, related to the 1998 general election;

and, four contributions, totaling $2,300, related to the 2000 primary election. The Audit

staffnoted that the Committee made two refunds subsequent to audit fieldwork, totaling

$350, relative to two ofthe 101 contributions noted above and provided photocopies of

the refund checks (front only). These refunds were not made in a timely manner.

No separate account was maintained by the Committee relative to

questionable contributions and the Committee did not consistently maintain a sufficient

balance to cover the amounts deposited in excess ofthe limitation (see 11 CFR

103.3(b)(4».

The Audit staff discussed this matter with Committee officials; at the exit

conference, a schedule ofthese contributions was provided. After the conclusion of

fieldwork, the Committee submitted statements relative to 48 ofthe 85 contributors

Page 7 of 20 Approved 2/28/00
G

discussed above which included signed redesignations. The Audit staff notes that these

statements were all dated between July and September 1999 and were, therefore,

untimely.

In the interim audit report, the Audit staffrecommended that the

Committee provide evidence demonstrating that the $68,767 ($69,117 - $350) in

contributions were not excessive. Absent such evidence, the Audit staffrecommended

that the Committee refund the excessive contributions to the contributors and submit

evidence ofthe refunds (copies ofthe front and back of the negotiated refund checks).

The Committee stated in its response to the interim audit report that its

fundraising staffwas " ... unaware ofthe requirement for signed written designations for

future elections or debt retirement purposes, or the requirement that contributions

attributed between spouses be documented by written reattributions signed by both

contributors." In addition to the 48 statements noted above, the Committee submitted an

additional 32 statements which included signed redesignations or reattributions. As a

result, statements have been provided relative to 80 (48 +32) ofthe 85 identified

contributors. For the remaining five contributions, the Committee made four refunds in

January 2000, totaling $3,100, and demonstrated that one contribution, in the amount of

$500, had been refunded timely.

Although written redesignations or reattributions from contributors were

obtained relative to 80 contributions, this remedy is not available to the Committee

because requests were not made within 60 days ofthe Committee's receipt ofthe

contributions pursuant to 11 CFR §103.3(b)(3). The redesignation and reattribution

letters are all dated between July and December 1999.

In summary, ofthe $69,117 in excessive contributions received from

individuals that were identified by the Audit staff, the Committee refunded $3,950

($3,100 + $500 + $350). Therefore, excessive contributions totaling $65,167

($69,117 - $3,950) have not been refunded.

B. DISCLOSURE OF CANDIDATE LOANS

Section 104.3(d)(I) ofthe Code of Federal Regulations states, in part,

when a candidate or political committee obtains a loan from, or establishes a line of credit

at, a lending institution as described in 11 CFR 100.7(b)(II) and 100.8(b)(12), it shall

disclose in the next due report the following information on schedule C-l: the date and

amount of the loan or line of credit; the interest rate and repayment schedule ofthe loan,

or ofeach draw on the line ofcredit; the types and value oftraditional collateral or other

sources ofrepayment that secure the loan or the line of credit, and whether that security

interest is perfected; an explanation ofthe basis upon which the loan was made or the line

of credit established, if not made on the basis of either traditional collateral or other

sources ofrepayment; and, a certification from the lending institution ofthe accuracy of

the borrower's statements. Also, 11 CFR §104.3(d)(2) requires a political committee to

Page 8 of 20 Approved 2/28/00
7

submit a copy ofthe loan or line of credit agreement which describes the terms and

conditions ofthe loan or line of credit when it files Schedule C-l.

Section 102.7(d) ofthe Code of Federal Regulations states, in part, that

any candidate who obtains any loan shall be considered as having obtained the loan as an

agent ofsuch authorized committee.

Section 104.3(a)(4)(iv) ofthe Code of Federal Regulations states that each

report shall disclose each person who makes a loan to the reporting committee or to the

candidate acting as an agent ofthe committee, during the reporting period, together with

the identification of any endorser or guarantor ofsuch loan, the date such loan was made

and the amount or value ofsuch loan.

Section 104.1 1(a) ofthe Code of Federal Regulations states, in part, that

debts and obligations owed by a political committee which remain outstanding shall be

continuously reported until extinguished.

Section 110.10(a) ofthe Code of Federal Regulations states that except as

provided in 11 CFR parts 9001, et seq. and 9031, et seq., candidates for Federal office'

may make unlimited expenditures from personal funds.

Sections 110.10(b)(I) and (2) ofthe Code of Federal Regulations state, in

part, that for purposes ofthis section,personalfunds means any assets which under

applicable state law, at the time he or she became a candidate, the candidate had legal

right of access to or control over, and with respect to which the candidate had either legal

and rightful title, or an equitable interest. Also included as personal funds are salary and

other earned income from bona fide employment and dividends and proceeds from the

sale ofthe candidate's stock or other investments.

On its 1997 Year End report, the Committee disclosed three loans from the

Candidate in the following amounts: $25,000, $5,000 and $70,000. In response to a

Request for Additional Information sent to the Committee by the Commission's Reports

Analysis Division asking for information as to the source ofthese loans, the Committee

filed an amendment to Schedule C (Loans) which stated that these loans were "...from the

candidate's personal funds, as defined by 11 CFR 110.10." No Schedule C-1 (Loans and

Lines ofCredit from Lending Institutions) or copy ofthe loan agreement was filed.

Based on documentation provided to the Audit staff, we determined that

the $25,000 and $5,000 loans were from the Candidate's personal funds. However, the

$70,000 loan provided by the Candidate to the Committee was from a $118,000 line of

credit extended to the Candidate by a lending institution. Bank documentation provided

to the Audit staffindicated that a draw by the Candidate against the entire $118,000 line

of credit was deposited into the Candidate's personal checking account on September 24,

Page 9 of 20 Approved 2/28/00
8

1997 and on that same date, a $70,000 check from this account was deposited into the

Committee's operating account.'

At the exit conference, the Audit staffinformed Committee officials that it

appeared that the source offunds relative to the $70,000 loaned to the Committee was the

lending institution [TOm which the Candidate secured the line of credit as opposed to from

the Candidate's personal funds. Committee officials stated that they would file a

Schedule C-I to correctly disclose this information. Subsequent to the exit conference,

the Committee provided documentation relative to the collateral used by the Candidate to

obtain the line of credit from the lendor, and documentation to demonstrate that the

source offunds, relative to the $5,000 and $25,000 loans, was the Candidate's personal

funds.

In the interim audit report, the Audit staffrecommended that the

Committee file Schedules C and C-1 to correctly disclose the three loans discussed

above. The Audit stafffurther recommended that the Committee file these amendments

for each reporting period and to file a copy ofthe loan agreement relative to the $70,000

bank loan in 1997.

In its response to the interim audit report, the Committee stated that "[d]ue

to a misunderstanding ofFEC's definition of 'personal loan' and since the loan was

secured by the candidate's personal equity in his residence, the source ofthe funds were

not disclosed on Schedule C-1 with the loan agreement." The Committee stated that

"(t]here was no intention to conceal the mortgage as the source ofthe candidate's loan

and that the candidate made numerous public statements during the campaign that he had

taken a mortgage on his home to demonstrate his commitment to his efforts." Included in

the Committee's response were Schedules C-1 and amended Schedules C for the

appropriate reporting periods. In addition, the Committee provided a copy ofthe bank

loan agreement to clarify the source of funds for the $70,000 loaned to the Committee.

C. MISSTATEMENT OF FINANCIAL ACTIVITY

Sections 434(b)(1), (2), and (4) ofTitle 2 ofthe United States Code

require a political committee to disclose the amount of cash on hand at the beginning of

each reporting period and the total amount of all receipts and disbursements for each

reporting period and the calendar year.

The Audit staffreconciled the Committee's reported financial activity to

its bank activity for the period July 15, 1997 through December 31, 1998 and determined

that the Committee's reported 1998 activity was materially overstated.

The Committee overstated reported receipts by $76,337. This net

overstatement was primarily due to the following: over reporting unitemized

contributions from individuals, in the amount of $82,298; not reporting contributions

, The Committee stated that the remaining $48,000 ofthe $118,000 line of credit was retained by the Candidate

for living expenses during the campaign.

Page 10 of 20 Approved 2/28/00
9

received in the Year End reporting period, totaling $50,867; over reporting receipts due to

a math error on the Detailed Summary Page, in the amount of$35,751; not reporting

offsets to operating expenditures, totaling $33,034; and, reporting several contributions

twice, totaling $22,750.

The Committee overstated its 1998 reported disbursements by $10,268.

This net overstatement was primarily due to the following: reporting the same

disbursements twice, totaling $36,927; not reporting in-kind contributions, totaling

$20,846; and, not reporting disbursements made in the Thirtieth day report following the

General Election and Year End reporting periods, totaling $8,986. The reported

beginning cash on hand balance at January 1, 1998 was understated by $463 and ending

cash on hand balance at December 31, 1998 was understated by $41,331 due to these

misstatements.

At the exit conference, the Audit staffinformed the Committee officials of

the identified discrepancies included in their reported activity. These officials agreed to

file the necessmy amended reports to correct the identified misstatements.

In the interim audit report, the Audit staffrecommended that the

Committee file amendments to the applicable 1998 reports to correct the misstatements.

It was recommended that these amendments include Summary and Detailed Summary

Pages, as well as Schedules A (Itemized Receipts) and Schedules B (Itemized

Disbursements) for each reporting period in 1998.

In its response to the interim audit report, the Committee filed amended

reports which materially corrected these misstatements. The Committee also stated that

receipts and disbursements were overstated due to a clerical mix-up in the reporting dates

with the 1998 Pre-General and Post-General reports. The overlap in reporting periods

caused certain receipts and disbursements to be inadvertently reported twice. In addition,

the Committee stated that discrepancies on the Detailed Summmy Pages were a result of

"(t]he person preparing the amendments to the Post-General and Year-End reports

inadvertently added the period totals to the previous year-to-date totals on the original

Pre-General report, not the amended report."

D. ITEMIZATION AND DISCLOSURE OF RECEIPTS FROM INDIVIDUALS AND

POLITICAL COMMITTEES

Section 434(b)(3)(A) ofTitle 2 ofthe United States Code states, in part,

that each report shall disclose the identification of each person who makes a contribution

to the reporting committee during the reporting period, whose contribution or

contributions have an aggregate amount or value in excess of $200 within the calendar

year, together with the date and amount of any such contribution.

Section 434(b)(3)(B) ofTitle 2 ofthe United States Code states that each

report under this section shall disclose the identification of each political committee

Page 11 of 20 Approved 2/28/00
10

which makes a contribution to the reporting committee during the reporting period,

together with the date and amount of any such contribution.

Section 43 1(13)(A) ofTitle 2 of the United States Code defines the term

"identification" to be, in the case of any individual, the name, the mailing address, and

the occupation ofsuch individual, as well as the name ofhis or her employer.

Section 104.3(a)(4) ofTitle 11 ofthe Code ofFederal Regulations states,

in part, that the identification of each contributor and the aggregate year-to-date total for

such contributor shall be reported for each person whose contribution or contributions

aggregate in excess of$200 per calendar year and for all committees which make

contributions to the reporting committee during the reporting period.

The Audit staff conducted a sample review of contributions from

individuals and determined that the Committee did not itemize a material number of

contributions from individuals on Schedules A (Itemized Receipts) as required. A

majority of the contributions not itemized as required should have been included on the

1998 Year End Report; some ofthe contributions were received in 1998 but not deposited

until January 1999.

The Audit staff also reviewed all 315 contributions, totaling $442,887,

which the Committee received from political committees. Not itemized on Schedules A,

as required, were 43 contributions, totaling $ 32,396. Eighteen ofthese 43 items, totaling

$3,896, were in-kind contributions from other political committees while eight others,

totaling $15,500, were received in 1998 but not deposited until 1999.

The Audit staffs review of contributions from political committees

itemized on Schedules A also revealed 21 disclosure errors, totaling $43,779, mainly due

to the incorrect reporting of aggregate year-to-date totals.

At the exit conference, the Audit staff explained the irregularities noted

above and provided a schedule ofthe itemization and disclosure errors relative to

contributions from political committees. The Committee officials stated that they would

file amended Schedules A to correct the deficiencies noted by the Audit staff In a

written response received subsequent to the exit conference, the Committee stated that

they were now utilizing computer software that calculated the aggregate totals for each

reporting period and that amendments would be filed to correct the aggregate year-to-date

errors.

In the interim audit report, the Audit staffrecommended that the

Committee file amended Schedules A and Detailed Summary Pages for each reporting

period to correct the deficiencies noted above.

In its response to the interim audit report, the Committee filed

amendments to materially correct the itemization and disclosure deficiencies noted above.

Relative to the itemization deficiencies, the Committee also stated that several

Page 12 of 20 Approved 2/28/00
II

contributions received by the Committee in December 1998, but deposited in January

1999, were not itemized on the 1998 Year-End report because Committee staff did not

process and date stamp the contributions until the first business days ofJanuary 1999.

The Committee further stated that "oo.[tJhis is a small and common problem compounded

by mail delivery and collection schedules during the holidays, and the Committee

requests that this finding be deleted from the final report." Regarding certain in-kind

contributions which were not itemized, the Committee stated " ...it did not have a record

ofreceiving a notice from the contributing committees with information concerning their

allocable disbursements."

Sections 432(c)(5) and (d) ofTitle 2 ofthe United States Code state that

the treasurer of a political committee shall keep an account ofthe name and address of

every person to whom any disbursement is made, the date, amount, and purpose ofthe

disbursement, and the name of the candidate and the office sought by the candidate, if

any, for whom the disbursement was made, including a receipt, invoice, or canceled

check for each disbursement in excess of$200. The treasurer shall preserve all records

required to be kept by this section and copies of all reports required to be filed by this

subchapter for 3 years after the report is filed.

E. RECORDKEEPING AND DISCLOSURE OF DISBURSEMENTS

Section 434(b)(5)(A) ofTitle 2 ofthe United States Code requires each

report under this section to disclose the name and address of each person to whom an

expenditure in an aggregate amount or value in excess of $200 within the calendar year is

made by the reporting committee to meet a candidate or committee operating expense,

together with the date, amount and purpose ofsuch operating expenditure.

Section 104.3(b)(4)(i)(A) and (B) ofTitle II ofthe Code ofFederal

Regulations defines "purpose" as a briefstatement or description ofwhy the disbursement

was made, and gives examples of acceptable descriptions.

The Audit staff conducted a sample review ofthe Committee's

disbursements to determine ifrecords were maintained as required and ifthe

disbursements were adequately disclosed. From this review, the Audit staff identified a

material number ofitems for which the Committee did not have sufficient records (i.e.,

receipted bill or invoice generated by the payee) to support payee address andlor purpose

ofthe disbursement. Canceled checks were maintained by the Committee for most

disbursements, however, the payee address and purpose of disbursement were not

recorded on the checks.

The Audit staff further identified a material number ofitems for which no

payee addresses were disclosed on Schedules B (Itemized Disbursements) pursuant to 2

U.S.C. §434(b)(5)(A). Many ofthese disbursements were itemized on the Committee's

1998 Year End report.

Page 13 of 20 Approved 2/28/00
12

At the exit conference, the Audit staff presented these matters to

Committee officials. These officials stated that they were preparing amended Schedules

B for all 1998 reports to correct the deficiencies noted by the Audit staff.

In the interim audit report, the Audit staffrecommended that the

Committee obtain and submit the missing disbursement information and/or provide

documentation ofits efforts to obtain this information. The Audit staff further

recommended that the Committee file amended Schedules B to correct the disbursements

not adequately disclosed.

In its response to the interim audit report, the Committee filed amended

Schedules B that materially corrected the missing payee addresses. The Committee did

not provide any further documentation relative to disbursement disclosure information.

F. DISCLOSURE OF DEBTS AND OBLIGATlONS

Section 434(b)(8) ofTitle 2 ofthe United States Code states, in part, that

each report filed under this section shall disclose the amount and nature of outstanding

debts and obligations owed by a political committee.

Sections 104.11(a) and (b) ofTitle 11 ofthe Code ofFederal Regulations

state, in part, that debts and obligations owed by or to a political committee which remain

outstanding shall be continuously reported until extinguished. These debts and

obligations shall be reported on separate schedules together with a statement explaining

the circumstances and conditions under which each debt and obligation was incurred or

extinguished. A debt or obligation, the amount ofwhich is $500 or less, shall be reported

as ofthe time payment is made or not later than 60 days after such obligation is incurred,

whichever comes first. A debt or obligation which is over $500 shall be reported as of

the date on which the debt or obligation is incurred, except that any obligation incurred

for rent, salary or other regularly reoccurring administrative expense shall not be reported

as a debt before the payment due date.

During the Audit staffs review ofdisbursements, the disclosure of debts

and obligations owed by the Committee was also tested. Our testing was limited because

the Committee had no system in place for tracking debts owed and the available

documentation was not generated by the payees (such as invoices, receipted bills, etc.),

nor was information otherwise available with which to determine the dates on which

these obligations were incurred (see Finding II.E.).

However, the Audit staff noted that the Committee disclosed $132,687 in

outstanding debts and obligations on Schedules D (Debts and Obligations) as of

November 23,1998, the close ofthe reporting period for the Thirtieth day report

following the General Election. Furthermore, no outstanding debts were disclosed as of

December 31, 1998, the close ofthe reporting period for the 1998 Year End report.

When the Audit staff discussed these debt reporting problems, Committee officials stated

that while recently preparing the 1999 Mid Year Report they had performed vendor

Page 14 of 20 Approved 2/28/00
13

reconciliations which indicated that adjustments were necessary to the debt balances

disclosed as ofNovember 23, 1998. Further, as of December 31, 1998, the Committee

actually owed $79,473 to 21 vendors. By comparing these vendor reconciliations to

available records, the Audit staff determined this total to be materially correct. Officials

stated that they would file amended Schedules D to correct the debts and obligations for

the 1998 reports.

In the interim audit report, the Audit staffrecommended that the

Committee file amended Schedules D relative to the Thirtieth day report following the

1998 General Election and the 1998 Year End report.

In its response to the interim audit report, the Committee filed amended

Schedules D to materially correct the debts and obligations owed by the Committee.

Page 15 of 20 Approved 2/28/00
Page 16 of 20 Approved 2/28/00
FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

•

•

March 6, 2000

Mr. Jay Castle, Treasurer

David Wu for Congress

818 SW Third Avenue

Portland, OR 97204

Dear Mr. Castle:

Attached please find the Report ofthe Audit Division on David Wu for Congress.

The Commission approved the report on February 28, 2000.

The Commission approved Final Audit Report will be placed on the public record

on March 13,2000. Should you have any questions regarding the public release ofthe

report, please contact the Commission's Press Office at (202) 694-1220. Any questions

you have related to matters covered during the audit or in the report should be directed to

Tom Hintermister or Marty Favin ofthe Audit Division at (202) 694-1200 or toll free at

(800) 424-9530.

Sincerely,

Attachment as stated

cc; Ms. Whitney Bums, Consultant

Page 17 of 20 Approved 2/28/00
•

Page 18 of 20 Approved 2/28/00
CHRONOLOGY

DAVIn WU FOR CONGRESS

Audit Fieldwork

Interim Audit Report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

7/]9/99 - 8/16/99

] 1/22/99

1/11/00

2/28/00

Page 19 of 20 Approved 2/28/00
"

Page 20 of 20 Approved 2/28/00
w•