AR003014

FEDERAL ELECTIO" CO\"i\r1'SSION

June lSi 1992

MEMORANDUM

TO: FRED EILAND

CHIEF, PRESS OFFICE

FROM: ROBERT J. COSTA

ASSISTANT STAFF DI~~TOR AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT eN

THE COMMITTEE FOR QUALITY HOSPITAL CARE

Attached please find a copy of the Final Audit Report on

The Committee for Quality Hospital Care, which was approved by the

Commission on June 9, 1992.

Informational copies of the report have been received by all

parties involved and the report may be released to the public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Reports Analysis Division

FEe Library
FEDERAL ELECTION COMMISSION

REPORT OF THE AUDIT DIVISION

ON

COMMITTEE FOR QUALITY HOSPITAL CARE (CQHe)

MLF001408

A91-44

I. Background

A. Overview

This report is based on an audit of the Committee for

Quality Hospital Care ("the Committee H ) undertaken by the Audit

Division of the Federal Election Commission in accordance with

the provisions of the Federal Election Campaign Act of 1971,

amended ("the Act"). The audit was conducted pursuant to 2

U.S.C. Section 438(b) which states, in part, that the

Commission may conduct audits and field investigations of any

political committee required ~ofile a report under Section 434

of this title. Prior to conducting any audit -uriderthls

subsection, the Commission shall perform an internal review of

reports filed by selected committees to determine if the reports

filed by a particular coaaittee meet the threshold requirements

for substantial coapliance with the Act.

The Coaaittee registered with the Federal Election

Commission on December 5, 1988, and maintains its headquarters

in Boston, Massachusetts. The audit covered the period from

oecember 15, 1988 (the Committee's reported date of inception)l/

through December 31, 1990. The Committee reported an opening -

cash balance of $26,613.48, total receipts of $52,770.00, total

disbursements of $50,417.52, and a cash on hand balance at

December 31, 1990 of $2S,45S.78.~/

This report is based on documents and workpapers

supporting each of its factual statements. They form part of

the record upon which the Commission based its decisions on the

matters in this report and were available to the Commission and

appropriate staff for review.

!/ The earliest transaction on the Committee's bank statements

includable in reported activity was dated December 21, 1988.

Committee activity between December 5 and December 15, 1988

was minimal.

~/ The amounts do not foot due to reporting discrepancies

(See Misstatement of Financial Activity, Finding II.B.)~
.... -4,-

B. Key Personnel

The treasurers of the Commlttee from its inception to

the present are as follows:

William Guenther

Bernard D. Flynn

P au 1 ..;. ~t 0 ran

;:. Scope

Inception - 2/09/89

The audit lncluded such ~ests as verlfi=atlcn cf total

reported receipts, disbursements, and :ndi'Jldual transactions:

review of required supporting dccumentatlon; analysIs of debts

and obligations; and other audit ~rocedures as deemed necessary

under the CIrcumstanceSe

II. Audit Findinas and Recommendat:c~s

A. Source of Cash on Hand

Section 104.12 of Title 11, Code of Federal

Regulations states, in part, that political committees which

have cash on hand at the time of registration shall disclose on

their first report the source(s) of such funds. The cash on

hand balance is assumed to be composed of those contributions

most recently received by the committee.

The Committee reported beginning cash on hand at

December 15, 1988 of $26,613.48. The correct reportable balance

per our bank reconciliation is 527,282.39 (See Misstatement of

Financial Activity, Finding II.B.S.). The Committee has not

disclosed the source(s) of its reported beginning cash on hand.

The Audit staff traced the bank deposits containing

the most recently received contributions beginning December 15,

1988, back through July 15, 1988, to cover the $27,282.39. Each

check deposited in this period was reviewed for permissibility.

The Audit staff determined that twenty-four of these contributions

reviewed, totaling $7,250.00, required itemization, and should be

included as memo entries on Schedules A (Itemized Receipts).

The remaining contributions, totaling $20,032.39, are requlred

to be reported as unitemized contributions cn an amended

Detailed Summary Page [Line 11{a)}.

In the interim audit ~eport the Audit staff

recommended that the Committee file Memo Schedules A (Itemlzed

Receipts) and an amended Detailed Summary Page to disclose t~e

source of beginnIng cash on hand.
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In response to the interim audit report, the Committee

filed Memo Schedules A (Itemlzed Receipts) and an amended

Detailed summary Page, correctly disclosing the source of

beginning cash on hand.

Recommendation #1

The Audit staff recommends no further action with regard to

this matter.

B. Misstatement cf financ:ai ~ct:~lty

Sections 434(bJ',ll, ,2: ,3.nd '-.t) of :'itle;: of the

United States Code state, :':1 part, :~at each ::,~port shall

disclose the amount cf cash en hand at ~~e beglnning of each

reporting period, ~he total amount :: all recelpts, and the

total amount of all disbursements :~: ~~e period and t~e

calendar year.

The Audit staff's reconc:l:aticn af :he Ccmmittee's

reoorted activity to its bank actl~i:v f=om December 15, 19883/

through June 30,-1989 and from January 1, 1990 through December

31, 1990 revealed the followlng misstatements:~/

i/ It should be noted that t~e Committee's reported activity

began on 12 15/88. Since the initlal discl~sure report

filed covered activity bet·..;een 12 15/88 and 6/30/89 and the

activity between 12/15/88 and :::-'31/88 was minimal, the

Audit staff included the 1988 act:~lty ~lth the 1989

activity for this review.

4/ The Committee did not file a report coverlng activity from

July 1, 1989 through December 31, 1989 (See Finding II.C.).
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1. Receipts: December 15, 1988 through June 30, 1989

The Committee's receipts from December 15, 1988

through ~une 30, 1989 were understated by a net amount of

$7,648.00. The components of this misstatement are as follows:

1989 Receipts as Reported

Unreported Interest

Unreported Contributions~/

Over Reported Contribution

Reported Contributions - No

Record of Deposit

Unexplained

Adjusted 1989 Receipts

S 838.00

1,265.00

25,,00)

305.00)

125.00)

$ 5,215.00

7,648.00

512,863.00

2. Disbursements: December lS, 1988 through

June 30, 1989

The Committee's disbursements from December 15,

1988 through June 30, 1989 were understated by a net amount of

$4,483.47. The components of this misstatement are as follows:

1989 Disbursements as Reported

unreported Bank Charges

Unreported Disbursements!/

Voided Disbursement - No

Report Adjustment for Void

Over Reported Contribution Made

by the Committee

Unexplained

Adjusted 1989 Disbursements

$ 42.47

4,397.00

300.00)

50.00)

394.00

$11,613.82

4,483.47

S16,097.29

~/ Included in this total are $1,250.00 in unreported contributions

requiring itemization.

~/ $2,800 - Contributions to political Committees and

Unregistered Organizations [$2,400 of which

requires itemization (See Finding II.D.)],

$1,597 - Operating Expenditures
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3. 1990 Receipts

The Committee's 1990 receipts w~re overstated by

a net amount of $2,163.1C. The components of this misstatement

are as folluws:

1990 Receipts as Reported

Unreported Interest

Contributions Recelved in

1990, Reported in 1991

Unreported 1990 Refund,

Deposited in 1991

Unreported 1989 Refund

Deposited in 1990

Reported Contributions with

No Record of Deposit

Over Reported Contribution

Over Reported Unitemized

Contributions

Unexplained

Adjusted 1990 Receipts

S 716.82

510.00

1,000.00

625.00)

100.00)

195.00)

30.00 (2,163.18)

545,391,82
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4. 1990 Disbursements

The Committee/s 1990 disbursements were

understated by a net amount of $3,708.00. 'fhe compOltents of

this misstatement are as follows:

1990 Disbursements as Reported

unreported DisbursementsII

Under Reported Disbursements

Reported Unitemized

Disbursements with No Payment

Transaction Records

Over Reported Disbursements

unreported Bank Charges

Adjusted 1990 Disbursements

5,272.43

100.00

(1,2/1.93)

400.00)

"':".50 3,708.00

§42,511.7Q

s. Ending Balance

The reported ending cash balance--at -December 31,

1990 was overstated by $15,954.74, resulting from the

misstateaents detailed above. Included in this a.ount is a

$668.91 difference between the Committee'S reported cash on hand

of $26,613.48 on December 15, 1988 and the correct reportable

cash on hand balance of $27,282.39 (See Finding II.Ae).

At the exit conference the Treasurer was provided

with (a) photocopies of the 1989 and 1990 bank reconciliations,

(b) photocopies of contribution checks for the unreported

contributions, and (e) schedules detailing reported

contributions for which no deposit record could be located by

the Audit staff. Committee officials provided no explanations

as to why some contributions were not reported and why no

deposit records were available for other reported contributions.

In the interim audit report the Audit staff

recommended that the Committee file comprehensive amendments

covering the periods December 15, 1988 through June 30, 1989 and

calendar year 1990 correcting reported receipts and

disbursements for both periods, and cash on hand.

1/ $3,300.00 - Contributions to Political Committees and

Unregistered Organizations [$2,800 of which

requires itemization (See Finding II.D.)}

$1,972.43 - Operating Expenditures
... - /-

In response to the interim audit report, the

Committee filed comprehensive amendments covering these periods

which materially corre~ted reported receipts, disbursements and

..:ash on hbnd.

Recommendation =2

The Audit staff recommends

this matter.

c. Failure ~o File Reoart

fur~her action with regard to

Section 434(a)(4)(A)(i~1 cf ~~tle 2 of the United

States Code, states, that :~ a calendar year :n which a

regularly scheduled general election :5 not held, all political

committees, other than authoflzed c~mmlttees of a candidate,

shall file a report covering the gericd beginning January 1 and

ending June 30, ~hich shall =e filed ~o :ater ~han July 31 and a

report covering the per led beginnlng :~ly 1 and ending December

31, which shall be filed no late~ ~~an January 31 of the

following calendar year.

The Committee did not file a report covering the

period July 1, 1989 through December 31, 1989. On December S,

1990 the Commission's Reports Analysis Division sent a l'notice

of failure to file" relative to this omission. Our review of

bank records provided by the Committee revealed that the

Committee received a $625.00 refund and S539.79 in interest

earned during this period. These items were required to be

itemized on Schedules A. Further, the Committee made

disbursements totaling $18,691.97, comprised of $16,650.00 in

contributions made to political committees (of which S15,650.00

was required to be itemized on Schedules B) and $2,041.97 in

operating expenditures (of which $1,856.54 was required to be

itemized on Schedules B).

No explanation was provided by the Committee for its

failure to file this report.

In the interim audit report the Audit staff

recommended that the Committee file a Year End 1989 report to

include the reportable activity and receipts/disbursements which

required itemization.

In response to the interim audit report, the Commlttee

filed a Year End 1989 report which lncluded the reportable

activity and receipts/disbursements which required itemizatlon.

Recommendation :3

The Audit staff recommends no further action with regard :~

this matter.
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D. Itemization of Contributions to Political Committees

and unregistered Organizations

Section 4~4(b)(6}(B){i) of Title 2 of the United

States Code states that each report shall disclose the name and

address of each political committee which has received a

contribution from the reporting committee during the reporting

period, together with the date and amount of any such - contribution. In addition, 2 U.S.C. §434(b)(6)(B)(v) states, in

part, that each report shall disclose the name and address of

each person who has received a disbursement from the reporting

committee in an aggregate amount or value 10 excess of $200

within the calendar year, :ogether ~ith the date and amount of

any such contribution.

Section 441atal(8' cf Title 2 of the United States

Code states that for purposes of the limitations imposed by this

section, all contribu~ions made by a person. either directly or

indirectly, on behalf of a particular candidate, including

contributions which are in any way earmarked or otherwise

directed through an intermediary or conduit to such candidate~

shall be treated as contributions from such person to such

candidate. The intermediary or conduit shall report the

original source and the intended recipient of such contribution

to the Commission and to the intended recipient.

Under 11 C.F.R. §110.6(c)(1)(iv)~/ the report by the

conduit or intermediary shall contain the following inforaation:

(A) The name and mailing address of each contributor and,

for each earmarked contribution in excess of $200, the

contributor's occupation and the name of his or her

eaployeri

(8) The amount of each earmarked contribution, the date

received by the conduit, and the intended recipient as

designated by the contributor; and

(C) The date each earmarked contribution was forwarded to

the recipient candidate or authorized committee and

whether the earmarked contribution was forwarded in

cash or by the contributor's check or by the conduit's

check.

During our review of Committee disbursements made to

political committees and unregistered organizations, it was

~/ This regulatory citation was contained in the regulations

revised as of January 1, 1990. In the regulations revised

as of January 1, 1988 and January 1, 1989, this regulation

was 11 C.F.R. §110.6(c)(4) and contained the same

requirements.
-9-

noted that 12 disbursements, totaling $5,200.00, were not

itemized as required.~/

Of the 12 disbursements ~ot itemized as required, 11

were in amounts greater than $200.01. The other disbursement

was an earmarked contribution. Under 11 C.F.R. §110.6(c),

earmarked contributions are required t~ be itemized :egardless

of amount.

Committee cfficlals provlced no explanation for these

discrepancies.

In the lnterlm audit :epcrt :he Audit staff

recommended that wlthin 30 days of ~~e serVlce of this report,

the Committee file amended Schedules 5 [Itemized Disbursements),

as part of comprehensive amendmen~s, :overing the periods

December 15, 1988 through June 30. :989 and calendar year 1990,

correcting the above noted problems.

In response t~ the interim audit report, :he Committee

filed comprehensive amendments correcting the above noted

problems.

Recommendation .4

The Audit staff recommends no further action with regard to

this matter.

~/ The $5,200.00 in contributions not :temized as required,

comprised of $2,400.00 during the period December 15, 1988

through June 30, 1989 and $2,800.00 during calendar year

1990, were not included in the Committee's reported activity

(See Misstatement of Financial Activity, Finding II.B.2. and

4 • ) •