FEDERAL ELECTION COMMISSION B5003069

January 2, 1992

MEMORANDUM

TO:

FROM:

FRED EILAND

CHIEF, PRESS OFFICE

ROBERT J. COSTA

ASSISTANT STAFF DIREctOR

AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT

ON RIVERSIDE COUNTY REPUBLICAN CENTRAL COMMITTEE

Attached please find a copy of the Final Audit Report on the

Riverside County Republican Central Committee which was approved

by the Commission on December 20, 1991.

Informational copies of the report -have beeri--rffce:-ivec,f-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 88001152

A89-43

REPORT or THE AUDIT DIVISION

ON THE

RIVERSIDE COUNTY REPUBLICAN CENTRAL COMMITTEE

I. Background

A. Overview

This report is based on an audit of the Riverside County

Republican Central Committee ("the Committee") undertaken by the

Audit Division of the Federal Election Commission in accordance

with the Commission's audit policy to determine whether there has

been compliance with the provisions of the Federal Election

campaign Act of 1971, as amended ("the Act"). The audit was

conducted pursuant to Section 438(b) of Title 2 of the United

states Code which states, in part, that the Co.mission may conduct aud-rfs- --and- ffel-d --invifst.-iqat.i-6tls----of---any--polit-fea-l e-oaaiTIffe--

required to file a report under Section 434 of this title. Prior

to conducting any audit under this subsection, the Coaaissian

shall perfor. an internal review of reports filed by selected

coaaittees to determine if the reports filed by a particular

coaaittee meet the threshold requireaents for substantial

co.pliance with the Act.

The Co..ittee registered with the Federal Election

Commission on September 29, 1978, and maintains its headquarters

in Riverside, California.

The audit covered the period January 1, 1987 through

December 31, 1988. The Comaittee reported a cash balance on

January 1, 1987 of $667.06; total receipts for the period of

$82,591.84; total disbursements for the period of $82,892.87; and

a cash balance on December 31, 1988 of $366.03.

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 Commissioners and

appropriate staff for review.

B. Key Personnel

The Treasurer of the Committee during the period covered

by the audit was Ms. Kathleen E. Oaley. The Committee's current

Treasurer is Mr. Ronald Sullivan.
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c. Scope

The audit included such tests as verification of total

reported receipts, disbursements and individual transactions:

review of required supporting documentation: analysis of Committee

debts and obligations; and such other audit procedures as deemed

necessary under the circumstances, except that although the

Committee's recordkeeping with respect to receipts appears to be

in compliance with the requirements of 2 U.S.C. §432(c),

supporting documentation for a limited number of deposits

identified by the Audit staff remain unreconciled (See Finding

II.C).

II. Audit Findings and Recommendations

Introduction to Findings

The Audit Staff reviewed the Committee's financial activity

for 1987 and 1988, and determined that the Committee did not

engage in activity directly supporting federal candidates. The

Committee did, however, actively participate in a voter

registration program throughout this period. In accordance .with

both 2 U.S.C. 5431(4) and 11 C.F.R. 5100.5(a) which state

"'political committee' means any committee which makes

expenditures aggregating in excess of $1,000 during a calendar ye_~r," the Commi ttee became a political CODlDli ttee on September 18,

1987. On this date the Coui-ttee---e-x-penaed ltr---exc4!ss----of--$l,--oOO,

the federal portion of allocated voter registration expenses!/ .

The Coamittee maintained a federal account and a non-federal

account during the period aUdited. The Audit Staff reviewed all

federal account activity occurring on and after September 18,

1987. Therefore, all findings noted below pertain to federal

account activity from Septeaber 4, 19872/ through December 31,

1988. -

The Audit staff reviewed the disbursements made by the

Committee, for administrative and voter re9istration expenses from

its federal and non-federal accounts. Using an allocation based

on the ratio of federal candidates to total candidates on the

Riverside County ballots for both the Primary and the General

elections, administrative expenses and the voter registration

expenses were analyzed. In each category, overpayments in the

!/ The Audit Staff calculated the allocable amount of both

administrative and voter registration expenses based on a

ratio of the number of federal candidates to total candidates

on the Riverside County ballots for both the primary and

General elections. The total value of all allocable voter

registration expenses was $72,941.75, of which the federal

portion totaled $31,438.

~/ Cash-on-hand on September 18, 1981 contained funds deposited intc

the federal account on September 4, 14 and 17, 1987.
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Primary period and reported loans/debts owed to the non-federal

account which arose from contributions that were erroneously

deposited into the federal account, were applied to underpayments

in the General period. It was determined that the federal

committee had paid a reasonable share of both administrative and

voter registration expenses during the period audited in

accordance with 11 C.F.R. §106.1{e).

A. Misstatement of Financial Activity

Sections 434(b)(2) and (4) of Title 2 of the united

states Code state that each report shall disclose for the

reporting period and calendar year, the total amount of all

receipts, and the total amount of all disbursements.

A reconciliation of bank activity to reported financial

activity revealed that the Committee did not report receipts and

disbursements, each totalling $3,031. A review of the deposits

into and disbursements from the Committee's federal account

revealed that the Committee had deposited into its federal account

five checks from the Assembly Republican Political Action

Coamittee (ARPAC). These checks were dated 1/12/88 through

2/17/88. The Committee wrote two checks, each dated April 15,

1988, which were deposited into the Committee's non-federal

account. The memo lines on the checks were as follows: for "T/F --to SPNB £or- A!tPAC---erroneous deposit'" and for "T/F to-SPN8;--fl-3/- The

Committee did not report either the receipts from ARPAC or the

disbursements to the Committee's non-federal account.

At the Exit Conference, a Committee spokesperson indicated

the Committee's willingness to file amendments to correct the

public record.

In the Interim Audit Report, the Audit staff recommended that

the committee, within 30 calendar days of service of that report,

file a comprehensive amendment to include $3,031 in receipts and

disbursements.!/

The Committee's response received May 15, 1991 contained a

comprehensive amendment for 1988 which corrected the above

described misstatement.

Recommendation 11

The Audit Staff recommends no further action with respect to

this matter.

1/ SPNB is Security Pacific National Bank, the bank at which the

Committee maintains its non-federal account.

~/ See Finding II.B. regarding the itemization of the

disbursements.
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B. Itemization of Disbursements

Sections 434(b}(S)(C) and (0) of Title 2 of the United

States Code state that each report under this section shall

disclose the name and address of each affiliated committee to

which a transfer is made by the reporting committee during the

reporting period and, where the reporting committee is a political

party committee, each transfer of funds by the reporting committee

to another political party committee, regardless of whether such

committees are affiliated, together with the date and amount of

such transfers; and each person who receives a loan repayment from

the reporting committee during the reporting period, together with

the date and amount of such loan repayment.

A review of Committee disbursements revealed seven

disbursements made from the Committee's federal account to its

non-federal account, totalling $13,108 which were not itemized as

required. Of these disbursements, two disbursements totalling

$3,031 were made to reimburse the non-federal account for receipts

erroneously deposited into the federal account (see Finding

II.A.). Five disbursements, totalling $10,077, were loan

repayments and reductions of debts which also arose from

contributions erroneously deposited into the federal account, and

were reflected as such on Schedules C and D respectively.

However/ these individual payments were not itemized as

disbursements on Schedule B.

At the Exit Conference, a Committee representative was

provided with a copy of the schedule of disbursements which were

not itemized on the Committee's reports. A Committee spokesperson

indicated the Committee's willin9ness to amend its reports to

correct the public record.

In the Interim Audit Report the Audit staff recommended

that the Committee, within 30 calendar days of service of that

report, amend its reports to disclose the payee, date and amount

of the seven disbursements, totalling $13,108, made to the

Committee's non-federal account.

The Committee's response, received May 15, 1991,

contained Schedules B disclosing the above noted disbursements.

Recommendation 12

The Audit staff recommends no further action with respect to

this matter.

c. Deposit of Contributions

Section 432(h)(1) of Title 2 of the United States Code

states that each political committee shall designate one or more

State banks, federally chartered depository institutions, or
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depository institutions the deposits or accounts of which are

insured by the Federal Deposit Insurance Corporation, the rederal

Savings Loan Insurance Corporation, or the National Credit Union

Administration, as its campaign depository or depositories. All

receipts received by such committee shall be deposited in such

accounts.

A review of contributions received by the Committee and

deposits, made by the Committee, into its federal account revealed

two deposits for which the supporting contributions exceeded the

deposit amount. The deposits in question are dated 11/15/88 for

$583.64 and 12/4/87 for $2,465.70.

In addition, checks made payable to an individual,

associated with the Committee, were among the associated

contributions for the 11/15/88 deposit. Due to recurrent

same-dollar-amount checks and multiple checks drawn on the same

banks, the Audit staff was unable to identify the checks actually

deposited.

At the Exit Conference, a Committee spokesperson ~t~ted

that the checks made payable to the individual, associated with

the Committee, resulted from a fundraiser given by this

individual, to which attendees were to bring food or contribute

$10.00.

In Interim Audit Report, the Audit staff recommended

that, within 30 calendar days of service of that report, the

Committee provide an explanation as to why the amounts for

deposits made on 11/15/88 and 12/4/87 do not equal the total of

the associated contributions, as well as documentation to support

the deposit of checks, made payable to an indiviuual associated

with the Committee.

The Committee's response, received May 15, 1991, noted

its inability to reconcile the above mentioned deposits. The

Audit staff is of the opinion that, in view of the limited problem

identified, the matter not be pursued.

Recommendation t3

Section 441b(a) of Title 2 of the United States Code

states that it is unlawful for any corporation organized by

authority of any law of Congress, to make a contribution or

expenditure in connection with any election to any political

office, or for any political committee knowingly to accept or

receive any contribution prohibited by this section.
~/

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Section l02.5(a)(1)(i) of Title 11 of the Code of

Federal Re9ulations states that each organization, including a

party committee, which finances political activity in connection

with both federal and non-federal elections and which qualifies as

a political committee shall establish a separate federal account.

Such account shall be treated as a seoarate federal oolitical

committee which shall comply with the~requirements of th~ Act.

Only funds subject to the prohibitions and limitations of the Act

shall be deposited in such separate federal account.

A review of the Committee receipts revealed that the

Committee received and deposited into its federal account 32 items

totalling $28,857.20 from unregistered political organizations.

One of the contributing committees notified the Commission in a

letter dated June 17, 1988, that it had "donated monies to the

Republican Party of Riverside with the understanding that these

monies would be used in the State of California elections only."

At the Entrance Conference, the Committee Treasurer, for

the period covered by the audit, stated that when she assumed the

job of the Treasurer in 1987 she was told that the federal account

was the non-federal account and that the non-federal account was

the federal account. She said that she made the Committee's

deposits _accordingly until she realized the error in about June

1988. In an attempt to rectify the error she repoit-ed- the funds

that should have been deposited in the non-federal account but

were deposited into the federal account, as loans from the

non-federal account to the federal account. As funds becaae

available in the federal account, repayments were made to the

non-federal account, and the loan balance decreased by that

amount. At the Exit Conference, a Committee spokesperson

requested information as to what remedies were available to settle

this issue.

In the Interim Audit Report, the Audit staff reco•••nded

that the Committee, within 30 calendar days of service of that

report, provide the Audit staff with documentation to demonstrate

the $28,857.20 at issue was from permissible sources, or transfer

the amount of the contributions to the Committee's non-federal

account and provide evidence of the transfer.~/

The Audit staff also recommended, that with 30 days of

service of the Interim Audit Report, that the Committee provide

documentation to support the balance of the loans payable to the

Although not provided for in the Commission's Regulations, the transfe

of funds from the Committee's Federal Account to its non-Federal

account is recommended in this instance to effect the contributors

apparent intent as well as the Committee's which was for the

contributions to be used for non-Federal activities.
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state Account as of December 31, 1987. The documentation may

include worksheets, check copies, deposit and contribution

records.

The Committee's response, received May 1S, 1991,

contained workpapers with respect to the loans payable balance and

indicated that the Committee had transferred funds to the

non-federal account and/or made payments on behalf of the

non-federal account sufficient to resolve the matter regarding

these funds. In addition to the above, overpayments related to

administrative and voter registration expenses by the federal

account on behalf of the non-federal account, totaling in excess

of $28,000, were noted during the period these apparent prohibited

funds were deposited to the federal account. Also, during 1987,

when contributions were deposited into the wrong accounts,

deposits totalling approximately $20,000 were made to the

non-federal account.

On December 10, 1991, based upon the facts as presented

above, the Commission determined that no further action was

necessary concerning this matter.

Recommendation 14