Part II

Overview of Committee
Committee Organization

Important Dates

Republican Campaign Committee of
New Mexico

e Date of Registration

May 11, 1976

e Audit Coverage

January 1, 2001 — December 31, 2002

Headquarters

Albuquerque, NM

Bank Information

e Bank Depositories

1

e Bank Accounts

6 Federal and 5 Non-federal

Treasurer

e Treasurer When Audit Was Conducted

James White

e Treasurer During Period Covered by Audit

Laurie Fowler

Management Information

e Attended FEC Campaign Finance Seminar _| No
¢ Used Commonly Available Campaign Yes
Management Software Package
e¢ Who Handled Accounting and Volunteer and Paid Staff

Recordkeeping Tasks

Overview of Financial Activity
(Audited Amounts)

Cash on hand @ January 1, 2001 $ 59,665
Receipts

o From Contributors 928,342
o Transfers From Affiliates 1,218,674
o_ Transfers From Non-federal 1,525,970
o Other Receipts 23,056
Total Receipts $ 3,696,042
Disbursements

o Operating Disbursements 3,136,935
o. Transfers to Affiliates 356,695
© Contributions to Federal Candidates 120,000
o Other Disbursements 19,609
Total Disbursements $ 3,633,239
Cash on hand @ December 31, 2002 $122,468



Further, there was no documentation to demonstrate that expenditures, totaling $42,790
made directly from the non-federal account were solely for non-federal purposes. Many
of the vendors also received payments from the allocation account for shared
expenditures. Absent documentation, the expenditures were considered potentially
shared; the federal portion totaled $10,698 ($42,790 x 25%).

RCNM held seven fundraising events that benefited both the federal and non-federal
accounts. The allocation ratios for all but two events were disclosed on Schedules H2.
For the most part, the ratios disclosed were 50% federal and 50% non-federal. For the
two events ratios that were not disclosed on Schedules H2, RCNM did not maintain any
records detailing which contributions were received relative to those events.

With respect to the five fundraising events for which receipt records were maintained, the
Audit staff determined that the allocation ratios disclosed on Schedules H2, which were
used to allocate event expenditures, were incorrect. For the two events for which receipt
documentation was not maintained, the Audit staff calculated a mean allocation ratio
based on the documented receipts from the other five events. Applying the correct
allocation ratios, as well as the calculated mean allocation ratio, to the respective event
expenditures, the Audit staff determined that the federal account overpaid its share of the
expenditures by $21,650. This “credit” has been offset against the amount of shared
expenditures overpaid by the non-federal account.

When these adjustments were combined with other needed corrections to the allocation
calculations, at the time of the interim audit report it was concluded that the non-federal
account had potentially over funded its share of expenses by $460,557.

During the exit conference the Audit staff provided the RCNM representatives with a
spreadsheet detailing the allocation of expenses between federal and non-federal
activities. An RCNM representative stated she did not know how the over funding
occurred.

Interim Audit Report Recommendation
The Audit staff recommended that RCNM:

e Provide documentation to include copies of video tapes or scripts to show
that the media disbursements classified above as potentially 100% federal
($622,115) by the Audit staff were shared expenses;

e Provide documentation to show that payments totaling $42,790 made directly
from the non-federal account did not represent expenditures for shared
activity; or

e Absent such documentation, reimburse the non-federal account $460,557 for
the underpayment of the federal share of shared expenses and provide
evidence of the reimbursement (copies of the front and back of the instrument
used for the reimbursement);

e Provide amended memo Schedules H4 to disclose the payments made from
the non-federal account for each reporting period;


Part IV
Findings and Recommendations

Finding 1. Disclosure of Occupation and Name of
Employer

Summary

RCNM failed to disclose occupation and/or name of employer for 69 contributions from
individuals totaling $57,185. In addition, best efforts to obtain, maintain and submit the
information were not documented by RCNM. The Audit staff recommended that RCNM
provide either documentation that demonstrated best efforts were made to obtain,
maintain and submit the missing occupation and/or name of employer information or
contact each contributor and submit evidence of such contact and disclose any
information received in amended reports. In response, RCNM provided copies of letters
sent to each contributor and filed amended reports disclosing the contributor information
received as a result of its efforts.

Legal Standard

A. Required Information for Contributions From Individuals. For each itemized
contribution from an individual, the committee must provide the contributor’s occupation
and the name of his or her employer. 2 U.S.C. §434(b)(3)(A) and 11 CFR §100.12.

B. Best Efforts Ensures Compliance. When the treasurer of a political
committee shows that the committee used best efforts (see below) to obtain, maintain,
and submit the information required by the Act, the committee’s reports and records will
be considered in compliance with the Act. 2 U.S.C. §432(h)(2)(i).

C. Definition of Best Efforts. The treasurer and the committee will be
considered to have used “best efforts” if the committee satisfied all of the following
criteria:

e All written solicitations for contributions included:

o Acclear request for the contributor’s full name, mailing address, occupation,
and name of employer; and
© The statement that such reporting is required by Federal law.

¢ Within 30 days after the receipt of the contribution, the treasurer made at least one
effort to obtain the missing information, in either a written request or a
documented oral request.

e The treasurer reported any contributor information that, although not initially
provided by the contributor, was obtained in a follow-up communication or was
contained in the committee’s records or in prior reports that the committee filed
during the same two-year election cycle. 11 CFR §104.7(b).


Part III
Summaries

Findings and Recommendations

Finding 1. Disclosure of Occupation and Name of
Employer

RCNM failed to disclose occupation and/or name of employer for 69 contributions from
individuals totaling $57,185. In addition, best efforts to obtain, maintain and submit the
information were not documented by RCNM. The Audit staff recommended that RCNM
provide either documentation that demonstrated best efforts were made to obtain,
maintain and submit the missing occupation and/or name of employer information or
contact each contributor and submit evidence of such contact and disclose any
information received in amended reports. In response, RCNM provided copies of letters
sent to each contributor and filed amended reports disclosing the contributor information
received as a result of its efforts. (For more detail, see p. 4)

Finding 2. Allocation of Federal and Non-federal Expenses
The Audit staffs review of disbursements from both the federal and non-federal accounts
indicated that the non-federal account potentially over funded its share of allocable
expenses by $460,557. For media buys totaling $622,115, documentation such as scripts
and copies of advertisements was not available to determine the shared nature of the
expenses. Therefore, the non-federal portion of these expenditures was considered
potentially federal. In addition, payments made directly from the non-federal account
also contributed to the potential over funding. The Audit staff recommended that RCNM
either demonstrate that there was no over funding by the non-federal account or
reimburse the non-federal account $460,557 and file amended Schedules H2 (Allocation
Ratios) and H4 (Joint Federal/Non-Federal Activity) as appropriate. In response, RCNM
provided the necessary documentation that demonstrated that the non-federal account did
not over fund its portion of shared activity. (For more detail, see p. 5)


accounts. Alternatively, the committee may conduct both federal and non-federal
activity from one bank account, considered a federal account. 11 CFR §102.5(a)(1)(i).

B. Paying for Allocable Expenses. Commission regulations offer party
committees two ways to pay for allocable, shared federal/non-federal expenses.

e They may pay the entire amount of the shared expense from the federal
account and transfer funds from the non-federal account to the federal account
to cover the non-federal share of that expense; or

e They may establish a separate, federal allocation account into which the
committee deposits funds from both its federal and non-federal accounts
solely for the purpose of paying the allocable expenses of shared federal/non-
federal activities. 11 CFR §106.5(g)(1)(i) and (ii)(A)

C. Reporting Allocable Expenses. A political committee that allocates
federal/non-federal expenses must report each disbursement it makes from its federal
account (or separate allocation account) to pay for a shared federal/non-federal expense.
Committees report these kinds of disbursements on Schedule H4 (Joint Federal/Non-
Federal Activity). 11 CFR §104.10(b)(4)

D. Allocation Ratio for Administrative & Generic Voter Drive Costs.
State and local party committees must allocate their administrative expenses and generic
voter drive costs according to the ballot composition method. Under this method, a
committee determines the ratio of federal offices to the total number of federal and non-
federal offices expected on the ballot in the next general election in the state or
geographic area. 11 CFR §106.5(d)(1) and (2)

E. Allocation Ratio for Shared Fundraising Expenses. Ifa committee
raises both federal and non-federal funds through the same fundraising program or event,
it must allocate the direct cost of the fundraising event based upon the ratio of funds
received by the federal account to the total amount raised for the event. 11 CFR

§106.5(f)(1)

Facts and Analysis

RCNM maintained an allocation account to pay for shared federal/non-federal expenses
and transferred funds from both federal and non-federal accounts to the allocation
account for allocable expenses. It correctly utilized the ballot composition ratio of 25%
federal and 75% non-federal for administrative and GOTV expenses. However, as noted
below other adjustments are required.

Media expenditures, totaling $622,115 were disclosed on Schedules H4 and allocated
based on a 25% federal and 75% non-federal ratio. Documentation, such as copies of
scripts and/or advertisements, was not made available to demonstrate the shared nature of
these expenditures. The non-federal portion totals $466,587 ($622,115 x 75%) and was
considered potentially federal.


FEDERAL ELECTION COMMISSION

WASHINGTON, DC 20463

August 10, 2005

MEMORANDUM

TO: Press Office

FROM: Joseph F. Stoltz Y
Assistant Staff mirector
Audit Division /

SUBJECT: Public Issuance of the Audit Report on the Republican Campaign
Committee of New Mexico (03-34)

Attached please find a copy of the audit report on the Republican Campaign
Committee of New Mexico, which was approved by the Commission on July 26,
2005.

The audit report may be released to the public on August 10, 2005.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library
Web Manager


e If funds were not available to make the necessary reimbursement, disclose the
debt to the non-federal account on Schedule D (Debts and Obligations) until
funds become available to make the reimbursement.

Committee Response to Recommendation and Audit Staff’s
Assessment

In response, RCNM provided documentation including copies of print ads as well as
copies of scripts and video or audio tapes for television and radio that demonstrate the
shared nature of the expenditures. RCNM also provided documentation that
demonstrated payments made directly from the non-federal account were not for shared
activity. As a result, it is concluded that RCNM’s non-federal account did not over fund
its portion of shared expenses. Therefore, RCNM was neither required to reimburse the
non-federal account nor file amended disclosure reports.


Facts and Analysis

After reviewing contributions from individuals required to be itemized on Schedule A
(Itemized Receipts), the Audit staff identified 69 contributions, totaling $57,185, that did
not have an occupation and/or name of employer reported properly. Of the 69 errors
identified, the information was disclosed either as “information requested” and/or “best
effort made.” However, RCNM did not present documentation that demonstrated that
best efforts were exercised to obtain, maintain and submit the missing information.

The Audit staff presented this matter to RCNM representatives during the exit
conference. RCNM agreed to contact contributors in an attempt to obtain the required
information and file the amended disclosure reports, as appropriate.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that, RCNM take the following action:

e Provide documentation that demonstrated best efforts were timely made to
obtain, maintain and submit the missing occupation and/or name of employer
information; or,

© Contact each contributor whose occupation and/or name of employer were
incorrectly disclosed, submit evidence of such contact, and disclose any
information received in an amended report.

In response, RCNM provided copies of letters sent to each contributor and filed amended
reports disclosing the contributor information received as a result of its efforts.

| Finding 2. Allocation of Federal and Non-federal Expenses |

Summary

The Audit staff's review of disbursements from both the federal and non-federal accounts
indicated that the non-federal account potentially over funded its share of allocable
expenses by $460,557. For media buys totaling $622,115, documentation such as scripts
and copies of advertisements was not available to determine the shared nature of the
expenses. Therefore, the non-federal portion of these expenditures was considered
potentially federal. In addition, payments made directly from the non-federal account
also contributed to the potential over funding. The Audit staff recommended that RCNM
either demonstrate that there was no over funding by the non-federal account or
reimburse the non-federal account $460,557 and file amended Schedules H2 (Allocation
Ratios) and H4 (Joint Federal/Non-Federal Activity) as appropriate. In response, RCNM
provided the necessary documentation that demonstrated that the non-federal account did
not over fund its portion of shared activity.

Legal Standard

A. Accounts for Federal and Non-federal Activity. A party committee that finances
political activity in connection with both federal and non-federal elections must establish
two accounts (federal and non-federal) and allocate shared expenses -- those that
simultaneously support federal and non-federal election activity - between the two


Part I
Background

Authority for Audit

This report is based on an audit of the Republican Campaign Committee of New Mexico
(RCNM) undertaken 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 2 U.S.C.
§438(b), which permits the Commission to conduct audits and field investigations of any
political committee that is required to file a report under 2 U.S.C. §434. 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. 2 U.S.C. §438(b).

Scope of Audit

Following Commission approved procedures, the Audit staff evaluated various factors
and as a result, this audit examined:

1. The disclosure of occupation and name of employer.

2. The disclosure of disbursements, debts and obligations.

3. The disclosure of expenses allocated between federal and non-federal accounts.

4. The consistency between reported figures and bank records.

5. The completeness of records.

6. Other committee operations necessary to the review.

It should be noted that the current Treasurer declined to sign the Statement of Availability
of Records and the Statement of Bank Accounts and Cash-on-Hand, stating that he was
not the Treasurer for the period under audit.

Changes to the Law

On March 27, 2002, President Bush signed into law the Bipartisan Campaign Reform Act
of 2002 (BCRA). The BCRA contains many substantial and technical changes to the
federal campaign finance law. Most of the changes became effective November 6, 2002.
Except for the period November 6, 2002, through December 31, 2002, the period covered
by this audit pre-dates these changes. Therefore, the statutory and regulatory
requirements cited in this report are primarily those that were in effect prior to November
6, 2002.


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Changes to the Law

Part II. Overview of the Committee
Committee Organization
Overview of Financial Activity

Part III. Summaries
Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Disclosure of Occupation and Name of Employer
Finding 2. Allocation of Federal and Non-federal Expenses

Page


Report of the Audit Division on
the Republican Campaign

Committee of New Mexico
January 1, 2001 - December 31, 2002

Why the Audit About the Committee (p. 2)

Was Done The Republican Campaign Committee of New Mexico is a state
Federal law permits the party committee headquartered in Albuquerque, New Mexico.
Commission to conduct For more information, see chart on the Committee Organization,
audits and field p. 2.

investigations of any

political committee that is Financial Activity (p. 2)
required to file reports

e Receipts
under the Federal o From Contributors $ 928,342
Election Campaign Act o. Transfers From Affiliates 1,218,674
(the Act). The o Transfers From Non-federal 1,525,970
Commission generally o Other Receipts 23,056
conducts such audits o Total Receipts $ 3,696,042

when a committee

appears not to have met * Disbursements

the threshold o Operating Disbursements $ 3,136,935

A ts fe o. Transfers to Affiliates 356,695
substantial compliance o Contributions to Federal 120,000
with the Act.’ The audit Candidates
determines whether the o Other Disbursements 19,609
committee complied with o Total Disbursements $ 3,633,239
the limitations,
prohibitions and . .
disclosure requirements Findings and Recommendations (p. 3)
of the Act. e Disclosure of Occupation and Name of Employer (Finding 1)

e Allocation of Federal and Non-federal Expenses (Finding 2)

Future Action
The Commission may
initiate an enforcement
action, at a later time,
with respect to any of the
matters discussed in this
report.

' 2US.C. §438(b).