FEDERAL ELECTION COMMISSION

\V-\SHI"(,10' L1 ( 2U4b3

September 4, 1985

r~EMORANOUM

TO:

FROM:

SUBJECT:

FRED EILAND

PRESS OFFICER

ROBERT J. COSTA

ASSISTANT STAFF 01 CTOR

AUDIT DIVISION

PUBLIC ISSUANCE OF FINAL AUDIT REPORT - 1984

DEMOCRATIC NATIONAL CONVENTION COMMITTEE, INC.

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Attached please find a copy of the final audit report of the

1984 Democratic National Convention Committee, Inc. which was

approved by the Commission on August 26, 1985.

Informational copies of the report have been received by all

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

Attacnment as stated

cc: FEC Library

RAD

Public Record

Office of General Counsel
• FEDERAL ELECTION COMMISSION

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REPORT OF THE AUDIT DIVISION

ON THE

1984 DEMOCRATIC NATIONAL CONVENTION COMMITTEE, INC.

I. Backaround

A. Overview

This report is based on an audit of the 1984 Democratic

National Convention Committee, Inc. ("the Committee"), to

determine whether there has been compliance with the provisions

of t~e Federal Election Camp~i9n Act of 1971, as amended ("the

Act"). The audit was conducted pursuant to Section 9008(9) of

Title 26 of the United States Code which directs the Commission

to conduct an examination and audit of the payments for

presidential nominating conventions no later then December 31 of

the calendar year in which the presidential nominating convention invol~ed is held.

The Committee registered with the Federal Election Co~rnission on June 9, 1983 as a national committee of the

Democratic Party designated by the Democratic National Committee

as the convention committee of the Democratic Party. The Co~mittee maintains its headquarters in Washington, D.C. The

aucit covered the period December 2, 1982, the earliest date of

financial activity by the Committee, through September 30, 1984,

the final coverage date of the most recent report filed at the ti~e of the audit. During the period, the Committee reported an ope~ing cash balance of $-0-, total receipts of $8,137,144.02,

total cisbursements of $6,639,601.02 and a closing cash balance

on September 30, 1984 of $1,497,543.00. In addition, certain

receipts and disbursements were reviewed through December 13,

1984.

This report is based on documents and working papers

which support each of its factual statements. They form part of

the record upon which the Commission based its decisions on the

matters in the report and were available to Commissioners and

appropriate staff for review•
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B. Key Personnel

,': The Treasurers for the period audited were Ms. Ursula

Culver from inception through June 20, 1984 and Mr. Paul G. Kirk

from June 20, 1984 through September 30, 1984.

C. Scope

The audit included tests such as verification of total

reported receipts, disbursements and individual transactions,

review of required supporting documentation; analysis of

Committee debts and obligationsJ review of contribution and

expenditure limitations and such other audit procedures as deemed

necessary under the circumstances.

II. Finding and Recommendation Related to Title 2 United St!!!!

Code

Disclosure of Receipts and Disbursements "

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Section 9008.8(b) (4) (ii) of Title 11 of the Code of Federal

Regulations states, in relevcnt part, that a convention

committee, established by a national party committee, shall file

convention reports as required under 2 U.S.c~ § 437 and 11 C.F.R• § 9008.12 •

According to 2 U.S.C. § 437(2), each-committee which

represents a national political party in making arrangements for

the convention of such party shall file with the Commission a

full and complete financial statement, in such form and detail as

it may prescribe, of the source from which it derived its funds,

and the purpose for which such funds were expended.

11 C.F.R. § 9008.12 (b) (2) (ii) states, in part, that the "first

quarterly report shall be filed on FEe Form 4 no later than 10

days after the end of the calendar quarter in which a committee

either receives payment under 11 C.F.R. § 9008.8 or for parties which do not accept public funds, no later than 10 days after the

calendar quarter in which the committee receives contributions or

makes expenditures to defray convention expenses."

The instructions to FEC Form 4 state, in relevant part, that

all loans received by the committee must be itemized on Schedule

A to include the full name and mailing address of the creditor,

the date and the amount of each loan. Further, a convention

committee must provide on Schedule B the full name and mailing

address of the payee, the date, and the amount of each convention

expenditure to include loan repayments aggregating in excess of

$200 and the purpose of the expenditure •

During the audit the following matters were noted:
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(I) The Committee's first disclosure report (7-1 to 9-30- I

83) failed to report the receipt of four bank loans totaling . $400,000.00. These loans were from two banks and represented

amounts drawn against lines of credit totaling $600,000.00. The

amounts and dates of these receipts were; 12-2-82 - $150,000.00;

2-25-83 - $100,000.00; 4-29-83 - $100,000.00: and 6-15-83 - $50,000.00. These loans were deposited into Committee accounts,

but were disclosed by the DNC Services Corp. (DNe) on its

disclosure reports. The DNe reports did not indicate that the

amounts were related to convention activity.

(2) Expenditures from Committee accounts totaling $395,952.62 were not itemized/disclosed on the Committee's first

report. These expenditures occurred between 12-3-82 and 6-29-83

and consisted of 17 payments to the DNe (totaling $391,462.831:

$4,253.42 for interest on Committee loans, and $236.37 in bank

charges.

(3) The Committee's first report disclosed a 7-5-83 payment

to the DNe in the amount of $402,907.60 described as

"Reimbursement for Convention expenses incurred August 1981 -June

1983". However, this amount was two payments to the banks in

settlement of the loans discussed in (1) above. This entry was

supported by a schedule breaking the amount down by expense

category (i.e. Salaries, Fees, Taxes/Insurance, etc).

Committee otficials informed the auditors that they interpreted the provisions of 11 C.F.R. § 9008.12(b) to preclude

them from registering and reporting prior to one year before the conve~tion. Therefore, they felt the activities prior to their

registration required disclosure in the manner described above.

T~e Audit staff recommended that the Committee provide a writte~ supplement to its 1984 October 15 Quarterly Report

detailino the incurrence and disDosition of the above mentioned

loans, to include interest payments; and, to further provide a me~o Schedule(s) B fully disclosing the above noted convention

expenses made by the Committee and/or the DNC through June 30,

1982.

o~ August 12, 1985, the Committee submitted an amendment

which complied with these requests.

The Audit staff recommends that no further action be taken

on this matter .
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III. Finding rnd Recommendation With Respect to

Title 26'0£ the United States Code

Unsoent Portion of Fund Payment

Section 900S{h) of Title 26 of the United States Code

states, in part, that the Commission shall have the same

authority to require repayments from the national committee of a

major party as it has with respect to repayments from eligible

candidates under Section 9007(b).

In addition, 11 C.F.R. § 900S.l0Ce) (1) and (2) state

that if any portion of the payment under 11 C.F.R. § 9008.3

remains unspent after all convention expenses have been paid,

that portion shall be returned to the Secretary of the TreasurYJ

the national committee or convention committee shall make an

interim repayment of unspent funds based on the financial

position of the committee as of the end of the sixth month

following the last day of the convention, allowing for a

reasonable amount as determined by the Commission to be withheld

for unanticipated contingencies. If, after written request by

the national committee or convention committee, the Commission

determines, upon review of evidence presented by either

committee, that amounts refunded are needed to defray convention

expenses, the Commission shall certify such amount for payment.

Finall}, 11 C.F.R. § 9008.10(9) (1) and (2) state, in

part, that if the Commission determines that repayment is

required, it shall give written notification of the amounts

required and the reasons therefore: and the national committee

shall repay to the Secretary, within 90 days of the notice, the

amount of the repayment. Upon application submitted by the

national committee, the Commission may grant a 90-day extension

of the repayment period.

Our review of the Committee's financial position at the

close of business December 13, 1984 revealed that the unspent portion of the fund payment totaled $12,982.13. The financial

position of the Committee is depicted below•
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Calculation of the Unspent Portion of the Entitlement of the

1984 Democratic National Convention Committee, Inc.

as of December 13, 1984

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Amount of Federal Funds

Received by the Committee

Less Disbursements for

Convention Expenses to

December 13, 1984

Undisbursed Fund

Less:

Accounts Payable for

Qualified Convention

Expenses £/

Estimated Winding Down

Costs Through Projected

Termination Date (January

31, 1985) 1./

Repayment Amount

Recommendation

$101,467.40

10,000.00

$8,080,000.00

7,955,550.47

$ 124,449.53

111,467.40

$ 12,982.13

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On January 17, 1985, the Committee presented its check in

the amount of $12,982.13, payable to the United States Treasury.

Therefore, no further action is recommended at this time. The

repayment amount is subject to change based upon a review of the

:eceipt and disbursement activity subsequent to December 13,

1984.

1/ Contains a reserve of $5,000.00

£/ Contains a reserve of $1,076.40