Interim Report of the

Audit Division on

Communications

Workers of America - COPE PCC

January 1. 2005 - December 31, 2006

Why the Audit

Was Done

Federal law permits the

Commission to conduct

audits and field

investigations of any

political committee that is

required to file reports

under the Federal

Election Campaign Act

(the Act). The

Commission generally

conducts such audits

when a committee

appears not to have met

the threshold

requirements for

substantial compliance

with the Act.1 The audit

determines whether the

committee complied with

the limitations,

prohibitions and

disclosure requirements

of the Act.

Future Action

The Commission may

initiate an enforcement

action, at a later time,

with respect to any of the

matters discussed in this

report.

About the Committee (p. 2)

Communications Workers of America - COPE Political

Contributions Committee is a separate segregated fund

headquartered in Washington, DC. For more information, see

chart on the Committee Organization, p. 2.

Financial Activity (p. 2)

• Receipts

o From Individuals $ 6,720,647

o Refunds from Federal Candidates 69,225

& Other Political Committees

o Other Receipts 4,014

o Total Receipts $6,793,886

• Disbursements

o Contributions to Federal & Non- $ 5,654,187

Federal Candidates and

Committees

o Operating Expenditures 1,029,491

o Transfers to Affiliated Committee: 300,000

o Other Disbursements 15,800

o Total Disbursements $ 6,999,478

Findings and Recommendations (p. 3)

• Transfers Made to AFL-CIO COPE PCC (Findingl)

2U.S.C.§438(b).
Interim Report of the

Audit Division on

Communications Workers of

America - COPE PCC

January 1, 2005 - December 31, 2006
Table of Contents

Page

Part I. Background

Authority for Audit 1

Scope of Audit 1

Part II. Overview of Committee

Committee Organization 2

Overview of Financial Activity 2

Part III. Summary

Finding and Recommendation 3

Part IV. Finding and Recommendation

Finding 1. Transfers Made to AFI^CIO COPE PCC 4
Parti

Background

Authority for Audit

This report is based on an audit of Communications Workers of America - COPE

Political Contributions Committee (CWA-COPE PCC), 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 risk

factors and as a result, the scope of this audit was limited to the following:

1. The receipt and transfer of certain contributions.

2. The disclosure of certain disbursements, debts and obligations.

3. The consistency between reported figures and bank records.

4. The completeness of records.

5. Other committee operations necessary to the review.
Part II

Overview of Committee

Committee Organization

Important Dates

• Date of Registration

• Audit Coverage

Headquarters

Bank Information

• Bank Depositories

• Bank Accounts

Treasurer

• Treasurer When Audit Was Conducted

• Treasurer During Period Covered by Audit

Management Information

• Attended EEC Campaign Finance Seminar

• Used Commonly Available Campaign Management

Software Package

• Who Handled Accounting and Recordkeeping Tasks

Communications Workers

America - COPE PCC

of

March 20, 1975

January 1, 2005 - December 31, 2006

Washington, DC

One

One Checking

Barbara J. Easterling

Barbara J. Easterling

Yes

Yes

Paid Staff

Overview of Financial Activity

(Audited Amounts)

Cash on hand @ January 1, 2005

o From Individuals

o Refunds from Candidates & Political Committees

o Other Receipts

Total Receipts

o Contributions to Federal & Non-Federal Candidates

and Committees

o Operating Expenditures

o Transfers to Affiliated

o Other Disbursements

Total Disbursements

Cash on hand @ December 31, 2006

$ 1,555,818

6,720,647

69,225

4,014

$ 6,793,886

5,654,187

1,029,491

300,000

15,800

$6,999,478

$ 1,350,226
Part III

Summary

Finding and Recommendation

Finding 1. Transfers Made to AFL-CIO COPE PCC

CWA-COPE PCC made transfers totaling $300,000 to AFL-CIO COPE PCC in 2005 and

2006. Based on the available information, CWA-COPE PCC has not met the transmittal

and recordkeeping requirements of a collecting agent. CWA-COPE PCC contends the

longstanding and current joint fundraiser/collecting agent arrangement between the two

separate segregated funds is in accordance with Commission regulations. The Audit staff

recommends CWA-COPE PCC amend past reports and implement new procedures to

ensure the proper accounting, reporting, and recordkeeping requirements for these

contributions and transfers. (For more detail, see p. 4)
Part IV

Finding and Recommendation

| Finding 1. Transfers Made to AFL-CIO COPE PCC |

Summary

CWA-COPE PCC made transfers totaling $300,000 to AFL-CIO COPE PCC in 2005 and

2006. Based on the available information, CWA-COPE PCC has not met the transmittal

and recordkeeping requirements of a collecting agent. CWA-COPE PCC contends the

longstanding and current joint fundraising/collecting agent arrangement between the two

separate segregated funds is in accordance with Commission regulations. The Audit staff

recommends CWA-COPE PCC amend past reports and implement new procedures to

ensure the proper accounting, reporting, and recordkeeping requirements for these

contributions and transfers.

Legal Standard

A. Affiliated Definition. Established, financed, maintained or controlled by the same

organization. Affiliated political committees are considered one political committee for

purposes of contribution limits. Committees presumed to be affiliated include those

established, financed, maintained or controlled by a single national or international union

and/or its local unions or other subordinate organizations. Also committees established

by an organization of national or international unions and/or all its State or local central

bodies are presumed to be affiliated. Affiliation is not presumed between unions and

organizations of national or international unions. 11 CFR §§100.5(g) and 110.3(a).

B. Collecting Agent Definition. A collecting agent is an organization or committee that

collects and transmits contributions to one or more separate segregated funds to which

the collecting agent is related. A collecting agent may be the separate segregated fund's

connected organization, an organization or committee affiliated with the SSF, or a local,

national, or international union collecting contributions on behalf of the separate

segregated fund of any federation with which the local, national, or international union is

affiliated. 11 CFR §102.6(b)(l).

C. Requirements of Collecting Agent The separate segregated fund is responsible for

ensuring that the recordkeeping, reporting, and transmittal requirements are met.

1. Collecting agent may solicit only those individuals who are eligible for

solicitation under the law, and pay the expenses of soliciting.

2. Collecting agent may include a solicitation for contributions to an SSF in a bill for

another payment.

3. Collecting agent may establish a separate transmittal account solely for the SSF's

contributions or use its own account for the temporary deposit and transmittal of

contributions to the SSF. The agent must keep separate records of all receipts and

deposits that represent contributions to the SSF.
4. Collecting agent must transfer the funds within 10 days for all contributions over

$50 and within 30 days for contributions $50 or less.

5. Collecting agent must forward the required recordkeeping information to the SSF

along with the collected contributions, and maintain records of SSF contribution

deposits and transmittals for three years.

6. The SSF is responsible for reporting the contributions collected through the

collecting agent as contributions from the original donors rather than as a transfer

from the collecting agent. 11 CFR §§102.6(c) and 102.8(b).

D. When to Itemize. Political committees other than authorized candidate committees

must itemize:

• Any contribution from an individual if it exceeds $200 per calendar year, either

by itself or when aggregated with other contributions from the same contributor;

and

• Every contribution from any political committee, regardless of the amount.

• Every transfer from another political party committee, regardless of whether the

committees are affiliated. 2 U.S.C. §434(b)(3)(A), (B) and (D).

E. Definition of Itemization. Itemization of contributions received means that the

recipient committee discloses, on a separate schedule, the following information:

• The amount of the contribution;

• The date of receipt (the date the committee received the contribution);

• The full name and address of the contributor;

• In the case of contributions from individual contributors, the contributor's

occupation and the name of his or her employer; and

• The calendar year-to-date total of all contributions from the same contributor. 11

CFR §§100.12 and 104.3(a)(4) and 2 U.S.C. §434(b)(3)(A) and (B).

Facts and Analysis

CWA-COPE PCC is the separate segregated fund of the international union

Communications Workers of America (CWA). CWA is a collecting agent for CWACOPE PCC and for AFL-CIO COPE PCC, the separate segregated fund of the federation

of unions AFL-CIO. CWA-COPE PCC and AFL-CIO COPE PCC are not considered

"affiliated" within the meaning of 11 CFR §110.3 and, therefore, are subject to separate

contribution limitations and reporting.

CWA-COPE PCC received and deposited contributions for both organizations via

contributor checks and payroll deduction authorizations. Based on available solicitation

material, contributors were informed that an unspecified portion of their contribution

would go to AFL-CIO COPE PCC. CWA-COPE PCC reported the receipt of the

contributions primarily as unitemized contributions. CWA-COPE PCC and AFL-CIO

COPE PCC periodically agreed on an amount to be transferred to AFL-CIO COPE PCC.

AFL-CIO COPE PCC reported this lump sum transfer without information regarding the

individuals contributing the funds.
During the period covered by the audit, CWA-COPE PCC made four transfers to AFLCIO COPE PCC totaling $300,000 ($100,000 in 2005 and $200,000 in 2006). To fulfill

the requirements as a collecting agent, CWA-COPE PCC must:

• Have a separate transmittal account solely for AFL-CIO COPE PCC contributions

or keep separate records of all such receipts and deposits if using its own account;

• Transfer the funds within 10 days for all contributions over $50 and within 30

days for contributions $50 or less;

• Forward the recordkeeping information to AFL-CIO COPE PCC and maintain

records of the deposits and transmittals for AFL-CIO COPE PCC for three years.

During audit fieldwork, CWA-COPE PCC did not demonstrate that the above

requirements were met during calendar years 2005 and 2006. CWA-COPE PCC did not

furnish the Audit staff with documentation that identified the individual contributions (or

portions thereof) supporting the amounts transferred to AFL-CIO COPE PCC or any

documentation that detailed the timing or calculation of the amounts transferred.

The Audit staff presented this matter to CWA-COPE PCC representatives during the exit

conference. In response, counsel for CWA-COPE PCC challenged the conclusion of the

Audit staff with the following arguments.

First, counsel addresses the timing of the transfers and argues that the requirements at 11

CFR §102.6(c)(4) (transfer of funds within 10 days for contributions over $50, and 30

days for smaller contributions) are not applicable to the situation because of the joint

fundraising arrangement that exists between CWA-COPE PCC and AFL-COPE PCC.

No joint fundraising agreement was presented.

However, counsel contends that if 11 CFR §102.6(c)(4) was applicable the transfers did

conform to the timing requirements. In support of his argument, counsel computed that

CWA-COPE PCC received an average of $90,000 in individual contributions every 10

days and $270,000 every 30 days in 2005; and, $100,000 every 10 days and $300,000

every 30 days in 2006. Since CWA-COPE PCC received contributions that were

predominately $50 or less, counsel believes that, within the 30 days prior to each of the

four transfers to AFL-CIO COPE PCC, CWA-COPE PCC received far more

contributions from individuals than was transferred.

Based on its own analysis, the Audit staff concurs that CWA-COPE PCC received

sufficient receipts within 30 days prior to each of the four transfers to fund the transfer.

However, based on the available records, the Audit staff was not able to identify which

contributions were included in the transfers. The Audit staff maintains that the

requirements at 11 CFR §102.6(c)(4) and 11 CFR §102.8(b) are applicable and the

amount of each contribution being transferred is required to be provided to AFL-CIO

COPE PCC within the appropriate time frame along with the required records supporting

the contributions.
Second, counsel discusses the issue of having a separate account solely for AFL-CIO

COPE PCC contributions. Counsel confirms that CWA-COPE PCC did not maintain a

separate account solely for AFL-CIO COPE PCC contributions, did not keep separate

records of contributions attributable to its transfers, or give that information to AFL-CIO

COPE PCC. Again, counsel argues that such requirements are not applicable to CWACOPE PCC since 11 CFR §102.6 does not recognize its dual role as a collecting agent for

AFL-CIO COPE PCC and a separate segregated fund soliciting and receiving

contributions for itself. According to counsel, CWA-COPE PCC records and reports all

disclosure information for AFL-CIO COPE PCC contributions because the "contributors

authorize the remittance of the contributions only to CWA-COPE PCC" via standard

payroll deduction authorization cards. These cards also inform contributors of the joint

fundraising arrangement between CWA-COPE PCC and AFL-CIO COPE PCC and

acknowledge that contributions will be used for "political purposes."

Counsel further explains that reporting the transfers without detailing the associated

individual contributors is sufficient under 11 CFR §104.3(a) and that the regulations do

not plainly require a shift to AFL-CIO COPE PCC of the responsibility to report the

individual contributors. According to counsel, the current practice "underscores that

these transfers are most accurately viewed as comprised of funds that are not attributable

to any particular individual, but are comprised of the unitemized aggregate portion of all

of them".

The Audit staff believes that 11 CFR §102.6(c)(4) requires CWA-COPE PCC to record

the amount and details of each contribution on behalf of AFL-CIO COPE PCC. Such

information is necessary in order to specifically track what amounts are contributed to the

respective organizations, as well as to monitor itemization and limitation requirements. It

is further noted that by viewing the transfer amount as being comprised of a portion of

each contribution instead of the full amount of those contributions received prior to the

transfer would likely not support the argument that the transfers were made timely.

Finally, counsel explains how the proposed changes would cause a significant

administrative burden on both organizations and would ultimately result in a reduction of

contributor information on the public record. According to counsel, the number of

individual contributors itemized by CWA-COPE PCC would be fewer since a portion of

their contributions would be attributed to AFL-CIO COPE PCC.

In summary, the Audit staff accepts that the CWA-COPE PCC can function as a

collecting agent for AFL-CIO COPE PCC. However, as a collecting agent, CWA-COPE

PCC must abide by the rules governing collecting agents at 11 CFR §102.6(c). During

the period covered by the audit, CWA-COPE PCC did not have a separate transmittal

account or keep separate records of all receipts and deposits that represent contributions

to AFL-CIO COPE PCC, or distinguish these contributions at the individual level. Given

that these records were not kept, the arrangement between AFL-CIO COPE PCC and

CWA-COPE PCC did not satisfy the requirements of the collecting agent regulations.
Interim Audit Report Recommendation

The Audit staff recommends that, within 30 calendar days of service of this report, CWACOPE PCC document that procedures have been implemented to ensure the proper

accounting, reporting, and recordkeeping in accordance with 11 CFR §102.6(b)(l) and

(c).

Past Reporting

Reports covering the audit period should be corrected to reflect all amounts that have

been forwarded to AFL-CIO COPE on Line 29, (Other Federal Disbursements) instead of

on Line 22 (Transfers to Affiliated/Other Party Committees). To clarify the public

record, it is also suggested that reports for the period subsequent to the audit period be

amended as well.

Future Reports

On the next report due following the response to this interim audit report and for all

reports thereafter; the following is recommended:

CWA-COPE PCC may choose to establish a separate transmittal account for AFL-CIO

COPE PCC's contributions. If so, those contributions need not be reported by CWACOPE PCC as long as the account is used solely for the deposit and transmittal of

contributions collected on behalf of AFL-CIO COPE PCC. 11 CFR § 102.6(c)(4)(ii)(A).

Alternatively, CWA-COPE PCC may choose to continue to use its own accounts to

deposit AFL-CIO COPE PCC's contributions. CWA-COPE PCC should maintain a

separate accounting of AFL-CIO COPE PCC contributions or portions thereof, being

transferred.2 CWA-COPE PCC should disclose contributions received for AFL-CIO

COPE PCC on Line 17 (Other Receipts). The transfer of the funds to AFL-CIO COPE

PCC should be reported on Line 29 (Other Federal Disbursements), itemizing the transfer

on Schedule B as a transfer of funds received on behalf of AFL-CIO COPE PCC in their

role as collecting agent. Only contributions received by and intended for CWA-COPE

PCC should be reported on Line 11 (a) (Receipts from Individuals/Persons) and itemized

on Schedule A as necessary.

Under either alternative, as a collecting agent, CWA-COPE PCC is required to forward

the contributions and all contributor and date of receipt information to AFL-CIO COPE

PCC within 10 or 30 days depending on the contribution amounts. Records for such

contributions are required to be retained for three years. 11 CFR §§102.6(c)(5) and 102.8.

2

 CWA-COPE could apply any consistent accounting method to identify the individual contributions

transmitted to AFL-CIO COPE including calculating a percentage of contributions transferred or

assuming that the transferred contributions are those most recently received.