Interim Audit Report of the 

Audit Division on Ted Cruz for 

Senate 

(January 18, 2011 - December 31, 2012) 

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. 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) 

Ted Cruz for Senate is the principal campaign committee for Ted 

Cruz, Republican candidate for the Unit^ States Senate from the 

state of Texas, and is headquartered in Austin, Texas. For more 

information, see the Campaign Organization Chart, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions fix)m Political 

Committees 

o Transfers from Other Authorized 

Committees 

o Candidate Loans 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Disbursements 

o Candidate Loan.Repayments 

o Contribution Refunds 

o Other Disbursements 

Total Disbursements 

$ 12,044,368 

1,407,608 

175,347 

1,430,000 

40,960 

$ 15,098,283 

$ 13,814,542 

587,000 

192,327 

25,000 

$ 14,618,869 

Finding and Recommendation (p. 3) 

• Reporting of Candidate Lorn as a Contribution 

52 U.S,C. §30111(b). 
Interim Audit Report of the Audit 

Division on Ted Cruz for Senate 

(January 18, 2011 - December 31, 2012) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit ^ 1 

Part II. Overview of Campaign 

Campaign Organization 2 

Overview of Financial Activity 2 

Part III. Summary 

Finding and Recommendation 3 

Part IV. Finding and Recommendation 

Reporting of Candidate Loan as a Contribution 4 
Parti 

Background 

Authority for Audit 

This report is based on an audit of Ted Cruz for Senate (TCFS), undertaken by the Audit 

Division of the Federal Election Commission (the Commission) in accordance with the 

Federal Election Campai^ Act of 1971, as amended (the AcQ. The Audit Division 

conducted the audit pursiiant to 52 U.S.C. §30111(b), which permits the Commission to 

conduct audits and field investigations of any political conunittee that is required to file a 

report under 52 U.S.C. §30104. 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. 52 U.S.C. §30111(b). 

Scope of Audit 

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

1. the receipt of excessive contributions and loans; 

2. the receipt of contributions fix)m prohibited sources; 

3. the disclosure of contributions received; 

4. the disclosure of individual contributors' occupation and name of employer; 

5. the consistency between reported figures and bank records; 

6. the completeness of records; and 

7. other committee operations necessary to the review. 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration February 2,2011 

• Audit Coverage January 18,2011 - December 31,2012 

Headquarters Austin, Texas 

Bank Information 

• Bank Depositories Three 

• Bank Accounts Seven Checking 

Treasurer 

• Treasurer When Audit Was Conducted Bradley S. Knippa 

• Treasurer During Period Covered by Audit Bradley S. Knippa 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand ® January 18,2011 $0 

Receipts 

o Contributions from Individuals 12,044,368 

o Contributions from Political Committees 1,407,608 

o Transfers from Other Authorized 175,347 

Committees 

o Candidate Loans 1,430,000 

o Other Receipts 40,960 

Total Receipts S 15,098,283 

Disbursements . 

o Operating Disbursements 13,814,542 

o Candidate Loan Repayments 587,000 

o Contribution Refunds 192,327 

o Other Disbursements 25,000 

Total Disbursements 14,618,869 

Cash-on-hand @ December 31,2012 S 479,414 
Part III 

Summary 

Finding and Recommendation 

Reporting of Candidate Loan as a Contribution 

During audit fieldwork, the Audit staff reviewed loans from the Candidate to TCFS for 

calendar years 2011 and 2012. The Candidate made three loans totaling $1,030,000 to 

TCFS for the primary election, and, to date, TCFS has repaid the Candidate $485,000. 

However, TCFS continued to report the remaining outstanding balance of $545,000 as a 

loan payable to the Candidate instead of converting this balance to a personal 

contribution from the Candidate, as required. Subsequent to the exit conference, TCFS 

converted the loan from the Candidate to a personal contribution from the Candidate on 

its 2015 April Quarterly report. The Audit staff recommends that TCFS provide any 

comments it deems relevant with respect to this matter. (For more details, see p. 4.) 
Part IV 

Finding and Recommendation 

Finding 1. Reporting of Candidate Loan as a Contribution 

Summary 

During audit fieldwork, the Audit staff reviewed loans from die Candidate to TCFS for 

calendar years 2011 and 2012. The Candidate made three loans totaling $1,030,000 to 

TCFS for the primary election, and, to date, TCFS has repaid the Candidate $485,000. 

However, TCFS continued to report the remaining outstanding balance of $545,000 as a 

loan payable to the Candidate instead of converting this balance to a personal 

contribution from the Candidate, as required. Subsequent to the exit conference, TCFS 

converted the loan from the Candidate to a personal contribution fix)m the Candidate on 

its 2015 April Quarterly report. The Audit staff recommends that TCFS provide any 

comments it deems relevant with respect to this matter. 

Legal Standard 

A. Personal Funds. Personal funds of a candidate mean the sum of assets, income, and 

jointly owned assets. 11 CFR §100.33. 

B. Restriction on an Authorized Committee's Repayment of Personal Loans 

Exceeding $250,000 Made by the Candidate to the Authorized Committee. Personal 

loans mean a loan or loans, including advance, made by a candidate, using personal 

funds, as defined in 11 CFR §100.33, to his or her authorized committee where the 

proceeds of the loan were used in connection with the candidate's campaign for election. 

For personal loans that, in the aggregate, exceed $250,000 in cormection with an election, 

the authorized committee may; 

• Repay the entire amount of the personal loans using contributions to the candidate 

or the candidate's authorized committee provided that those contributions were 

made on the day of election or before; 

• May repay up to $250,000 of the personal loans from contributions made to the 

candidate or the candidate's authorized committee after the date of the election; 

and 

• Must not repay, directly or indirectly, the aggregate amount of the personal loans 

that exceeds $250,000 from contributions to the candidate or the candidate's 

authorized committee if those contributions were made after the date of the 

election. 

If the aggregate outstanding balance of the personal loans exceeds $250,000 after the 

elections, the authorized political committees must comply with the following conditions: 

• If the authorized committee uses the amount of cash-on-hand as of the day after 

the election to repay all or part of the personal loans, it must do so within 20 days 

of the election. 
• Within 20 days, of the election date, the authorized committee must treat the 

portion of the aggregate outstanding balance of the personal loans that exceeds 

$250,000 minus the amount of cash-on-hand as of the day after the election used 

to repay the loan as a contribution by the candidate. 

• The candidate's principal campaign committee must report the transactions in 

paragraphs (c) (1) and (c) (2) of this section in the first report scheduled to be 

filed after the election pursuant to 11 CFR §104.S(a) or (b). 

• This section applies separately to each election. 11 CFR § 116.11 (a), (b), (c) and 

(d). 

Facts and Anal3rsi8 

A. Facts 

During audit fieldwork, the Audit staff reviewed loans from the Candidate to TCFS. The 

Candidate made three personal loans to TCFS for the primary election totaling 

$1,030,000.^ The following chart outlines the amounts and dates of these loans for the 

primary election and the repayments that TCFS has made to the Candidate within 20 days 

of the primary election on May 29,2012; 

Date Amount Transaction Running Balance 

3/21/2012 $70,000 Primary Loan $70,000 

5/18/2012 $400,000 Primary Loan $470,000 

5/22/2012 $560,000 Primary Loan $1,030,000 

6/16/2012' $(235,000) Loan Repayment $795,000 

Repayment Limit ($250,000)* 

Primary Loan Balance to Report as Candidate 

Contribution $545,000 

As noted above, the balances of the Candidate's loans for the primary election totaled 

$795,000 on the twentieth day following the election. TCFS may repay up to $250,000 

of the personal loans for the primary election fi:om contributions made to the Candidate 

after the date of the election. Also, TCFS was required to treat as a contribution the 

amount of $545,000 ($795,000 - $250,000) which is equal to the outstanding balance of 

the Candidate primary loans less the repayment limit. TCFS was required to report the 

contribution of $545,000 on the first report scheduled to be filed after the election (2012 

July Quarterly). TCFS, however, continued to report the remaining balance as an 

outstanding primary loan fix)m the Candidate on Schedule C (Loans) instead of 

converting the loan to a personal contribution from the Candidate on Schedule A, Line 

11(d) (Contributions from the Candidate). 

The Candidate also loaned TCFS $400,000 for the run-off election. TCFS repaid this amount in fiill and 

in accordance with 11 CFR §116.11(a), (b), and (c). 

Single payment made within die 20 day period aftn the primary election. 

In accordance with 11 CFR §116.11(b)(2), the Candidate was repaid a total of $250,000 for the primary 

election loans with contributions made to the TCFS after the May 29,2012 primary date. 
B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this issue with TCFS at the exit conference and subsequently 

provided a detailed schedule outlining amounts loaned to TCFS, its repayments to the 

Candidate, and the loan balance outstanding. TCFS's legal counsel (Counsel) 

commented that TCFS should be allowed to pay off the balance of the loan and 

questioned the necessity of the loan conversion. However, in response to the exit 

conference. Counsel stated that TCFS reviewed the Audit staffs schedule of loans, 

compared it to its accounting records, and concluded that the schedule of loans was 

correct. 

Counsel further stated that TCFS will rq)ort the loan balance of $545,000 as a contribution 

fit>m the Candidate per 11 CFR §116.11 (c). Counsel also noted that the Candidate may 

wish to note on the report his belief that the statute establishing limits on the amount of 

personal debt that may be repaid to a candidate, is unconstitutional. 

Subsequent to the exit conference, TCFS disclosed the conversion of the loan to a 

contribution by the Candidate on Schedule A of its 2015 April Quarterly report. TCFS 

also disclosed that it reserves the right to challenge the constitutionality of this provision 

of the law. Per 11 CFR §116.11 (c)(3), the Audit staff considers the disclosure of the 

Candidate contribution to the 2012 primary election as untimely. 

The Audit staff recommends that, within 30 calendar days of service of this report, 

TCFS provide any comments it deems relevant with respect to this matter.