FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM 

To: The Commission 

Through: Alec Palmer 

Staff Director 

From: Patricia C. Oirock: 

Chief Compliance Officer 

February 16,2017 

Assistant StaiHSiredtOr' 

Audit Division 

Pacious 

By: Mary Moss 

Lead Auditor ^ 

Subject: Audit Division Recommendation Memorandum on the Colorado 

Republican Committee (CRC) (A13-12) 

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit R^rts), 

the Audit staff presents its recommendations below and discusses the findings in the 

attached Draft Final Audit Report (DFAR). The Office of General Counsel has reviewed 

this memorandum and concurs with the recommendations. 

Finding 1. Misstatement of Financial Activity 

A. Misstatement of Financial Activity - Most Recent Reports Filed Prior 

to the Audit 

The Audit staff determined that, for 2011, CRC understated its disbursements 

by $38,529 and overstated its ending cash-on-hand by $44,431. For 2012, 

CRC understated its receipts and disbursements by $210,996 and $145,201, 

respectively. In response to the Interim Audit Report (lAR), CRC filed 

amendihents that materially corrected the misstatements for 2011. In response 

to the DFAR, CRC filed an additional response and materially corrected the 

misstatements for 2012. CRC materially complied with the recommendation, 

however, it has yet to reconcile the cash balance on its most recent rqiort. 
The Audit staff recommends that the Commission find that CRC misstated its 

financial activity for calendar years 2011 and 2012 as stated above. 

B. Misstatement of Financial Activity - Original Reports Filed 

The Audit staff determined that CRC also materially misstated its financial 

activity for the originally filed reports. In response to the lAR, CRC stated it 

agreed with the Audit staff's recommendations regarding this finding, but 

provided no further comments regarding the misstatement of financial activity 

for the original reports filed. CRC did not address this finding in its response 

to the DEAR. 

The Audit staff recommends foat the Commission find that CRC materially 

misstated its financial activity in its original reports filed for calendar years 

2011 and 2012. 

C. Misstatement of Financial Activity - Unreported Bank Account 

During the period covered by the audi^ CRC provided bank statements and 

other related banking documentation for a bank account titled 'the Colorado 

State Republican Central Committee Rqiublican National Convention Expense 

Account* (Convention Account). The total activity and the cash balance were 

as follows; $87,354 in receipts; $86,428 in disbursements; and the ending 

cash-on-hand balance was $926. CRC did not report this financial activity. 

In response to the lAR and DEAR, CRC disagreed that the Convention 

Account was a federal account and that the issue of account ownership 

remained unresolved. The legal counsel for CRC (Counsel) requested an audit 

hearing before the Commission^ to restate that CRC did not control the 

Convention Accourit and therefore was not required to report the financial 

activity associated with this account Counsel agreed to provide 

documentation fix>m the financial depository to verify that CRC's Employee 

Identification Number was not opened and/or associated with the Convention 

Account during the audit period. To date, CRC has not provided any such 

financial depository documentation. 

The Audit staff recommends tiiat the Commission find that, based on the 

documentation provided, the Convention Account was a federal account and 

CRC should have reported the financial activity associated with this account 

Finding 2. Reporting of Apparent Independent Expenditures 

A. Reporting of Apparent Independent Expenditures 

During audit fieldwork, the Audit staff revievi^ expenditures totaling 

$357,895 that CRC disclosed on Schedule B (Operating Expenditures). The 

Audit staff noted that tiiese expenditures appeared to be media-related 

independent expenditures that CRC should have disclosed on Schedule E 

(Independent Expenditures). CRC also did not provide invoices associated 

with 77 direct mail cortununications that contained express advocacy as 

' llifi hearing was held an December 6,2016. 
defined under 11 CFR 100.22(a) or (b). In response to the lAR, CRC 

disagreed with the recommendation. CRC stated that the communications at 

issue were not reportable as independent expenditures because they were 

subject to the volunteer materials exemption (VME). This included the 22 

volunteer forms signed by volunteers on direct mailers of $93,090. The Audit 

staff subsequently reexamined these forms and determined that the 

documentation provided in support of the VME was consistent with such 

evidence in the past audits. The Audit staff considered the remaining 

expenditures totaling $264,805^ as independent expenditures. In response to 

the DFAR, CRC agreed that the SI 53,900 of the remaining amount \^ch was 

spent on radio communications, did not qualify for the VME. CRC 

maintained, however, that the remaining apparent independent expenditures 

totaling $110,905^ were not independent expenditures and that CRC provided 

sufficient documentation to demonstrate the VME. CRC did not address the 

77 mailers with no associated invoices that were also included in the finding. 

The Audit staff recommends diat the Commission find that CRC failed to 

properly disclose independent expenditures totaling $264,805. Further, the 

Audit staff recommends that the Commission find that CRC failed to properly 

disclose independent expenditures associated with 77 direct mailers whidi 

contained express advocacy. 

B. Failure to FOe 24/48 Hour Reports for Apparent Independent 

Expenditures 

The Audit staff identified $264,805 in apparent independent expenditures for 

which CRC did not file 24/48 hour reports, as required. In response to the 

lAR, CRC stated it disagreed with the recommendation and reiterated its belief 

that the communications at issue were not reportable as independent 

expenditures because they were subject to the VME.. In re^onse to the DFAR, 

CRC agreed that the $153,900 spent on radio conununications did not qualify 

for the VME, and therefore, would require filing of24/48 hour reports totaling 

$32,164. CRC continued to maintain that no 24/48 hour reports were required 

for the remaining expenditures totaling $110,905. 

The Audit staff recommends that the Commission find that CRC did not file 

24/48 hour reports totaling $32,164 for apparent indq)endent expenditures 

totaling $153,900. The Audit staff further recommends that the Commission 

find that CRC did not file 24/48 hour reports for additional apparent 

indepmdent expenditures totaling $110,905 as well as 77 mailers with no 

invoices. 

Finding 3. Recordkeeping for Communications 

During audit fieldwork, the Audit staff reviewed disbursements to verify the 

accuracy of the information and proper classification of transactions disclosed on 

reports. CRC reported 28 expenditures totaling $5,812,448 on Schedule B, Line 

21b (Operating Expenditures) with purposes of "direct mail," "direct mail 

' S264,805 = S3S7,89S - $93,090 

^ $110.90S S264.80S - $133,900 
disbursements and verification as an operating expense. In response to the lAR, 

CRC stated it disagreed vdth the recommendation and explained it provided all the 

requested documentation in its possession in a series of letters, USB thumb-drives 

and online file site links to the Audit staff. CRC indicated that it was working to 

associate the provided invoices and communications with each other and would 

provide the final record associating all communications with invoices. In response 

to the DFAR, CRC related that associating the invoices to the conununications was 

a time consuming task that was still in process. CRC stated it would provide a 

final record associating all communications with invoices no later than December 

31,2016, however, to date, it has not provided this information. 

The Audit staff recommends that the Commission find that CRC did not provide 

the necessary records pertaining to disbursements totaling $5,812,448. 

Finding 4. Failure to Itemize Debts and Obligations 

During audit fieldwork, the Audit staff noted that CRC foiled to disclose debts and 

obligations to three vendors totaling $235,968. In response to the lAR, CRC 

amended its disclosure reports and materially disclos^ debt to two vendors 

totaling $102,481. CRC stated that the debt totaling $133,487 owed to its GOTV 

vendor was not a debt as the contract has been terminated. In response to the 

DFAR, CRC continued to disagree that the disclosure of the aforementioned debt 

was required since it was CRC's opinion that the statute of limitations for any 

breach of the agreement has expir^. With respect to this matter. Counsel 

requested an audit hearing before the Commission to restate that the contract with 

the GOTV vendor was terminated. Counsel stated that although there may have 

been an unknown amount of disputed debt at the time, the statute of limitations for 

any breach of the agreement has expired. As such, any remaining amounts owed 

to this vendor were no longer debt and, therefore, did not require any reporting. 

The Audit staff recommends that the Commission find that CRC foiled to itemize 

debts and obligations totaling $235,968. 

If this memorandum is approved, a Proposed Fiiul Audit Report will be prepared within 

30 days of the Commission's vote. 

In case of an objection, Directive No. 70 states that the Audit Division Recommendation 

Memorandum will be placed on the next regularly scheduled open session agenda. 

Documents related to this audit report can be viewed in the Voting Ballot Matters folder. 

Should you have any questions, please contact Mary Moss or Zuzana Pacious at 694-

1200. 

Attachments: 

- Draft Final Audit Report of the Audit Division on the Colorado Republican 

Committee 

- LRA 961 (CRC) DFAR Comments - Revised 

cc: Office of General Counsel 
Draft Final Audit Report of the 

Audit Division on the Colorado 

Republican Committee 

(January 1, 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 hi • ,ici 

the threshold 

requirements for ^ 

substi'.nii.'.l i.Mnipli.in.. ] 

withjlic VLI. I ii.c|audit* 

det^iries whethei; 

coiffiStee complied^ 

the lir^Mtons, 

prohibitio^mnd 

disclosure ri^" . lents 

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 Com 

The Colorado Republi 

headquartered in 

information, seejhf^ha^rt 

e (p. 3) 

Tnmittee is a state party committee 

Village, Colorado. For more 

Committee Organization, p. 3. 

Financ 

• Receipts 

ivity (p. 3) 

dividuals 

Political 

Opera^g Expenditures 

Federal Election Activity 

Kefunds of Contributions 

I iii:il Disbursements 

$ 1,975,834 

61,630 

8,332,317 

1,940 

235,765 

$ 10,607,486 

$ 8,863,660 

1,374,497 

3,050 

S 10,241,207 

' Findings and Recommendations (p. 4) 

• Misstatement of Financial Activity (Finding I) 

• Reporting of Apparent Independent Expenditures (Finding 2) 

• Recordkeeping for Communications (Finding 3) 

• Failure to Itemize Debts and Obligations (Finding 4) 

52U.S.C. §30111(b). 
Draft Final Audit Report of the 

Audit Division on the 

Colorado Republican Committee 

. (January 1, 2011 - December 31, 2012) 

A 

• ^ 

• li. •! • 

V V.-N 

VC 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit I 

Commission Guidance 1 

Limitations 2 

Part II. Overview of Committee ~ 

Committee Organization * . - 3 

Overviewof Financial Activity 3 

Panm. S„»»aHe. ' ' > 

Findings and Recommendations t 4 

Part IV. Findings andLRecommendati^s 

Finding!. Misstatement of Activity • 6 

Finding 2. Reporting of App^^^^^endeni I \|ii.-iiditures II 

Finding.3. Recordkeeping for C^amulR^^gTS 17 

Finding 4. Failure to Itemize Del^ .lOBKi '• - 19 

^ ^ ^ 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Colorado Republican Committee (CRC), 

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 52 U.S.C. §3011 i(b), which permits 

the Commission to conduct audits and field investigation&.dmnv political committee that 

is required to file a report under 52 U.S.C. §30104. 

this subsection, the Commission must perform an ir 

selected committees to determine if the reports file 

threshold requirements for substantial compliar 

nducting any audit under 

iew of reports filed by 

committee meet the 

U.S.C. §30111(b). 

jous risk 

Scope of Audit 

Following Commission-approved procedi '• J \udit staff evaluated AJ»OI 

factors and as a result, this audit examined: *. ^ 

1. the receipt-of contributions ^^dgrohibited 

2. the disclosure of individual cS^m^^gre' occup^i^^nd name of employer; 

3. the disclosure of disbursement- ..emi^^obligatioi 

4. the disclosure of expenses al locat^jbetw^^federal ai 

5. the consistency bgf^^n.reported nitres and iMiik lei oi 

6. the completen^Pfrel^^s: and 

other commiro^peratio^ i-jcessary view. 

-federal accounts; 

i^r a Legal Question 

itl^st 

ion Gu^jtfct 

Tomi W 

Tto the CSi^^»ioi?%^l icy StMfet^stablishing a Program for Requesting 

ation of Le^^uesti^fSj^ the Commission," CRC requested early 

considS^ion of a legal^MStioni^^d during the audit. Specifically, CRC questioned 

whetherTK^Quirement u^r 11 CF^ 104.3(d) to disclose outstanding debt on 

Schedule D^^^ and Obli^pns) violated attorney - client privilege when the debt 

related to outstaying legal re^sentation services. 

The Commission coT^^^,- Ly a vote of 6-0, that the Colorado rules of confidentiality 

do not preclude the Commission from requiring CRC to report an outstanding debt and/or 

obligation owed by or to CRC from its legal counsel under 52 U.S.C. §30104(b)(8) and 

11 C.F.R. § 104.3(d). The Audit staff informed CRC's Counsel of the Commission's 

decision on CRC's request. This audit report includes findings and recommendations 

with respect to CRC's failure to disclose outstanding debt owed to its legal 

representative. (See Finding 4, p. 19.) 
Limitations 

CRC satisfied the minimum disbursement recordkeeping requirements of 11 CFR§ 102.9. 

However, in response to the Internal Control Questionnaire (ICQ) presented by the Audit 

staff at the beginning of the audit, CRC representatives identified a federal bank account 

titled "Federal Transfer Account" but did not provide bank'statements from the audit 

period pertaining to that account. Without these statements, the Audit staff could not 

determine if federal activity related to this account was properly reported. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration February 17,197^ 

• Audit Coverage Januaiy 1.2,Q*l|.l - December 31,2012 

Headquarters Greenwqp^^ilage. Colorado 

Bank Information 

• Bank Depositories Tv^ 

• Bank Accounts QiEi^ral. 8 Mrtefederal 

Treasurer JSISF ''''Shk 

• Treasurer When Audit Was Conducted ^arty Neilson (ll/^^Ql 5 - present) 

^bert Balink (S/9/20r»J 1/19/201S) 

^istine^tin (6/10/21^^5/8/2014) 

• Treasurer During Period Covere^thv. Audit .-•••: — RlBd^Vestfall (8/lS/2iS^-

6/9^W 

Management Information 

Attended Commission Campaign 

Seminar 

Who Handled A> 

Recordkeeping 

a^cial Activity 

" ounts) 

Cash-on-haTi@^ January 1^2(i 11 $ 70,571 

Receipts 

o Contributions l^fbJndividufH 1,975,834 

o Contributions fror^oliticalB^mmittees 61,630 

o Transfers from Afflfil^P®' Other Party 

Committees 

8,332,317 

o Transfers from Non-Federal Accounts 1,940 

o Other Receipts 235,765 

Total Receipts S 10,607,486 

Disbursements 

o Operating Expenditures 8,863,660 

o Federal Election Activity . 1,374,497 

o Refunds of Contributions 3,050 

Total Disbursements S 10,241,207 

Cash-on-hand @ December 31,2012 $ 436,850 
Part III 

Summaries 

Findinjgs and Recommendations 

Finding 1. Misstatement of Financial Activity 

A comparison of CRC's bank activity with its most recent fended reports prior to the 

audit revealed material misstatements in both 2011 and 2. 

of CRC's bank activity with its original reports for 20 

misstatements. In response to the Interim Audit Re 

the misstatements were inadvertent and agreed to ifjpamei 

CRC subsequently amended its reports to mate^ly correct 

for 2011. As of the date of this report, hov^SCRC has not nJ 

the recommendations to correct the misstfi!^Sits in 2012, nor has 

to reconcile the cash balance on its most rec^treoort. ^ 

n addition, a comparison 

012 also revealed material 

mendation, CRC stated that 

Its to the relevant reports, 

itatements identified 

Jly complied with 

le an adjustment 

During audit fieldwork, CRC al 

documentation for a Republican 

federal account. CRC did not rei 

pertaining to this account on its 

Report recommendat^Sl^^ning to 

Account, CRC st^^^^^^^iously 

controlled by CJ^^d, as suc^^ not an 

documentation thaF^^rms C^^ was 

Audit si ". •-Mers^^: i.^Btesnlved. 

•- and other relat^^ 

nse Account, an apparent 

d disbursement activity 

resp€rn|g|to the Interim Audit 

itionalfenvention Expense 

n that this account was not 

>unt. Absent bank 

iated with the Convention Account, the 

T more detail, see p. 6.) 

2. "R^'po 

iditures 

During^^R fieldwork, 

$3S7.89yiyRC disclo: 

appeared to oi^irect mail ( 

of Ajp^^nt Independent 

iewed operating expenditures totaling 

le B, Line 21 b (Operating Expenditures) that 

.^dia-related independent expenditures that should have 

been disclosed o^cheduU 1 Itemized Independent Expenditures). 

Additionally, of the $^^^5 appeared to be independent expenditures, CRC did not 

provide sufficient docummtation pertaining to dissemination dates to verify whether 

24/48-hour reports were required to be filed for the apparent independent expenditures 

totaling $203,995. CRC also did not provide invoices associated with 77 direct mail 

communications that contained express advocacy as defined under 11 CFR 100.22 (a) or 

(b). 

In response to the Interim Audit Report recommendation, CRC stated it disagreed with 

the recommendation. CRC reiterated its belief that the communications at issue were not 

reportable as independent expenditures because they were subject to the volunteer 
material exemption. CRC further stated it has provided all such documentation in its 

possession to substantiate application of the volunteer material exemption. 

The Audit staff reexamined the documentation provided related to the volunteer materials 

exemption for specific communications totaling $93,090 and determined the 

disbursements were not independent expenditures. For the remaining communications 

(consisting of Si 10,905 and 77 mailers with no invoices) that CRC claims the volunteer 

materials exemptions is applicable, the Audit staff again recommends that CRC provide 

further evidence to support the application of the volunteer materials exemption to the 

specific communications involved. The Audit staff consid^^the disbursements for 

radio advertisements for $153,900 to be independent exo^^ires that also required 

filing of 24 hour reports totaling $32,164. (For moretdeMprsee p. 11.) 

Finding 3. Recordkeeping for 

During audit fieldwork, the Audit staff revi^ 

the information and proper classification 

reported 28 expenditures totaling $5,812,^ 

Expenditures) with purposes of "direct mail,^ 

mail." Documentation that was g.-«'.ded by CI 

determination pertaining to the 

operating expense. 

In response to the Interim Audit Re 

the recommendatio^^pl&lained it i 

possession in a seffflSf 1 

staff. CRC indic^^hat it 

communications wi^^ch o 

commu^atignswith 

the j^m^pbn of 

(Rj[- i e inform 

ions 

sbursementP^erify the accuracy of 

tions disclose^^raports. CRC ' 

n Schedule B, Line ^^^perating 

mai If&dvertising'^^aitv direct 

icient to mal« 

ments and verificatJSn as an 

iteted it disagreed with 

^mentation in its 

file site links to the Audit 

ivided invoices and 

ide the final record associating all 

of records, the Audit staff considers 

itsatll CFR§L04.14(b)(l). 

Findin^4. Failu: 

During auSffieldwork, th 

obligations owmto three v 

Report recomm^^rion. ( K( 

period and disclose 

not amend its reports 

to Ifl^ized Debts and Obligations 

kdit sta^oted that CRC failed to disclose debts and 

prs totaling $235,968. In response to the Interim Audit 

agreed to amend its disclosure reports for the applicable 

^ed to CRC's former legal counsel. CRC stated it would 

^e the debt owed to its former get-out-the-vote (GOTV) 

vendor due to the termination of the contract. CRC subsequently filed amended reports 

to disclose debt owed to the two non-GOTV vendors. Absent the filing of amended 

reports to include the debt owed to the GOTV vendor, the Audit staff considers the matter 

unresolved. (For more detail, see p. 19.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

A comparison of CRC's bank activity with its most recent amended reports prior to the 

audit revealed material misstatements in both 2011 and 201^ In addition, a comparison 

of CRC's bank activity with its original reports for 2011 .al^^0l2 also revealed material 

misstatements. In response to the Interim Audit Repi-.-i mmendation, CRC stated that 

the misstatements were inadvertent and agreed to .:ments to the relevant reports. 

CRC subsequently amended its reports to mater^l1^6rrect!^jnisstatemehts identified 

for 2011. As of the date of this report, howe^^pRC has nof^|^ially complied with . 

the recommendations to correct the misstat^pl^ in 2012, nor n^^giade an adjustment 

to reconcile the cash balance on its most report. 

During audit fieldwork, CRC als 

documentation for a Republii 

federal account. CRC did not 

pertaining to this account on its di 

Report recommendation pertaining 

Account, CRC stat^^^^^viously 

controlled by CR^^rafas^^^is not 

documentation t^^^firms^^ was m 

Audit staff consid^^^s matt^ranresolvi 

IStanda: 

iofRei 

lount of cai 

amount o 

• The toli^mount of di 

and 

• Certain trr - ;j&ns tha' 

Schedule B (il^^ed^l») 

r 

Facts and Analysis 

• ind other reH 

se Account, an afTparent 

and disbursement activity 

to the Interim Audit 

nvention Expense 

it this account was not 

lunt. Absent bank 

Convention Account, the 

le beginning and end of the reporting period; 

f^^^reporting period and for the calendar year; 

-jmenSror the reporting period and for the calendar year; 

uire itemization on Schedule A (Itemized Receipts) or 

• • rsements). 52 U.S.C. §30104(b)(1), (2), (3), (4) and (5). 

A. Misstateinent of Financial Activity- Most Recent Reports Filed Prior to the 

Audit 

• 1. Facts 

The Audit staff reconciled CRC's reported financial activity with its bank records for 

calendar years 2011 and 2012. The following charts outline the discrepancies 
between CRC's disclosure reports and its bank records. Succeeding paragraphs 

explain why the discrepancies occurred. 

2011 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand @ 

January 1,2011 

$71,745 $70,571 ($ 1,174) 

Overstated 

Receipts $722,469 $717,741 ($4,728) 

Overstated 

Disbursements $634,792 ^3,321 ($38,529) 

Understated 

Ending Cash-on-Hand @ 

December 31,2011 

$159,422 -^14,991 ($ 44.431) 

Overstated 

The beginning cash balance was over 

unexplained, but likely resulted from 

The understatement of disbursements resu 

• Transfers to non-federal^^gjijits, not rep -_j." 

• Disbursements not repom 

• Unexplained difference 

Understatement of Disbu ents 

The overstai 

discrepancie 

of receipts. 

-• SI,174 and i'.-,^^repancy is 

oeriod discrepancies?: 

llowing: 

$35,80o ^ 

2,448 

226 

1 ofthei 

its descrii }ve as 

$38.52? 

jkvas a result of the reporting 

the $4,728 overstatement 

— 2012 ( iiiiiiiiillri-'^tivili — • 

$9:678,749 

$9,422,685 

Ending Cash-onDecember 31,2012 $415,486 

Bank Records 

$114,991 

$9,889,745 

$9,567,886 

$436,850 

Discrepancy 

($44,431) 

Overstated 

$210,996 

Understated 

($145,201) 

Understated 

$21,364 

Understated 

' Correct reportable activity includes an adjustment to the bank account for S9,I46 itemized by ORG on 

Schedule A (Itemized Receipts) to correct the cash balance as recommended in a prior audit of ORG. See 

the Final Audit Report on the Colorado Republican Federal Campaign Committee, 2008 election cycle, 

Finding 1 - Misstatement of Financial Activity, Audit Division Recommendation, page 8. 
The understatement of receipts resulted from the following: 

• In-kind contributions, not reported as receipts^ 

• Receipts from an individual and a PAC, not reported 

• Unexplained difference 

Understatement of Receipts 

$162,099 

25,000 

23,897 

$210.996 

The understatement of disbursements resulted from the following: 

In-kind contributions, not reported as disbursements 

Disbursements in bank, not on reports 

Disbursements on reports, not in bank 

Incorrect or duplicate disbursement amounts iv* - '. d 

Unexplained difference A _ 

Understatement of Disbursements 

$162,099 

27,666 

(13,336) 

(23,228) 

(8.000) 

45.201 

The $21,364 understatement of the endinf@^sh balance w •- i^ult of the reporting 

discrepancies noted above. 

mmer 

above 

- bsequenf 

endation 

Tmisstatement of^^ncial 

asked questions for clarification 

ssponse to either the 

l<( Its'oisclosure reports to. 

inciletn^ksh balance on its most 

crepancies that may affect the 

2. Interim Audit Report & Audit Divis 

The Audit staff provided wo|p-|ppers and disc 

activity at the exit conferenc^^^^representati^ 

during the discussion, howeve^hey^rebnot provic 

disbursements or receipts misstM^ent 

The Interim 

correct the 

recent report td 

recomrnended adj 

Eommitte^lespoii^iyothe Ihlli(^^iiilit Report 

ssponse to tR^®erim«^it Report n^mmendation, CRC'stated it agreed with 

tn^^Udit Division^^coinm^^ions regarding Finding 1 A. CRC explained that 

the^^tatements were inadvert^^nd that it would file amendments to the relevant 

reports^Msistent with ihc recommendation. CRC subsequently amended its reports 

to materia^^orrect the'misstatements identified for 2011. As of the date of this 

report, howev^^RC hii<, not materially complied with the recommendations to 

correct the mis^m^'nis in 2012, nor has it made an adjustment to reconcile the cash 

balance on its mos^pe'nt report. 

' The unreported in-kind transactions discussed-above were for disbursements paid on behalf of CRC for 

equipment and software licensing by the Republican National Committee (RNC) and the Republican 

Party of Wisconsin (RPW). Both the RNC and the RPW reported these transactions as in-kind 

contributions made to CRC. 
B. Misstatement of Financial Activity - Original Reports Filed 

1. Facts 

During audit fieidwork, in addition to examining CRC's most recent reports filed 

prior to audit notification, the Audit staff compared CRC's originally filed reports 

with its bank records. The purpose of this additional reconciliation was to identify 

the degree to which CRC had misstated its original filings. 

The Audit staff calculated that CRC understated the sum of the reported receipts on 

the original reports filed by $803,097 and the sum of th^^ported disbursements on 

the original reports filed by $637,688 over the two-v^^^iod (2011-2012). These 

figures include the $4,728 and $38,529 understat^^^^f receipts and disbursements, 

respectively from 2011, and the $210,996 and the understatement of 

receipts and disbursements, respectively, fromZif^ disc^^d in Section A above 

(Misstatement of Financial Activity - Mo^^bent Repor^^^ed Prior to the Audit). 

2. Interim Audit Report & Audit 

The Audit staff discussed the understatei 

original reports during the eid^nference a 

detailing the receipts and dii^^ments not 

questions for clarification, anSp^^hev undersi 

they inadvertently filed incorre^mi5in®@D.orts. 

The Interim Audii 

it deemed n 

>n Recommendatior 

id disburM'^en^ts on its 

bopies of rele'^B^chedules 

CRC represented^ asked 

'. finding, but related that 

ivi.-J ..jiy additional comments 

idit Report 

lendation, CRC stated it agreed with 

ig Finding 1B but provided no further 

ncial activity for the original reports 

C. Missl.u^ent of Financial Actmfy - Unreported Bank Account 

1. Facts A. 

. During audit representatives provided bank statements and other 

banking documen^^pror a bank account that was identified on the bank statements 

as the Colorado Sta^^epublican Central Committee Republican National 

Convention Expense Account (Convention Account).^ This account was maintained 

at the same financial depository used by CRC for other federal and non-federal bank 

Net disbursement adjustments identified in Section A above (Misstatement of Financial Activity - Most 

Recent Reports Filed Prior to the Audit), totaling S9,686, were correctly disclosed on the original reports 

in 2012. 

As noted in the scope section of this report, CRC representatives also identified an additional federal 

bank account in its written response to the Internal Control Questionnaire, but have not yet provided 

bank statements or other documentation pertaining to this account to indicate whether there was 

reportable activity during the audit period. See p. 2. 
10 

accounts. The bank statements reflected that the Convention Account was active in 

January 2012, although it had a zero balance until April 20,2012, at wh'ich time a 

deposit of $1,000 was made.® Although CRC provided copies of bank statements, 

deposit tickets and cancelled checks pertaining to this account, none of the receipts or 

disbursements appeared to have been reported. For the calendar year 2012, the total 

activity and the cash balance were as follows: receipts, $87,354; disbursements, 

$86,428; and ending cash-on-hand, $926.^ 

In response to an Audit staff query, CRC's Chairman (Chairman) explained that the 

financial activity from this account did not need to be 

account that belonged to a separate legal entity identi 

Host Committee for the Republican National Coi 

neither CRC or any of its officers or agents m 

activities. The Chairman also provided a 

reflected the Colorado RNC Host was im 

Profit 501(c)(4) corporation on June 

accept contributions and pay for certar 

their guests from Colorado and other stat 

National Convention in Tam 

Colorado Secretary of State 

the Colorado RNC Host shou 

The Chairman did not explain 

statements and 

irted since it was a bank 

the Colorado Chairman's 

(Colorado RNC Host) and 

trolled that committee's 

e Ar^i^^of Incorporation that 

ted in the st^^f Colorado as a Nonand was establisl^|mdependently to 

;nts and promotion i^^^r delegates and 

snnect 

.Florida. Th 

Land relai 

sd to tha: 

I to be 

{ 

with the Zi^^epublican 

vided a lim^Mhe 

itional questions pertaining to 

ittee's legal representatives, 

session of the bank 

wiseTlt^i|.Chairman did not explain 

lublican Central 

count. Although 

a request to the bank to 

(EIN)® that was associated with this 

ition from the bank that would clarify 

why the bank 

Committee, 

requested, C 

confirm the Em 

ac. • • : C 

rh. . 

^2. Interim And 

Tli^^Hdit staff disci 

provio^^levant schi 

At that m^^e Audit s 

the bank or^mthe Au 

associated witl^Bis ai 

pertaining to the 

Republican Nationa 

the bank to verify that the'Convention Account was assigned to this EIN. 

dit Division Recommendation 

ntion Account during the exit conference and 

the financial activity pertaining to this account, 

again requested that CRC provide documentation from 

itaff authority to contact the bank to confirm the EIN 

it. The CRC representatives provided documentation 

"the Colorado Chairman's Host Committee for the 

nvention, but did not provide additional documentation from 

The next deposit into this account was not made until June 13,2012 (SS,2S0). The first debit (by wire) 

occurred on August 10,2012 (SI0,000). 

The tables and charts presented in Part A (Most Recent Reports Filed Prior to the Audit) do not include 

an analysis of the Convention Account. 

The EIN is a unique nine-digit number that the Internal Revenue Service and other federal agencies use 

to identify a business. Banks will not allow a business entity to open an account without providing an 

EIN. 
11 

The Interim Audit Report recommended that CRC provide additional documentation 

to resolve the question of ownership and control of the Convention Account. To 

support its position, CRC should have obtained pertinent bank documentation 

confirming that the CRC's EIN was not associated with the Convention Account and, 

therefore, CRC was not required to report the financial activity associated with this 

account. 

3. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendation, CRC expressed its 

disagreement regarding Finding IC. CRC stated that iLhas previously provided 

documentation demonstrating that the account in 

and, as such, was not an unreported federal acco 

its prior correspondence, sufficiently demon 

Convention Account. With its response, CRC 

correspondence. 

The Audit staff maintains that previouMMj^i dded documentatic 

question of ownership and control of the^ ^ntioir^count. At 

documentation that confirms^^ was not a i).' '.'^^th the Conve 

the Audit staff considers thi^Mter unresolve 

Finding 2. Reporting 

Expenditures 

Summary 

During audit field 

$357,895 that CRC 

--fc* ma 

losec 

s not controlled by CRC 

position is that it has, by 

not control the 

of the prior 

Aooi 

provid 

24/48-

totaling $20 

communication 

(b). 

not resolve the 

ccount. 

nt Ind^endent 

, of the $: 

cient docuni 

rts were 

CRCal 

It contai 

staff re^ iperating expenditures totaling 

B?^he 21b (Operating Expenditures) that 

dent expenditures that should have 

It Expenditures). 

to be independent expenditures, CRC did not 

ling to dissemination dates to verify whether 

I to bdmled for the apparent independent expenditures 

:id not provide invoices associated with 77 direct mail 

F express advocacy as defined under 11 CFR 100.22 (a) or 

In response to the Interim Audit Report recommendation, CRC stated it disagreed with 

the recommendation. CRC reiterated its belief that the communications at issue were not 

reportable as independent expenditures because they were subject to the volunteer 

material exemption. CRC further stated it has provided all such documentation in its 

possession to substantiate application of the volunteer material exemption. 

The Audit staff reexamined the documentation provided during fieldwork related to the 

volunteer materials exemption for specific communications totaling $93,090 and 

determined the disbursements were not independent expenditures. For the remaining 
12 

communications (consisting of $110,905 and 77 mailers with no invoices) that CRC 

claims the volunteer materials exemptions is applicable, the Audit staff again 

recommends that CRC provide further evidence to support the application of the 

volunteer materials exemption to the specific communications involved. The Audit staff 

considered the disbursements for radio advertisements for $153,900 to be independent 

expenditures that also required filing of 24 hour reports totaling $32,164. 

Legal Standard 

A. Definition of Independent Expenditures. An independent expenditure is an 

expenditure made for a communication expressly advocatn^yie election or defeat of a 

clearly identified candidate that is not made in cooperatU^^lnsultation, or concert with, 

or at the request or suggestion of, a candidate, a candidai^authorized committee, or 

their agents, or a political party or its agents. 

A clearly identified candidate is one whose 

appears, or whose identity is apparent th 

Congressman," or through an unambiguoi 

such as "the Democratic presidential nomi 

this state." ^ 

Expressly advocating means any 

• Uses phrases such as "vote 

communications of campai 

can have ngjj^^^^spnable 

more cleiir" THentifie^andida 

• When tak.—.'is a whol^md with li 

proximity toli^electiq^^Du^ be in^ 

advftgadng the^li^-ij^i^eat of on^ 

t '6cMi0.l7 

ickname, p 

ambiguous refei 

rence to his or her 

RepubUcan candid^ 

ph or drawing 

such as "your 

a candidate, 

- Senate in. 

your Congressman" or 

l(s), which in context 

in or defeat of one or 

ferencesra external events, such as 

d by a re^onable person only as 

more clearly identified candidates. 

sure Reaui^ments • 

be repo^^^n Scheduled 

same payel^uring the i 

made (i.e., pu^^ dissemiH 

on Schedule E^^^las a debtl 

need not be itemiz 

line (b) on Schedule' 

leral Guidelines. An independent expenditure shall 

whem^ded to other independent expenditures made to the 

ilendar^ebr, it exceeds $200. Independent expenditures 

;d) prior to payment should be disclosed as memo entries 

iSchedule D. Independent expenditures of $200 or less 

1e committee must report the total of those expenditures on 

§§l04.3(b)(3)(vii), 104.4(a) and 104.11. 

C. Last-Minute Independent Expenditure Reports (24-Hour Reports). Any 

independent expenditures aggregating $ 1,000 or more, with respect to any given election, 

and made alter the 20"* day but more than 24 hours before the day of an election, must be 

reported and the report must be received by the Commission within 24 hours after the 

expenditure is made. A 24-hour report is required each time additional independent 

expenditures aggregate $1,000 or more. The date that a communication is publicly 

disseminated serves as the date that the committee must use to determine whether the 
13 

total amount of independent expenditures has, in the aggregate, reached or exceeded the 

threshold reporting amount of $1,000. 11 CFR §§104.4(f) and 104.5(g)(2). 

D. Independent Expenditure Reports (48-Hour Reports). Any independent 

expenditures aggregating $10,000 or more with respect to any given election, at any time 

during a calendar year, up to and including the 20th day before an election, must be 

disclosed within 48 hours each time the expenditures aggregate $10,000 or more. The 

reports must be filed with the Commission within 48 hours after the expenditure is made. 

11 CFR §§104.4(0 and 104.5(g)(1). 

E. Formal Requirements Regarding Reports and 

committee shall maintain records with respect to the 

which shall provide in sufficient detail the nece: 

filed reports may be verified, explained, clarifie^^ 

completeness. 11 CFR §104.14(b)(1). % 

ts. Each political 

required to be reported 

and data from which the 

T accuracy and 

F. Volunteer Activity. The payment by 

costs of campaign materials (such as pins, b 

party tabloids or newsletters, and^rd signs) 

volunteer activities on behalf o 

provided that the following con 

1. Such payment is not for 

newspaper, magazine, bill 

. communicati]diW&®litical ad 

of the 

res, posters, 

ition with 

ion. 

2. 

3. 

ution! 

mailingO 

The port? 

paid from c 

/ment 

1 parti 

ch mai 

srations. 

^de by a 

^tee as a disl 

allo^ U[o specific' 

The e: ^Jtlon is n 

party 

§100. 

:ial ven 

such mai 

[bject to th 

^ntri 

candiaiEqbfor Fi 

iiiiiied by 

e committee of a polif 

stickers^andbills, 

immittee in 

inee(s) o^^i - - :rty is not a contrif 

let: 

Oonnectift^|dth any broadcasting, 

or sii^^^pe of general public 

direc^ail means any 

mfi^^jTiade from commercial lists: 

llocablefo^ederal candidates must be 

itatidns and prohibitions of the Act. 

ns designated by the donor to be spent 

1 office. 

irs and not by commercial or for-profit 

[ comfrr^g^, such payments shall be reported by the political 

smenn^ccordance with 11 CFR §104.3 but need not be 

lidates in committee reports. 

jlicable to campaign materials purchased by the national 

tFK §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR 

.d),(e)and(g). 
14 

Facts and Analysis 

A. Reporting of Apparent Independent Expenditures 

1. Facts 

During audit fieidwork, the Audit staff reviewed disbursements to ensure proper 

reporting. The Audit staff noted that CRC did not disclose any independent 

expenditures on Schedule E, however, made apparent media-related expenditures 

totaling $3S7,89S and disclosed them as operating expenditures. These 

communications, as well as others that are not assocU^ with invoices, were 

identified as possible independent expenditures. A^^pkdown analysis of these 

expenditures is as follows: 

a. Independent Expenditures Reported^f^Operanim Expenditures 

(Associated Invoice Provided)^ 

CRC made nine apparent indc|-.-ii jjlTit expenditures iS^ii- $357,895 that 

were documented as follows: 

i. CRC made six disbursemei 

direct mail totaling $203,995 

mailer with an a^^^^ invoice 

these direct maile^^^^iired langui 

or defeat of a clear® derm^^andidat] 

§ 100.22(a). 

lependenFl^enditures for 

ivided a cop^^he direct 

; to the Audit s^", each of 

ressly advocating the election 

lefined under 11 CFR 

-^jMndependentexpenditures 

r whichlt^ovided supporting 

reconciliations, airing dates, scripts and 

of the audio files included the voice of 

upon this portion of the audio 

ppeared this radio ad expressly 

n or defrat of a clearly identified candidate as 

00.22(b). 

ditures Reported as Operating Expenditures (No 

Hifferent direct mail communications that contained 

express as defined under 11 CFR 100.22(a) or (b). The 

communican!^s are as follows: 

i. 72 direct mail communications contained language expressly 

advocating the election or defeat of clearly identified candidates, as 

defined under 11 CFR 100.22(a). 

ii. Five direct mail communications contained language that encouraged 

the reader to vote for Republicans and help repeal "Obamacare", with 

various reasons why Obamacare was bad for Colorado and/or 

America's economy. Based on the definition of express advocacy 

under 11 CFR 100.22(b), these communications could only be 
15 

interpreted by a reasonable person as advocating the election or defeat 

of clearly identified candidates. 

CRC did not provide sufficient information to allow each of the 77 

communications to be associated with an invoice. Without this additional 

information, the Audit staff is unable to calculate the disbursement amount 

for each communication. (See Finding 3.) 

c. Volunteer Material Exemption 

In response to the Audit staffs request duringj 

to support that volunteers participated in exe 

forms signed by 22 different mail procesj 

reflected the volunteer's name, site Ic 

The mail piece section was left blanM^l for 

which a candidate's last name 

forms, it appeared most of thito the 2012 General Election. 

;ified. Bas 

iteer activity occT 

jwork for documentation 

tivity,' CRC provided 

lunteers. These forms 

m most forms, the date', 

^h one exception, in 

Jhe dates on the 

^mediately prior 

The Commission hasgaddressed the' 

exemption in the Fi^^fei^t Reports 

Democratic Executi^^^mttee of Floi 

Party. In these reports. sion I 

iplicatiorv le v( 

fom 

1 voluni 

iwas neve 

ition of the 

of the voluniS^paterials 

rizona Republicanrarty, the 

id the Tennessee Republican 

a lack of clarity 

matefil^l^emption. The 

senH^policy regarding what 

'emen^raw^he purpose of applying the 

eved. Since a lack of clarity exists 

unteer materials exemption, it follows 

locutfu^i 'ion needed to support volunteer 

eeded to i 

jount of do^ 

scommen^ 

def^Minfor 

associi 

regarding the amount of volunteer involvement 

for tl^^olunteer materials exemption, as well as the 

ntatioi^quired to support such an exemption, the Audit 

at the conclusion of fieldwork that CRC provide more 

and documentation for any volunteer involvement 

mailer.. 

2. Interim Audit Report and Audit Division Recommendation 

At the exit conference, the Audit staff presented the schedule of disclosure errors for 

independent expenditures. CRC representatives provided a listing of additional 

invoice numbers and invoice amounts in response to the exit conference but did not 

provide any copies of communications or further information that would allow the 

available invoices to be associated with the copies of the communications. 

' CRC has not claimed that any exemptions apply with respect to any expenditures discussed above such 

as, for example, volunteer material exemption, slate cards exemptions, etc. 

10 Proposed Interim Enforcement Policy, Agenda document No. 10-16. 
16 

The Interim Audit Report recommended that CRC: 

• Provide additional invoices and/or information associating the 77 direct mail 

communications containing express advocacy with an invoice; and 

• Provide documentation and evidence that apparent independent expenditures 

totaling $357,895 and the 77 direct mail communications containing express 

advocacy, did not require reporting as independent expenditures. Evidence 

should have included any documentation such as volunteer timesheets and 

photographs to support the involvement of volunteers in the processing or 

distribution of the communications noted above. 

• Absent such evidence, CRC should have amend^Wts reports to disclose these 

disbursements as independent expenditures on^^dule E and submit revised 

procedures for reporting independent exoei! 

3. Committee Response to the Interim 

In response to the Interim Audit Reportj 

with the recommendation. CRC reite 

were not reportable as independent exp 

volunteer material exemption. CRC furtfi! 

^T^eport' 

lendation, CHIkstated it disagreed 

Fs belief that the i" "lunications at issue 

because they we^ubject to the 

ated it h^provided amlcumentation 

in its possession substantiatin^olunteer invS^jg^pmcluding the vol^j^er names, 

the location where the workand the da^^the volunteer involvement. 

CRC.stated it had never been^mi^^^tp orovide^lunteer timesheets and 

photographs, and that it did not^gjlectlu^^ybrmat^ further stated that 

"...it has provided^^migh infonm^n to sul^^^te ^^bation of the volunteer 

material exemp^^^tj^t it woi^not mdli^ifeamendlfents to disclose the 

disbursemen^l^uestiofSkindepenc 

The Audit staff Ig $15: .''"^j^ent on radio communications should be 

sinc^^volunteer materials exemptions does 

cations • V 

sspect to th^^volunl^^forms signed by volunteers on direct mailers of 

$9^^^he Audit s^^as reo^^ned the documentation and believes the 

docunrem|tion provid^m suppo^f the volunteer materials exemption is consistent 

with sud^^ence pro^^ld in past audits. As a result, these disbursements are not 

considered^^^ndent^penditures. For the remaining communications (consisting 

of $110,905 ana^Adjj^^ailers without invoices) that CRC claims the volunteer 

materials exemptl^Sapplicable. the Audit staff again recommends that CRC 

provide further evidence to support the application of the volunteer materials 

exemption to the specific communications involved.- Such evidence will assist the 

Commission in determining if the volunteer materials exemption is applicable to 

these communications. 
17 

B. Failure to File 24/48 Hour Reports for Apparent Independent Expenditures 

1. Facts 

In addition to not reporting any independent expenditures during the audit period, 

CRC also did not file 24 or 48-hour reports for any independent expenditures. 

Therefore, the apparent independent.expenditures identified above by the Audit staff 

may also have required such a filing. 

2. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided CRC w^a schedule of possible 

undisclosed 24/48-hour reports. CRC representati^. - T^ot offer any comments 

regarding this matter. A ' 

X. 

The Interim Audit Report recommended tl 

apparent independent expenditures totalii 

communications containing express 

independent expenditures (per Part A 

the date of public dissemination for each 

filing of a 24/48-hour report was required. 

3. Committee Response to liit' 

In response to the Interim Audi 

with the recommendation. CRC 

were not reporte^^^^^endenf 

volunteer m^^p^em^pn. For 

hour reports —cessar\ i.?r these 

Th.- \! JTma 

e>^-j- •••.at requSltc .•'.4-hoi 

fiDsent doc^entation and evidence that 

S7,89S and tn^I direct mailer 

5y did not reauire^^rtine as 

), CRC provide doc^^iUtion to support 

lunicatiSnto determnSvhether a 

stated it disagreed 

mmunications at issue 

were subject to the 

not believe any 24 or 48-

advertisements are independent 

ng $32,164. 

' h^^udit staff m^^ins 1' ' igless further evidence of the volunteer involvement 

wul^^specific commnicatio^s provided, the Commission may conclude the 

remam^^irect maile^btaling^^0,90S as well as the 77 direct mailers without 

invoicesw^Jbe reporta'- c .s independent expenditures and may require 24 or 48-

hour reports^ 

Finding 3. Re H^rdkeeping for Communications 

Summary . 

During audit fieldwork, the Audit staff reviewed disbursements to verify the accuracy of 

the information and proper classification of transactions disclosed on reports. CRC 

reported 28 expenditures totaling $5,812,448, on Schedule B, Line 21b (Operating 

Expenditures) with purposes of "direct mail," "direct mail advertising" or "party direct 

mail." Documentation that was provided by CRC was insufficient to make a 

determination pertaining to the purpose for these disbursements and verification as an 

operating expense. 
18 

In response to the Interim Audit Report recommendation, CRC stated it disagreed with 

the recommendation and explained it provided all the requested documentation in its 

possession in a series of letters, USB thumb-drives and online file site links to the Audit 

staff. CRC indicated that it was working to associate the provided invoices and 

communications with each other and would provide the final record associating all 

communications with invoices. Absent the provision of records, the Audit staff considers 

the matter a violation of the recordkeeping requirements at 11 CFR §I04.14(b)(l). 

Legal Standard 

A. Formal Requirements Regarding Reports and Si 

committee shall maintain records with respect to the 

which shall provide in sufficient detail the necessaj 

filed reports may be verified, explained, clarified, 

completeness. 11 CFR § 104.14(b)( 1). 

its. Each political 

required to be reported 

and data from which the 

r accuracy and 

B. Preserving Records and Copies of Rfpiii is. The treasurer or a 

must preserve all records and copies of reooft^ar 3 

U.S.C.§30l02(d). . ~ 

yearstafter the rei 

ical committee 

•iled. 52 

Facts and Analysis 

A. Facts 

During audit field 

the information 

28 expenditures 

determination pert^ 

Schedi.:. .1.:.• ?.lb 

dit stafF^ieweil ilRiur-'i-iiiem^ verify the accuracy of 

ficatioiT^raiis.u iimiN iji.^Jipsed on reports. CRC made 

8 for w^^pocumehtafimi was insufficient to make a 

ler these dH^sements were correctly reported on 

itur 

r Conies of Communications Provided 

DisSt^^ents total 

were dH^sed on Si 

advertisinj 

were providi 

12,156,415 were paid to two direct mail vendors, and 

ule B with purposes of "direct mail", "direct mail 

irect mail", but no invoices or associated communications 

ut sufficient details, the Audit staff is unable to verify 

CRC's reportinf^these amounts as operating expenditures. The Audit staff 

requested copies of the invoices and the associated direct mail piece for each of 

the disbursements. To date, these invoices or other information to associate the 

payments to a particular communication have not been provided. 
19 

ii. Disbursements- Invoices Provided - Not Able to Associate with Copies of 

Communications tS3.656.033) 

Disbursements totaling $3,656,033 were paid to direct mail vendors and were 

disclosed on Schedule B with purposes of "direct mail," "direct mail advertising'' 

or "party direct mail." For these disbursements, CRC provided invoices but did 

not provide information about the related mail communications. Without 

sufficient details, the Audit staff is unable to verify CRC's reporting itemization 

of these amounts as operating expenditures. The Audit staff requested 

information that would allow an association between the invoice and the 

. communication, however, CRC has not respondc.'' - 'lis request. 

B. Interim Audit Report & Audit Division Reco 

At the exit conference, the Audit staff presented a 

which further records were necessary to verify 

Audit staff again requested that CRC provid 

would associate each invoice to the corre 

provided a listing of additional invoice nu 

exit conference but did not provide any copii 

that would allow the available invoices to be 

communications. 

The.Interim Audit Report recommi 

necessary informationj^n which th 

$5,812,448 may b^^^^^explaim 

• Copies o^^picesa^^entificai 

• If the coir^rocation n^^lready 

communicat^l®/ith aniiWvoice(s). 

iniimhiiioh 

po^^the disbursements for 

luracy^^RC's reporting. The 

:ional invoi^g^nd information that 

g communicati. - t representatives 

and invoice amourif^^esponse to the 

mmun^Mtions or fu^^r information 

.-u-il u iih the copies of^^ 

sufficient detail, the 

eiTidhditures totaling 

lould^kfe included: 

communication, and 

rmation associating each 

C. G^miiii-f 1^' 

Iniro^mse to the 

the re^imendation al 

its pos^^gn in a series 

Audit sta^^^C was 

with each otm^gd would 

invoices as soom^he 

staff considers the 

§104.14(b)(l). 

nsv liMljr Inte 

A'^ 

itltbport 

port recSiP^endation, CRC stated it disagreed with 

it has provided all the requested documentation in 

thumb-drives and online file site links to the 

to assSl^ate the provided invoices and communications 

ide the final record associating all communications with 

complete. Absent the provision of records, the Audit 

ation of the recordkeeping requirements at 11 CFR 

Finding 4. Failure to Itemize Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff noted that CRC failed to disclose debts and 

obligations owed to three vendors totaling $235,968. In response to the Interim Audit 

Report recommendation, CRC agreed to amend its disclosure reports for the applicable 

period and disclose the debt owed to CRC's former legal counsel. CRC stated it would 

not amend its reports to disclose the debt owed to its former get-out-the-vote (GOTV) 
20 

vendor due to the termination of the contract. CRC subsequently filed amended reports 

to disclose debt owed to the two non-GOTV vendors. Absent the filing of amended 

reports to include the debt owed to the GOTV vendor, the Audit staff considers the matter 

unresolved. 

Legal Standard 

A. Continuous Reporting Required. A political committee must disclose the amount 

and nature of outstanding debts and obligations owed by or to the reporting committee 

until those debts are extinguished. 52 USC §30104(b)(8) and 11 CFR §§ 104.3(d) and 

104.11(a). 

parate schedules for debts 

jning the circumstances and 

.•xtinguished. 11 CFR 

B. Separate Schedules. A political committee musi 

owed by or to the committee, together with a state 

conditions under which each debt and obligatioi 

§104.11(a). 

C. Itemizing Debts and Obligations. 

• A debt of $500 or less, not including 

administrative expenses, 

from the date incurred (i 

next regularly scheduled 

• Regularly recurring admini 

debts until due. 

• A debt ex^i^mig^^^must 

which th( 

D. Disputed Debts. 

and till- riiiiiiiiiiii.-i- -is t^ 

UntiB'lii-1 ii-iliini ".•'•d com 

somll^np of value 

I amount th^^mmi 

ler regularl^^ccurring 

been outstanGH^60 days 

committee reports it on the 

not have to be treated as 

covers the date on 

mount the ci 

unts the cc 

de disagreement between the creditor 

he amount owed by the committee, 

(assuming the creditor did provide 

ir claimMs owed; and 

ttee h^paid the creditor. 11 CFR §116.10. 

Facts and 

A. Facts 

During audit fieldwork, the Audit staff used available disbursement records to reconcile 

the accounts'' of three CRC vendors. This review identified debts owed to these three 

vendors totaling $235,968 that should have been disclosed on Schedule D.'^ 

" The reconciliation consisted of calculating invoiced and paid amounts for individual reporting periods in 

the 2011 - 2012 election cycle. The Audit staff then determined whether outstanding debts were 

correctly disclosed on Schedule D. Each debt amount was counted once, even if it required disclosure 

over multiple reporting periods. . 

'' There was no debt reported during the audit period for any of these three vendors. 
21 

One of the vendors provided legal services and had debt outstanding at the end of four 

reporting periods totaling $100,197, including an outstanding balance at the end of the 

audit period of $ 13,541. A second vendor that provided accounting services had an 

outstanding balance at the end of one reporting period for $2,284, but did not have an 

outstanding balance at the end of the audit period. The last vendor had debt outstanding 

at the end of the audit period of $133,487 that pertained to the unpaid balance of a 

contract for a GOTV program. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed these disc 

representatives and provided them with schedules detaili 

reported. CRC representatives disagreed with the A 

respect to the disclosure of debts owed to the veni 

Subsequent to the exit conference, CRC requei 

by the Commission regarding the disclosure 

payment. CRC contended the disclosure 

privileges.'^ CRC representatives also di 

for the GOTV program, stating that CRC 

provided all contracted services. XRC represeni 

letter, sent by CRC to the GOT 

immediate termination of the con¥ 

am .vendor. 

Based on the terms of 

to make pro rata 

that it termina 

which suggests 

the termination of tl 

did not indieate^s to 

to ( !<(-• pi 

t' 

Thc-Inicrim Audit Ropo. 

thai c\pc^itures total in: 

GOTV p'^^^ vendor, tl 

provide infoffiM^^n and doi 

the vendor provT^|before 

was not signed, Q^^boj 

vendor, e-mails or te 

the Interim Audit Repo 

debts and obligations. 

re errors with CRC 

debts that were not 

s determination with 

ided legal services, 

consreij^tion of a legal question 

'debt for le^Bfejjvices prior to 

violate confidenti^ffiorney/client 

with the requirem^^idisclose debt 

inatedjgg^contract b^^^he vendor 

led a copy of^fonsiened 

advised this vendor of an 

tract, its t 

for tl 

intrdgjgfefore the 

vendo^pvided ai 

itract.li^vailable df 

s Vl 

lOt re .• from the obligation 

bj^fe vendor. CRC stated 

ivide^^^f the contracted services 

'some of thrcontracted services before 

ment documentation provided by CRC 

for services that the vendor provided 

comt^^ed that CRC provide documentation demonstrating 

lS,96^^^ot require reporting on Schedule D. As for the 

^terim/irait Report further recommended that CRC 

Mentation relating to debt remaining for any services that 

termination of the contract. Since the termination letter 

ave submitted documentation such as a signed letter to the 

logs regarding the termination. Absent such documentation, 

ipmmended that CRC amend its reports to disclose these 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendations, CRC stated that, given the 

Commission's determination that the amounts owed to CRC's former counsel were not 

privileged from disclosure, CRC agreed to amend its disclosure reports for the applicable 

period and disclose the debt owed to CRC's former legal counsel. CRC stated it would 

13 See Part I Background, Commission Guidance at p. 1. 
22 

not amend its reports to disclose the debt owed to its former GOTV vendor due to the. 

termination of the contract. CRC provided the previously submitted unsigned 

termination letter but did not submit any documentation related to debt for any services 

prior to termination of the contract. CRC subsequently filed amended reports to disclose 

debt owed to the two non-GOTV vendors. Absent the filing of amended reports to 

include the $133,487 debt owed to the GOTV vendor, the Audit staff considers the matter 

unresolved. 

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