Draft Final Audit Report of the 

Audit Division on the Freedom's 

Defense Fund 

(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 have me 

the threshold 

requirements for 

substantial compliance^ 

with the Act,.' 

determine 

adit 

commit 

the limi] 

prohibitic 

disclosure i 

of the Act. 

I compile 

lUlt lents 

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 Committeey(^.^2) 

The Freedom's Defense Fun^i^^on^onnected committee, 

headquartered in Arlington,^irainra. For more information, see 

the chart on Committee ^^nizati(^,^p.2. 

$3,626,052 

54,481 

$3,680,533 

Financial^ctivity^Cp. 2) 

• Receipts \\. 

o Contributions^fiom'individuals 

tier Receipts 

Disbu 

o Opei 

o Contribi 

Candii 

ig Expenditures $3,221,626 

107,900 

376,492 

14,728 

$3,720,746 

ions to 

imittees 

./^-.....o^lndepe^dient Expenditures 

\. o'Other'Disbursements 

x\rotai Disbursements V. 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Disclosure of Occupation and Name of Employer (Finding 2) 

• Reporting of Apparent Independent Expenditures (Finding 3) 

• Recordkeeping for Communications (Finding 4) 

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

Audit Division on the 

Freedom's Defense Fund 

(January 1, 2011 - December 31, 2012) 
Table of Contents 

Part I. Background 

Authority for Audit 

Scope of Audit 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findinga and Recom^^n^tio: 

Finding 1. Misstatement of Financial Activify^ 

Finding 2. Disclosure of Occupation and Nam^f'E yer 

Findings. Reporting of Apparentlndependent E:^ res 

Finding 4. Recordkeeping for Coinniunications 
Parti 

Background 

Authority for Audit 

This report is based on 

Audit Division of the F 

the Federal Election Ca 

conducted the audit pursi 

conduct audits and field 

report under S2 U.S.C. 

Commission must peril 

determine if the reports 

for substantial compliai 

in audit of the Freedom's Defense Fund (FDF), undertaken by the 

sderal Election Commission (the Commission) in accordance with 

npaign Act of 1971, as amended (the Act). The Audit Division 

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

investigations of any political committee-that is required to file a 

130104. Prior to conducting any audi^under this subsection, the 

rm an internal review of reports file^iW^sielected committees to 

filed by a particular committee meet the4hre;shold requirements 

ice with the Act. 52 U.S.C. §3ari i^b). X 

Scope of Audit 

Following Commission 

factors and as a result, 

1. the disclosure of indi 

2. the disclosure of de 

3. the consistency betiyeen 

4. the completeness of 

5. the disclosure of ii 

6. other committee opOTati( 

<i 

it expenditures; 

-approved procedures;-the. Audit stafEfvaluated various risk 

lis audit examined: ' ^ 

ividual contributors' occupatibn wd name of employer; 

Its and obligdtibns^pertaining to ir 

reported figuc^^d bank i 

disbursement i 

ndependent expendif 

ion&jiecessary to;ttierreview."i 

\\ 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

Date of Registration June 7.2004 

Audit Coverage Januaiy 1,201/rcl3ecember 31,2012 

Headquarters Arlington. yji^inK 

Bank Information 

ihecki 

V\ 

Bank Depositories One/^ \\ 

Bank Accounts checking accounts^ \ 

Treasurer \ 

Scolt^Mack^^ie 

\ ^ 

Treasurer When Audit Was Conducted IZl 

Treasurer During Period Covered by Audit Scott^h^^kenzie 

Mauagemeut Information 

Attended Commission Campaign 

Seminar 

Yes 

Who Handled Accounting and 

Recordkeeping Tasks 

OverView/^ Fina)il5ia! Activity 

X^Audited-^^ounts) 

\\ 

Cash-o.n^hand@ Januari-4,2P11 \ V 

Receipts V\ ir 

o Contributions fix?m Individpaiis 

o Other Receipts ^ \ 

Total Receipts 

Disbursements 

o Operating Expenditures 

o Contributions to Candidates/Committees 

o Independent Expenditures 

o Other Disbursements 

Total Disbursements 

Cash-on-hand @ December 31,2012 

S 46,043 

3,626,052 

54,481 

S 3,680,533 

3,221,626 

107,900 

376,492 

14,728 

$3,720,746 

$5330 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

The Audit stafTs comparison of FDF's reported financial activity with its bank records 

revealed that, for 2011, FDF understated its reported disbursenmi^:^ $S2,3S7, and 

overstated its ending cash-on-hand balance by $62,220. In response ro the Interim Audit 

Report recommendation, the FDF Treasurer stated that FDF wg^Id amend its reports to 

correct the discrepancies. However, as of the date of this iiroori>ti^amended reports 

have been filed. 

(For more detail, see p. S.) 

Finding 2. Disclosure of Occulpktion and. Name 

Emplosrer 

During audit fieldwork, a review of t^ll rantributions frbrtrii^ividuals requiring 

itemization indicated that 2,911 contritions totaling $37^39 lacked adequate 

disclosure of occupation and name of eri^loyen^DF did nm.^de^nstrate "best efforts" 

to obtain, maintain and submit this inforfriationM^sprase ^'the Interim Audit Report 

recommendation, the FDF Treasurer provided.a^s^R^uje'Sdntaining missing occupation 

and name of employeri^oTttion. He stat^that FDFJi^ obtained approximately 9S% 

of the missing informahon and^tuld amend its reports to include this information. The 

Audit staff review^ th^ ^hedul^ and concuri^.tjiat FDF has obtained more tban 9S% 

of the missing informatio.^but4^fthe^ate o^tKis report, no amended reports have 

been filed. 

(For mor^dietaiirsee ^6.) 

pparent Independent 

Ebcpen 

During audit^fieidwork, th^ ^udit staff reviewed disbursements to verify that the 

independent expenditims^that FDF disclosed on Schedule E (Itemized Independent 

Expenditures) wer^reroiled accurately. FDF disclosed independent expenditures 

totaling $385,619. Audit staff identified additional disbursements disclosed as 

operating expenditures on Schedule B, Line 21b (Operating Expenditures) totaling 

$868,015 which appear to be independent expenditures and for which no 24/48 hour 

reports were filed. 

In response to the Interim Audit Report recommendation, the FDF Treasurer stated that 

these expenditures were properly reported as operating expenditures since the primary 

purpose for the expenditures was to raise funds for FDF. The Treasurer also referred to 

similar mailings that were not considered to be independent expenditures when the Audit 

staff audited FDF for the 2008 ejection cycle. 
The Audit staff acknov ledges that some of the 2008 election cycle mailers contained 

similar language to the language contained in mailers used during the 2012 election 

cycle. However, the 2( i08 election cycle mailers were not reviewed for potential 

independent expenditui es; and therefore, were not included in a finding. 

(For more detail, see p. 8.) 

Finding 4. Rec 

the information and pn 

ordkeeping for Communications 

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

per classification of transactions disci 

reported 13 expenditures totaling $90,814 on Schedule B, Liius 

Expenditures) with pur mses of "direct mail - creative" 

Documentation that wa s provided by PDF was insuffic 

pertaining to the purpo! e for these expenditures and 

In response to the Inter m Audit Report, the PDF 

to obtain the missing documentation from its 

expenses have been pn 

records, the Audit staff 

requirements at 11 CFI 

(For more detail, see p. 

perly reported as 

considers the matter a vioi 

§104.14(b)(l). 

13.) 

..reports. PDF 

b^Operating 

mail - postage." 

determination 

asvan'^Qperating expense, 

stated that.f^F is attempting 

er, it J 

Absent the ^vision of 

ing-^ 
Part IV 

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity 

Summary 

The Audit staffs comparison of FDF's reported financial activity with its bank records 

revealed that, for 2011, FDF understated its reported disbursements by $S2,3S7, and 

overstated its ending cash-on-hand balance by $62,220. In respons^to the Interim Audit 

Report recommendation, the FDF Treasurer stated that FDF would amend its reports to 

correct the discrepancies. However, as of the date of this/^Oit^Q amended reports 

have been filed. 

the reportin^fferiod; 

and for the calendar year; 

riod and for the calendar 

Sched'ule^Itemized Receipts) or 

§3(y.Cl%))(l),(2),(3),(4),and 

Legal Standard 

Contents of Reports. Each report must disclpi 

• the amount of cash-on-hand at the beg'umii^ 

• the total amount of receipts for the reportinj 

• the total amount of disbursements for the 

year; and 

• certain transactions that require 

Schedule B (Itemized Disbursem' 

(5). 

Facts smd Anal: 

A. Facts ^ ^ 

During audit-fieldwotlc, the^Audit^s&ff-reira^iled FDF's reported financial activity with 

its bank^^drdTforxalendarVe^^Ol 1 and 2012. The reconciliation determined that 

FDF^m'isstated disbursements and mdipg cash-on-hand for 2011. The following chart 

outlifieis>^.discrepancieS^be^een^DF's disclosure reports and its bank records. The 

succeedin¶graphs explam why the discrepancies occurred. 

2011 Commlttee'^Acti^^ 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand @ 

January 1,2011 

$43,781 $46,043 ($2,262) 

Understated 

Receipts $1,324,490 $1,312,363 $12,125 

Overstated 

Disbursements $1,293,431 $1,345,788 ($52,357) 

Understated 

Ending Cash-on-Hand 

@ December 31,2011 

$74,840 $12,620 $62,220 

Overstated 
The understatement of disbursements resulted from the following differences: 

• Contributions to candidates/committees not reported $ S 1,650 

• Vendor payment not reported 2,900 

• Unexplained differences (2.193) 

Net Understatement of Disbursements $ 52,357 

The $62,220 overstatement of the ending cash-on-hand balance primarily resulted fn>m 

the misstatements described above. 

B. Interim Audit Report & Audit Division Recommendationyv 

At the exit conference, the Audit staff provided work papers wddiSbussed the reporting 

errors that caused the misstatements. The PDF Treasurer smtecMhat amended reports 

would be filed to correct the misstatements. 

The Interim Audit Report recommended that PDF amend^ reports^t^ 

misstatements for 2011 as noted above. 

C. Committee Response to Interim Audit ReportX y 

In response to the Interim Audit Report recommendatipn,;the PDF Treasurer stated that 

PDF would amend its reports to correct^ discrepancies. However, as of the date of this 

report, no amended reports have been ^ 

Finding 2. 

Employer 

Smninary 

During audi^fiel 

itemization>indii ^ 

disclosu^of occup^it^ 

to obtain, maintain and si^l 

recommen^tipn, the PDFv 

and name of-employer info] 

of the missin^i^rmatioi 

Audit staff reviewe^this^ 

of the missing information, 

been filed. ^ 

'•allcdntributions from individuals requiring 

'fTeontributiSn's totaling $378,639 lacked adequate 

naiii^Qf ^ployer. PDF did not demonstrate "best efforts" 

lit this information. In response to the Interim Audit Report 

"'surer provided a schedule containing missing occupation 

:ion. He stated that PDF had obtained approximately 95% 

would amend its reports to include this information. The 

lule and concurred that PDF has obtained more than 95% 

but as of the date of this report, no amended reports have 

Legal Standard 

A. Itemization Required for Contributions from Individuais. A political committee 

other than an authorized committee must itemize any contribution from an individual if it 

exceeds $200 per calendar year, either by itself or when combined with other 

contributions from the same contributor. 52 U.S.C §30104(b)(3)(A). 

B. Required Information for Contributions from Individuals. For each itemized 

contribution from an individual, the committee must provide the following information: 
the contributo 

the contributo 

the date of ret^i 

the amount o; 

the calendar 

U.S.C. §301 

C. Best Efforts Ensu^ 

shows that the commiti se 

the information require 1 

considered in compliance 

D. Definition of Best 

have used "best 

• All written sol 

o a clear 

and 

o the 

o Note: 

manner 

• Within 30 da; 

effort to obtaii 

documented 

• The treasurer 

provided by^ 

contained 

during the 

's full name and address (including zip code); 

's occupation and the name of his or her employer; 

ipt (the date the committee received the contribution); 

ifjthe contribution; and 

>ar-to-date total of all contributions from the same individual. 52 

04(b; i)(3)(A) and 11 CFR §§ 100.12 and 104.3(a)(4)(i). 

Compliance. When the treasurer of a political committee 

used best efforts (see below) to obtain, maintain, and submit 

by the Act, the committee's reports and records will be 

with the Act. 52 U.S.C. §30102(i).^ 

1 be considered to 

lowing criteria. 

mailing add^s,^;upation. 

Ifforts. The treasurer and the 

i" if the committee satisfie^aH^of 

icitations for contributions.incluaCd: 

uest for the contribui 

le of employer; and ^ , 

ent that such reporting is requi^b^Federal law.^'^ 

le request and statement mus^ppev in a clear and conspicuous 

any respoif^-qi^erial includ^ m-^solicitation. 

of receipt of fihe^ntri^tion, the tr^urer made at least one 

1 the missing infoimatic^iamther a wi^en request or a 

request. "X 

any contriButOT-informatioifthat, although not initially 

e'cdntrtBhtor, was obtained in a follow-up communication or was 

commit^e's records or in prior reports that the committee filed 

election cyclep^ 1 CFR § 104.7(b). 

Facts 

A review^fall contribi i 

contributions totaling $ 

to be itemized'-I^^F, 

majority ofthecOi 

were blank on the _ ^ 

The Audit staff revii 

utilized "best efforts" 

itil^n^^fiiom/individuals requiring itemization indicated that 2,911 

n8,6p, or 41% of total contributions frt)m individuals required 

lackra disclosure of occupation and name of employer. The 

itries (2,669 of 2,911) that lacked the required information 

ules A (Itemized Receipts) filed with the Commission. 

iewdd 

t( 

the contribution records provided by FDF to determine if it had 

obtain, maintain and submit the missing information. 

FDF did not 

282 contributions 

pro|vide documentation showing it made follow-up best efforts for 

totaling $26,841 ($378,639 - $351,798). 

FDF had the req 

however, this in 

disclosure repo 

uired information for 2,629 contributions totaling $351,798; 

brmation was not subsequently disclosed on the Commission 

ts. 
B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided schedules and discussed the omission of 

occupation and name of employer information from the disclosure reports. The PDF 

Treasurer commented that he had obtained some of the missing occupation and name of 

employer information. In its response to the exit conference, PDF provided a work paper 

demonstrating that PDF had obtained most of the missing occupation and name of 

employer information. PDF also provided copies of letters that it had sent to contributors 

to obtain the missing occupation and name of employer information. This additional 

documentation demonstrated that PDF had obtained occupation w(l>jiame of employer 

information for $256,451 of the errors; however, amended di^losiire reports were not 

filed.^ This amount is included in the $351,798 noted a^e..s^ 

The Interim Audit Report recommended that PDF demqn'sf^te th^tJ^c^plied with the 

"best efforts" requirements by amending its repor^lorcli^close the massing information 

relating to the 2,629 contributions totaling $35^,7^ ($95,347 + $256,45 

C. Committee Response to Interim Audit Re^il\>^^^ 

In response to the Interim Audit Report recommendation,<the PDF Treasurer stated that 

PDF had obtained approximately 9S%''of the missing oraupation and name of employer 

information and would amend its report^.^'inc^de this iruonna^im. PDF provided an 

attachment containing this information, ^^qdit-^staff review^'this schedule and 

concurred that PDF had obtained more than 95%^f the^mijsing information, but as of the 

date of this report, no aniendecfjieports iecfjiep have'>beeh tile^N 

Finding 3. Riming ol^ppare^ Independent 

Expenditures^ — 

Duririg-ai^it 

indepeni 

Expenditures 

totaling $385,1 

operating expendii 

$868,015 which ai 

reports were filed. 

\ ^ 

tudit sUff reviewed disbursements to verify that the 

ditures'thdt PDI^isclosed on Schedule E (Itemized Independent 

report^ accurately. PDF disclosed independent expenditures 

e Audit staff identified additional disbursements disclosed as 

o/r'Schedule B, Line 21b (Operating Expenditures) totaling 

'^to be independent expenditures and for which no 24/48 hour 

In response to the Interim Audit Report recommendation, the PDF Treasurer stated that 

these expenditures were properly reported as operating expenditures since the primary 

purpose for the expenditures was to raise funds for PDF. The Treasurer also referred to 

similar mailings that were not considered to be independent expenditures when the Audit 

staff audited PDF for the 2008 election cycle. 

2 FDF's database contained the occupation and name of employer information for an additional 420 

contributions totaling $95,347. 
The Audit staff acknov\ 

similar language to the 

ledges that some of the 2008 election cycle mailers contained 

language contained in mailers used during the 2012 election 

cycle. However, the 2( 08 election cycle mailers were not reviewed for potential 

independent expenditures; and therefore, were not included in a finding. 

Legal Standard 

A. Definition of Independent Expenditures. The term "independent expenditure" 

means an expenditi re by a person for a communication expressjy advocating the 

election or defeat o 'a clearly identified candidate that is not ma^^in coordination 

with any candidate )r authorized committee or agent of a cwdidate. No expenditure 

shall be considered independent if the person making du^e^penditure allows a 

candidate, a candid; ite's authorized committee or their agents,.^ra political party 

committee or its ag nts to become materially inydly^n decisions^i^rding the 

communication as (escribed in 11 CFR I09.21^d)p), or shares financial 

responsibility for the cost of production ordis^emination with any such person. 11 

CFR §100.16. ^ ^ 

B. Disclosure Requln ments - General GuldellnMNAh.Jndependent expenditure shall 

be reported on Sche dule E if, when added to other ind^ndent expenditures made to 

the same payee dur: ng the same calendar year, it exceeds^l^20^? Independent 

expenditures made i.e., publicly disspmlnat^ypripr to parent should be disclosed 

as memo entries on iSchedule E and as^debr^on SjcRCdule'^b. Independent 

expenditures of $2C O or less need not be i^mized, though the committee must report 

the total ofthose expm^ituies on line (b>o/Schedule E. 11 CFR §§104.3(b)(3)(vii), 

104.4(a) and ^ 

ehdent'Expe^lture'^eports (24-Hour Reports). Any 

hures a^regatiii'g $^1*^000 or more, with respect to any given 

and m^e. r^r the^d'^av but more than 24 hours before the day of an 

must be reported and th&report must be received by the Commission within 

C. Last-Minute.Inde[ 

independentexpenc 

el 

pleetil 

24 houre a^ the e; penditure Is made. A 24-hour report is required each time 

additional independ 

communi(»tidn is publicly disseminated serves as the date that the committee must 

use to determine' 

aggregate, reacH^;6r exceeded the threshold reporting amount of $1,000. 11 CFR 

§§104.4(f)and 104. 

D. Independent Ex| pendi 

expenditures aggrei 

and including the 2( 

time the expenditur :i 

Commission within 

required each time 

The date that a com 

committee must use 

ent expenditures aggregate $1,000 or more. The date that a 

sr the total amount of independent expenditures has, in the 

5(g)(2). 

Iture Reports (48-Hour Reports). Any independent 

i^ting $10,000 or more for an election in any calendar year, up to 

th day before an election, must be disclosed within 48 hours each 

;s aggregate $10,000 or more. The reports must be filed with the 

48 hours after the expenditure is made. A 48-hour report is 

i dditional independent expenditures aggregate $10,000 or more, 

nunication is publicly disseminated serves as the date that the 

to determine whether the total amount of independent 
expenditures has, ir 

amount of $10,000 

10 

the aggregate, reached or exceeded the threshold reporting 

11 CFR §§104.4(0 and 104.5(g)(1). 

E. Definition of Expn ssiy Advocating. The term "expressly advocating" means any 

communication Aa; 

• Uses phrases su sh as "vote for the President," "re-elect your Congressman," 

"defeat" accom >anied by a picture of one or more candidate(s), "reject the 

incumbent," or x)mmunications of campaign slogan(s) or individual word(s), 

which in context can have no other reasonable meaning than to urge the election 

or defeat of one or more clearly identified candidate(s), such as posters, bumper 

stickers, advertisements; or 

• When taken as a whole and with limited reference to external events, such as the 

proximity to the election, could only be interpreted^b^Eueasonable person as 

containing advocacy of the election or defeat of dne or more cl^Iy identified 

candidate(s) bemuse: 

o the electoral portion of the communication is unmistakabl^unambiguous, 

and suggestive of only one me^ning;and V \ 

o reasonat le minds could not differ as^v^hether>at encourageJ,dctions to 

elect or lefeat one or more clearly iden^rfira candidate(s) or encourages 

some oti ler kind of retwtipn. 11 CFR §i'00?22^a) and (b). 

F. Formal Requireme^nts Regarding 

committee shall mainta n records with 

which shall provide in sufficient detail the 

\ 

id Statem'enfe^ach political 

: to th^matters i^uired to be reported 

ion and data from which the 

filed reports may be verified,^plained, cl^fii for accuracy and 

completeness. 11 CFl(§ 104.)4(6)(1). W 

)' ' 

Facts and AnaljrsI t 

A. RefiQ^^df Ap^ r^nnq^lMndenf 

\\ \/^ 

During wd^t fieldw arlc, the Audit staff reviewed disbursements to ensure that 

independenrrapem ituiies' were disclosed correctly on Schedule E. FDF disclosed 

independent^Mprac iturps totaling $385,619 on Schedule E. However, FDF also 

made media-relatedi^xpenditures totaling $868,015 and disclosed them as operating 

expenditures on ^1 edule B, Line 21b (Operating Expenditures), when it appears that 

they should have^en reported as independent expenditures on Schedule E. 

contained the maile -

the pieces were mai 

were made available 

election or defeat o 

that is required to be 

According to vendor invoices, FDF was billed $868,015 for mailers. The invoices 

identification codes, the quantity of pieces mailed, the date that 

led, and the cost of each mailing. A review of the mailers that 

; indicated that they contained language expressly advocating the 

a clearly identified candidate, which is Federal Election Activity 

report^ on Schedule E as defined under 1ICFR § 100.22(a). 
11 

A breakdown of the analysis for these expenditures is as follows: 

Apparent Independent Expenditures Reported as Operating Expenditures 

(Copy of Communication Made Available) 

FDF made 137 apparent independent expenditures totaling $868,015 for which it 

provided supporting documentation such as invoices and the associated mailers 

for each invoice. All of these communications contained language expressly 

advocating the election or defeat of a clearly identified candidate, as defined 

under 11 CFR § 100.22(a). 

The majority of the mailers advocated the defeat of Bara^Obgma in the 2012 

general election. Some of the mailers included statements directly advocating 

defeat such as, "Barack Obama must be defeated^pd^'^t^s going to take a 

Herculean effort to defeat Barack Obama...this bully must b^exposed and 

defeated." Other mailers contained languageeubh^as, "we coi^s^atives need to 

start attacking Barack Obama's re-elect efforts NOW... if we're going to...do 

what's necessary to make Barack Hussein^Obama l^one-term presid^ht^nd "It 

goes without saying that Barack Obama must^be dented...Togeth^^you and 1 

must take Barack Obama and his liberal-progressive hacks head-on. litis is the 

only way that they will be defeated!" 

2. Interim Audit Report & Audit:Rec^mendatIon^^ ^ 

At the exit conference, the Audit staff presen^'sch^ule^df apparent independent 

expenditure reporting errors. In respoh^ to^he^xi(^copfference, the FDF Treasurer 

stated that FDF's pj^'itio^would be thaftnese expenjlitures were fiindraising 

expenditures and not independent expenditures. 

The Interim Audit Repori^mnmeji^ provide documentation and 

evidence that-apparen^in^TO^^dent.oxpe^itures totaling $868,015 did not require 

reportmg'^Tndepen^nt ei^ienditures. Absent such evidence, it was further 

'imended that-JFDF^amen^ its..^ports to disclose these disbursements as 

mclepradent expenditi^res on Schedule E and submit revised procedures for reporting 

independent expendit""*" ^ 

3. CommilteeNResponM to Interim Audit Report 

In response t^the Interim Audit Report recommendation, the FDF Treasurer stated 

that these expendkures were properly reported as operating expenditures since the 

primary purposeTor the expenditures was to raise funds for FDF. The Treasurer 

explained that these direct mail pieces were sent to "like-minded individuals" who 

had previously contributed to FDF or another conservative committee and that the 

purpose of these mailings was not to influence their vote, as FDF already knew with 

nearly 100% certainty how these individuals would vote. FDF's goal was to solicit a 

contribution. The Treasurer acknowledged that the mailers may contain language 

such as "Barack Obama must be defeated," but stated that this language was used to 

touch a raw nerve in the reader to solicit a contribution and not to persuade them to 

vote FDF's way. 
The Treasurer also 

independent expenc 

cycle. The Treasure! 

were properly repoi ted 

determine that the s 

12 

eferred to similar mailers that were not considered to be 

itures when the Audit staff audited PDF for the 2008 election 

r claimed that since the Audit staff determined that the mailers 

for the 2008 election cycle, the Audit staff should not 

imilar 2012 mailers were reportable as independent expenditures. 

The Audit staff ack lowledges that some of the 2008 election cycle mailers contained 

similar language to pe language contained in mailers used during the 2012 election 

; 2008 election cycle mailers were not reviewed for potential 

itures; and therefore, were not includedJn.a-finding. 

cycle. However, th 

independent expenc 

B. Failure to File 24A 8- Hour Reports for Independrai 

1. Facts 

During audit fieldw 

by PDF, as well as 

whether additional 

the Audit staff iden 

require filing of 24/j 

Qik, the Audit staff revl 

he apparent independent'^exj 

I eporting of24/48-hou^] 

ifled apparent independent 

8-hour 

reported 

ine 

^ As noted above, 

01S which^ay also 

r report^ 

2. Interim Audit ^port ;& & Audit Audit Re^toio 

At the exit confereti|ce, the Audit stan'preseni 

expenditure reporting errors. The PDP^Trea^ 

that these expendituraswete^fiindraising^ 

expenditures. 

the Inteiim Audk Report r 

... ^ pyjjijg ^' 

independent 

: PDP's position would be 

1 not independent 

Absent documentation and evidenc^at apbafent independent expenditures totaling 

$868,0l^did-no^requir^re;^~rting.^^d^endent expenditures (per Part A above), 

' —^ommended fhat PDF provide documentation to support 

:i^-%^the communications to determine whether a filing 

dt a /48-hour report required. 

^pouse to the Interim Audit Report 

Intenm Audit Report recommendation, the PDF Treasurer stated 

I filed 24/48-hour reports for expenditures for broadcast 

media and target^-Voter contact mail totaling $385,619. Further, the Treasurer stated 

that the expend 

expenditures. 

Absent the provision 

mailers, the Audit 

expenditures totalin 

totaling $868,015 have been properly reported as as operating 

of documentation to support the public dissemination of the 

staff maintains that 24/48-hour reports for apparent independent 

I $868,015 should have been filed. 

^ The date the expenditure i 

made for purposes of the 

mail date for each mailer 

publicly distributed serves as the date that the independent expenditure is 

24/48-hour reports. PDF provided a master list of all mailers that included the 

(in the list 
13 

I Finding 4. Recordkeeping 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. PDF 

reported 13 expenditures totaling $90,814 on Schedule B, Line 21b (Operating 

Expenditures) with purposes of "direct mail - creative" and "direct mail - postage." 

Documentation that was provided by PDF was insufficient to makS^a determination 

pertaining to the purpose for these expenditures and verificatipi),:^ asperating expense. 

In response to the Interim Audit Report, the PDF Treasure^jatedjhat PDF is attempting 

to obtain the missing documentation from its vendors, hi 

expenses have been properly reported as operating ex| 

records, the Audit staff considers the matter a vioir 

requirements at 11 CPR §104.14(b)(1). 

that these 

it the provision of 

: recor ing 

Lef^ Standard 

A. Formal Requirements Regarding Reports and^Ste^ments. Each political 

committee shall maintain records'^it{Mespect to th^^tters required to be reported 

which shall provide in sufficient detail^the^iecessary inf( 

the filed reports may be verified, exp)aihed,jclarified, am 

completeness. 11 CPR §104.14(b)(l)y 

in and data from which 

for accuracy and 

B. Preserving Records and^opies of Drts. The! ' of a political committee 

must preserve J all^reVsVc lopies of rei)brts for 3 years after the report is filed. 

52 U.S.C. §30102(dj\ ) J 

litTieldwork, th^udit §taff reviewed disbursements to verify the accuracy of 

ati^and propef clpsification of transactions disclosed on reports. PDF 

reported expend^res totaling $90,814 for which documentation was insufficient to make 

a determination pe.^ining.to whether these disbursements were correctly reported on 

Schedule B, Line 2 ing Expenditures). 

The Audit staffs analysis resulted in the following: 

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

Communications ($90^14) 

Disbursements totaling $90,814 were paid to two direct mail vendors and were 

disclosed on Schedule B with purposes of "direct mail - creative" and "direct 

mail - postage." For these disbursements, PDF provided invoices but did not 

provide information about the related mail communications. Without a copy of 

the associated communications, the Audit staff is unable to determine how PDF 
14 

should have reported these disbursements. During audit fieldwoik, the Audit stafT 

requested copies of the mail communications. To date these records have not 

been provided. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff presented a schedule of the disbursements for 

which further records were necessary to verify the accuracy of FDF's reporting. The 

Audit staff requested copies of the mail communicatioiis. The FDF Treasurer stated that 

he would contact the vendors to find the missing mail communications, or find out if the 

invoices had incorrect mailer job identifiers, and would provide the^Audit staff with any 

documentation that was obtained. 

lient detail, the 

totaling $90,814 

The Interim Audit Report recommended that FDF provideniTsu 

necessary information from which the reported opera^g^expendii 

may be verified or explained. Such records should h^ye::included: 

• Copies of communications that can be as^iated to the vendor"! 

• If the communication has already beeif^royided. ihformation 

communication with an invoice(s). 

C. Committee Response to Interim>Ai^it Report 

In response to the Interim Audit Repo);ti^n[mendation,'"th^FDF Treasurer stated that 

FDF is attempting to obtain the missing>^bcumbntation fio^^ite vendors, however, it 

asserts that these expenses have been pro'^erly repor^^opqrming expenditures. 

Absent the provision of recox^, the Audit'^fjc^ideis ^ matter a violation of the 

recordkeeping requirem^ts.$t M CFR §104.1''4(b)(l). v