"i"',;,'%"<o _ ...".... l!F_-~;;'""~~o'~'~>,,..-<" .,~""',--~'... ~~"":'~."......,,..,..""',:. __~l"!" SL.=~g~n.;-",J.<~"""!i.f~.I¥~.-1f!">''<.\-1= i@ti!t<;.«\., "'r';"~~~

- -;<7

REPORT OF THE AUDIT DIVISION

ON

Citizens for Bacchus 92 ,",'

,

c

FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

WASHINGTO!li, D.C.
AK005077

June 1,1994

MEMORANDUM

TO:

FROM:

RON HARRIS

PRESS OFFICE

ROBERT J. COSTA

ASSISTANT STAFF

AUDIT DIVISION

DIt!k;-

ttl

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

CITIZENS FOR BACCHUS 92

Attached please find a copy of the final audit report

and related documents on Citizens for Bacchus 92 which was

approved by the Commission on May 13, 1994.

Informational copies of the report have been received by

all parties involved and the report may be released to the

public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Reports Analysis Division

FEe Library
'J)

CONTENTS

Executive summary

Final Audit Report

Background

Findings

Transmittal to Treasurer

Chronology

Page

1

3

3

5

13

15
FEDERAL FLECTIO" COM~lISSI0"

..-

,--.

FINAL AUDIT REPORT

ON

CITIZENS FOR BACCHUS '92

EXECUTIVE SUMMARY

citizens for Bacchus '92 (the Committee) registered with

the Federal Election Commission on June 7, 1991 as the

principal campaign committee for James L. Bacchus, Democratic

candidate for the House of Representatives, Florida, 15th

District.

The audit was conducted pursuant to 2 U.S.C. Section

438(b), which states that the Commission may conduct audits

of any political committee whose reports fail to meet the

threshold level of compliance set by the Commission.

The findings of the-audit were presented -totne

Committee at an exit conference (7/1/93) held after the audit

fieldwork and later in an interim audit report. the

Committee was given an opportunity to respond to the findings

both after the exit conference and after receipt of the

interim audit report. The Committee's responses to those

findings are included in the final audit report.

The following is an overview of the findings contained

in the final audit report.

Misstatement of Financial Activity - 2 U.S.C. Section

434(b)(1), (2), and (4). The Committee overstated its 1991

receipts by $160 and understated its disbursements by $1,740.

For 1992, receipts were understated by $1,151 and

disbursements were overstated by $3,628. Due to these

discrepancies, 1992 ending cash was understated by $2,880.

The Committee responded to these findings by filing amended

reports which corrected the misstatements.

Apparent Excessive Contributions - 2 U.S.C. Section

441a(1)(A). The Committee received contributions from 11

individuals who exceeded their primary contribution limits by

a total of $6,025. In response to the interim audit report,

the Committee submitted copies of canceled refund checks to

verify that $4,025, representing 9 of the excessive

contributions, had been refunded. For the remaining $2,000

outstanding, the Committee provided the front of the refund

checks as verification.

Page 1, 5/13/94
..

-2-

48 Hour Notification of Contributions - 11 C.F.R.

Section 104.5(f). The Audit staff identified 43

contributions totaling $84,125 that were subject to the

48-hour notice requirements. Of this amount the Committee

failed to file notices for 17 contributions total $23,000 and

filed late notices for 26 contributions totaling $61,125. In

response to the interim audit report the Committee's

treasurer stated that steps had been taken to ensure future

compliance with the 48 hour notice requirements.

Itemization of Receipts - 2 U.S.C. Section 434(b)(2)(I)

and 11 C.F.R. Section l04.3(a)(4)(v). The Committee did not

itemize 5 refunds totaling $14,520 and interest received

totaling $7,118. After audit fieldwork the Committee filed a

comprehensive amendment which disclosed the missing entries.

Omission of Disclosure Information - Disbursements -

2 U.S.C. Section 434(b)(S)(A) The Committee's disclosure

reports contained incomplete or inadequate information for

101 disbursements totaling $160,506. Eighty-four entries la-cked--compl~te-addresses__and__ 17__fiiiled to provide an

adequate ·purpose". After audit fftirawork--tlie-Committeefiled amended disclosure reports correcting the omissions.

Page Z, 5/13/94
FEDER-\L ELECT:O'- CO\1\tI~~I()'

REPORT OF THE AUDIT DIVISION

ON

CITIZENS FOR BACCHUS 92

AK004972

I. Background

A. Audit Authority

This report is based on an audit of Citizens for Bacchus

92 (the Committee), undertaken by the Audit Division of the

Federal Election Commission in accordance with the provisions of

the Federal Election Campaign Act of 1971, as amended (the Act).

The audit was conducted pursuant to Section 438{b) of Title 2 of __ the _Uni_t_e_dS_t.~t~s co~t~ ~1:1icl1 states, in part, that the Commission

may conduct audits and field Tnvest.igatTo-nsofahy-poTitlcu:--

committee required to file a report under section 434 of this

title. Prior to conducting any audit under this subsection, the

Commission shall perform an internal review of reports filed by

selected committees to determine if the reports filed by a

particular committee meet the threshold requirements for

substantial compliance with the Act.

The audit covered the period June 3, 1991, the date of

the Committee's initial bank transactions, through December 31,

1992. The Committee reported a beginning cash balance of $0;

total receipts for the period of $781,451; total disbursements for

the period of $760,437 and an ending cash balance of $21,014.

B. Campaign Organization

The Committee registered with the Clerk of the U.s.

House of Representatives on June 7, 1991 as the principal campaign

committee for James L. Bacchus, Democrat for the U.s. House of

Representatives for the fifteenth District in the state of

Florida. The Committee maintained its headquarters in Orlando,

Florida. During the campaign, the Committee established campaign

offices in Cocoa and Maitland, Florida.

page 3, 5/13/94
-2-

The audit determined that the Committee was financed

primarily by contributions from political action committees

($432,737) and contributions from individuals ($331,389). The

remaining receipts were from interest earned on certificates of

deposit, other political party contributions, and interest earned

on Committee bank accounts.

This report is based on documents and workpapers which

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

record upon which the Commission based its decisions on the

matters in the report and were available to the Commissioners and

appropriate staff for review.

C. Key Personnel

Initially, the Treasurer for the Committee was Mr. Bruce

C. Starling. On August 10, 1992, Mr. Jack Oppenheimer assumed the

duties of Treasurer.

D. Scope

The audit included testing of the following general

_c:~t~gS>Eies:

1.

2.

~,

~.

........

3 . .. ,

!...0

c..-

4 .

The receipt of contributions or loans in excess of

the statutory limitations (see Finding II.B.);

the receipt of contributions from prohibited

sources, such as those from corporations or labor

organizations;

proper disclosure of contributions from

individuals, political committees and other

entities, to include the itemization of

contributions when required, as well as, the

completeness and accuracy of the information

disclosed (see Findings II.C., and 11.0.);

proper disclosure of disbursements including the

itemization of disbursements when required, as well

as, the completeness and accuracy of the

information disclosed (see Finding II.E.);

proper disclosure of campaign debts and

obligations;

6. the accuracy of total reported receipts,

disbursements and cash balances as compared to

campaign bank records (see Finding II.A.);

7. adequate recordkeeping for campaign transactions;

Page 4, 5/13/94
-.. "

-3-

8. other audit procedures that were deemed necessary

in the situation.

The Audit staff's review of the Committee's receipts was

limited to testing the Committee's contribution database due to

the lack of third party documentation; i.e., copies of contributor

checks or contributor response devices.

Unless specifically discussed below, no material

non-compliance was detected. It should be noted that the

Commission may pursue any of the matters discussed in this report

in an enforcement action.

II. Audit Findings and Recommendations

A. Misstatement of Financial Activity

Section 434(b)(l),(2} and (4) of Title 2 of the United

States Code states, in relevant- part, that each report shall

disclose the amount of cash on hand at the beginning of the

reporting period and the total amount of all receipts and

disbursements received or made during the reporting period and the

calendar year.

- -1-; - -Calendar--Year-199L

Between June 1991 and December 31, 1991, reported

receipts were overstated by $160; reported disbursements were

understated by $1,740; and reported cash on hand was overstated by

$1,900.

The misstatement of receipts resulted from an

unreported $500 political committee contribution; net addition

errors of $295 which resulted in under reported receipts, and a

$955 reconciling item.

The misstatement of disbursements resulted from the

Committee reporting a $2,039 disbursement as a memo entry;

unreported disbursements totaling $167; reporting disbursements

totaling $402 which were not supported by canceled check copies or

other documentation in the Committee's vendor files and a $64

reconciling item.

2. Calendar Year 1992

Between January 1, 1992 and December 31, 1992

reported receipts were understated by $1,151; reported

disbursements were overstated by $3,628 and reported cash on hand

at 12/31/92 was understated by $2,880. Attachment 1 details the

reporting errors in receipts and disbursements.

page 5, :Ji 13/94
-.........

'r-

-,

~t$ _I L_ {- -r ~~;,~~ ~k-'-"!~'- ~~....,.,.: ry: "l:41frjNi:i. Q;;.o"*7 ~<-.-. ·'V--""",.... Ui( _ P(iI$,-*>=· -,~'--A:a

>:'1

-4-

At the exit conference, the Committee was provided

with schedules detailing the misstatements. In response, the

Committee filed comprehensive amendments for both 1991 and 1992

which materially corrected the misstatements noted above.

B. Apparent Excessive Contributions

Section 441a(a)(1) of Title 2 of the United States Code

states that no person shall make contributions to any candidate

and his authorized political committees with respect to any

election for Federal office which, in the aggregate, exceed

$1, 000.

Section 43l(l)(A) of Title 2 of the United states Code

defines, in part, "election" to include a general, special,

primary, or run-off election.

The Committee maintained a record of contributions in a

computerized database. Each record contained the contributor's

name, address, 'the amount of the contribution, and a date.

According to a Committee official, the information entered into

the database was obtained from the contributor checks and/or

solicitation devices received with the contributions. The

Committee did not retain copies of the contributor'S checks or

-----s'trli-ci.ta-tion-de-vicesonce_the_inf_ormation was entered onto the

database. A Committee official sta-tedthat when--entetihg-the---

contributor information, the data entry staff was inconsistent

with regard to entering the date of the contributions. In some

instances it appeared the check date was entered, and at other

times the deposit date was entered.

Our review of contributions recorded on the database

identified 11 excessive contributions. These contributions

exceeded the contributor's limitations by $6,025 with regard to

the primary election.

The Audit staff did not find any evidence that the

Committee attempted to reattribute or redesignate any of the

contributions pursuant to Section 110.1(k)(3)(i) or Section

110.1(b)(5) of Title 11 of the Code of Federal Regulations.

At the exit conference, the Committee was provided with

schedules detailing the excessive contributions. Committee

officials stated that they were unaware that it was necessary to

obtain redesignation letters for contributions to be redesignated

to the general election. In addition, they stated that refunds of

any excessive contributions would be made.

Page 6, 5/13/94
-5-

According to copies of refund checks provided by the

Committee, refunds totaling $4,525 !/ were made on July 13, 1993,

relative to 9 contributions. The Committee did not provide any

additional documentation on the 2 remaining excessive

contributions totaling $2,000.

In the interim audit report the Audit staff recommended

that the Committee provide evidence that the remaining $2,000 in

unrefunded contributions were not excessive. Absent such evidence

the audit staff recommended the Committee refund the excessive

contributions and provide evidence of the negotiated refund checks

(copies of front and back) for all refunded contributions for the

Audit staff's review.

In response to the interim audit report, the Committee

provided copies of negotiated refund checks for the 9

contributions totaling $4525. In addition copies of the fronts of

the 2 remaining refund checks totaling $2,000 were also provided.

In a letter which accompanied the check copies, the Comaittee's

treasurer stated that copies of the two remaining negotiated

refund checKs would be provided once they become available.

C. 48 Hour Notification of Contributions

. -Section--HI 4 ~-5 (fl- o~--Title11-of--the Gode--o f--F~dera1---

Regulations states if any contribution of $1,000 or more is

received by any authorized committee of a candidate after the 20th

day, but more than 48 hours before 12:01 a.m. of the day of the

election, the principal campaign committee of that candidate shall

notify the Commission within 48 hours of receipt of the

contribution. The notification shall be in writing and shall

include the name of the candidate and office sought by the

candidate, the identification of the contributor, and the date of

receipt and amount of the contribution. The notification shall be

in addition to the reporting of these contributions on the

post-election report.

As discussed above in Finding II.B., the Committee's

contribution records consisted of a computerized database. Our

review of the Committee's contributions from political committees

and individuals identified 43 contributions totaling $84,125

subject to the 48 hour notice requirements based on the date

recorded in the database. Of this amount the Committee failed to

file any notices for 17 contributions totaling $23,000. For the

remaining 26 contributions totaling $61,125 the Committee did file

notices, however they were not filed within 48 hours of the date

recorded on the database.

The Committee refunded $1,000 to one contributor although the

excessive amount was only $500.

page 7, 5/13/94
C>.

-6-

With respect to the primary election, the Committee

filed six 48 hour contribution notices which were received 4 to 9

days after the date recorded on the database. In addition, the

contribution date contained in the notices was not the date

recorded on the database. In each case the date contained in the

notice was later than the date recorded on the database giving the

appearance of a timely notice. With respect to the general

election, the Committee's notice was received November 6, 1992,

and detailed 20 contributions totaling $50,500. The notice did

not contain the dates of the contributions, and was received

between 11 and 23 days later than the dates recorded on the

database.

At the exit conference, the Committee was provided with

schedules detailing the irregularities. Subsequent to the

completion of fieldwork, the Committee responded with the

following explanation:

"Due to redistricting, the campaign office was

moved to Cocoa, Florida. This is fifty miles

away from the location of the original office

and the bank we used for the campaign account.

A new campaign post office box was opened in

Cocoa, and we maintained the one in Orlando. contdbut:ions-w~fre--received~hroughthe- -

Orlando box, the Cocoa box and at events

directly. Checks were sent to the assistant

treasurer by mail or by a staffer, if one was

heading to Orlando.

Most of the 48 hour notices were made timely.

Apparently some were not. The arrangement was

cumbersome and resulted in delays. To ease

the process, we did, for a short period of

time, deposit monies in a Brevard County

branch bank. However, we discontinued use of

the Brevard account when back-up documents

were not getting sent to the assistant

treasurer with the deposit information.

We are taking steps to solve these problems,

which were caused by the unexpected results of

redistricting occurring well into the

campaign. We have begun banking in Brevard

County and are in the process of closing the

Orlando post office box. Every effort will be

made to fully comply with this requirement."

The Committee's contention that most of the 48 hour

notices were filed timely is incorrect. As discussed above, of

the 43 contributions subject to the 48 hour contribution notice

requirements, based on the receipt date recorded on the database,

26 were not filed timely by the Committee. Also, the above

response does not address the 17 contributions subject to the 48

Page 8, 5/13/94
-7-

hour contribution notice requirement which were not filed at all;

why there were no dates on the notices filed for the general

election; and why the dates on the six 48 hour notices filed for

the primary election were different than the dates recorded on the

database giving the appearance of a timely notice.

In the interim audit report, the Audit staff recommended

that the Committee provide further explanations regarding the:

o Failure to file 48 hour notices for 17 contributions

totaling $23,000;

o late filing of notices for 26 contributions totaling

$61,125;

o incorrect dates disclosed in the 48 hour notices filed

for the primary election; and

o abse~ce of dates on the notice filed for the general

election.

In addition, the Audit staff recoaaended the Committee

'.- implement procedures to insure compliance with the 48 hour --.....,-----~---conti:-i-bu-tion-notice __r~_q\,1j~~_m_t!!lts in the future . . ------ --- - -- --- -- -- - ------

In response to the interim audit report, the Committee'S

treasurer stated that steps have been taken to insure compliance

with the 48 hour contribution notice requirements in the future.

These steps include moving the committee'S checking account and

post office box closer to the campaign headquarters; the

Comaittee's treasurer attending an FEC seminar to improve his

understanding of the regulations; creating a standard form for

recording the receipt of contributions which require 48 hour

notice; establishing procedures to FAX the notices; and

consolidating all fundraising data on computer in the Committee's

campaign office.

The Committee treasurer further stated that there was no

further explanation for the failure to file the required notices,

however redistricting which required the candidate to both

personally move and move his campaign headquarters contributed to

the problem.

D. Itemization of Receipts

Section 434(b)(2)(I) of Title 2 of the United States

Code states that each report under this section shall disclose for

the reporting period and calendar year the total amount of all

rebates, refunds, and other offsets to operating expenditures.

Section l04.3(a)(4)(v) of Title 11 of the Code of

Federal Regulations requires the itemization of receipts for

authorized committees, including the identification of each person

who provides a rebate, refund or other offset to operating

Page 9, 5/13 /9 4
-------._.. -_.~- -- -;.",,,F'y,

-~. _..'

-8-

expenditures to the reporting committee in an aggregate amount or

value in excess of $200 within the calendar year, together with

the date and amount of any such receipt.

Our review of the Committee's receipts database and

disclosure reports identified 5 refunds from vendors totaling

$14,520 which were not itemized as required. Additionally, the

Committee did not itemize interest received in the amount of

$7,118.

At the exit conference, the Committee was provided with

schedules detailing the unitemized refunds and interest discussed

above. Subsequent to the completion of fieldwork the Committee

filed, as part of a comprehensive amendment, Schedules A which

materially corrected the itemization of refunds and interest

received.

E. Omission of Disclosure Information - Disbursements

Section 434(b)(S)(A) of Title 2 of the United States

Code states each report under this section shall disclose the name

and address of each person to whom an expenditure in an aggregate

amount or value in excess of $200 within the calendar year is made

--bythe-repor-ting c()lIIJIli~t_£!e to meet a candidate or committee

operating expense, together -i.fTth--the-date ,-amount,-and -purpose_of _

such operating expenditure.

Section 104.3(b)(4)(i)(A) of Title 11 of the Code of

Federal Regulations states, in part, purpose means a brief

statement or description of why the disbursements or descr.iption

of why the disbursement was made. Examples of statements or

descriptions which meet the requirements include the following:

dinner expense, media, salary, polling, travel, party fees, phone

banks, travel expenses, travel expenses reimbursed and catering

costs. However, statements or descriptions such as advance,

election day expenses, other expenses, expenses, expense

reimbursement, miscellaneous, outside services, Get-out-the-vote

and voter registration would not meet the requirements for

reporting the purpose of an expenditure.

A review of the Committee'S disbursements identified 101

instances of incomplete or inadequate information appearing on

disclosure reports totaling $160,506. Eighty-four of the errors

resulted from the Committee not disclosing a complete address.

The remaining 17 errors resulted from the Committee disclosing an

inadequate purpose.

At the exit conference, the Committee was provided with

schedules which included examples of the disclosure errors.

Subsequent to the completion of fieldwork, the Committee filed

amended Schedules B which materially corrected the public record.

Page 10, 5/13/94
-

AK004558

Attachment 1

Page 1 of 1

CITIZENS FOR BACCHUS 92

1992 REPORTING ERRORS

Reported Totals

Unreported Interest

Received

Receipts

$538,052

950

Disbursements

$698,493

unreported PAC

Contributions

NSF Contributi~n Checks

reported in error

Net Addition Errors

.-. -- Re concil-ing-item.--- _

unreported Wire Transfer

Wire Transrer reported

incorrectly

Disbursements reported

twice

Disbursement reported

but not made

Inter Account Transfer

reported

Over reported Unitemized

Disbursements

Void Check reported

Disbursement reported as

Memo Entry

Reconciling Item

CORRECT REPORTABLE TOTALS

5,100

(2,750)

(2,000)

(148 )

2,500

103,124

(55,000)

(6,554)

(1,904)

(47,092)

(1,054)

2,432

( 80)

$539,204 $694,865

Page 11, 5/13/94
FEDERA.L ELECTiO, CO'1\\15510'-' AKOOS048

May 24, 1994

Mr. Jack Oppenheimer

Citizens for Bacchus 92

P.O. Box 361235

Melbourne, FL 32936-1235

Dear Mr. Oppenheimer:

Attached please find the Final Audit Report on Citizens

for Bacchus 92. The Commission approved the report on Kay

13,1994.

, The Commission approved Final Audit Report will be - --------------placed_on__th_~pub1ic record on June 1, 1994. Should you have

"." any questions rega-rdtng -the---publ-i~-t"e1ea_s~_o_Lthereport, J please contact the C01lUllission' s Press Office at. T21:r2) ----------------

., 219-4155. Any questions you have related to matters covered

during the audit or in the report should be directed to Tom

Hunter or Ray Lisi of the Audit Division at (202) 219-3120 or

toll free at (800) 424-9530.

c:,

Attachment as stated

12::;t: ~~o~:~- ;~ Costa

Assistant Staff Director

Audit Division

Page 13, 5/13/94
Chronology

Citizens for Bacchus 92

" .

c

Audit Fieldwork

Interim Audit Report to

Committee

Response Received to Interim

Audit Report

Final Audit Report Approved

Page 15, 5/13/94

6/14/93 - 7/1/93

3/10/94

4/11/94

5/13/94