AGENDA DOCUMENT NO. 09-37
 

RECEIVED
 

FEDERAL ELECTION
 

COMMISSION
 

SECRETARIAT
 

FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 ZOOq JUN 21.l P 5: I 2 

June 24, 2009 

MEMORANDUM AGENDA ITEM 

TO: The Commission for Meetingal: 0'--;;..s- 0 '1 

FROM: Vice Chaimlan Matthew S. Petersen 'Nf~

Commissioner Caroline C. Hunter (t' \ SUBMITTED LATE 

Commissioner Donald F. McGahn!:V! vi, 

Subject: Proposed Rule of Agency Procedures: Audit Hearings 

Attached is a proposed rule of agency procedure. We have asked to place this 

draft on the agenda for June 25, 2009. 

Attachment 
FEDERAL ELECTION COMMISSION 

11 CFR Part 111 

[NOTICE 2009-XX] 

Procedural Rules For Audit Hearings 

AGENCY: Federal Election Commission 

ACTION: Rule of Agency Procedure 

SUMMARY: The Federal Election Commission ("Commission") is instituting a 

program that allows committees that are audited pursuant to the 

Federal Election Campaign Act of 1971, as amended ("FECA") to 

have a hearing before the Commission prior to the Commission's 

adoption ofa Final Audit Report. Similar to the Commission's 

current program for hearings at the probable cause stage of the 

enforcement process, audit hearings will provide audited 

committees with the opportunity to present oral arguments to the 

Commission directly and give the Commission an opportunity to 

ask relevant questions prior to adopting a Final Audit Report. 

Further information about the procedures for the audit program is 

provided in the supplementary information that follows. 

DATES:	 Effective [15 days from the date of publication in the Federal 

Register]. 

FOR FURTHER 

INFORMATION 

CONTACT:	 _______, Assistant General Counsel, or _ 

Attorney, 999 E Street NW, Washington, DC 20463, (202) 694­

1650 or (800) 424-9530. 

SUPPLEMENTARY 

INFORMATION: 

The Commission is instituting a program to afford committees that are the 

subject of a Commission audit the opportunity to participate in hearings 

(generally through counsel) and present oral arguments directly to the 
Commissioners prior to any Commission adoption of an audit report that includes 

findings that assert a potential violation oflaw. 

I. BACKGROUND: 

On June 11,2003, the Commission held a hearing concerning its 

enforcement procedures. The Commission received comments from the public, 

many of which argued for increased transparency in Commission procedures and 

expanded opportunities to contest allegations. Comments and statements for the 

record are available at: http://www.fec.gov/agenda/agendas2003/notice2003­

09/comments.shtml. In response to issues raised at the hearing, the Commission 

issued new rules of agency procedure. See Statement of Policy Regarding 

Deposition Transcripts in Nonpublic Investigations, 68 Fed. Reg. 50688 (Aug. 22, 

2003); Statement of Policy Regarding Treasurers Subject to Enforcement 

Proceedings, 70 Fed. Reg. 1 (Jan. 3,2005). 

On December 8, 2006, the Commission published a proposal for a pilot 

program for probable cause hearings, and sought comments from the public. See 

Proposed Policy Statement Establishing Pilot Program for Probable Cause 

Hearings, 71 Fed. Reg. 71088 (Dec. 8,2006). The comment period on the 

proposed policy statement closed on January 5,2007. The Commission received 

four comments, all of which endorsed the proposed pilot program for probable 

cause hearings. These comments are available at 

http://www.fec.gov/law/policy.shtml#proposed under the heading "Pilot Program 

for Probable Cause Hearing." 

On February 8, 2007, the Commission decided by a vote of 6-0 to institute 

the pilot program. The program went into effect on February 16, 2007. The pilot 

program was designed to remain in effect for at least eight months, after which 

time a vote would be scheduled on whether the program should continue. The 

Commission found that the pilot program had been successful and the 

Commission announced that the program would become permanent. See 72 Fed. 

Reg. 64919 (Nov. 19,2007). 

On December 8, 2008, the Commission issued a notice of public hearing 

and request for public comment on its compliance and enforcement processes. 

Agency Procedures (Notice of public hearing and request for public comments), 

73 Fed. Reg. 74495 (Dec. 8,2008). On January 14-15, 2009, the Commission 

received comment and testimony regarding procedures and processes that it uses 

to resolve cases. At that time, many commenters praised the probable cause 

hearing program and some requested that a similar procedure be adopted with 

respect to other Commission processes, including audits. The comments received 

by the Commission, as well as the transcript of the hearing are available at: 

http://www.fec.gov/law/policy/enforcement/publichearingOl1409.shtml. 
One of the questions specifically set forth in the Notice of public hearing 

and request for public comments was whether respondents should be given the 

opportunity to appear before the Commission at times such as when the 

Commission is considering audit reports that state violations of law. See 73 Fed. 

Reg. 74495, 74497. Several commenters supported providing an opportunity for 

committees being audited to be heard directly by the Commission before the 

Commission issues a final audit report. Based upon its experience with the 

probable cause hearing program, and public comments regarding hearings during 

the audit process, the Commission is instituting a new rule of agency procedure to 

expand the Commission's hearing procedures to include audits in which one or 

more findings assert a potential violation of law. 

II. Procedures for Audit Hearings 

A. Opportunity to request a hearing 

The Commission is issuing a new rule of agency procedure allowing a 

committee that is being audited by the Commission's Audit Division to request a 

hearing prior to the Commission's adoption of a Final Audit Report when the 

Audit Division staffs draft Final Audit Report concludes that the committee 

violated FECA or Commission regulations. Currently, once the Audit Division 

completes its field work, it conducts an exit conference at which it presents its 

preliminary findings to the audited committee. Based upon the field work and the 

committee's response at the exit conference, the Audit Division prepares an 

interim or preliminary audit report that, in certain situations, the Commission 

considers in executive session prior to the report being sent to the committee 

being audited.! The committee then has the opportunity to respond in writing. 

The Audit Division then prepares a draft Final Audit Report for Commission 

consideration. If one or more Commissioners object to such report, the matter is 

discussed and decided in an open meeting of the Commission. 

While all written submissions provided during the audit process are 

considered under current practice, the Commission wishes to provide those being 

audited with an opportunity to address the Commission directly and in person, 

before the Commission considers adopting any Audit Division findings that a 

violation of the Act or Commission regulations occurred. Upon preparing its 

draft Final Audit Report, which takes into consideration the committee's exit 

conference discussion and response to the interim or preliminary audit report, the 

Audit Division will provide the audited committee with a copy of its draft Final 

Audit Report. In audits where the Audit Division recommends the Commission 

adopt findings that a violation of the Act or Commission regulations occurred, it 

shall attach a cover letter informing the committee of the opportunity to provide a 

written response and request an oral hearing before the Commission. Moreover, 

I Pursuant to the Commission's regulations, the Audit division prepares "interim" audit reports in Title 2
 

matters and "preliminary" audit reports in Title 26 matters.
 
if the Office of General Counsel has provided any legal advice on the draft Final 

Audit Report, the Audit Division shall provide a copy of the Office of General 

Counsel's legal memorandum to the committee. Within 15 days after receiving 

the draft Final Audit Report and any corresponding legal memoranda, the audited 

committee may respond in writing, and include a written request for a hearing. 

Any request for a hearing must be in writing and filed with the committee's 

response. The request must provide notice if the requestor intends to appear via 

teleconference or videoconference (subject to the Commission's technical 

capabilities). When non-final audit matters include information entitled to 

exemption under the Sunshine Act, a hearing regarding a draft Final Audit Report 

will occur in an executive session of the Commission. 

Hearings are voluntary, and the Commission will draw no adverse inference 

based on the committee's request for, or waiver of, such a hearing. Each request 

for a hearing must state with specificity why the hearing is being requested and 

what issues the committee expects to address. Absent good cause, to be 

determined at the sole discretion of the Commission, late requests will not be 

accepted. Committees are responsible for ensuring that their requests are timely 

received. The Commissioners shall be notified of any such request within 5 days 

of receipt of the response. The Commission will grant a request for an oral 

hearing if any two Commissioners agree that a hearing would help resolve 

significant or novel legal enforcement issues or significant questions about the 

application of the law to the facts. The Commission will inform the committee 

whether the Commission is granting the committee's request within 30 days of 

receipt of the request. 

B. Hearing Procedures 

The purpose of an oral hearing is to provide an audited committee with an 

opportunity to present their arguments in person to the Commissioners when the 

Audit Division staffs draft alleges that the committee violated FECA or 

Commission regulations, but before the Commission adopts the Final Audit 

Report. Consistent with current Commission regulations, a committee may be 

represented by counsel, at the committee's own expense, or may appear pro se at 

the oral hearing. See 11 CFR 111.23. Committees (or their counsel) will have the 

opportunity to present their arguments. Commissioners will have the opportunity 

to pose questions to the audited committee, or their counsel, ifrepresented. 

At the hearing, committees are expected to raise only issues that were 

identified in their hearing request. Similarly, absent extenuating circumstances, 

committees may not introduce any new documents at the hearing that were not 

previously provided to the Audit Division. Committees may discuss any issues 

presented in the Audit Division staffs draft Final Audit Report, and the request 

for hearing should include specific citations to any authorities (including prior 

Commission actions) on which the committee is relying or intends to cite at the 

hearing. If audited committees discover new information after submission of their 
response to the draft Final Audit Report or need to raise new arguments for 

similarly extenuating circumstances, they should notify the Commission as soon 

as possible prior to the hearing. Commissioners may ask questions on any matter 

related to the audit and committees are free to raise any gennane new issues in 

response. 

Committees should notify the Secretary of the Commission at least one 

week prior to the scheduled date of the hearing if they intend to use charts, 

handouts, or audio-visual aids during their presentation to the Commission, to 

allow the Commission time to coordinate the handling of these arrangements with 

the court reporter and the Commission Secretary. 

When non-final audit matters include infonnation entitled to exemption 

under the Sunshine Act, a hearing will occur in an executive session of the 

Commission, and only the committee and their counsel may attend. Attendance 

by any other parties must be approved by the Commission in advance. When the 

hearing is held in an executive session, the Committee will be afforded the 

opportunity to submit a response to the Final Audit Report, which will be placed 

on the public record at the same time as the Final Audit Report. 

The Commission will detennine the fonnat and time allotted for each hearing at 

its discretion. Among the factors that the Commission may consider are agency 

time constraints, the complexity of the issues raised, and the extent of the 

Commission's interest, and the availability of teleconference or videoconference 

capabilities. The Commission will detennine the amount of time allocated for 

each portion of the hearing; the time limit may vary from hearing to hearing. The 

Commission anticipates that most hearings will begin with a brief opening 

statement by the committee or their counsel. Thereafter, Commissioners will 

have the opportunity to pose questions to the audited committee, and 

Commissioners may ask questions designed to elicit clarification from the Office 

of General Counselor Office of the Staff Director. The General Counsel and the 

Staff Director will have the opportunity to pose questions to the audited 

committee, or their counsel, if represented. Hearings will nonnally conclude with 

closing remarks from the committee or their counsel. 

Third-party witnesses may not be called to testify at an oral hearing. 

However, the Commission may request that the committee submit supplementary 

infonnation or briefing after the hearing. The Commission discourages 

voluminous submissions. Supplementary infonnation may be submitted only 

upon Commission request and no more than ten days after such a request from the 

Commission, unless the Commission's request for infonnation imposes a 

different, Commission-approved deadline. Materials requested by the 

Commission and materials considered by the Commission in making its 

detennination may be made part of the public record pursuant to the 

Commission's Statement of Policy Regarding Disclosure of Closed Enforcement 

and Related Files, 68 Fed. Reg. 70426 (Dec. 18,2003). 
The Commission will have transcripts made of the hearings. The 

transcript will become part of the record of the audit and may be relied upon for 

Commission determinations. Committees may be bound by any representations 

made by the committee or their counsel at the hearing. The Commission will 

make the transcripts available to the committee for inspection as soon as 

practicable after the hearing, and committees may purchase copies of the 

transcript. Transcripts may be made public after the matter is closed in 

accordance with Commission policies on disclosure. 

C. Scheduling of Hearings 

The Commission will seek to hold the hearing in a timely manner after 

receiving a committee's request for a hearing. The Commission will attempt to 

schedule the hearing at a mutually accepted date and time. If a committee is 

unable to accommodate the Commission's schedule, however, the Commission 

may decline to hold a hearing. The Commission reserves the right to reschedule 

any hearing. Where necessary, the Commission reserves the right to request from 

a committee an agreement tolling any upcoming deadline, including any statutory 

deadline or other deadline found in 11 CFR Ill. 

D. Pilot Program 

The Commission shall evaluate this new program, and consider whether it 

should, by an affirmative four votes of the Commission, be discontinued or 

modified. After one calendar year, the program shall continue as a pilot program 

until such time that the Commission either terminates it by an affirmative four 

votes or makes it permanent by an affirmative four votes. 

E. Conclusion 

This notice establishes rules of agency practice or procedure. This notice 

does not constitute an agency regulation requiring notice of proposed rulemaking, 

opportunities for public comment, prior publication, and delay effective under 

5 U.S.c. 553 ofthe Administrative Procedures Act ("APA"). The provisions of 

the Regulatory Flexibility Act, 5 U.S.C. 605(b), which apply when notice and 

comment are required by the APA or another statute, are not applicable.