REPORT OF THE AUDIT DIVISION

ON THE

1996 DEMOCRATIC NATIONAL CONVENTION COMMITTEE, INC.

 

EXECUTIVE SUMMARY

 

The 1996 Democratic National Convention Committee, Inc. (DNCC) registered with the Federal Election Commission on June 6, 1995 as a National Convention Committee of the Democratic Party.

The audit was conducted pursuant to Section 9008(g) of Title 26 of the United States Code which directs the Commission to conduct an examination and audit of the payments for presidential nominating conventions no later than December 31 of the calendar year in which the nominating convention is held. In accordance with 26 U.S.C. 9008(b), the Committee received $12,364,000 in federal funds.

The findings of the audit were presented to the Committee at an exit conference held on August 7, 1997 and in the Exit Conference Memorandum (ECM). The Committee’s responses to the findings are contained in the audit report.

The following is an overview of the findings contained in the audit report.

Apparent Convention Expenses Paid By The Host Committee And City Of Chicago- 26 U.S.C. 9008(h), 11 CFR 9008.3(a)(4)(vii), 11 CFR 9008.7(a)(4), 11 CFR 9008.12(b)(3) and (b)(7), 11 CFR 9008.52 (c), 11 CFR 104.3(a). The Audit staff identified payments, totaling $2,580,742, made by Chicago’s Committee for ’96 (Host Committee) and the City of Chicago for certain production and telecommunications expenses which did not appear to fall within the categories of permissible expenses which could be paid by the Host Committee or the City of Chicago.

The production payments, which totaled $1,455,407, were made to six vendors for services such as providing a public address system, constructing camera platforms and lighting, providing stagehands, riggers, projectionists, electricians, teamsters, etc. Based on the DNCC’s response to the ECM, the Audit staff conceded that audio services, including a public address system, provided by one vendor could be permissibly paid. The Commission determined that services provided by the remaining five vendors were permissible Host Committee expenditures. Regarding the telecommunications expenses, the Commission determined that payments totaling $726,835 for the DNCC’s local and long distance telephone charges were not permissible Host Committee or City expenses and the amount must be repaid to the US Treasury and itemized as an in-kind contribution on an amended disclosure report.

In-Kind Contributions to the Host Committee Viewed As Apparent Convention Expenses- 11 CFR 9008.(b)(3), 11 CFR 9008.7(a)(4)(ix). The Audit staff identified an "electronic voting system" contributed by AT&T, valued at $150,000, and a "credentials management system" contributed by the Polaroid Corporation, valued at $15,000, which appeared to be items which should have been paid for by the DNCC. The Commission determined however, that the use of funds for a voting tabulation system was a permissible Host Committee expense. In addition, based on the DNCC’s response to the ECM, the Audit staff concluded that the credentials management system was used as a security measure and, as such, did not result in a prohibited in-kind contribution.

Improper Use of Fund Payments- 11 CFR 9008.12(a), (b)(4), and (c). The DNCC made payments of $33,183 to seven vendors for expenses that were not convention-related. The DNCC received reimbursements totaling $14,131 from four of the vendors. The amount, of the payments to the remaining two vendors, $19,052, is repayable to the US Treasury. The DNCC made the repayment on July 24, 1997.

Determination of Net Outstanding Convention Expenses and Amounts Subject to the Spending Limitation- 26 U.S.C. 9008(b)(1) and (5); 11 CFR 9008.5(b); 11 CFR 9008.8(a)(1), (b)(1), (b)(2); 11 CFR 9008.10(g); 11 CFR 9008.12(b)(3), (b)(7), (c). The Net Outstanding Convention Expenses amount of ($676,218) is in contrast to the DNCC’s most recent calculation, prepared October 21, 1997, showing unspent funds of $50,617. The Audit staff’s inclusion of $726,835 in in-kind contributions, viewed as subject to the spending limitation, created this situation. Prior to receipt of the ECM, the DNCC made a repayment to the US Treasury in the amount of $120,562. The Commission determined that the $120,562 paid to the US Treasury by the DNCC is a credit against the $726,835 repayment due. The net repayment due is $606,273 ($726,835 - $120,562).

 

Apparent Allocable Convention-Related Expenses- During the review of background materials, the Audit Staff identified a possible in-kind contribution to the DNCC. Published reports stated that the Democratic National Committee assumed $25,000 in hotel bills associated with its Finance Chairman and the DNCC’s Treasurer, R. Scott Pastrick’s stay in Chicago during the Democratic National Convention. The Audit staff requested documentation such as copies of the hotel bills, information concerning the payment of the expenses, a copy of Mr. Pastrick’s appointment calendar during the convention and an explanation of why at least a portion of the expenses were not related to the convention. The DNCC responded that Mr. Pastrick was not required to serve in the role of Treasurer of the DNCC during the convention week. The requested documentation was not provided.