REPORT OF THE AUDIT DIVISION

ON

PHIL GRAMM FOR PRESIDENT, INC.

PHIL GRAMM FOR PRESIDENT COMPLIANCE COMMITTEE, INC. AND

PHIL GRAMM FOR PRESIDENT AUDIT FUND

EXECUTIVE SUMMARY

Phil Gramm for President, Inc. (the Primary Committee) registered with the Federal Election Commission on November 14, 1994. In addition, the Phil Gramm for President Compliance Committee, Inc. (the Compliance Committee) registered with the Federal Election Commission on January 14, 1995 and on April 29, 1996 filed an amended Statement of Organization, changing its name to Phil Gramm for President Audit Fund (the Audit Fund).

The audit was conducted pursuant to 26 U.S.C. §9038(a), requiring the Commission to audit committees authorized by candidates who receive Federal Funds. The Candidate received $7,356,221 in matching funds from the U.S. Treasury.

The findings of the audit were presented to the Committees at an exit conference held on December 5, 1996 and in the Exit Conference Memorandum. The Committee responses to those findings are contained in the audit report.

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

FEDERAL FUNDS RECEIVED IN EXCESS OF ENTITLEMENT - 11 CFR §§9034.1(b) and 9038.2(b)(1). The Audit staff calculated that the candidate received matching funds in excess of entitlement totaling $369,642. The excess resulted primarily from the Committee's overstatement of estimated winding down expenses on its Statement of Net Outstanding Campaign Obligations and from differences in the valuation of the Primary Committee's capital assets purchased after August 16, 1995. The Commission determined that this amount was repayable to the U.S. Treasury.

REFUNDED CONTRIBUTIONS - 11 CFR §9038.2(b)(1)(iii). The Primary Committee received contributions totaling $12,960 from 25 individuals who requested refunds after the Candidate's date of ineligibility. The amount of matching funds associated with these contributions totaled $4,700. The Commission determined that this amount was repayable to the U.S. Treasury. The Committee made this payment on February 19, 1997.

STALE-DATED CHECKS - 11 CFR §§9038.6 and 9007.6. The Audit staff identified checks issued by the Primary Committee and the Compliance Committee totaling $33,006 and $10,015 respectively, that had not been negotiated. The Commission determined that these amounts were repayable to the U.S. Treasury. The two Committees made the payments on February 19, 1997.

PHIL GRAMM FOR PRESIDENT, AUDIT FUND

No material non-compliance was detected during the audit of the Audit Fund.