REPORT OF THE AUDIT DIVISION
lugar for president committee, inc.,
lugar for president committee legal and accounting
compliance fund, and
lugar for president committee - audit fund
Lugar for President Committee, Inc. (the Committee) registered with the Federal Election Commission on March 3, 1995. In addition, the Lugar for President Committee Legal and Accounting Compliance Fund (the Compliance Committee) and the Lugar For President Committee - Audit Fund registered with the Federal Election Commission on May 31, 1995 and March 15, 1996, respectively.
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 Committee received $2,657,244 in matching funds from the United States Treasury.
The findings of the audit were presented to the committees at an exit conference held on February 10, 1997 and in the Exit Conference Memorandum. The Committees response to those findings are contained in the audit report.
The following is an overview of the findings contained in the audit report.
Misstatement of Financial Activity 2 U.S.C. §§434(b)(1) and (4). The Committee misstated its total disbursements and cash balances on disclosure reports covering 1995 and 1996 activity. Amended disclosure reports were filed which materially corrected these misstatements.
Itemization of Disbursements 2 U.S.C. §434(b)(5)(A). The Committee did not itemize 918 disbursements, totaling $94,777, that were less than or equal to $200 but were still required to be itemized on disclosure reports. The Committee filed amended reports which materially itemized these disbursements.
Apparent Non-qualified Campaign Expenses 11 CFR §9034.4(a)(5)(ii), 11 CFR §§9034.4(b)(3) and §9034.4(e)(6)(i). The Audit staff identified bonus payments made to two employees, totaling $3,000, which were not provided for pursuant to a written contract made prior to the candidates date of ineligibility, as required by 11 CFR §9034.4(a)(5)(ii). In addition, the Committee made payments, totaling $6,404, for Compliance Committee contribution solicitation and processing costs. As a result, the Commission determined that a pro-rata repayment to the United States Treasury in the amount of $3,336 was warranted pursuant to 26 U.S.C. §9038(b)(2) [$3000 + $6,404 x .35472 (the Committees repayment ratio)].
Apparent Prohibited In-kind Contributions 2 U.S.C. §441b(a) and 11 CFR §100.7(a)(1). During July of 1995, the Committee purchased a telephone call and contact management system from Ontario Systems Corporation (OSC) at a cost of $355,425. The system was repurchased by OSC in March 1996 in exchange for $232,500 and the Committees agreement to serve as a beta test site for the political candidate telemarketing industry. The Audit staff requested additional documentation which demonstrated that OSC entered into similar repurchase agreements with other clients and that the agreement between the Committee and OSC conformed to the usual and normal practice in OSCs industry. The Audit staff concluded that the arrangement appeared to be commercially reasonable based on an analysis of the information ultimately provided and therefore, no in-kind contribution resulted.
The Committee made net payments, totaling $9,988, to three entities for use of an airplane for campaign travel. Although one of these entities, Eastway Aircraft Services, Inc. (Eastway), was licensed to operate a charter air service, the Audit staff noted that the Committee followed the corporate travel provisions of 11 CFR §114.9(e) instead of reimbursing Eastway for the usual and normal charter rates for travel on this plane. The Audit staff requested documentation relative to the Committees arrangements with these entities. The Committee demonstrated that Eastway operated but did not own the plane and that the owner of the plane made the plane available to the candidate under the corporate travel provisions. Therefore, the Committee complied with the regulations at 11 CFR §114.9(e) and no in-kind contribution resulted.
Stale-dated Checks 11 CFR §9038.6. The Audit staff identified checks issued by the Committee, totaling $10,958, that had not been negotiated. The Commission determined that this amount was payable to the United States Treasury. The Committee paid $10,958 to the United States Treasury on April 24, 1997.
Lugar for President Committee Legal and Accounting Compliance Fund and the Lugar for President Committee - Audit Fund
The Audit staff did not detect any material non-compliance during the audits of these two committees.