REPORT OF THE AUDIT DIVISION

ON

ARLEN SPECTER '96

EXECUTIVE SUMMARY

Arlen Specter '96 (the Committee) registered with the Federal Election Commission on January 20, 1995. The Committee was the principal campaign committee of Senator Arlen Specter, candidate for the 1996 Republican nomination for President of the United States.

The audit was conducted pursuant to 26 U.S.C. §9038(a), which requires the Commission to audit committees that receive Federal funds. The Committee received $1,010,457 in matching funds from the United States Treasury.

The audit findings were presented to the Committee at a conference held on August 27, 1996, and in the Exit Conference Memorandum on November 26, 1996. The Committee filed a response to matters presented at the conference as well as matters addressed in the Exit Conference Memorandum.

In the Audit Report, the Commission made determinations that the Committee pay the United States Treasury $233,768 in connection with the receipt of a prohibited corporate in-kind contribution; $83,749 in connection with the receipt of excessive contributions and $3,562 for checks issued by the Committee that were never cashed. The Committee has paid $87,311 ($83,749 + $3,562) to the United States Treasury.

These matters are summarized below.

APPARENT PROHIBITED IN-KIND CONTRIBUTION - 2 U.S.C. 441b(a) and 11 §CFR 100.7 (a)(1)(iii). The audit report noted that the Committee received a prohibited in-kind contribution in the amount of $233,768. The Committee used an incorporated charter air service for most of its campaign travel and paid a first class rate for each person traveling on its behalf instead of the usual and normal charter rate. Since Koro Aviation, Inc. is licensed to offer commercial service, the Committee should have paid the usual and normal charter rate. The Committee contended that 11 CFR §114.9(e) provides for reimbursement at the first class airfare. It should be noted that 11 CFR §114.9(e) addresses the use of aircraft owned or leased by corporations, other than a corporation licensed to offer commercial services.

UNRESOLVED EXCESSIVE CONTRIBUTIONS - 2 U.S.C. §441a(a)(1)(A) and 11 CFR §§110.1(k), 110.1(l), 103.3(b)(3) and (4). The Committee paid the United States Treasury $83,749, representing the value of excessive contributions that were not reattributed or refunded in accordance with the Commission's Regulations.

STALE-DATED CHECKS - 11 CFR §9038.6. The Committee paid the United States Treasury $3,562, representing the value of checks issued by the Committee that were never cashed.