This file contains archived live captions of the hearing of the Federal Election Commission held on February 14, 2023. This file is not a transcript of the meeting, and it has not been reviewed for accuracy or approved by the Federal Election Commission.


Thank you. Good  morning, everyone. The special session  of the Federal election commission  for Tuesday, February 14 The special  session of the Federal election  commission for Tuesday, February  14, 2023 will  please come to order. I would like  to welcome everyone to the hearing  on the commission's policies and  procedures regarding the auditing  of committees that do not receive  public funding. I am Darrell Lindenbaum  Trevor the commission this year.  Sitting to my left is Commissioner  Alan Dickinson and to the right  are Alan Wyckoff and  Shauna  Brassard.  

Today is acting general  counsel Lisa Stephenson and the  commission staff director  Alec Palmer. I would like to note that Commissioner  Traynor has been a indispensable  partner in the buy spot is an effort.  I appreciate his professionalism  and plan to today's hearing in working  towards improving the audit process.  I'm hoping that we will  work on many initiatives together.  I would like to think [  Indiscernible  ]  for all of their work on this. People  have been talking about the issues  with the audit process for years  it took a casual offhand conversation  Ashley and Nick to get the ball  rolling. Additionally I would like  to thank the commissions incredible  incredible are operations. For  putting together this hearing. Your  hard work does not  go unnoticed and we truly appreciate  everything  you do. The issues we are discussing today  were included in a notice for public  comments published in the Federal  Register Monday, January 9. We received  several comments addressing different  aspects of the agency's audit process.  We have five witnesses testifying  in person at today's  hearing. Why are we having  this hearing? Five out of  six of the current commissioners  have been here for under three years  and it takes make sense to take  a look at the processes to  make sure we are fulfilling our  mission  effect Tivoli. From our  witnesses today we hear how we might  increase fairness, due  process, efficiency and effectiveness  of the commissions auditing of political  committees. We appreciate all who  have taken the time and effort to  comments and particularly those  as witnesses to give us the benefit  of your expertise and experience.  

I want to think the staff in  the audit vision  we have the benefit of having dedicated  professional  staff members that any agency  could ask for. I will be so bold  to say that any criticism many of  which are well-deserved, or shortcomings  of which there are many of those  of the commissioners past and present  not our staff. I will also highlight  Dana Brown Miss Brown has been advocating  for a dates to the process for years  and we would not be able to make  these changes without her hard work  and leadership. Thank you comes  Brown. I now pass it to my colleague  Commissioner Traynor to provide  opening remark.  

Ink you, Mdm. chair. I want to  take this opportunity to thank you  for the opportunity to work on this  important issue that we have. As  you state it we have relatively  new commissioners. It is important  to periodically go through and review  policies and procedures to make  sure we are keeping up. The audit  process has been one noted by many  that needs to be addressed. I find  it  particularly interesting that where  the rubber meets the road in politics  usually happens at the state party  level with local grassroots people  getting involved in the first time  process. State parties are  the ones who get this people involved  in the process. In dealing with  all of the people they deal with  they also have deal with the myriad  of rules and regulations we placed  upon them in order  to keep up with the transparency  and political process. I think it  is important to take the opportunity  to review these rules of how we  audit's  particular entities and how we can  be more efficient and fair in the  process. We could not have done  this without your leadership. We  could not of done it without the  help of the staff to get us prepared  for the hearing. Most importantly  I want to thank those that took  the time to give us comments. Let  us know what  they think are important issues  that we need  to address. We did receive quite  a few comments. We are thankful  for the individuals testifying today.  As always I wish we  had  more comments. There are issues  not being addressed but I think  we have the top issues in front  of us. With that I look forward  to hearing from the witnesses  and look forward to working with  each colleague as we move forward  in the process  I just want to take the time to  think the staff in chair for everyone  getting us ready for today.  

Thank you. I  like to briefly describe the format  we will  follow today. The hearing will be  conducted similarly to other meetings.  Each witness will provide the opportunity  to make an opening statement. After  all witnesses have provided opening  remarks I will call upon commissioners  to ask questions of the witnesses.  I would like to introduce our guest  today in the order in which they  will  submit remarks. [  Indiscernible ]  

The first remarks will be  from Brian who join is joined by  his colleague.  

 Thank you for having us here  today. I was wondering  how most effective use to make up  the opening remarks and I thought  that the most effective way [ Indiscernible  - low volume ] would be  to talk from cradle to grave about  the audit process from the perspective  of [ Indiscernible - low volume  ] factor it with the others that  are here today but this is how the  process work for  the committee selected for audit.  In the case of a campaign committee  you will be the day notice that  a committee has been selected for  audit. The first thing I will  do is see the traffic for the previous  cycle on the website. In many cases  I will be able to tell why the committee  was selected. There are some cases  where I'm not able to to sell that  but that goes to one of the matters  we talked about in the common which  is the criteria of what it means  to be in substantial compliance.  One where the public does  not have a a lot of use of the  Internet process.  That is one impression that we have  at some point when the audit  begins. The audit usually begins  with a flurry  of activity. We are eager to receive  ASIC documents but they need to  be [ Indiscernible - low volume  ] for  the audit. 
     That can sometimes be easy and in  some ins and since it could be more  difficult particularly if there  are changes in personnel or [ Indiscernible  - low volume ] or have  changed banks [ Indiscernible -  low volume ] that happens time to  time by committee selected  for audit [ Indiscernible - static  ] [ Indiscernible - low volume ]  we find that we  normally work well and function  with the auditors in that circumstance  and we want to do that.  We want to make the process as efficient  as possible then the work  will begin. That can be a good opportunity  for the committee to have some visibility  into issues that it has. In  some cases there may be a concern  [ Indiscernible - low  volume ] they don't really know  what is going to be on the auditors  mind as well. That brings us to  the conference where one of the  most important comments is one that  [ Indiscernible - low  volume ] the  conference is very very important.  If a matter is resolved with  the auditors it's good for the committee  in its good for the [ Indiscernible  - low  volume ]  

There are a couple of limitations  that makes process [ Indiscernible  - low volume ] number one is that  the time you may have fieldwork  occurred for two maybe  two months maybe sometimes less  [ Indiscernible - low  volume ]  you have 10 business days  to respond. You will be told that  there is no extension. Particularly  if the finding involves a legal  issue of certain  application or involves a  factual issue and additional information  has to  be gathered. Auditing committees  are also told at that process not  to submit  legal argument  obviously the process. And so of  request for consideration legal  [ Indiscernible - low volume ] the  exit conference itself is  not [ Indiscernible - low  volume ] the conference is typically  one that [ Indiscernible -  low volume ] [ Indiscernible - static  ] often times it  can't be. Whatever they say [ Indiscernible  ] may  be recorded so that process is not  particularly well-suited for  resolving issues I realize I am  a five minutes already and I do  not want to take up too much more  time we'll talk more about the final  audit report suffice it to say that  those  processes involve -- up into this  point those processes can involve  issues that may be are not yet  right or me  more consideration  indiscernible Mac normally something  intended for a release  the process ought to be more  towards the [ Indiscernible - low  volume ]  

Thank you  for that. I think we  all want to ask you to continue  that incredible and very helpful  information. I will just  as the speakers to make sure your  microphone is close to  you.  

Nextep we have Aaron from Sandler  reef.  

Thank you Mdm. chair  and commissioners. Given the opportunity  to be here today and share comments  and provide feedback about the commissions  audit process. My comments here  today will echo the written  comments of [ Indiscernible ] who  cannot be here today. At a  general matter the audit process  in the current form performs an  appropriate balance between the  need to conduct a  thorough review of the committee's  activities while providing ample  opportunity for an audit committee  to divide factual legal information  and responses to the commission.  We also wanted to take this opportunity  to commend the professionalism of  the audit division staff and their  treatment of the attorneys and committees  throughout the audit process. With  that said we described in written  comments significant concerns and  made several recommendations on  how we believe the process can  be improved. I wanted to emphasize our chief  concern recommendation in the opening  statement that there should be more  affirmative commission participation  earlier in the audit process. Especially  with respect to legal issues and  theories rated by the audit division  during  the process. It has been our experience,  especially in audits related to  state party committees at the audit  division often makes an initial  determination of law with respect  to issue that it knows or should  know it doesn't have support of  the commission in either direction  with a significant number  of commissioners. Under the current  procedures any dispute adds to the  legal issues during the audit division  and committee and they are dressed  continuously throughout the audit  process. As a practical matter this  means that the audit committee has  to dispute the same issue  on multiple occasions including  potential request for late legal  consideration in response to interim  audit report if requested in a hearing  before the commission and finally  in the response to the draft final  audit report. The commission procedures  should allow for an affirmative  intervention  by the commission early in the audit process  so there can be in earlier determination  of a disputed legal issue. This  could be similar to the enforcement  process  which allows legal findings to proceed  if they have the support of at least  four commissioners. This  allows for a definitive resolution  of legal issues early in the process  and will conserve valuable time  and resources in audited  committee commission. We made other  recommendations in written comments  that we hope the  commission gives consideration to  and we are happy to answer  questions.  

Thank you very much. Mr. Holloway?  Welcome back.  

Good  morning commissioners. Thank you  for the opportunity to allow me  to submit written comments and allow  me to testify  about this important commission  responsibility. The auditing of  committees that that do not receive  public funds. I set for  two recommendations in my written  comments detailed syndicate considerations  related and I will be brief in my  opening remarks. Overall  I think the best way to improve  the audit process is to shorten  it and make it  more efficient. I believe the commission  can achieve this by moving to outlines  of the process the request for consideration  in the audit hearing and move both  of them to the interim audit  report stage. Currently the request  for consideration is the begin at  the beginning of the process ask  after the exit conference. The audit  hearing or the opportunity for the  audit hearing does not take place  until the final audit report stage.  I moving  both components the commission can  gather information at a critical  stage of the  audit process. With this information  the commission can make the necessary  decisions that will allow the process  to proceed more efficiently for  the remainder of the process. The  keys that the commission could gather  our factual  information and hear all the legal  arguments directly from the committee's  in the  stage and the result is that the  committees were raised and the commission  would address all issues at  one time .  

Thank you, Mdm. chair.  Happy Valentine's  Day. Thank you for the opportunity  to testify my name is [ Indiscernible  - low  volume ]  I will not repeat  my remark I will highlight one point  respond to one  comment made. The one point that  I wanted  to highlight is that looking at  the Federal Register notice and  the communications about  this initiative from the outside  the commission is working as a customer  service initiative. Which I think  is great and the federal  agents agency should do more customer  service improvement but I think  that there  may be a little bit of  a definitional issue on who  the customers are for these purposes.  The commission customers are  not politicians. The commission  customers are devoted's of the  United States the voters of the  United States to the statutory right  to timely  accurate information. The rules  around that [ Indiscernible - low  volume ] when the commission  puts out calls to the private bar  saying how can we help you in our  audit of more clients?  I think it sends the wrong message  and  tends to invert the  commission's mission.  Maybe the commission consider asking  as maybe in area [ Indiscernible  - low volume ] somebody like Joe  Santos  can file ridiculous reports and  not trigger an audit on a time line  that matters to voters.  How can  I happen? What adjustments of the  audit process might be appropriate  to ensure a situation like that  [ Indiscernible - low  volume ] that is all  I wanted to highlight from the written  submission. The brief  response to one suggestion  about confidentiality. Comments  that a commission could applied  the section 1 09 two audit and  I think that is  statutorily inaccurate. Section  31 09 provide that investigation  to notification under  that section [ Indiscernible - low volume  ] the section commission audit and the regulations  that site for the or Kars references  part 111 of the commission regulation  enforcement division not the audit  division and one  for 16.  Before goes down that road I think  there is no statutory authority  applied to that confidentiality  rule. I will stop  there. Happy to answer  questions.  

Thank you before we open it for  questions I asked all the panelists  that while situations are  always helpful for us I asked  that we do not use any names of  current or act to political committees  or those who have not gone through  the process. As  you know we have confidentiality  divisions here and I do not want  them to feel that we are impartial  in any way. I welcome you to your  favorite singer or actor in  hypothetical situations. With that  is safe to open it up  for questions.  

Happy Valentine's Day  to everyone. Thank you for  the recognition. I will use the  on site for the purpose of [ Indiscernible  - low  volume ] I would like to  go back [  Indiscernible ] comment regarding  the exit conference in the important  of the exit conference. Of course  we do have a 10 day response but  what would you consider to be  a more sufficient time period for  committees to respond to  the exit  conference?  

I think it would be better if  it was more  aligned with the timeframe where  you get 30 days potential 15 day  extension perhaps more if cause  is presented. Part of the reason  for that is the novelty of the  issue that we presented in the  exit conference. And maybe something  the committee is not that with full  before but if working in the audit  process and with the auditors hopefully  we have a sense of what is coming  but that is not always the case.  Sometimes it varies based on circumstances  of the audit or personnel  among the  auditors and [ Indiscernible - low  volume ] in doing that. Often times  you will see a nitpick  in push and that is  surprise. That is where the whole  process benefits from the additional  time safety valve trying to address  those issues. One broad comment  I would have about the process is  a lot of time is devoted to the  very end. Potential for the audit  hearing and request for  legal consideration.[  Indiscernible - low  volume ]  thank you for  that answer  

And consideration for your comment  same time on the backend if we were  to look at it in the sense of the  interim  audit stage  remove the D far and look at expanding  the audit stage period do you see  that as  a possibility of releasing the need  for the DFA  are stage? [ Indiscernible - low  volume  ] see eliminating one of those other  stages I expanding the interim audit  stage and addressing some of  the factual as well as what will  be achieved during that time period?  

The interim audit  the state report stage is designed  to permit that sort of servicing  of legal issues such that you have  a forum to present a position [  Indiscernible - low volume  ] the interim audit report stage  is very important because at that  point at the end of the  process used should perform the  auditor's recommendation if there  is amendments to be filed those  amendment are supposed to be filed  the interim order  audit report. If transactions need to be rectified  or refunded it is to be done at  the end of that process. If the  process  does not permit the time to do that  than it does not work as well as  it should and it undercuts one of  the main purposes of the audit process  to encourage compliance and get  a committee back on the right  track.  

Happy  Valentine's Day. I want to start  by regulating things  to chairman  trainer on the leadership  on this. I guess it's Valentine's  Day so I will call it a [ Indiscernible  - low volume ] issue.  It is vitally important to work  with the agency. I also want to  thank her to spend. Participants  and I will not that all of  you here are not on behalf of  compliant you are here on your personal  professional capacities. This is  not paid work for a lack of  utter term. I  really do appreciate it.  With that I have one very  quick  question but in the interest of  fairness, there have been a number  of questions raised about  the process and number of responses  and papers about what sort of changes  should be made in the process.  One exception is as you noted the  center has vast experience  and expertise in this area. You're  here for  a decade. The entirety of the recommendation  for the process were vague simplifying  the procedures. Looking around  the room I was going  to ask if you have any concrete  recommendations for us?  

Thank you for the question and  the opportunity to answer. I think  the big picture recommendation that  we  can offer with the board's consideration  is that you could imagine the audit  process in the opposite  direction of what was suggested  in which the commissioners played  no role. You can imagine an audit  process in which the commission  sets the audit threshold  as the statue provides in  the auditors that the audit then there is  a report in the commissioner decides  any matters  that the process could be much more  efficient. Much more streamlined  by the commission not  getting involved  after the [ Indiscernible  ] phase.  

I take that to be a minority  position on the panel is. I ask  the general question and whoever  would like to answer. I was really  struck with the  comments about the importance of  the exit conference. I will  say that this is a very difficult  process to spend on the  general public. I  had  the flowchart for the first year  here. I do not think it is intuitive  at all. One thing that is not intuitive  is the  key moment. There were a number  of [  Indiscernible ]  deciding questions and inviting  the audit process but there seems  to be some disagreement about where  that falls with regard to the  exit conference. My question is,  what do you all, in your experience  as the earliest reasonable [ Indiscernible  ] would provide guidance to the  audit process given  the complexities of solidifying  the natural record and [ Indiscernible  - low volume ] . It just struck  me as a key  issue.  

My initial reaction  to that is it depends  on the complexity or vagueness of  the legal issue  involved. Following [  Indiscernible ] Bruce Springsteen's  goes to the exit conference presented  with findings it does not know what  is coming. Finding one is personal  use of campaign funds.  The campaign paid the sister the  photographer to take  picture of him at campaign events  and the auditors looked at the invoices  and concluded based on criteria  not evidence that she was overpaid  or paid a  superior market wage so they conclude  from that personal use of campaign  can be 10  business days. So that rights as  a host of questions the first and  most fundamental is given with the  regulation actually says that they  pay ephemera family member as long  as services are  for payment and fair  market value. 
     

Will you  ever present to the auditors satisfaction  that it is fair market value. Will  the auditors perhaps let the  finding percent process  and let the  commission decide. Headlines  political  saying Springsteen [ Indiscernible  ] to pay sister if that is  an example and that's people right  by you in the  exit conference. We hope to try  to  avoid it and hopefully it  is avoided. Is commission intervention  necessary to avoid that? Maybe he  was overpaid. There is a factual  list there. I am  not denying how did  you avoid the surfacing  and finding that would  come prematurely and interim  and provides the office of General  Counsel  and requires committees to provide  informed  legal response in a timely manner.  

I guess  a follow-up. I read the comments  suggesting that the process should  happen prior to the  exit conference. I'm curious if  you have a pitch on your preferred  outcome.  

Our proposal  would be that the post findings  would be presented to the committee  and then if there were legal issues  or questions of the law the committee  would have options to request preliminary  review to make  a determination we will question  at  that point. And only if the commissioner  agrees this you should move forward  then we will move forward. And then  factual questions will  concede along with the  normal  process.  

Is Holloway your comment [ Indiscernible  - low  volume ]  [ Indiscernible - low volume  ]  

I think I  would advocate that the commission  could you all the issues at one  time. Where there is some value  in doing a very early in the  process I ink as a practical matter  it could be cumbersome of  the commissions involved to do early  in the process. I  think you have to do and determine  with the factual issues are and  work with the [ Indiscernible ]  and what the legal issues  are. And also as  a reminder it also  has a directive nine so  they can submit  legal issues on their own under  director 69 early in the process  if they thought the commission should  be involved early in  the process. That is one way to  do it but I would advocate for overall  the commission should be involved  early in the process and the involvement  should be at the audit report stage.  The audit [ Indiscernible ] now  everything has a context for  the commission. Unless the commission  wants the auditor. I don't think  you want to  do that. So I would say let the  staff fully developed the issues.  Then you can hear from the committee  and once you have heard from the  committee then you can make the  decision. So I would advocate for  [ Indiscernible - low  volume ]  

Have you also considered the  request for  legal consideration to be in the  same stage or audit hearing or as  they consideration for the  audit hearing? Quite possibly legal  issues before moving on to the next  age.  

I would advocate for and recommend  that the audit hearing remain. I  think it is vitally important. I  think you need  to hear their side of the issue  and that is important. How they  are framing in the particular issues  important. I would keep that  but I would put it at the [ Indiscernible  ] input to requesting consideration  [ Indiscernible - low volume ]  goes right now it exists even before  the report but when you  get that what has  to happen is the requester in the  committee as well as General Counsel  has to frame the issues for the  commission. The commission needs  context. At that point the commission  has not even seen the finding. Both  have to frame it but if you move  it back then now you have the findings.  Now you've heard from the committee.  And you also have  the benefit requesting consideration  and they can come into the audit  hearing and make the  argument whirly.  

Thank you, Mdm. chair. I will  put this out there for the  panel as part of the discussion  for how these issues are developed.  I am always very concerned. When  the commission  comes in and asked for particular  documents for anyone we are dealing  with. In your experience are the  request you get from the  audit staff are they very broad  or more narrowly tailored to  specific issues? Does it very at specific points  in the process? What has the back  and forth between the committee's  and audit staff then with regard  to those  document requests? 
     

The Council is  looking at each other to see who  is going to talk first . Expect  you win brownie points for your  references. I was impressed but  not surprised. I will present to  you . Expect inky Mdm. chair. I  will try not to quote  more lyrics. Tour starts today so  I had him  on mine. Commissioner trainer my  experiences I seldom seen and can  specifically recall a request in  the audits I have handled in the  past that I thought was prima  facie overbroad to such a degree  that I felt compelled to try  to go up the chain in  the audit division in the office  of General Counsel with that  request. There are moments when  the auditors might seek records  outside the time scope of the audit.  There is a common pack this word  the auditors will  seek debate  statements for three months preceding  the beginning of the audit period  and three months following so they  can check the positive and transfers  and help identify committees bank  balances equally. I have  seen instances where a finding of  statement of financial activity  tended by the auditors have Imprimis  by reporting issues that carried  over from a previous cycle. I had  that concern in the  audit process. I have typically  found on the request for factual  information that I have been able  to work with the auditors to try  to respond to that  without otherwise turning into an  adversarial process. Again where  the function of the audit process  is such where they respond  to counsel respond  to counsel has to be cautious if  you declare war on auditors you  will have an unhappy  audit and eight unhappy two years  following and that is the reality  of the  process.  

Going  with that, there are often times  in the audit process in the fieldwork  that records audit is seeking they  don't  receive them they don't receive them in response  to exit conference in the get to  the later stages where it would've  been helpful to have the information  or cut off. Is there anything in  the audit  staff can do to facilitate or are  we not making the request clear  enough? What can we do to help get  this along so we're not two years  later where we get thing that may  have resolved the entire thing.  

My experience has  in a little different in dealing  with the auditors which is a have  not hesitated to remind me that  they have subpoena power and will  come to the commissioners and the  issuances of  a administrative and set aside a question of what  the commission grants the subpoena.  You deal with the reality that the  fact that the auditors help compel  to seek the  subpoena is something that could  end up in the interim and final  audit report and be on public record  that tends not to be in my  clients interest. That power  exists and my experiences the auditors  have not been shy to that  possibility.  

Thank you Mdm. chair. I do not  know why people keep saying this  is not a sexy topic but what could  be a better activity for Valentine's  Day? I am actually very excited  to have  this hearing and to have all of you  here to provide information to us. It is  long overdue and I appreciate all  of my colleagues are interested  in  doing this. Let me say in response  to what was just said, I do not  think the problem that  the Commissioner highlighted is  committees not coughing up the duff  documents until later in the process  has been particularly pronounced  with the lawyers we have at the  table but you don't  represent everyone and we have had  that problem where committees hold  back  and wait to see whether the auditors  are going to make a  recommended finding and then they  say no we did not do that and then  they coffee documents. It has been  a problem in some audits in  the past. One question that  I have that I will have to  direct to [  Indiscernible ] is, it requires  longevity of representing  clients. Direct -- before  directive 70 the commission had  a two-part process. An  interim audit report and final audit  report. That was all. And as a result  direct  to 70 directive 70 we developed  a more convoluted process  that had the interim audit report  and audit division recommendation  memorandum and  a draft final audit report and a  proposed final audit report. And  then final  audit report. I  know internally that has bogged  down the process is there is so  much paper that needs to be produced  along  the way. I long had this concern  that we have over complicated the  process. I wondered whether  the changes to all these  different  documents, how does that translate  on your side of the table? How does  that does have you noticed that  it has an effect on the process  and your ability to proceed with  the audit and get  it done in a  timely basis. One concern I've always  had is they take  so  long. This including the American  people who are the client and  I agree with that sentiment. These  audits take so long that by the  time we come to a final audit report  and  intentionally consider enforcement  whether findings come out  of it we are to come three car four  years past the actual time of  the activity. Anything we can do  to streamline the process would  the in everyone's interest. Again,  going back to  my question, has the  addition of all these extra steps  had an impact on your side of the  equation or is that  just something that is a problem  for us internally?  

It is  complicated things. Two different aspects come  to mind. Here I will  agree with Mr. nudity on one's subject  and then disagree on one subject.  Get ready. On the  agreement his comment  is correct that the process is too complicated.  It has become more complicated than  it needs to be and that is part  of the reason why we suggested writing  regulations for  this process as you have for the  administrative buying process as  you have required title 26 top audits  and for the  enforcement process I'm going to  disagree with him on the subject  of confidentiality and  directive 70 confidentiality in  a couple  of ways. One it  makes clear that the confident she  the protection of confidentiality  is subject to the sunshine act and  provides empirical guarantee that  you will be able to present these  concerns and avail yourselves of  these process and a executive  session context. And in  the case of a hearing on a draft  final audit report or not Jackson  guarantees public consideration  of matters that might not otherwise  be made public yet. They will be  later but not at  that stage. That makes counsel for  respondent like  I am more reluctant than I might  be to avail myself of  this process. With the commissions  leave I would like to talk a moment  on the nature of our argument on  confidentiality because it is a  little different than with Mr. nerdy  said. Which is that we are not arguing  the 31 09 audit process and the  rules that apply it is more  of a nuance  than that. Recognizing that 30109 does not  govern the audit process. The  audit process fundamentally is part  of the enforcement process. When  you look at the red reviewing the  procedures they appear to be targeting  committees that are not on substantial  compliance in the act that is the  function right now. That we see  in connection with  the process which is what the  commission's regulations on meeting  references. There are two ways you  can look at it first you can look  at the commission discretion for  certain matters to be closed. That  generally follows  sunshine act. If you want to go  with that you can look at quite  a few exemptions one of them is  formal proceeding. Another  one is matters  related to privacy. There are quite  a few that could apply to the audit  process but in addition the commission  meetings and regulation  also says  that  certain matters as 30109 defines  do have to be kept in close  session ending the  regulation defined and is requiring any notification  or investigation that a violation  has occurred as requiring be discussed  in closed session. And as we say  in  the comment fundamentally we think  the audit process is part of the  enforcement  process.  

Thank you, Mdm. chair and thank  you [ Indiscernible  ] putting aside for  a moment the confidentiality issue  which I take  seriously and I will take a close  look at your comments on that. If  we want it to streamline  the process do you or anyone at  the table happy to have suggestions  do you  have suggestions for exactly how  we should go about  doing  that?  >> Myself I would  not oppose a [ Indiscernible  ] as long as you have sufficient  safeguards in the interim modern  audit report  process permit a surfacing and revolution  that might be  avoided before the publication of  a report. It is not a  question of [ Indiscernible ] making  sure the quality and that  it represents the authoritative  statements on what actually happened  and what instances of potential  noncompliance occurred and how the  committee responded to those  instances  

I think you can shorten the audit  process the two recommendations  reflected in my written comment.  By removing  consideration and audit hearing  to the interim audit portion.  I also think you can shorten it  in it addition by eliminating the  committee's response to the draft  final  audit report. Once you get to that  point if you adopt a earlier recommendation  you already heard from the committee  on legal issues you heard them at  a audit hearing. So they have had  plenty of opportunity to reflect  whatever illegal factual position  they  will take. And if there is anything  else that comes up I would  suggest that you follow procedures  and petitions for rehearing in the  public finance regulations where  they demonstrate why they cannot  raise the issue early and I think  that would shorten the  audit process. Another thing I want  to add that goes back to the document  request, I think committees would  have incentives to submit documents  earlier if they knew  that proceeding and issues  would be resolved early. If they  know everything that needs to be  submitted in response to that report  because the commission will make  a decision on factual and legal  issues I think they will submit  the document  

If I may follow on Mr. Holloway's  point the reason under current symptoms  dances that I might submit a  response on behalf of a client is  typically that is the moment where  the audit is publicly known. That  is the audit moment where it is  sent to the commissioner in  the objective and final audit report  is put on the public agenda. I have  an audit  finding one and  even though you've heard my argument  on a before and the audience auditors  have heard the arguments and a juicy  has heard it the public has not.  They draft final audit report often  does not adequately reflect what  I communicated to the auditors or  OTC on  these issues. That is where I  need to be heard in my our words  to defend the honor of Mr. Springs.  

My question is going to go in  response to the  last statements. When the record  goes public and whole wall all of  this information everything  be on the record so it will include  the responses you had. It will not  have the up-to-date responses and  then I will  turn to [  Indiscernible ]  I want to make sure your getting  into this game you've been sitting  silent. If we are talking about  all the schemes of lowering the  ages or cutting stages out your  comment makes a particular note  about micromanagement of the auditors.  I would like you to first talk about  how from the house I am reviewing  the reports you can consider that  to be  a micromanagement. If that is the  case how do we eliminate that we  can effectively make sure the public  is seeing findings  out there.  

Thank you commissioner take the  second question first the way to  eliminate is to  eliminate it. There is nothing in  the statute or inherent in the process  of an audit that  requires commissioners to weigh  in at multiple stages of the  process or at all in with the auditors  are finding. The commission statute  provided that the  commission set audit thresholds  to determine when an audit is triggered  to assess substantial compliance  of the law. There is nothing  else required of the commission.  That would be the easy way to do  it. I think  the concern about having the commission  involved at multiple phases is  that as the  history should, the  chances of a  deadlock on matters of importance  are very high. It  is critical that for  accountability it is critical that  the public know when  deadlocks occur and there is a certain  level  of attention does it does not look  great to  have political appointees managing  the findings of individual auditors  and individual audit involving  particular committees like  Mr. Springsteen. There are some pretty good policy  and legal reasons why the commission  might want to step out of micromanagement  but step out of the day-to-day management  of audit and let the auditors do  their job. There is no penalty from  an audit. It is not the IRS where  the IRS audits you and find you  did something wrong and you are  the government money. There are  multiple step that you  have to follow to be a penalty from  an audit. That's the point at which  the commission statutorily can and  should be involved.  

Do you happen to have a sense  of how much time and money committees  spend on  audit?  

I do not. I have never  represented a committee in  a audit. I do the have  a sense of how the audit reports  informed the public record and how  groups or journalists in law-enforcement  use  that information. I  think the suggestions I'm offering to the  commission about transparency and  accountability are geared towards  ensuring that the public record  around that is clear and service  of the mission to  the public and less towards the  compliance costs  and obligations.  

One of the issues the commission  is how do we make running for office  accessible. How do we make it work  better  for people? Which I think it is  important that we do that. The question  is first for Mr. Holloway but  then  four [  Indiscernible ] , many of the committees  that are actually audited do not  use counsel. One of  our concerns is for the  smaller committees  or those who do not want to spend  a lot of money  on lawyers. Is there anything you  think we could do to make this process  easier to understand and  comply with? Thus making more  people comply that is for Mr. Holloway  and all your experience for  my friend in private  practice, if you taking on clients  who started off the process without  counsel and realized midweight theater  that they need counsel how is it  gone?  

The first thing I recommend in  terms of someone getting involved  in this process is it  would be easier if all commission  procedures with respect to the audit  were in one place. Whether or not  that is what uses decide to do  a  regulations and if you don't do  it in regulations I think the procedures  need to be one place. Whether or  not you combined set directive 69  directive 70 audit hearing procedures  all of that should be in  one place. It should not be  a search through the commission  website to find all  of the procedures with respect to  the audit. I think it could be challenging  for a layperson not familiar with  the process. It  will require counsel to know that  there are other procedures out there  to be aware  of.  

I echo what Mr. Holloway was  saying. I think there could be definite  improvement on the availability  of the information about the audit  process. Right now to go to the  commission website you have to toggle  through multiple screens to find  it. You can find in legal resources  that may or may not  be doing if you're not a  lawyer or I think there could be  information there also in the  for  committee and  candidate section. A condensed version  of all of the different direct of  his emeralds and procedures  put together for a layperson to be able to follow  along with and understand and that  is important. To answer your question  about coming on as counsel ladling  in the process, that can certainly  be difficult. A committee  could have lost opportunities to  respond to earlier stages on different  legal issues or may not  understand the laxity of the legal  issues raised at a earlier point  and are August on getting their  documents together and  produced plus the nature of political  committees is that often times staff  turns over after the  election cycle. So  you are not only trying to find  all the documents you're potentially  dealing with someone who just arrived  at the committee. They are trying  to learn what the person before  them did.  So there is that Emil element of  scrambling to put it all together  when a audit first appears. A  can certainly be difficult to  come on later in the process as  counsel.  

I would add  two things. The commission's best  investment is one that is made since  instantly in  the last 10 to 15 years  much success and should continue  to redouble on which is education  for committees while on the battlefield  campaigning. To the degree that  you have more tips for treasures  or more YouTube videos and training  opportunities and people understand  so they do not get audited in the  first place. The second  is if the committee does  get selected for audit they need  to understand that they face genuine  legal peril potentially. The auditors  need to deal with the unrepresented  treasurer and sensitivity that perhaps  a judge may deal with the pro se  plaintiff or pro  se defendant realizing you're  dealing with people that do not  necessarily understand exposure  or their right. I remember  representing long ago  a committee where in the  exit conference [ Indiscernible ] and the treasurer  said they did not file the reports  because they did not know the correct  data and it was better to file a  report all then file an accurate  or an  accurate report. It  was in every draft of the final  audit report they thought it was  the funniest thing in the world.  It was actually prudent if you think  about it. But that is the sort of  thing that someone not represented  is not necessarily going to be alert  to.  

Mr. trainer?  

Pink you come at  him chair. Thank you. In my experience and  correct me if I'm wrong but in dealing  with the audit staff in regards  to legal issues that may arise,  it is my understanding that the  audit staff works mostly as a intermediary  between the office of General Counsel  and yourselves as people who are  representing people. My question  is, would  it help the resolution of legal  issues that arise in the course  of an audit to be more fair and  efficient if the office of General  Counsel's position were provided  to in order to committee in a written  form that  you had the opportunity to file  a response to as opposed to the  back-and-forth through an intermediary  process now. It can either  be a moving object or one that gets  lost in  translation.  

[ Indiscernible - low  volume ]  

 The audited committee does not necessarily  know what involvement  if any ODC has for you get  to the interim otter audit report  stage. They will  not know if they  have been read into the potential  findings or have views on the potential  findings. That is a little bit of  a box. I guess it is a gentle way  of disputing the question and it  may be the limitations of my knowledge  that the audits are intermediaries  between ourselves and ODC that I  am not convince  or I do not know that is actually  the case.  

That answers my question and  to help to  know that you do not know the level  of interaction between the office  of General Counsel and auditors  to know whether or not they are  legal issues being pushed or general  theories of what the auditors might  have. Thank you, Mdm.  chair.  

Listening to what all of you  have and saying it  sounds like there is  some desire for two separate types  of documents. Mr. Svoboda is advocating a full  rulemaking which that would obviously  take a while to get regulations  into place.  That is not a instantaneous  process. It sounds like  what was being suggested is in addition  to that or a revision of direct  is 70. Whatever  we codify and revised procedures in addition  maybe we need something that is  more of a plain English version  along the line of  a guidebook that is  a project of former Commissioner  will offer. I think it has been  very useful to people to get a basic overview  of the enforcement process. It sounds  like we need something for the lawyers  and something for the nonlawyers.  They obviously need to be consistent  with one another although written  in a  different format. I love our  regulation but it is not the most  transparent  reading experience. 
     

Without abandoning the proposal  we made in regulations we are very  committed to we have gone 50 years  what's another three or four. One  alternative might be a policy statement.  Like  you have with [ Indiscernible ]  submissions. Where there is one  federal document that lays out the  audit process and how  work is. This is what fieldwork  is and this is the exit conference  and the interim audit report stage  and final audit report stage these  he opportunities  to have legal issues and laid  out in one document. If the commission  was to shy away from a rulemaking  that would be a logical thing  to happen .  

There are concerns about the  way findings or suggestions  of wrongdoing and up on the  public record as  to documents. I think it  is a sensible thing to  worry about. My question for you as we talked  a little bit about the audit hearing  and whether that should happen in  the open art  negative session  you think about  the documents involved in  is there a way to  shield committees[ Indiscernible  ] [ Indiscernible - low  volume ]  

True reaction to reactions  to  that. First, I think the sunshine  act provides some authority for  a commission to  do that. I will double back to  that moment the second thing I wanted  to raise was in response to Commissioner  Brassard's question. Where she  asked about why it is important  [ Indiscernible - low volume ] I  will paraphrase  but all of  these documents are published at  the end of the audit so what does  it matter if we do not have the  opportunity to comment on the final  report while it is happening. My  response to that is when I am working  with  a committee I have to be in the  present moment. Someone may be looking  at what is on the agenda for Thursday  and the reporter may write about  in the story comes out and I have  be there to have my wrist wants  on the record. So I have to play  the short and long when if you going  to the long game,  I think there is authority in the  sunshine act to narrow the potential  enforcement related materials [  Indiscernible - low  volume ]  >> If the audit is being discussed  in closed session the documents  should not be released till the  end. I think that brings us to  an interesting discussion about  what the flock and final  document is. Right now I think it  is meant to be the commission  and document but if there is disagreement  over a finding it is very hard to  tell sometimes what the actual end  results was. I know directive 70  says in that case matters are moved  to additional issues and is a  brief summary of  the fact. In  my experience it is only  a sentence and that can be  very misleading. The journalist  with the public record in the  accusation does not request the  reality.  >> One of the things we have  been thinking about is if you get  to a interim audit report and there  are  no disagreements what are the fast-track options?  Where you go all the way to the  end of it? I think we can take time  on both sides and save expenses  on both sides and I would like to  see if you had any [ Indiscernible  ] to  consider  that.  

Commissioner that happens from  time to time.  From a responded committee perspective  we have nothing further to say that  has  not been [ Indiscernible ] typically  and be done with the  process.  

[ Indiscernible - low volume  ] [  Laughter ]  

I'm going to follow up  on that.  Sometimes when we start the  audit process and obviously because  we think there is something that  needs to be flushed out we get into  and realize okay, it is  actually fine for whatever reason.  We do not have all  the documents and for whatever reason  there are  audit that proceed along for two  years and at the end of the day  they come out and assess clean on  it  no findings. From  your perspective  is it worth  it? If we get to  a point that we will not make things  at the end of the day is it that  are to cut off the audit they were  going to terminate the  audit now or is an advantage  to your client to have  a clean audit report go through  the process and incur the extra  expenses then getting that piece  of paper that says we have and scrub  and found  and compliant my  gut tells me the first one that  I would be interested  if I.  Am  wrong.  

 Mdm. chair. I think the first question  I thought of when you  raised that is it depends on what  is going on  public record. If there is something  in the public record that audit  was initiated but it  just gets [  Indiscernible ]  so the thought of the clean record  at the end of the day helps with  that potential  issue and to  regarding expenses when there  aren't any disputes committees tend  to  stop responding or stop submitting  formal responses  to the  draft report. The expenses with  legal fees increases once  that occurs. [ Indiscernible ]  

A private letter from the commission  saying simply we have made no findings  and found you to be in compliance  and go forth and say no more  is adequate to meet  committee needs. If you look for the example in  the House of Representatives and  the office of Congressional efforts,  that can happen. You can have a  preliminary review that is conducted  confidentially and at the end of  30 days that says the board anonymously  close  the review. 
     If someday later  somebody learn and can ensure that  that is a  helpful thing to have but that can  be done with a private letter not  an announcement.  

I just want to point out there  is a norms difference between affirmative  finding by four more commissioners  that the committee was in  substantial compliance. And the  absence of any finding amounts of  Angel compliant any  procedure intended to address the  affirmative substantial compliance  finding need to be worded carefully  to not  unintentionally provide an  unwarranted confidentiality where  all findings  deadlock.  

Let me ask  about that how should we [ Indiscernible  - low  volume ] on legal questions in this  context? We know what the rule is  statute  tells us. What should we think  of here and what should be the process  of [ Indiscernible ] and essentially  is  the audit division get a tiebreaker  or what does it do it  is ago? 
     

[ Indiscernible - multiple speakers  ]  

I would say probably everyone  on the panel would agree that is  a situation that no one is happy  with. From the perspective of a  private client under audit they  would ask with justice why am I  seeing the public release of a  report indicating the staff at the  federal electric commission that  my client violated the law when  in fact the commission one is able  to say that my client violated the  law. It puts them in  a add  unfair situation.  He would say would find in  unsatisfying situation because the  commission failed to  say clearly they adopt  a  staff recommendation and from the  agency perspective I would imagine  it would be unsatisfying because  they would appear to but the staff  and agency where the staff advance  the position of the commission which  under statute it has the use of  authority of performing  the  policy. So, I do not know if it  is a good answer but I would  say something nobody is  happy about [ Indiscernible - low  volume ]  

Anything you would like us to  discuss that we have not discussed?  Any important point you think  we are missing  here?  

[ Silence  ]  

If there's nothing further this  concludes our hearing. I  want to thank all of our  panelists here. We had a wonderful  discussion that that's the tone  for how we look at these  procedures and diverse ideas. Made  us realize that some of  our ideas were not so  good that is particularly appreciated  as  well with that this meeting is  adjourned.  >> 
     The meeting is  now live. Mr. Chairman we are live  and recording 
     -- this meeting is  adjourned.  

[ Event  Concluded ]