Audit of the Democratic, Republican, Independent Voter Education Political Campaign Committee

On July 5, 2005, the Commission approved the final audit report on the Democrat, Republican, Independent Voter Education Political Campaign Committee (DRIVE). The audit found that the committee:

• Received two bank loans that appear to be unsecured;
• Failed to maintain contributor payroll deduction authorizations;
• Did not deposit contributions in a timely manner; and
• Misstated financial activity.

Apparent prohibited contributions—bank loans

A bank’s loan of money to a political committee is not a contribution by the lending institution if the loan is made in the ordinary course of business. A loan is considered to be made in the ordinary course of business if it bears the usual and customary interest rate, is made on a basis which assures repayment, is evidenced by a written instrument and is subject to a due date or amortization schedule. 11 CFR 100.7(b)(11).

DRIVE received two bank loans in October and November 2002 that totaled $500,000. Neither loan was secured by collateral. The FEC’s Audit staff therefore concluded that the loans were not made on a basis that assured repayment. In addition, DRIVE did not properly disclose the loans as outstanding on its 2002 Year-End report. The Audit staff recommended that DRIVE either demonstrate that the loans were secured, made in the ordinary course of business and therefore not a prohibited contribution or file amended reports disclosing each loan as unsecured. To date, DRIVE has done neither.

Failure to maintain contributor payroll deduction authorizations

A separate segregated fund (SSF) must maintain copies of payroll deduction authorizations for each individual who makes any contribution to the SSF via automatic payroll deduction. 11 CFR 104.14(b)(1). These authorizations, like other committee records, must be kept for a period of three years from the date of the report to which they relate. The Audit staff conducted a sample review of DRIVE’s contribution deposits and concluded that payroll deduction authorization forms were not available for contributions totaling $1,235,460. In response to the interim audit report, DRIVE implemented policy and procedural changes to ensure that such authorizations are obtained and maintained in the future. These new procedures will be subject to review by the Audit staff.

Untimely deposit of contributions

Under Commission regulations, all receipts by a political committee must either be deposited or returned to the contributor within 10 days of the treasurer’s receipt of the contribution. 11 CFR 103.3(a). Additionally, collecting agents that receive contributions on behalf of a committee must transmit those funds and the necessary records to the committee treasurer within a specific time period—within 10 days for contributions over $50 and within 30 days for contributions of $50 or less. 11 CFR 102.6 and 102.8(b).

The Audit staff’s sample review of contribution transmittals from local unions and/or employers to DRIVE showed that contributions made via payroll deduction totaling $1,914,970 were not deposited timely, and some deposits were made up to 64 days late. In response to the interim audit report, DRIVE implemented new procedures, subject to review by the Audit staff, to ensure compliance.

Misstatement of financial activity

FEC reports filed by SSFs must disclose the amount of cash-on-hand at the beginning and end of the reporting period, the total amount of receipts and disbursements for the reporting period and for the calendar year and certain transactions that require itemization. 2 U.S.C. §434(b)(1)-(5). DRIVE’s receipts, disbursements and ending cash-on-hand were misstated in 2001 and 2002. In response to the interim audit report, DRIVE filed amended reports.

The full audit report can be viewed on the FEC website at http://www.fec.gov/audits/2002/20050718drivepac.pdf.