Independent Audit Report on FEC Submitted to Congress

INDEPENDENT AUDIT REPORT ON FEC SUBMITTED TO CONGRESS

WASHINGTON – An independent audit of the Federal Election Commission, conducted over the past eight months and submitted to Congress today by the firm of PricewaterhouseCoopers LLP (PwC), determines that the Commission executes its duties "…without partisan bias," and addresses the necessity for Congress to authorize mandatory electronic filing of campaign reports.

The audit was mandated by Congress in 1997, with an earmarked allocation of $750,000 from the FEC’s FY’98 budget. PwC was awarded the audit contract by the General Accounting Office through competitive bidding. The firm began its work in June of 1998 and submitted its final audit report to the GAO, Congress, and the FEC today, January 29, 1999.

In a joint statement, FEC Chairman Scott E. Thomas and Vice Chairman Darryl R. Wold said:

"We are gratified that the PwC review revealed several positive aspects of the FEC’s operations. Most significantly, PwC noted that the FEC by and large is a competently managed organization with a skilled and motivated staff, that we execute our disclosure and compliance duties without partisan bias, and that there is a high degree of customer satisfaction with our products and services.

"With regard to the various ‘improvement opportunities’ identified by PwC, we note that several (such as migrating to a new disclosure database and implementing a new computer-based case management system) reflect recommendations or actions already under way or suggested by the FEC itself. Further, several, such as mandatory electronic filing for certain committees, require legislative action.

"We will give each PwC recommendation serious consideration. Some may require additional cost/benefit analysis. We will work closely with Congress to effect those changes that will improve the FEC’s operations," the Commissioners’ statement concludes.

In the report’s Executive Summary, the PwC auditors state: "The FEC is basically a competently managed organization with a skilled and motivated staff, although it has its shortcomings. The ability of the FEC to adapt to the changing election environment, however, has been hindered by the FECA [Federal Election Campaign Act] statute itself, escalating campaign finance disclosure and compliance workloads, and an organizational culture that has attempted incremental change in a deadline-driven environment stretched by limited resources."

Specific FEC strengths the independent audit report cites include:

Disclosure and compliance activities are executed without a partisan bias. The report gives an "unqualified yes" to the question: "Are FEC programs conducted in a non-partisan, ethical, and independent manner?" The report states that "high ethical standards are espoused throughout the organization," that a "high level of confidentiality is maintained" and there is "no partisan bias evident in the release of public records or information."

On balance, the surveyed filing community is quite satisfied with the products and services provided by the FEC. "While the level of usage of products and services varies, the degree of satisfaction is consistently positive. A telephone survey of 353 randomly selected filers was used to assess satisfaction, and those surveyed filers generally perceived the Commission to be fair and non-partisan. On a scale from 1 to 10, where 1 means poor and 10 means excellent, surveyed filers gave the FEC an average rating of 8 on how well it was doing its job," the report notes.

FEC "…places a premium on facilitating voluntary compliance, and the regulated community values the products and services designed and employed by the FEC to enhance this voluntary compliance. "

"Productivity has increased in the processing, review, and dissemination of campaign finance transactions in the face of increasing workloads."

"Confidentiality of potential and existing compliance matters is maintained throughout the report review, referral, audit, and enforcement processes."

Additional findings and recommendations contained in the PwC audit report include:

"The Congress and the FEC need to initiate actions that will eventually allow the FEC to shift some resources from its disclosure activities to its compliance programs by the following means: develop a comprehensive, mandatory electronic data filing system for the major filers in conjunction with a significant business process reengineering throughout the FEC; redesign disclosure processes (using industry standard software) and realign organizational units to improve processing time, accuracy, and cost."

"Unless the paper-based, manual disclosure processes are changed to a mandatory and fully functional electronic filing system, the current well-regarded FEC disclosure function faces deterioration under the rapidly increasing volume of campaign finance transactions expected in future election cycles."

"The Commission’s Enforcement Priority System (EPS) is a system for prioritizing enforcement matters in the face of limited staff resources. The EPS is a reasonable triage approach and operates without evident partisan bias. EPS allows the FEC to exercise prosecutorial judgment while providing sufficient structure to differentiate among cases for Commissioner disposition. Improvements to strengthen the accountability of the case activation system and an increase in enforcement resources to expand the number of cases activated for disposition would enhance compliance effectiveness."

The FEC should be authorized to move "…non-deliberate and straightforward reporting violations, such as failure to meet reporting deadlines, away from the enforcement process and into an administrative fine system to allow enforcement resources to handle more significant violations."

The report’s Executive Summary also notes, "The FEC faces an increasing and volatile workload with the year 2000 election cycle that features a non-incumbent Presidential election. Increased FTE [employees] and automated data processing initiative resources should facilitate improved FEC FY1999 program performance. Depending on the number of Presidential candidate committees, the size of the enforcement caseload and the Commission desire to increase case activation rates, additional compliance resources in FY2000 may be warranted above normal inflation adjusted levels. FY2000 appropriations should be conditioned on the agency’s continued progress in implementing opportunities to increase productivity in its disclosure and compliance programs."

The report’s summary concludes, "The threat of the increasing volume and volatility of workload for the FEC is real and near. Failure to change will lessen the FEC capacity to meet its basic FECA requirements, while at the same time it will require ever-increasing staff resources to meet those minimal requirements. Change will not be easy, but it will be necessary if the FEC is to meet the difficult challenges it faces. Change will have to come from both inside and outside the FEC. This study has identified many steps that the FEC can take on its own to streamline operations, enhance management practices, and redesign business processes to leverage technology initiatives. However, several actions such as the authorization for mandatory electronic filing, the establishment of an administrative fine system, and the institution of a single point-of-entry for all registered committees will require Congressional action. Without these authorizations, it will be difficult for the FEC to capitalize on the many opportunities identified."

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Note to editors, correspondents, and broadcasters: The official title of the audit report is "Technology and Performance Audit and Management Review of the Federal Election Commission." It can be viewed on the General Accounting Office’s Website, at www.gao.gov/special.pubs/publist.htm. Media Relations contact at PricewaterhouseCoopers is David Nestor, 212-259-4855.