Understanding a Presidential Primary Audit Report

Purpose, Authority and Scope of Audit

Federal law requires the Commission to conduct a field audit of every political committee established by a candidate who receives public funds for his or her primary campaign. 26 U.S.C. §9038(a).

The audit examines the primary committee’s receipts and disbursements to be sure that the committee has used the Federal matching funds in accordance with the law and to determine whether the committee has otherwise complied with the limitations, prohibitions, and disclosure requirements of the FECA, as amended.

Audit Findings and Recommendations

If the Audit staff finds that the committee has not complied with the election law, it reports its "findings" to the committee in an exit conference and, again, in a Preliminary Audit Report. The committee may respond by providing additional documentation to demonstrate that, in fact, it had complied with the law or by correcting the errors and amending its FEC reports, accordingly.

The final report includes the Audit staff’s findings and the committee’s response to those findings.

Two Types of Findings

The Audit staff makes two types of findings:

Those that pertain to Title 26 of the U.S. Code (26 U.S.C), which cover the public funding provisions of the law; and
Those that pertain to Title 2 of the U.S. Code (2 U.S.C.), which cover the law’s contribution limits and prohibitions and its disclosure requirements.

Title 26 Findings and Recommendations – Repayment Matters

If the Audit staff finds that the primary committee has not fully complied with the matching fund requirements, it may recommend, in an audit finding, that the Commission require the committee to make a repayment of matching funds to the U.S. Treasury. Typical reasons for recommending a repayment include:

The committee’s use of matching funds for non-qualified campaign expenses (for example, the committee did not keep adequate records to document that their disbursements were made in connection with the primary campaign or the committee exceeded the expenditure limitations of 11 CFR 9035); and
The committee’s receipt of matching funds in excess of the amount to which it was entitled. 11CFR 9038.2(b)(1)).

The Audit Report always includes the audited Statement of Net Outstanding Campaign Obligations (NOCO). Committees that receive matching funds are required to submit a NOCO Statement. The document lists the committee’s assets and all outstanding obligations for qualified campaign expenses and estimates for winding-down costs, as of the candidate’s date of ineligibility. As part of the audit, the Audit staff reviews the committee’s NOCO and includes, in the Audit Report, an amended version of the NOCO statement based on its audit. Under the discussion of the NOCO Statement, the Audit staff gives its conclusion as to whether the committee received matching funds in excess of the amount to which it was entitled or whether it is entitled to additional matching funds.

Title 2 Findings and Recommendations – Non-Repayment Matters

If the Audit staff finds that the committee has made other errors (apart from the public funding requirements), the Audit staff will not recommend any repayment. But the Audit staff may recommend that the Commission require a payment to the U.S. Treasury to disgorge the committee’s accounts of excessive or prohibited contributions. Some typical findings in this category include:

Receipt of excessive or prohibited contributions;
Disclosure problems such as a misstatement of financial activity, inadequate itemization of receipts or disbursements, or inadequate recordkeeping for contributions received; and
Stale-dated checks—i.e., checks that the recipient never cashed. 11 CFR §9038.6

Future Commission Action

Findings never address a compliance action against the committee being audited. The Commission may, however, initiate an enforcement action, at a later time, with respect to any of the matters discussed in an Audit Report.