Commission adopts new audit procedures
On May 4, 2023, the Commission adopted new procedures for auditing political committees that do not receive public funds. The new audit process seeks to balance efficiency, procedural protections for audited committees, orderly development of the law, transparency, and the Commission’s statutory authority to seek voluntary compliance with the Federal Election Campaign Act (the Act). The new procedures will take effect for audits that begin on or after June 1, 2024. The audit process currently in effect will continue to apply to audits that begin before that date.
Summary
On January 9, 2023, the Commission published a notice of public hearing and request for public comments on its policies and procedures for auditing political committees that do not receive public funds. On February 14, 2023, the Commission held a public hearing on these policies and procedures. In adopting its new audit process, the Commission took into account comments and testimony received during the public comment and hearing process.
The Act provides that the Commission may audit any political committee required to file a report with the FEC. The newly adopted process begins with the review of a committee’s reports by the FEC’s Reports Analysis Division (RAD). If RAD determines that a committee’s reporting errors exceed Commission-approved thresholds, RAD refers the committee to the FEC’s Audit Division. Depending on its available resources, the Audit Division may recommend that the Commission authorize an audit. If the Commission votes to do so, the Audit Division will send a notification letter to the committee explaining the process, informing the committee of its right to be represented by counsel, setting forth the basis upon which the audit was initiated, and requesting records from the committee. If the committee does not provide the requested records, the Commission may authorize compulsory process to obtain the records. If the committee does not comply with the approved compulsory process, the Commission may initiate civil enforcement of the compulsory process.
After the committee provides the requested documents, an Entrance Conference will be held between representatives of Audit, RAD, the FEC’s Office of General Counsel (OGC), and the committee. Following the Entrance Conference, fieldwork will take place with Audit staff reviewing the committee’s records for compliance with the Act.
At the conclusion of fieldwork, Audit staff will assess whether the audit has uncovered apparent findings of noncompliance. If a preliminary finding is identified, Audit will provide OGC with a preliminary Exit Conference Report. OGC will provide Audit with its legal analysis of the preliminary findings after which Audit, OGC, RAD, and the committee will meet for an Exit Conference. During this meeting, the committee will receive the Exit Conference Report, setting forth any preliminary findings and recommended corrective actions. Absent a dispute about the proposed findings or recommended corrective actions, the committee is encouraged to take the recommended corrective action promptly, which the Commission may take into account in any subsequent enforcement action, including a potential reduction in civil penalties.
Following the Exit Conference, the committee may file a response to address any factual or legal issues, including any recommended corrective actions. If the committee’s response disputes any factual finding, question of law, or recommended corrective action, Audit staff and OGC will attempt to resolve the issue informally. If any issue of fact, law, or recommended corrective action remains unresolved after 30 days, the committee may request an Audit Hearing.
For audits in which Audit staff determine that the committee is in substantial compliance with the Act and there are no proposed findings, an Audit Division Recommendation Report and a proposed Final Audit Report will be circulated to the Commission. After the Commission has approved the Final Audit Report, the audit file will be published on the Commission’s website.
When Audit staff recommend the Commission adopt a finding that the committee has not complied with the Act or Commission recommendations, the committee will have an opportunity to present its arguments directly to the Commission during a voluntary Audit Hearing. If requested, the Commission will conduct the Audit Hearing in an executive session.
After the exit conference response deadline, or the conclusion of the hearing process, if any, Audit staff will prepare an Audit Division Recommendation Report containing, for each proposed finding, Audit staff’s factual findings, OGC’s legal analysis, and whether the committee implemented any recommended corrective actions. The report will also include a proposed Final Audit Report of the Commission.
The Final Audit Report will include all findings adopted by the Commission. If no findings are approved, the Final Audit Report will also state this. Any proposed audit finding rejected by four or more votes of the Commission will not be included in the report. Any proposed audit finding that does not receive four or more votes will be included under the heading “Issues Not Agreed Upon by a Majority of the Commission.”
Following the adoption of the Final Audit Report, the audit file will be published on the Commission’s website. Audit staff will also assess whether any findings approved by the Commission meet the applicable thresholds for referral to one of the Commission’s enforcement processes.
Reports Analysis Division Legal Question Resolution Program
As the Commission’s new audit process includes a procedure to resolve legal questions that arise in the course of audits, the Commission published a separate notice to limit the scope of its current Legal Question Resolution Program to apply only to legal questions that arise during RAD’s review process. The new RAD Legal Question Resolution Program will take effect on June 1, 2024. The Legal Question Program currently in effect will continue to apply to audits that begin before that date.
Revised Commission Directives
The new audit process required conforming changes to two Commission directives. The Commission revised Directive 69 which lays out the process by which the FEC’s Office of Compliance (RAD, the Audit Division, the Alternative Dispute Resolution Office, and the Office of Administrative Review) may request formal or informal legal guidance from OGC. Directive 70, which sets forth the steps in the current audit process, was also modified by adding a statement that it will apply only to audits that begin before June 1, 2024.
Federal Register publication
Notifications regarding the new Audit Process for Auditing of Political Committees That Do Not Receive Public Funds and Reports Analysis Division Legal Question Resolution Program were published in the Federal Register on May 12, 2023.