Federal Election Commission

Office of Inspector General -- Semiannual Report

Period ending September 30, 2004

If you require the entire printed version of this report, contact the Office of Inspector General, Federal Election Commission, 999 E Street, NW, Washington, DC 20463 or call Dorothy Maddox-Holland, Special Assistant, phone: (202) 694-1015, fax: (202) 501-8134, or e-mail: [email protected]

Executive Summary

            This Semiannual Report to Congress issued by the Federal Election Commission (FEC) Office of Inspector General (OIG), is submitted in accordance with the requirements of the Inspector General Act of 1978, as amended. This semiannual report summarizes the major activities and accomplishments of the FEC OIG covering the reporting period of April 1, 2004 - September 30, 2004. The Executive Summary summarizes the significant actions and achievements pertinent to the Federal Election Commission, Office of Inspector General. In depth facts pertaining to a particular topic can be found in subsequent sections of this report.

           To help ensure the integrity of the FEC, and to improve agency programs and operations, the OIG is responsible for conducting, supervising, and coordinating audits, investigations, and inspections. The OIG continues to strive to prevent and detect fraud, waste, abuse, and mismanagement of the Federal Election Commission’s resources and operations.

           The Federal Government has made the improvement of financial management a high priority. Under the provisions of The Accountability of Tax Dollars Act of 2002, the Office of Inspector General is required to audit the agency’s financial statements annually. To prepare to meet the requirements outlined in the Act, the FEC OIG selected Clifton Gunderson (CG), LLP to perform the first financial statement audit of the Federal Election Commission.

           The audit will include tests of the Commission’s accounting records necessary to enable the contractors to express their opinion on the financial statements. Tests of controls will be performed to examine the effectiveness of certain policies and procedures that are considered relevant to preventing and detecting errors and fraud.

           The FEC OIG involvement in the financial statement audit is critical. The OIG, along with the contractors and FEC management officials have been involved in a number of meetings pertaining to the financial audit. During the planning stages of the audit, the OIG met with the contractors and FEC management officials to discuss the financial operation of the Commission. In addition, the contractors were provided with information pertaining to previous financial related audits conducted by the OIG.

           Audit status meetings were conducted to discuss the progress of the audit, as well as address any questions or concerns raised during the fieldwork. Additional meetings were held to discuss specific accounting and budget issues relevant to the audit. The Audit section of this report, which starts on page 9, contains additional information regarding the Audit of the FEC’s Fiscal Year 2004 Financial Statements - OIG-04-01.

           The Audit of the FEC’s Public Disclosure Process – OIG-02-03 was initiated during a previous semiannual reporting period. The two objectives related to this audit are to: 1) determine the extent, if any, of disclosure differences between candidate contributions reported by political committees and related political committee contributions reported received by candidates; and 2) determine whether an adequate process is in place to remedy any reporting discrepancies.

           The Office of Inspector General continues to work towards completing the audit of the FEC public disclosure system. Steps taken to accomplish this task consist of examining various samples of campaign transactions through the disclosure system. These steps include analyzing, reviewing, and comparing balances of candidate receipts vs. political committee disbursements of campaign finance contributions. Campaign regulations were reviewed to determine the recording requirements for in-kind contributions, as well as the mandated responsibilities of the committee treasurer. For detailed information pertaining to the audit of the agency’s public disclosure system, see page 12.

          The OIG conducted a follow-up assessment on the audit entitled Agency Controls Governing the Process for Procurement of Vendor Training Services – OIG-00-01, released September, 2000. The audit was originally conducted to evaluate the effectiveness and efficiency of management controls governing the process for procurement of training services obtained through outside vendors.

           During this reporting period, the OIG contacted management to determine whether or not corrective actions had been taken to rectify the outstanding audit recommendations. As a result of the follow-up assessment, the OIG concluded that management had taken the necessary steps required to close the audit recommendations. For additional information as it pertains to the follow-up assessment, see page 14 located in the Audit Follow-up section of this report.

           The Inspector General provides necessary oversight and serves as a catalyst for improving and maximizing the efficiency and integrity of FEC programs and operations. The OIG is authorized to receive and investigate complaints concerning possible violation of laws, rules or regulations, mismanagement, abuse of authority, and waste of funds. These investigations are in response to allegations, complaints, and information received from FEC employees and other concerned individuals.

          The number of investigative inquires processed by the OIG increased during this reporting period. Several individuals contacted the OIG to discuss their concerns about matters involving possible violations of fraud, waste, abuse, or mismanagement of FEC programs and operations. For detailed information with regards to the hotline inquiries, see the section entitled Hotline Complaints which is located on page 16.

           Besides conducting audits, investigations, and reviews, the IG staff is involved in a wide range of additional activities. The items below outline some of the additional assignments taken on by the IG staff during this reporting period. For complete information with regards to the additional activities of the FEC OIG, refer to page 17, the section entitled Additional Office of Inspector General Activity.

        • Prior to the end of this reporting period, the OIG initiated a peer review of the Federal Housing Finance Board (FHFB), Office of Inspector General. The General Accountability Office’s Government Auditing Standards, requires that a peer review be conducted every three years on organizations that conduct government audits. A peer review, also referred to as an external quality review, is a review of an audit organization by an organization not affiliated with the audit organization being reviewed (see page 18).

        • The Inspector General continues to serve as a representative to the Executive Council on Integrity and Efficiency (ECIE). During this reporting period, the IG served as chairman of the 2004 ECIE awards review panel committee (see page 19).