At the Federal Election Commission Things Don't Add Up

Quotes on POGO's FEC Report

"The POGO report does an excellent job in highlighting problems with the present state of campaign finance disclosure and makes a number of important recommendations."

Lawrence Noble, Executive Director, Center for Responsive Politics and former Federal Election Commission General Counsel

"POGO's proposed reforms, by requiring PACs and candidates to follow simple bookkeeping procedures, will go a long way toward ensuring that the public has access to accurate information about PAC contributions."

Representative Carolyn Maloney (D-NY)

"The POGO study is right on target in pointing to the deficiencies in disclosure and, in particular, the deficiencies in the enforcement concerning disclosure that unfairly disadvantage candidates and mislead the public."

Tony Raymond, Co-Founder of FECInfo a campaign finance research firm and former Federal Election Commission Webmaster

"We've never taken a PAC check since I first ran in 1992, and yet because we send them back and they don't give the rapid response you want them to give, we have some opponent that's demagoging there, knows darn well I don't take them, but, gee, he can find something in the record, because we had to file a notice that it was there, that we've sent it back. . . But anyhow, that's the kind of thing about which I think your [POGO's] suggestions would be very helpful."

Representative Stephen Horn (R-CA)

Executive Summary

• In 1998, POGO completed a report which showed that $1.45 million in campaign contributions were unaccounted for, improperly listed, or otherwise missing within the Federal Election Commission's (FEC) databases. The enormous discrepancies between the amount of money the PACs (Political Action Committee) reported giving and the amount of money the House of Representatives (House) and Senate candidates reported receiving demonstrate that the FEC is not fulfilling its mission. Now, the discrepancies in the FEC's database, only taking into account incumbents, total more than $12 million.
• Graph showing 1997-1998 Election Cycle Contribution Discrepancies Between Candidate and PAC Reports
• When these two databases are compared only six incumbent candidates match - in the entire Congress.
• Although each PAC is assigned a unique ID number as an identifier, much like a Social Security Number, the FEC does not require its use for identification purposes. Because there is no required standardized method to identify a PAC, candidates often call the same PAC by different names. This compounds problem when attempting to determine the source of a candidate's funding. Candidates often use the PAC's acronym, the name which is at the top of the received checks, or shorthand nicknames, when reporting monies received from the PACs.

• At every turn, POGO encountered candidates who had problems filling out FEC forms, resulting in inaccurate filings. The FEC takes this information as is, without sufficient quality control measures, resulting in incorrect information entering the databases. As a result, journalists, concerned citizens, and campaign finance watchdogs are relying on data which is fundamentally flawed. For example, in February of 1998, The Hill, a Capital Hill newspaper, lauded Senators who refused to take PAC monies, including Senator Frank Lautenberg (D-NJ). Unfortunately, the FEC database upon which the article was based was wrong. In fact, Senator Lautenberg accepted $133,000 in PAC monies during that year.
• The FEC maintains two distinct and separate websites, an FTP (file transfer protocol) database website, which has extremely large data files, and a public website which is easily navigated. As seen by the chart, the two sites are not linked together. The FEC updates the FTP database website to reflect these changes but does not update the public website. The information at the FTP database website is inaccessible to the average computer user. In another example, Representative Steve Horn (R-CA) was accused by his opponent of lying when proclaiming to take no PAC money. The opponent was relying on faulty FEC data from the public website.

Selected Examples Showing Discrepancies Between Various FEC Websites

FEC's Mission

"The ultimate mission of the FEC is to assure that the campaign finance process is fully disclosed and that the rules are effectively and fairly enforced, fostering the electorate's faith in the ultimate integrity of the nation's political process."1

Introduction

The enormous discrepancies between the amount of money the PACs report giving and the amount of money the House and Senate candidates report receiving demonstrates that the FEC is not fulfilling its mission. In 1998, POGO completed a report2 demonstrating that $1.45 million in campaign contributions were unaccounted for, improperly listed, or otherwise missing within the FEC's databases. At that time, POGO made 10 recommendations to help correct these systemic problems. Now, POGO has revisited the issue to assess the progress of the FEC in light of the previously recommended changes. POGO analyzed data from the 1997-1998 campaign cycle and found that the discrepancies had ballooned to more than $12 million. As a result, journalists, concerned citizens, and campaign finance watchdogs are relying on data which is fundamentally flawed.

These problems mean that egregious campaign finance misconduct slips through the FEC's system as easily as honest mistakes. The building blocks for campaign finance disclosure - identifying who is getting money from whom, and how much - rely solely on the FEC's databases, yet this basic information is incorrect.

Since POGO's previous report, the FEC has addressed a number of issues which had been identified in 1998. In addition, the House has acted on one major problem, the lack of electronic filing. Beginning this year, all House candidates must file electronically with the FEC. This will bring about significant changes including more timely disclosure and increased accuracy. Unfortunately, the Senate continues to rely on paper filings.

Electronic filing is not a complete solution. As this report demonstrates, the electronic filing system still has significant shortcomings, but is nonetheless a substantial step in the right direction.

Through this investigation, POGO found that the FEC, the agency charged with the proper collection and upkeep of the largest campaign finance data archive in the world, has been dragging its feet in reforming this flawed system.

This report identifies seven sources of misinformation in the FEC's data and recommends specific reforms that must be addressed in order for more broad-reaching campaign finance reforms to be successful.

The FEC's System: Problems And Solutions

"The Congress should also replace the lame Federal Election Commission with a serious enforcement agency." New York Times Editorial, December 27, 1998.

Why is it that the nation's newspaper of record has called for the dismantling of the FEC? The FEC's problems stem not only from the design of the current laws, but also from "housekeeping" issues which prevent the FEC from being an effective election watchdog. Outlined below are some of the problems POGO unearthed during the investigation, as well as the changes the FEC needs to implement to become the agency the American people look to for reliable information.

A. Problem: PAC And Candidate Data Is Not Compared

While the FEC maintains an extensive website which successfully publicizes its information, the information is so flawed that it can hardly be said to fully disclose campaign finance monies, the core of its mission.

The FEC does not reconcile campaign contributions from PACs with PAC contributions received by candidates. The FEC keeps this data in two distinct databases which are never measured against each other. The first set of data is compiled from the PACs' monthly reports. The second set of data comes from the candidates' filings. When these two databases are compared only six incumbent candidates match - in the entire Congress!

APPENDIX A: Senate Database Comparison List and House Database Comparison List

Complicating things further, in the PAC-reported contributions made to candidates, the FEC does not separate political party PAC money from non-party PAC money. On the candidate-reporting form, however, the FEC does differentiate between party money and non-party money.

The total discrepancy is $12,095,323. The discrepancy within the House, only taking into account incumbents, is over $9.5 million. In the Senate the discrepancy is more than $2.5 million.

In the House, 182 Representatives reported receiving a total of $1,831,680 less than the PACs reported giving. 263 Representatives reported receiving a total of $7,756,492 more from PACs than the PACs reported giving. Only two incumbents reported receiving the same amount in PAC monies as the PACs reported giving them.

In the Senate, 50 Senators reported receiving a total of $1,781,652 less than the PACs reported giving. 43 Senators reported receiving a total of $725,496 more from PACs than the PACs reported giving. Only four of the incumbents' filings reconciled.

Graph showing 1997-1998 Election Cycle Contribution Discrepancies Between Candidate and PAC Reports

Solution: Compare PAC Disbursements With Candidate Receipts

The PACs' information can and should be immediately compared to the candidates' information through a computerized system. When a discrepancy is noted above a certain threshold, the filings for the candidate or PAC could be flagged. A manual review of the data could determine the potential problems with the filing and direct the candidate or PAC to re-file their report. Because the majority of the problems POGO encountered with the candidates' and PACs' reports centered around misunderstandings or miscalculations, many of the errors could be caught immediately and easily corrected.

The FEC should post the PAC-reported numbers separately, so that political party PAC money can be differentiated from non-party PAC money.

Once the FEC has compared the databases, POGO recommends posting on the web a list of candidates and PACs whose filings are in error, thus encouraging accountability. Once the candidates have corrected the problems, their names may be removed from the list.

B. Problem: Confusing Forms

At every turn, POGO encountered candidates who had problems filling out FEC forms, resulting in inaccurate filings. The FEC takes this misinformation as is, without sufficient quality control measures, resulting in incorrect information being entered into the databases. For example, in February 1998, The Hill, a Capitol Hill newspaper, lauded Senators who refused to take PAC monies. "Despite the pressures to raise large amounts of money, 10 senators withstood the pressure, taking no PAC money in 1997."3 The article then went onto list the Senators, including Senator Frank Lautenberg (D-NJ). Unfortunately, the FEC database upon which the article was based was wrong. Senator Lautenberg accepted $133,000 in PAC monies during that year.

When closely scrutinized, Senator Lautenberg's campaign finance reports for the years 1997 and 1998 show that while he itemized the PAC contributions, he did not supply a number for the summary page of the report. As a result, the FEC database reflected a zero in that column. APPENDIX B

Additionally, the forms do not make clear how to categorize contributions. The section of the FEC form in which candidates list contributions is section 11. Section 11a lists contributions from individuals. Section 11b lists contributions from political party committees. The third section, 11c, asks for contributions from "Other Political Committees." Included on section 11c, in parentheses, it is written "Such as PACs." However, in almost every case POGO looked into, there was some degree of confusion about which contributions belonged in which section.

Because of the confusion, Representative Zach Wamp (R-TN) and the NO-PAC Caucus asked the FEC for clarification so that section 11c would be used specifically for PAC monies only. Unfortunately, the actual phrase "Political Action Committee" is neither mentioned nor defined anywhere in the laws creating the FEC. Therefore, since the FEC has not been directed to do so, it does not make clear that line 11c should only be used to report PAC contributions. APPENDIX C

Senator Don Nickles' (R-OK) filings are a good example of the problem created by this confusion. All party contributions, which should have been reported in section 11b, were instead reported in section 11c along with his PAC contributions. APPENDIX D

Another example is Senator Michael Crapo (R-ID), who mistakenly itemized PAC contributions by reporting them in section 12, which includes transfers from "other authorized committees."4 This caused a discrepancy of $231,657 between what he reported in section 11and what PACs reported giving him.

Solution: Clearly Define Political Action Committee

Nowhere do the laws governing the FEC define PAC. The FEC should define this term through a formal rule-making process and section 11c should be explicitly reserved for PAC contributions.

C. Problem: Internally Inconsistent Data

The FEC maintains two distinct and separate websites, an FTP (file transfer protocol) database website, which has extremely large data files, and a public website which is easily navigated. When comparing the FEC's public information with the data from the FTP database website, it becomes apparent that the two information sources are not linked or concurrently updated. Oftentimes, candidates will file amendments after submitting their reports. The FEC updates the FTP database website to reflect these changes but does not update the public website.

To access the information at the FTP database website, a user must have advanced computer knowledge and a computer with massive computing abilities. The chart below illustrates how widely the two databases vary in the amount of PAC money reported.

Neglecting to update both sites concurrently leaves the public website completely inadequate to inform the public, the main mission of the FEC. In addition, it unfairly places candidates in the position of appearing to be misreporting their contributions.

Solution: Link Public Website To FTP Database Website

When the FTP database website is updated, the public website should automatically be updated.

D. Problem: Inconsistent PAC Names

Although each PAC is assigned a unique ID number, much like a Social Security Number, as an identifier, the FEC does not require its use by PACs and candidates for identification purposes. Because there is no required standardized method to identify a PAC, candidates often call the same PAC by different names. This compounds the problem when attempting to determine the source of a candidate's funding.

Candidates often use the PAC's acronym, the name which is at the top of the received checks, or shorthand nicknames, when reporting monies received from the PACs. Below, POGO has listed a few examples of PAC names as they appeared on the candidate's list and as they appeared on the PAC's list.

PAC Names as They Appeared on the Candidate's List, and as They Appeared on the PAC's List

These names are not easily associated with one another, leaving citizens unable to connect PAC contributions to the proper candidate. Both the FEC and the candidates are clearly aware of this problem. The FEC even has a publication entitled PACronyms, which matches some acronyms with their full PAC names. Yet none of the above examples are included nor dozens of others that are missing, making this publication an insufficient tool for both candidates and the public.

The treasurer for the Jerry Weller For Congress committee unknowingly summarized the problem in her reply to POGO's request for more information. She wrote, "I have also included an example for the acronym for 'BellSouth Corporation Employees Federal Political Action Committee,' commonly referred to and widely known as 'Berry PAC.'" However, this nickname and others are not equally obvious to those not intimately involved with the PACs.

At times, this confusion over names creates problems even after one connects PAC contributions to the proper candidate. This difference misleads the public about the source of the money. For example, in the above chart, "Voluntary Contributors for Better Government" is actually named "International Paper PAC." The name implies that the money comes from a good government group when in reality it came from a corporate sponsored PAC.

In order to associate these differing PAC names, POGO matched not only the address but also the dates of the contributions. This took several POGO staff members upwards of 2000 hours to complete. It would be virtually impossible for an individual citizen to undertake the same daunting task.

Solution: Require Use Of PAC ID Number

It is the FEC's and the candidate's job to make the connection between the two names clear to citizens unfamiliar with PAC acronyms. All PACs should be required to include their PAC ID number on their checks, a remedy that could easily be implemented. This number should be used anytime the PAC is identified, providing three methods, including the name and address on the check, to connect the money with the contributor. By doing so, the identity of the PAC will never be in question and it will be clear to the public the source of each candidate's money.

The House electronic filing program should also be modified to accept a PAC name only if the matching ID number is also included. Once the FEC receives the information, an automated program could be used to compare the data with the data received from the PACs. When the numbers do not match, a list could be generated, which would then be sent to both candidates and PACs.

E. Problem: Senate Contribution Information Not Readily Available

In 1999 the House moved to implement electronic filing. This is a very important step that allows the candidates to use a program disseminated by the FEC to file their reports. The electronic form is standardized and should enable the FEC to correct some of the problems highlighted in POGO's first report.

The Senate, however, continues to use an antiquated paper system to file their often handwritten reports. Without electronic filing in the Senate, the public loses. The public cannot readily find this information because it is not in an easily accessible location or form nor is it made public in a timely manner. For this investigation, POGO had to pay for the FEC to print out each file individually at a cost of $1330 for thousands of pages.

Paper filing carries with it an added opportunity for mistakes to be made. For example, in the last election, before electronic filing was enacted, the totals on the FEC's website did not match the paper filings summary page numbers for Representatives David Smith (D- WA), Jerry Weller (R-IL), and David Weldon (R-FL). This problem was created by the incorrect key punching of data by the FEC. The numbers were grossly inaccurate. For example, the FEC under-reported Smith's summary pages by approximately $47,000, Weller's by approximately $60,000, and Weldon's by $50,000.

Solution: Senate Should File Electronically

All Senatorial candidates should file electronically, in order to remedy the problems previously outlined.

F. Problem: PAC's Do Not Report Returned Checks

"We've never taken a PAC check since I first ran in 1992, and yet because we send them back and they don't give the rapid response you want them to give, we have some opponent that's demagoging there, knows darn well I don't take them, but, gee, he can find something in the record, because we had to file a notice that it was there, that we've sent it back... But anyhow, that's the kind of thing about which I think your [POGO's] suggestions would be very helpful." Representative Stephen Horn (R-CA)

The current regulations state that PACs are required to report to the FEC when the candidate refuses to accept the contribution. If the FEC compared the PACs' information to that of the candidates', it would be apparent that the PACs frequently fail to comply with this requirement.5

On the FEC's public website, Representatives and Senators who do not take PAC money are nearly always shown to have accepted contributions. This information has been used by opponents who have then charged that PAC money was accepted by their non-PAC taking opponents. Or the reverse can happen, as in Lautenberg's case, where a candidate is credited for accepting no PAC money when in fact he did.

Solution: Enforce Laws Requiring The Reporting Of Returned Checks

The FEC should enforce existing laws requiring the reporting of returned checks and reject filings from PACs or candidates which incorrectly omit returned checks. The FEC would be required to cross-reference the data for this solution to be possible.

G. Problem: Partial Amendment Filings Create Confusion

When House candidates were filing on paper, it was necessary that they only resubmit the parts of their reports with updates or corrections to simplify key-punching for the FEC. However this created confusion when attempting to follow the money because it was unclear which parts of each filing were new.

With the current plan to file electronically, candidates still will not be required to submit total updates. Confusion will continue to result from this policy. For example, when all of Senator John Breaux's (D-LA) amendments are incorporated into his total, his filings come closer to matching his PAC-reported contributions. The FEC, however, did not include the candidate's mid-year report amendment numbers in his total, which resulted in the large discrepancy of $57,075.

Solution: Require The Re-Submission Of Entire Reports When Filing Amendments

With the electronic filing system, the confusion could easily be cleared up by requiring candidates to resubmit the entire filing when amending the originals. Because of the electronic filing system, no extra work would be necessary for the FEC staff and it would greatly increase the clarity of the information.

Background

POGO's previous report outlined the many problems with the FEC's oversight. POGO's ten common sense reforms functioned as a spring board from which change could move forward.

POGO commends the House for requiring candidates to electronically file reports, and the Senate for beginning to report information directly to the FEC. The FEC is to be commended for implementing a number of the reforms indicated in POGO's 1998 report including grouping data by two- and six-year campaign cycles for both the House and the Senate.

In 1999, POGO initiated a rulemaking within the FEC to enact the other recommended reforms which could be implemented internally. This move was met with resistance from inside the FEC despite strong public support and was subsequently denied.

Within the rulemaking, POGO requested that the FEC utilize checks and balances which would compare PAC and candidate databases, standardize PAC names, eliminate duplicate entries within both databases, enforce the law stating that all PACs report returned checks, and require PACs to notify all candidates of "in-kind" contributions.

Unfortunately, the FEC has not acted on these reforms to date, nor does the Senate have any plans to implement electronic filing.

Investigation Methodology

To begin the investigation POGO asked FECInfo, a company run by former FEC officials, to compile data about candidates in the 1997-1998 filing cycle. This cycle was chosen over the 1998-2000 cycle to eliminate the likelihood that candidates had not yet filed all of their amended statements. This data was obtained from the FEC's FTP database website, which is open to the public but only accessible by computer specialists.

In the PAC-reported contributions made to candidates, the FEC does not separate political party PAC money from non-party PAC money. On the candidate-reporting form, however, the FEC does differentiate between party money (section 11b) and non-party money (section 11c). Therefore POGO combined section 11b with section 11c in order to compare like-quantities.

From this data, POGO only chose to analyze candidates who were incumbents. This subset of data was further refined to identify those candidates who had the largest discrepancy between PAC-reported contributions and candidate-reported receipts.

From there, POGO investigated the filings of the two Democrats and two Republicans in both the House and the Senate with the largest such discrepancies who were still in Congress. The Senators are Barbara Boxer (D-CA), John Breaux (D-LA), Michael Crapo (R-ID), and Don Nickels (R-OK). The Representatives are Richard Gephardt (D-MO), David Smith (D-WA), David Weldon (R-FL) and Gerald Weller (R-IL). Additionally, POGO investigated the filings of all candidates who, according to the FEC, had taken no PAC money for that period. In the Senate these are Joseph Biden (D-DE), John Edwards (D-NC), Herb Kohl (D-WI), Frank Lautenberg (D-NJ), and Patrick Leahy (D-VT). In the House these are William Archer (R-TX), Jay Dickey (R-AR), James Demint (R-SC), James Greenwood (R-PA), Steve Horn (R-CA), James Leach (R-IA), Martin Meehan (D-MA), Marshall Sanford (R-SC), Ralph Regula (R-OH), and Zach Wamp (R-TN).

Once POGO had these names, all of their filings were retrieved. The Representatives' information was downloaded from the FEC's website. POGO then printed all of the reports for these candidates for 1997 and 1998. For the Senate side, POGO requested the filings from the FEC.

POGO also took all of the information for each candidate for the 1996-1998 election cycle from the PAC side of the FEC website and converted it into Excel tables.

Once POGO had compiled all of the information, the data was manually compared and then double-checked.

POGO then compiled a list of contributions which could not be found. This information was included in a letter sent out to the candidates requesting clarification of these missing contributions and asking the candidates to respond by a given date. POGO made follow up calls to these offices, seeking further clarification if necessary. POGO received responses from four candidates.

Finally, POGO compiled the macro statistics to show how these seemingly minor problems, when combined, wreak havoc on the campaign finance-reporting system.

Appendices

Appendix A: Data compiled by FECInfo, a private campaign finance research firm, from FEC's FTP Database Website, September 21, 2000.

Appendix B: "Detailed Summary Page of Receipts and Disbursements (Page 2, FEC Form 3), Lautenberg 2000, Year End Report" January 31, 1997 and January 31, 1998.

Appendix C: "FEC Form 3: Report of Receipts and Disbursements," www.fec.gov, March 18, 2001.

Appendix D: "Detailed Summary Page of Receipts and Disbursements (Page 2, FEC Form 3), Friends of Senator Nickles, Year End Report" January 31, 1997 and January 31, 1998.

Endnotes

1. FY 1998-2003 Government Performance and Results Act Strategic Plan, FEC.

2. Re-Establishing Institution Integrity at the FEC: POGO's Ten Common Sense Reforms.

3. Senate PAC Receipts At Record High in '97, The Hill, February 11, 1998.

4. Other Authorized Committees are committees designated by the candidate which are allowed "to receive contributions or make expenditures" on behalf of the candidate. FEC Campaign Guide, April 1999.

5. 11 Code of Federal Regulations 104.8 (d)(4)