The Project On Government Oversight has documented core problems with the Federal Election Commission's management of information. POGO has brought forth specific examples of the FEC's disregard for the reliability and reputation of information taken from campaign finance reports of candidates and political committees. POGO has outlined specific low-cost fixes that can be implemented immediately. It is in the best interest of campaign, political committees, the FEC, the media and the general public to take aggressive action now to correct these deficiencies.
Kent C. Cooper
The Center for Responsive Politics
Thus report made possible by grants From The Joyce Foundation, Alida R. Messinger and The Florence and John Schumann Foundation. The Project On Government Oversight would also like to thank the Center for Responsive Politics, the New York City Campaign Finance Board and the Federal Election Commission for their invaluable contributions to this report.
"It [The Federal Election Commission] was set up to be a toothless tiger. You never worry about it because they're — by the time they catch up to anything, any mistake, legitimate mistake or deliberate circumvention, the election's over with. Who cares? So they fine you." F ormer Representative Tony Coehlo (D-CA)1
The Project On Government Oversight (POGO) has undertaken a major investigation into the Federal Election Commission's (FEC) Political Action Committee (PAC) contribution disclosure system. POGO found that the current status of the FEC's data creates opportunities for unfair allegations of misconduct against candidates. We discovered that hundreds of thousands of dollars in contributions are unaccounted for, improperly listed, or otherwise missing from FEC data. Practical, common sense reforms, however, would identify and remedy the existing inaccuracies that currently plague the campaign finance disclosure system.
POGO's investigation took months of original research and consultations with numerous campaign finance experts, including senior FEC staff and officials and the independent Center for Responsive Politics. POGO discovered that surprisingly, although both candidates and PACs each must submit financial contribution data, these numbers are never compared. Current FEC data inaccuracies are often very misleading.
At the beginning of this investigation, POGO believed that the large number of discrepancies and the sizable differentials associated with congressional candidates might be the result of hidden PAC contributions or some other nefarious activity on the part of candidates. It was not long into our investigation, however, that we found that it was the FEC's current disclosure system itself that was causing the misleading differentials.
Review of these differentials led POGO to discover several systemic flaws and their realistic reforms, many of which have been suggested in bills before Congress and in the FEC's annual reports to Congress. POGO's investigation and report provides the tangible evidence needed to achieve the implementation of these campaign finance reforms.
The current system, including its flaws, is the creation of both political parties as well as the FEC. No single entity should be blamed for its mistakes, but lessons can be learned from more successful efforts, such as the New York City Campaign Finance Board (CFB). 2
However, it does not appear that change is likely to emanate from within the FEC without direction and funding from Congress. The FEC is resigned to reacting to outside complaints of illegal activity, rather than using the resources at its disposal — the information it collects from contributors and candidates. As a result the FEC accepts the inaccuracies in their data and regards them as tolerable. In fact, it was expressed by FEC officials that even with the proper resources, it was not clear that the FEC would spend them on fixing the systemic problems POGO discovered. This acquiescence is not only harmful to the public and the media, who rely on accurate disclosure, but also to the candidates who are portrayed by the FEC data as intentionally concealing contributions.
In addition, contrary to the FEC's assessment, POGO believes that these reforms would, in the longrun, save the FEC both time and money. In the end, the FEC's very mission is compromised by its bunker mentality.3
On April 7, 1997, President Clinton sent a letter to the Speaker of the House of Representatives pleading for additional FEC appropriations and a strengthening of the FEC. President Clinton stated, ". . . the agency [FEC] plainly lacks the resources it needs to keep pace with the rapidly rising volume of campaign spending and electoral activities." He added that steps must be taken to strengthen the FEC's ability to stop improper practices. One step that should assist the FEC in improving its performance is the financial boost it recently received in the FY99 Budget proposal, which estimates that the FEC budget would increase from $28 million to an estimated $31 million in FY98 and $37 million in FY99.
"The FEC collects and distributes information that directly affects the public's perception of both campaigns and candidates. That they knowingly distribute information that is false without any warning to the public is totally unacceptable. Under our system of justice, you should not be declared guilty and be forced to prove your own innocence." Representative Bill Archer (D-TX) 4
The most immediate impact of the reforms listed below would be to allow the FEC to better discern genuine campaign finance infractions from data errors and therefore more effectively use their resources to enforce campaign finance laws. Even high-level FEC officials have admitted that they have had to assume a level of "chaos" in their numbers, making enforcement of the law sporadic at best. FEC sources stated that due to limited resources, some violations will have to slip through the system.
The longer-range intention of our work is to rebuild the integrity of the FEC and the campaign finance disclosure process. POGO is recommending tangible reforms of FEC guidelines as well as of candidate and PAC reporting requirements that will provide significant improvements to disclosure of campaign contributions. If the more comprehensive campaign finance reforms currently being debated are ever to pass, the FEC will ultimately be responsible for overseeing and
regulating the $100,000 contributions that are fueling this debate. If the FEC is not equipped to handle the current oversight of $1,000 and $5,000 PAC contributions, how can it be expected to tackle the big dollars? We believe our suggested reforms can lead to the institution-building necessary for positive systemic change.
These reforms would also assist the FEC in distinguishing between honest mistakes and willful misconduct, so as not to waste enforcement resources.
Furthermore, every Congressional candidate would benefit from the FEC's improved ability to more accurately and more swiftly disclose accurate campaign finance information. The reforms would preempt false accusations made by opponents relying on inaccurate FEC data.
The general public would stand to gain the most from POGO's reforms, as campaign contributions would be more accurately reported in FEC databases. All disclosure of information is not always good disclosure — the public must have access to campaign finance information that is both accurate and timely. If it is not, the information is of little use and can even at times be harmful. The public has the right to obtain accurate campaign finance information from the federal government.
Lumping Honest Mistakes with Willful Misconduct
Most of the errors POGO found in its investigation could be categorized as honest mistakes on part of the committees, although many violate current campaign finance law.
The individuals used as examples throughout this report are just that — examples to prove the systemic flaws in the system. The discrepancies found in their reports were overwhelmingly caused by the flaws in the FEC's system and could have been avoided if our recommended reforms were implemented. To indicate that the candidates in no way intended to provide inaccurate or incomplete information, a number of the candidates told POGO they were going to amend their FEC filings as a result of our inquiries.
Even before our inquiry, for example, Senator Ron Wyden (D-OR) amended 57 items, including "inadvertent accounting errors," an $87,012 typographical error and contributions that exceeded contribution limits 5 Why do we point out this correction? These amendments were submitted to the FEC only after his campaign conducted its own investigation responding to a potential dispute with tax collectors. At no point during or after the election did the FEC pinpoint problems with Sen. Wyden's campaign disclosures. To illustrate the prevalence of bad information in the FEC data, Sen. Wyden's amendment preceded POGO's inquiry which identified additional discrepancies.
Because the FEC disclosure system is flawed, honest mistakes slip through as easily as egregious misconduct. For example, in 1994, the Associated Press (AP) reported that Representative Mel Reynolds (D-IL) failed to report to the FEC thousands of dollars in contributions over a three-year period. The AP found $76,000 in unreported contributions, involving 72 different PACs.6 The investigation proved that many of these checks were deposited by Reynolds or his campaign. Reynolds contended that the money was spent for legitimate campaign purposes. However, the contributions were not reported to the FEC by his campaign. Due to the FEC's failure to compare PAC reports to candidate reports, this impropriety went undetected for many years -- discovered only later by the media.
The amount of money involved in Mel Reynolds' case, however, would not have stood out in the current state of the FEC databases. As you can see from Appendix C, a $76,000 differential between a candidate's receipts and PAC disclosures would not raise eyebrows at the FEC. Mel Reynolds' $76,000 unreported PAC contributions would not have put him in the top ten candidate differentials in 1995-1996. Until we resolve the issues that POGO has detailed in this
report, other violations like Mel Reynolds' are likely to remain unnoticed, while innocent mistakes can be cast as crimes.
Looking at the candidate differentials (Chart 1), Senator Wyden (D-OR) and Representative Gephardt (D-OR) both would appear to have committed various campaign finance disclosure violations, when in fact, a large portion of their differential was due to transfers of money from their other campaigns.7
POGO began this project by examining FEC data compiled by the Center for Responsive Politics into one user-friendly document. This document detailed the discrepancies between the contribution receipts reported by each candidate and the disbursements reported by PACs. In August 1997, nine months after the 1996 election, using the FEC's own data we found only four candidates out of nearly 500, had reported receiving the same amount of PAC money that the PACs reported contributing.8 In other words, every other candidate that ran for election in 1996 had either overreported, or in the majority of cases, under-reported, PAC contributions.
Utilizing this data, POGO selected ten candidates to investigate in detail. The candidates were chosen according to their reporting discrepancies.' (See Chart 1) After manually attempting to match each of the ten candidates' receipts to disbursements in FEC records, there remained a number of discrepancies which could not be resolved, requiring POGO to contact the candidates and the PACs for explanations. (See Chart 2) Many of the candidates and the PACs confirmed the discrepancies as errors.
The responses we received, along with our continued analysis of the primary data, made it clear that there were several systemic flaws in the FEC's system. After our initial meetings with FEC officials, it was apparent that although several of our proposed solutions could be enacted unilaterally by the FEC, some of our recommendations would require Congressional sponsorship.10
POGO does not argue that these reforms will prevent all mistakes. There will always be some errors that will still slip through the FEC's system. Our intention is not to point out anomalies -- such as the $1,500 contribution that was entered by the FEC as $500, errors caused by mis-attributing contributions that were issued to Bob Smith (R-NH) and Chris Smith (R-NJ) but instead attributed to Gordon Smith (R-OR) or contributions that were missed by the candidates. Although these problems did occur, POGO moved to distinguish more substantial and systemic FEC malfunctions and has recommended ten reforms that will serve to help the FEC be more efficient and effective, and protect candidates from unfair accusations of campaign finance deception or illegality.
Chart 1: Candidates' Reported Receipts v. FEC's Total of PAC-Reported Contributions
(1) This column was calculated by the Center For Responsive Politics on 8/7/97 using FEC data. See Appendix C for a comparison of all candidates' receipts with PAC disbursements. This data was used by POGO, resulting in the above ten candidates being selected for review.
Chart 2: Candidates' Reported Receipts v. POGO's Total of Unexplained PAC Contributions
(1) After manually attempting to match each of the ten candidates' receipts to disbursements inFEC records, there remained a number of discrepancies which could not be resolved, requiring POGO to contact the candidates and the PACs for explanations.
POGO's Ten Common Sense Reforms
"You should know that we have for some time been aware of discrepancies in the information available on the public record from the Federal Election Commission. Unfortunately, we have no control over the information entered by the FEC and are not aware of any method by which this information could be corrected."
-John Tumbarello, Treasurer for Representative Richard Gephardt (D-MO)11
POGO's investigation was limited to analyzing data involving PAC contributions, but many of our reforms could be applied to contributions from individuals as well. POGO proposes that the FEC and Congress fully consider and enact the following reforms.
1. Utilize Existing Checks and Balances: Compare Databases
The FEC does not compare PAC receipts reported by candidates with contributions reported by the PACs. The current system allows inaccuracies in FEC data to go unchecked and uncorrected. (See Charts 1 and 2 for examples of differentials between PAC reporting and candidate reporting, and Appendix C for a list of the differentials for all candidates in the 1996 election.)
2. Make Compilation and Filing of Data Uniform by Campaign-Cycle
A. Group FEC Data by Campaign Cycle
Currently the FEC assembles contribution data by two calendar year cycles rather than by two- and six-year campaign-cycles.
To perform this investigation, POGO was required to look at data from at least three different two-year cycles to identify contributions that were given to House candidates for their 1996 elections. For example, many of the candidates we investigated filed contributions they received in late 1996 in their 1997 midyear reports. Thus, in a House election, the 1995-1996 election-cycle data was just as important as the 1997-1998 cycle data in finding
contributions designated for the 1996 elections. To compound matters, if a contribution were donated late in the 1994 calendar year, after the 1994 general election, 1993-1994 data could also include contributions for a candidate's 1996 elections.
A single incumbent Senatorial candidate, whose term of office is six years, might record contributions for their campaign under four or more two-year cycles, yet no consolidation of this data is ever made by the FEC.
B. Candidates and PACs Should File by Campaign-Cycles
Candidates and PACs file primary and general campaign data in monthly, quarterly and semiannual reports by calendar year. The FEC, on the other hand, must sort through this information and organize it in two-year databases. Campaign finance laws, however, do not correspond with calendar years, but with primary and general campaign-cycles. This process is time consuming and handicaps FEC's resources.
3. Eliminate Irregular PAC Names
One of the most time-consuming aspects of this project was identifying and cross-referencing the irregular use of PAC names used by the candidates, the PACs and the FEC. Often during our investigation we were frustrated by the arbitrary use of shorthand for various PAC names. The following are some PACs whose names were recorded differently on various candidate's receipts, PAC disbursements and the FEC's index:
It is unreasonable to assume that outside parties, including constituents or the press, not to mention the FEC itself; would be capable of making a connection between the three sets of names without great difficulty.
4. Eliminate Duplicate Entries
The FEC does not correct many duplicate entries in filings submitted by candidates. POGO's investigation also revealed that the FEC often unwittingly creates duplicate entries by assigning two different transaction numbers to the same contribution. These duplicate entries often are left uncorrected.
Of the ten candidates POGO investigated, four of them (Gephardt, Wyden, Warner and Smith) had a total of seven separate instances of duplicate entries. In each case, POGO examined the PAC disbursements to verify if one contribution had been issued or if two contributions had been given for the same amount on the same day. Every instance proved to be a duplication that the FEC should have corrected.14
5. Candidates Should Report Returned Checks
Many times PAC contributions are returned by candidates, yet the PACs often do not report the unaccepted contribution to the FEC, although it is currently required. This notification should occur either through an amended filing or a negative entry on a subsequent filing that notifies the FEC that the contribution was not accepted. 15
According to FEC data, POGO found that some candidates who vow not to accept any PAC contributions, in particular Senator Joe Biden (D-DE), Representative Bill Archer (R-TX) and Representative Christopher Shays (R-CT), show receipts of thousands of dollars from PACs.
Rep. Archer responded to POGO's inquiry by stating, "Despite repeated requests, many PACs do not bother to amend their filings to reflect checks that were returned to them without being cashed. This has resulted in the past that my campaign is shown as receiving PAC checks when, in fact, none were accepted."' (Emphasis added)
Also in response to our inquiry, Peter Baryhydt, Campaign Manager for Rep. Shays, stated that Rep. Shays does not accept PAC contributions and simply mails any contribution back to the PACs. He added, "It has been my experience that the FEC files for PAC contributions do not indicate when a contribution was returned undeposited." 17
6. Notify Candidates of All "In-Kind" Contributions
PACs do not always inform campaign committees of their "in-kind" contributions, which are gifts of goods or services rather than money. Candidates often claim they were not aware of these contributions, although they were reported by the PAC to the FEC.
For example, John Ryan, Compliance Director for The Gephardt-in-Congress Committee (GIC), responded to POGO's investigation by stating the following concerning "in-kind" contributions:
"In-kind contributions for which GIC did not receive any notice from the contributor. GIC is in the process of preparing amendments to the Federal Election Commission for its reports to reflect these in-kind contributions." 18
Senator Wyden's campaign staff reported to POGO that they too were not notified by the PAC of certain "in-kind" contributions. In an effort to correct the record, Sen. Wyden also amended his filings by reporting these previously unknown contributions. 19
7. FEC Needs Better Tools to Encourage Compliance
The FEC does not have adequate tools to enforce compliance and deter noncompliance of regulations.
8. Mandatory Electronic Filing
As of March 2,1998, approximately 50 candidates and PACs, out of thousands, have utilized the FEC's electronic filing system, whereby committee reports are sent to the FEC by computer.21 Not only does the FEC already offer this time and error saving service, but it does so with its own free software program allowing campaign committees to maintain electronic records and generate their reports. If this reform were mandated by Congress, any, if not all, of POGO' s reforms could be incorporated into the FEC's electronic filing system.
9. Streamline Senate Filing
Currently Senate candidates are only required to file their reports with the Senate's Office of Public Records. This process hinders electronic filing because the FEC then only receives Senate candidate filings on microfilm. Unlike House candidates, who file campaign reports directly with the FEC, Senate candidates can only file with the Office of Public Records, which films all reports and sends the film out for processing onto microfilm.
10. Streamline Joint Fund-Raisers and Multi-Candidate Committees
Throughout POGO's investigation, problems were created by multi-candidate entities that are set up to accept PAC contributions on behalf of several candidates. Joint fund-raising events allow candidates to pool money into one account. This money is later used to cover the cost of the fund-raiser, with the balance being split between participating candidates.
For example, in our review of Senator John Warner's (R-VA) contribution receipts, POGO found that Sen. Warner reported the total money raised at joint fund-raisers in his receipts, rather than only his individual share. This practice created large discrepancies between the amount of money Sen. Warner reported and the amount actually received during the 1995-96 election-cycle. Moreover, Sen. Warner's receipts remain uncorrected in the FEC files. In addition, POGO found that several PACs as well as the FEC attributed nine contributions to Representative Richard Gephardt's (D-MO) 1996 campaign. These contributions were actually issued to the multi-candidate committee which he chairs, the Effective Government Committee, which distributed them to other candidates.22
1 The News with Brian Williams, MSNBC, February 27, 1997.
2 See Appendix A, Lessons Learned From The New York City Campaign Finance Board.
3 See Appendix B, FEC Background.
4 Response to POGO, March 3, 1998.
5 Sonner, Scott. The Associated Press, "Wyden says campaign apparently violated FEC rules," January 31, 1997.
6 Strong, Tom, The Associated Press, "Indicted Congressman's FEC Reports Fail to Disclose Donations," August 26, 1994.
7 Senator Wyden transferred $497,440 into his Senate campaign from his "Wyden for Congress" House campaign and Representative Gephardt transferred $50,000 into his House campaign from his "Gephardt for President Committee Inc."
8 See Appendix C, Comparison of Candidate Receipts with PAC Disbursements, p. C-5.
9 See Appendix D, Methodology.
10 See Appendix E, FEC Action vs. Legislative Action Required.
11 Response to the Project On Government Oversight, October 30, 1997, attachment.
12 See Appendix C, Comparison of Candidate Receipts with PAC Disbursements.
13 Senator Wyden reported these PAC contributions as one, although the FEC listed them as two separate PACs with their own I.D. numbers, 000279380 and 000286401, respectively.
14 See Appendix F.
15 11 CFR 104.8(d)(4).
16 Response to the Project On Government Oversight, October 20, 1997.
17 Response to the Project On Government Oversight, October 27, 1997.
18 Response to the Project On Government Oversight, October 30, 1997, Enclosure.
19 Phone conversation with Carol Butler, "Wyden for Senate Campaign," October 30, 1997.
20 The Federal Election Commission, Twenty Year Report, April, 1995, p. 10.
21 FEC's web site -- http://election.sdr.com/cgi-bi... Ryan, John D., Compliance Director, The Gephardt-in-Congress Committee, Response to the Project On Government Oversight, October 30, 1997, Enclosure.