Statement of Policy; Safe Harbor for Misreporting Due to Embezzlement, 16695 [E7-6299]

Download as PDF 16695 Rules and Regulations Federal Register Vol. 72, No. 65 Thursday, April 5, 2007 FEDERAL ELECTION COMMISSION at the time of a misappropriation, and the post-discovery steps described below are followed by the committee, the FEC will not seek a monetary penalty on the political committee for filing incorrect reports due to the misappropriation of committee funds.1 The Commission will also consider the presence of some, but not all, of these practices, or of comparable safeguards, as a mitigating factor in considering any monetary liability resulting from a misappropriation.2 11 CFR Part 104 A. Internal Controls [NOTICE 2007–9] b All bank accounts are opened in the name of the committee, never an individual, using the committee’s Employer Identification Number, not an individual’s Social Security Number. b Bank statements are reviewed for unauthorized transactions and reconciled to the accounting records each month. Further, bank records are reconciled to disclosure reports prior to filing. The reconciliations are done by someone other than a check signer or an individual responsible for handling the committee’s accounting. b Checks in excess of $1000 are authorized in writing and/or signed by two individuals. Further, all wire transfers are authorized in writing by two individuals. The individuals who may authorize disbursements or sign checks should be identified in writing in the committee’s internal policies. b An individual who does not handle the committee’s accounting or have banking authority receives incoming checks and monitors all other incoming receipts. This individual makes a list of all committee receipts and places a restrictive endorsement, such as: For Deposit Only to the Account of the Payee’’ on all checks. b If the committee has a petty cash fund, an imprest system 3 is used, This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. Prices of new books are listed in the first FEDERAL REGISTER issue of each week. Statement of Policy; Safe Harbor for Misreporting Due to Embezzlement Federal Election Commission. Statement of policy. AGENCY: rwilkins on PROD1PC63 with RULES ACTION: SUMMARY: The Commission is issuing a Statement of Policy to announce that it is creating a safe harbor for the benefit of political committees that have certain internal controls in place to prevent misappropriations and associated misreporting. Specifically, the Commission does not intend to seek civil penalties against a political committee for filing incorrect reports due to the misappropriation of committee funds if the committee has the specified safeguards in place. EFFECTIVE DATE: April 5, 2007. FOR FURTHER INFORMATION CONTACT: Mr. Joseph Stoltz, Assistant Staff Director, Audit Division, 999 E Street, NW., Washington, DC 20463, (202) 694–1200. SUPPLEMENTARY INFORMATION: The Commission has encountered a dramatic increase in the number of cases where political committee staff misappropriates committee funds. Misappropriations are often accompanied by the filing of inaccurate disclosure reports with the FEC, leaving committees vulnerable to a FEC enforcement action and potential liability for those reporting errors. In response to the rise in this activity, the Commission has concluded that the following internal controls are minimal safeguards a committee should implement to prevent misappropriations and associated misreporting. This policy does not impose new legal requirements on political committees; rather it creates a safe harbor. If the following internal controls are in place VerDate Aug<31>2005 16:26 Apr 04, 2007 Jkt 211001 1 The internal controls set forth here represent the minimum efforts a committee must take to qualify for this safe harbor. The FEC provides additional guidance on internal controls best practices at http://www.fec.gov/law/policy.shtml#guidance. 2 This policy does not absolve or mitigate FEC liability for individuals responsible or complicit in the misappropriations. 3 An imprest fund is one in which the sum of the disbursements recorded in the petty cash log since PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 and the value of the petty cash fund should be no more than $500. B. Post-Discovery of Misappropriation Activity As soon as a misappropriation is discovered, the political committee: b Notifies relevant law enforcement of the misappropriation. b Notifies the FEC of the misappropriation. b Voluntarily files amended reports to correct any reporting errors due to the misappropriation, as required by the FEC. This notice represents a general statement of policy announcing the general course of action that the Commission intends to follow. This policy statement does not constitute an agency regulation requiring notice of proposed rulemaking, opportunities for public participation, prior publication, and delay in effective date under 5 U.S.C. 553 of the Administrative Procedures Act (‘‘APA’’). As such, it does not bind the Commission or any member of the general public. The provisions of the Regulatory Flexibility Act, 5 U.S.C. 605(b), which apply when notice and comment are required by the APA or another statute, are not applicable. Dated: March 22, 2007. Robert D. Lenhard, Chairman, Federal Election Commission. [FR Doc. E7–6299 Filed 4–4–07; 8:45 am] BILLING CODE 6715–01–P FEDERAL ELECTION COMMISSION 11 CFR Part 111 [Notice 2007–8] Policy Regarding Self-Reporting of Campaign Finance Violations (Sua Sponte Submissions) Federal Election Commission. Statement of Policy. AGENCY: ACTION: SUMMARY: In order to encourage the selfreporting of violations about which the Commission would not otherwise have learned, the Commission will generally the last replenishment and the remaining cash always equals the stated amount of the fund. When the fund is replenished the amount of the replenishment equals the amounts recorded since the prior replenishment and should bring the cash balance back to the stated amount. Only one person should be in charge of the fund. E:\FR\FM\05APR1.SGM 05APR1

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[Federal Register Volume 72, Number 65 (Thursday, April 5, 2007)]
[Rules and Regulations]
[Page 16695]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-6299]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
week.

========================================================================


Federal Register / Vol. 72, No. 65 / Thursday, April 5, 2007 / Rules 
and Regulations

[[Page 16695]]



FEDERAL ELECTION COMMISSION

11 CFR Part 104

[NOTICE 2007-9]


Statement of Policy; Safe Harbor for Misreporting Due to 
Embezzlement

AGENCY: Federal Election Commission.

ACTION: Statement of policy.

-----------------------------------------------------------------------

SUMMARY: The Commission is issuing a Statement of Policy to announce 
that it is creating a safe harbor for the benefit of political 
committees that have certain internal controls in place to prevent 
misappropriations and associated misreporting. Specifically, the 
Commission does not intend to seek civil penalties against a political 
committee for filing incorrect reports due to the misappropriation of 
committee funds if the committee has the specified safeguards in place.

EFFECTIVE DATE: April 5, 2007.

FOR FURTHER INFORMATION CONTACT: Mr. Joseph Stoltz, Assistant Staff 
Director, Audit Division, 999 E Street, NW., Washington, DC 20463, 
(202) 694-1200.

SUPPLEMENTARY INFORMATION: The Commission has encountered a dramatic 
increase in the number of cases where political committee staff 
misappropriates committee funds. Misappropriations are often 
accompanied by the filing of inaccurate disclosure reports with the 
FEC, leaving committees vulnerable to a FEC enforcement action and 
potential liability for those reporting errors. In response to the rise 
in this activity, the Commission has concluded that the following 
internal controls are minimal safeguards a committee should implement 
to prevent misappropriations and associated misreporting.
    This policy does not impose new legal requirements on political 
committees; rather it creates a safe harbor. If the following internal 
controls are in place at the time of a misappropriation, and the post-
discovery steps described below are followed by the committee, the FEC 
will not seek a monetary penalty on the political committee for filing 
incorrect reports due to the misappropriation of committee funds.\1\ 
The Commission will also consider the presence of some, but not all, of 
these practices, or of comparable safeguards, as a mitigating factor in 
considering any monetary liability resulting from a 
misappropriation.\2\
---------------------------------------------------------------------------

    \1\ The internal controls set forth here represent the minimum 
efforts a committee must take to qualify for this safe harbor. The 
FEC provides additional guidance on internal controls best practices 
at http://www.fec.gov/law/policy.shtml#guidance.
    \2\ This policy does not absolve or mitigate FEC liability for 
individuals responsible or complicit in the misappropriations.
---------------------------------------------------------------------------

A. Internal Controls

[square] All bank accounts are opened in the name of the committee, 
never an individual, using the committee's Employer Identification 
Number, not an individual's Social Security Number.
[square] Bank statements are reviewed for unauthorized transactions and 
reconciled to the accounting records each month. Further, bank records 
are reconciled to disclosure reports prior to filing. The 
reconciliations are done by someone other than a check signer or an 
individual responsible for handling the committee's accounting.
[square] Checks in excess of $1000 are authorized in writing and/or 
signed by two individuals. Further, all wire transfers are authorized 
in writing by two individuals. The individuals who may authorize 
disbursements or sign checks should be identified in writing in the 
committee's internal policies.
[square] An individual who does not handle the committee's accounting 
or have banking authority receives incoming checks and monitors all 
other incoming receipts. This individual makes a list of all committee 
receipts and places a restrictive endorsement, such as: For Deposit 
Only to the Account of the Payee'' on all checks.
[square] If the committee has a petty cash fund, an imprest system \3\ 
is used, and the value of the petty cash fund should be no more than 
$500.
---------------------------------------------------------------------------

    \3\ An imprest fund is one in which the sum of the disbursements 
recorded in the petty cash log since the last replenishment and the 
remaining cash always equals the stated amount of the fund. When the 
fund is replenished the amount of the replenishment equals the 
amounts recorded since the prior replenishment and should bring the 
cash balance back to the stated amount. Only one person should be in 
charge of the fund.
---------------------------------------------------------------------------

B. Post-Discovery of Misappropriation Activity

    As soon as a misappropriation is discovered, the political 
committee:
[square] Notifies relevant law enforcement of the misappropriation.
[square] Notifies the FEC of the misappropriation.
[square] Voluntarily files amended reports to correct any reporting 
errors due to the misappropriation, as required by the FEC.
    This notice represents a general statement of policy announcing the 
general course of action that the Commission intends to follow. This 
policy statement does not constitute an agency regulation requiring 
notice of proposed rulemaking, opportunities for public participation, 
prior publication, and delay in effective date under 5 U.S.C. 553 of 
the Administrative Procedures Act (``APA''). As such, it does not bind 
the Commission or any member of the general public. The provisions of 
the Regulatory Flexibility Act, 5 U.S.C. 605(b), which apply when 
notice and comment are required by the APA or another statute, are not 
applicable.

    Dated: March 22, 2007.
Robert D. Lenhard,
Chairman, Federal Election Commission.
[FR Doc. E7-6299 Filed 4-4-07; 8:45 am]
BILLING CODE 6715-01-P