A Federal Election Commission audit of House Majority Leader Tom DeLay’s (R-Texas) leadership political action committee found several problems stemming from the 2001-02 election cycle.

Much of the imbalance between ARMPAC’s bank records and disclosure reports stems from its failure to use the proper allocation ratios for paying bills using a mix of hard and soft money. Soft money was banned from use in federal campaigns after the 2002 elections.

According to the FEC, ARMPAC used slightly more than $203,000 in soft money to pay for fundraising, administrative and get-out-the-vote expenses that should have been paid for in hard money. ARMPAC’s federal arm, which is still in operation, may be forced to reimburse the soft-money PAC for that amount by the FEC, although the soft-money PAC is now closed. ARMPAC raised $3.6 million in combined hard and soft money during the 2001-02 cycle, and spent slightly more than $3.7 million.

Don McGahn, a Republican campaign finance lawyer who has been retained by ARMPAC, said the PAC has set aside more than $200,000 in hard money in a separate account in order to cover any allocation errors. But no decision has been made where to send the money since ARMPAC’s soft-money arm is closed. “It’s been transferred to a separate account and will not be spent on any federal election activity,” McGahn said.

McGahn also said that ARMPAC did well in the FEC audit overall, despite the findings outlined in the agency’s report. “[The FEC] didn’t find any substantial violations,” he said. “It was a reasonably clean audit.”

McGahn disputed an FEC finding that ARMPAC had failed to disclose more than $322,000 in debts to vendors. He said all the vendors had been paid promptly, and that the FEC position on the vendor debt was based upon a highly restrictive reading of federal campaign law.

ARMPAC failed to report $66,750 in PAC and individual contributions during the 2001-02 cycle, and had more than $39,000 in “unexplained differences” between what it took in and what it reported, according to an FEC report detailing the audit findings. This led to a $125,716 “understatement” in receipts.

ARMPAC also understated its disbursements by $40,624, with most of that coming in the form of “unreported operating expenditures.”

“A comparison of ARMPAC’s reported figures to its bank records revealed that receipts and the ending cash balance had been materially misstated for calendar year 2001 as well as beginning cash-on-hand, receipts, disbursements and ending cash-on-hand for calendar year 2002,” the FEC report stated.

FEC auditors found that roughly 28 percent of the contributions to ARMPAC that they examined lacked “external documentation” as to who gave the money, how much and when the donation occurred. A review of disbursements “was similarly limited by the lack of external documentation” in about one-third of items checked, the FEC reported. Overall, the agency found that ARMPAC “satisfied the recordkeeping requirements” of federal election law.