el 

el 

FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

May 27, 2021 

MEMORANDUM 

TO: Patricia C. Orrock 

Chief Compliance Officer 

FROM: Neven Stipanovic 

Associate General Couns 

Policy Division 

Lorenzo Holloway 

Assistant General Couns

Joshua Blume 

Attorney 

Compliance Advice 

Counsel 

sel 

e 

SUBJECT: Interim Audit Report on the Kentucky State Democratic Central Executive 

Committee (LRA 1107) 

I. INTRODUCTION 

The Office of the General Counsel has reviewed the draft Interim Audit Report (“IAR”) 

on the Kentucky State Democratic Central Executive Committee (“Committee”). The draft IAR 

contains five findings: (1) Misstatement of Financial Activity; (2) Receipt of Contributions in 

Excess of the Limit; (3) Recordkeeping for Employees; (4) Excessive Coordinated Party 

Expenditures; and (5) Failure to File 24-Hour Report.1

 We comment on Findings 2 and 4 and 

otherwise concur generally with the findings. If you have any questions, please contact Joshua 

Blume, the attorney assigned to this audit. 

We recommend that the Commission consider this document in Executive Session because the Commission 

may eventually decide to pursue an investigation of matters contained in the proposed IAR. 11 C.F.R. § 2.4(a), 

(b)(6). 

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II. RECEIPT OF CONTRIBUTIONS IN EXCESS OF THE LIMIT (Finding 2). 

The draft IAR concludes that the Committee received apparent excessive contributions 

totaling $78,043. The Committee transferred these excessive contributions to its non-federal 

account; however, the draft IAR finds that the Committee did not provide timely notice to the 

contributors of its plan to do so. At issue is whether the Committee’s failure to notify 

contributors in advance of its transfer of funds may serve as the basis for an excessive 

contribution finding in an audit report when neither the Federal Election Campaign Act of 1971, 

as amended (the “Act”), nor Commission regulations, explicitly require committees that transfer 

excessive contributions to do so. We recommend that the Audit Division raise this issue in the 

cover memorandum that will accompany the transmission of the draft IAR to the Commission. 

Commission regulations require political party committees to resolve excessive 

contributions either by refunding or, with the contributor’s permission, reattributing them.2 11 

C.F.R. §§ 103.3(b)(3), (4); 110.1(k)(3). Transferring excessive contributions to the non-federal 

account is not covered in the regulations, and therefore nothing in the regulations explicitly 

requires timely notice to contributors of the intent to effect a transfer. We therefore reiterate 

comments we made in a previous audit raising this question, and recommending that the question 

be raised for the Commissioners in the cover letter accompanying the transmission of the report. 

See Memorandum from Neven F. Stipanovic to Patricia C. Orrock, Proposed Interim Audit 

Report on Tennessee Democratic Party (LRA 1073), at 2 (Nov. 29, 2018). In that previous audit, 

the Commission approved the proposed finding relating to receipt of excessive contributions 

without discussion.3 See Final Audit Report on Tennessee Democratic Party, at 9-13 (Sept. 16, 

2019). Subsequently when the Audit Division referred this finding to the Office of General 

Counsel’s Enforcement Division, and that division submitted a First General Counsel’s Report to 

the Commission, the Commission was divided on the question of whether to find reason to 

believe that the Tennessee Democratic Party accepted excessive contributions. See Vote 

Certification, Tennessee Democratic Party and Geeta McMillan, Audit Referral 19-12 (Feb. 10, 

2021) (dividing 3-3 on vote to approve all OGC recommendations, and voting 6-0 to approve all 

OGC recommendations except RTB recommendation that Tennessee Democratic Party 

knowingly accepted excessive contributions).4 

2 Contributions to state party committees, such as the Committee, may not be redesignated, as this is an 

option available only to candidates and their authorized committees. See 11 C.F.R. § 110.1(b)(5). 

3 The Commission similarly approved a proposed finding relating to receipt of excessive contributions 

involving a failure to transfer the excessive contributions within 60 days of receiving them. See Final Audit Report 

on Utah Republican Party, at 12 (Jan. 23, 2017). 

4 As noted above, before its consideration of the Tennessee Democratic Party audit, the Commission had 

approved a finding of receipt of excessive contributions in an audit of the Utah Republican Party, based upon that 

party’s failure to transfer excessive contributions to its non-federal account within 60 days of receiving them. See 

Final Audit Report on Utah Republican Party, at 12 (Jan. 23, 2017). The Utah Republican Party audit’s findings 

were also referred to OGC’s Enforcement Division. In that case, the Commission adopted OGC’s recommendations 

to find RTB regarding the Committee’s receipt of excessive contributions and entered into a conciliation agreement 

with the Utah Republican Party. See MUR 7235 (Utah Republican Party), Conciliation Agreement, at 3 (Dec. 7, 

2017). See also MUR 7235 (Utah Republican Party), Factual and Legal Analysis, at 5 (May 1, 2017) (noting that 

violations, including receipt of excessive contributions, “are clear”). 
 

 

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Given this development, which suggests some continued uncertainty on the part of the 

Commission regarding whether Commission regulations require a notice to contributors before 

transferring excessive contributions to the non-federal account, we recommend that the Audit 

Division raise this issue in the cover letter that will accompany the transmission of the IAR to the 

Commission. 

III. EXCESSIVE COORDINATED PARTY EXPENDITURES (Finding 4) 

The draft IAR finds that the Committee spent $558,320 more on communications 

supporting then-House of Representatives candidate, Amy McGrath, than it was entitled to spend 

when considering both its coordinated party expenditure limit for the 2017-18 election cycle 

($49,700)5 and its contribution limit for that cycle ($5,000). The draft IAR finds that the 

communications in question, 13 mail pieces, were coordinated party expenditures under 11 

C.F.R. § 109.37. 

Section 109.37 sets forth three criteria, or “prongs,” that a communication must satisfy in 

order to be deemed a party coordinated expenditure. First, under the “payment prong,” a party 

committee or its agent must have paid for the communication. Second, under the “content 

prong,” the communication must qualify as at least one of three possible types of 

communications, one of the three types being a public communication that expressly advocates 

the election or defeat of a clearly identified federal candidate. Finally, under the “conduct 

prong,” the party committee and the candidate must have engaged in one of six possible types of 

conduct. 11 C.F.R. § 109.37. We agree that the “payment” prong has been satisfied because the 

Committee, and not the candidate, paid for the communications. We address the “content” and 

“conduct” prongs below. 

The Audit Division concludes that the 13 communications meet the content prong by 

virtue of their containing express advocacy, as that term is defined in Commission regulations. 

See 11 C.F.R. § 100.22 (defining “express advocacy”). In addition to qualifying as express 

advocacy, however, such communications must also be “public communications” as that term is 

defined in Commission regulations. See 11 C.F.R. §§ 109.37(a)(2)(ii) (public communication 

expressly advocating election or defeat of clearly identified federal candidate meets content 

prong), 100.26 (defining “public communication”). 

According to the evidence presented by the Audit Division, we believe that the 

communications qualify as “public communications” under 11 C.F.R. § 100.26 because more 

than 500 identical pieces of each of the 13 communications were sent. 11 C.F.R. §§ 100.26 

(defining “public communication” to include “mass mailing”), 100.27 (defining “mass mailing” 

to include 500 or more mail pieces of an identical or substantially similar nature within any 30-

The draft IAR notes that the Democratic Congressional Campaign Committee apparently spent twice the 

applicable party coordinated expenditure limit, or $99,400, to support Amy McGrath’s House campaign. The 

auditors have no evidence that the Committee transferred its authority to make coordinated expenditures to the 

DCCC, however, and therefore credit the Committee with an independent $49,700 limit. 

5 
 

 

 

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day period6). The invoices accompanying each of the communications appear to show that 

70,749 copies of seven of the mail pieces; 92,557 copies of four of the mail pieces; and 81,016 

copies of two of the mail pieces were mailed, depending upon the individual piece, significantly 

exceeding the 500 pieces required. 

According to the definition of express advocacy, a communication expressly advocates 

the election or defeat of a clearly identified federal candidate if it uses phrases such as “vote for 

the President,” “re-elect your Congressman,” “support the Democratic nominee,” “cast your 

ballot for the Republican challenger for U.S. Senate in Georgia,” “Smith for Congress,” “Bill 

McKay in ’94,” “vote Pro-Life” or “vote Pro-Choice” accompanied by a listing of clearly 

identified candidates described as Pro-Life or Pro-Choice, “vote against Old Hickory,” “defeat” 

accompanied by a picture of one or more candidate(s), “reject the incumbent” or 

communications of campaign slogan(s) or individual word(s), which in context can have no other 

reasonable meaning than to urge the election or defeat of one or more clearly identified 

candidate(s), such as posters, bumper stickers, advertisements, etc. which say “Nixon’s the One”, 

“Carter ‘76”, “Reagan/Bush” or “Mondale!” 11 C.F.R. § 100.22(a). 

A communication also may constitute express advocacy if, when taken as a whole and 

with limited reference to external events, such as the proximity to the election, it could only be 

interpreted by a reasonable person as containing advocacy for the election or defeat of one or 

more clearly identified candidate(s), because: (1) the electoral portion of the communication is 

unmistakable, unambiguous, and suggestive of only one meaning; and (2) reasonable minds 

could not differ as to whether it encourages actions to elect or defeat one or more clearly 

identified candidate(s) or encourages some other kind of action. 11 C.F.R. § 100.22(b). 

We agree with the Audit Division that the communications constitute express advocacy, 

but would classify most of them as being so under subsection (a). All but two of the 

communications contain the candidate’s campaign logo “Lt. Col. (ret.) Amy McGrath 

Congress”, which is similar to “Smith for Congress” or “Carter ‘76”,7 and therefore these 

constitute express advocacy under 11 C.F.R. § 100.22(a).89 

6 It is our understanding that we do not have precise information regarding the period of mailing. The 

Committee should be given the opportunity to demonstrate that the mailings in question do not meet this criterion of 

the mass mailing definition. 

7 The mail pieces “Two Peas in a Pod” and “Cozying Up” do not contain the campaign slogan, but we agree 

with the Audit Division’s classifications of these two communications as express advocacy under subsection (a) and 

subsection (b), respectively. 

8 We note that the communications also may well meet the requirements of an additional content standard, 

because all of them refer to a clearly identified House candidate, Ms. McGrath and, in some cases, also her 

opponent, Andy Barr. 11 C.F.R. § 109.37(a)(2)(iii)(A). The Audit Division has informed us that it lacks precise 

information at this time about whether the communications were distributed within the 6th Congressional District 

and about whether the mail pieces were sent within 90 days of the election. The Audit Division may wish to 

consider acquiring this information from the Committee. 

9 The Audit Division also notes the presence of the slogan “amymcgrathforcongress.com” in the domain 

name listed on many of the communications. We agree that this is an additional contextual factor supporting the 

express advocacy determination where it exists. We presented similar arguments regarding the use of campaign 
 

 

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Regarding the conduct prong, the Audit Division observes that most of the 

communications contain the disclaimer “Paid for by the Kentucky Democratic Party and 

authorized by Amy McGrath for Congress”10 The content of the disclaimer is not one of the 

listed conduct standards set forth in 11 C.F.R. § 109.37(a)(3) (cross referencing 11 C.F.R. § 

109.21(d)(1)-(6)). Nevertheless, we have concluded in past audits that the conduct prong is 

satisfied when the communication indicates on its face that it was approved by the candidate, and 

the Commission has adopted this conclusion.11 See Memorandum from Christopher Hughey to 

Joseph F. Stoltz, Interim Audit Report - Democratic Executive Committee of Florida (LRA 805), 

at 5 (Apr. 15, 2011); Final Audit Report on Democratic Executive Committee of Florida, at 9-10 

(Sept. 24, 2012) (finding DECF exceeded coordinated party expenditure limit); Memorandum 

from Christopher Hughey to Patricia Carmona on Interim Audit Report on the Maine Republican 

Party (LRA 817), at 2, n.2 (Dec. 17, 2010); Final Audit Report on the Maine Republican Party, 

at 14 (Feb. 25, 2013). 

slogans in the domain names of website addresses before; however, the Commission did not approve our proposed 

Factual and Legal Analyses in those matters by the requisite four votes. See MUR 6697 (League of Conservation 

Voters), First General Counsel’s Report (“FGCR”) (Mar. 7, 2014), at 7-9 (arguing that website name 

“DanCox4Senate” constituted express advocacy under section 100.22(a) or (b) because domain name placed matter 

within electoral context); MUR 6704 (John Doe), FGCR (“Feb 34, 2014” [sic.] Mar. 6, 2014), at 7-8 (same 

regarding “GoodeForPresident2012”); MUR 6697(League of Conservation Voters), Certification in the Matter of 

League of Conservation Voters [et al.]), July 17, 2015; MUR 6704 (John Doe), Certification in the Matter of John 

Doe, July 17, 2015. 

10 Three of the mail pieces however, carry the disclaimer “Paid for by the Kentucky Democratic Party”. 

These are: McGrath Plan #01 “Reminding Congress”, McGrath #7 “Two Peas”, and McGrath #10 “Cozying Up”. 

11 We note that the Audit Division has indicated informally to us in previous conversations that it may have 

evidence of the party’s and candidate’s use of a common vendor, one of the express criteria for meeting the conduct 

prong. See 11 C.F.R. § 109.21(d)(4). If so, we would recommend adding this information, and the evidentiary basis 

for it, to the audit report. This would be especially appropriate for the three communications that carried disclaimers 

without indication of candidate authorization.