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FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM 

August 2, 2021 

TO: Patricia C. Orrock 

Chief Compliance Officer 

Dayna C. Brown 

Assistant Staff Director 

Audit Division 

FROM: Neven F. Stipanovic 

Associate General Couns 

Policy Division 

Lorenzo Holloway 

Assistant General Couns

Compliance Advice 

Danita Alberico 

Attorney 

unsel 

Counsel 

vice 

SUBJECT: Interim Audit Report of the Audit Division – Democratic Party of 

Arkansas (LRA 1153) 

I. INTRODUCTION 

The Office of the General Counsel has reviewed the Interim Audit Report 

(“Report”) on the Democratic Party of Arkansas (“Committee”). The Report contains 

four findings: (1) Reporting of Debts and Obligations; (2) Recordkeeping for Employees; 

(3) Reporting of Apparent Independent Expenditures; and (4) Disclosure of Loans and 

Loan Repayments. We generally concur with the findings, and comment on Findings 2 

and 3. If you have any questions, please contact Danita Alberico, the attorney assigned to 

this audit. 
 

 

Democratic Party of Arkansas IAR 

LRA 1153 

Page 2 of 4 

II. RECORDKEEPING FOR EMPLOYEES (Finding 2) 

The Report finds that the Committee did not maintain any monthly payroll logs to 

document the percentage of time each employee spent in connection with a federal 

election. For 2017 and 2018, the Audit Division identified payments to Committee 

employees totaling $33,537 for employees paid exclusively with nonfederal funds. The 

Audit Division recommends that the Committee provide evidence that monthly logs were 

maintained for employees paid solely with nonfederal funds or provide and implement a 

plan to maintain monthly payroll logs in the future. We recommend that, instead, the 

Audit Division give the Committee an opportunity to provide a record sufficient to verify 

that certain employees were involved in exclusively nonfederal activities. 

Depending on the percentage of time an employee spends on federal activities, 

Commission regulations dictate which accounts a committee may use to pay for the 

salary and benefit of the employee. Accordingly, salaries and benefits for employees 

who spend more than 25% of their compensated time on federal election activity (“FEA”) 

or activities in connection with a federal election in a given month must be paid only 

from a federal account. 52 U.S.C. § 30101(20)(A)(iv); 11 C.F.R. § 106.7(d)(1)(ii); see 

also 52 U.S.C. § 30125(b). Employees who spend 25% or less of their time on FEA or 

activities in connection with a federal election must either be paid from a federal account 

or be allocated as administrative costs. 11 C.F.R. §§106.7(c)(1), 106.7(d)(1)(i). 

Employees who spend none of their compensated time on FEA or activities in connection 

with a federal election may be paid entirely from a nonfederal account if the funds 

comply with state law. 11 C.F.R. §106.7(d)(1)(iii). 

Commission regulations also require political committees to maintain records that 

provide in sufficient detail the necessary information and data from which filed reports 

and statements may be verified, explained, clarified, and checked for accuracy and 

completeness. 11 C.F.R. § 104.14 (b)(1). The Commission, however, has no way of 

knowing whether an employee spent no time on federal election-related activities unless 

it can review documentation that indicates that information. We do not believe that a 

payroll log is necessary to verify this information since only one type of activity (the 

percentage of time an employee spent in connection with a federal election) must be 

tracked and verified. Instead, we conclude that a record prepared in accordance with 

section 104.14(b)(1) would be sufficient for verification purposes. A simplified record 

for these types of employees would also be less burdensome than a payroll log for a 

committee to create and maintain. Therefore, we recommend that the Audit Division 

give the Committee an opportunity to provide records consistent with 11 C.F.R. § 104.14 

(b)(1) to show that certain employees were involved in exclusively nonfederal activities. 
 

 

 

 

 

Democratic Party of Arkansas IAR 

LRA 1153 

Page 3 of 4 

III. REPORTING OF APPARENT INDEPENDENT EXPENDITURES 

(Finding 3) 

The Committee reported disbursements totaling $22,803 as Federal Election 

Activity. These disbursements were for direct mail pieces, pledge cards, and walking 

cards. According to the Audit Division, these disbursements should have been reported 

as independent expenditures and thus disclosed on 24-hour reports because each 

communication contains express advocacy. 

We concur with the auditors that the communications are independent 

expenditures. However, we address the Committee’s argument that its campaign 

materials (pledge cards and walking cards) are canvassing materials and therefore are not 

properly regarded as independent expenditures. The Committee contends that canvassing 

materials, by definition, are distributed by volunteers. The Committee told the auditors 

that the nature of canvassing materials means that volunteers are involved. The 

Committee contends that it is thus entitled to the “volunteer materials exemption” 

(“VME”) for the pledge cards and walking cards disbursements without any showing of 

volunteer involvement.1 See 52 U.S.C. § 30101(9)(B)(viii); 11 C.F.R. § 100.147. 

We disagree with the Committee’s contention. Under Commission regulations, 

the payment by a state or local party committee for the costs of campaign materials (such 

as pins, bumper stickers, handbills, brochures, posters, party tabloids or newsletters, and 

yard signs) used by such committee in connection with volunteer activities on behalf of 

any nominee(s) of such party is not an expenditure provided that such materials are 

distributed by volunteers and not by commercial or for-profit operations. 11 C.F.R. 

§ 100.147(d). Whether the VME applies, thus, does not hinge on the type of campaign 

material a committee uses, but, instead, on how the campaign materials are distributed. 

In particular, the regulation draws a distinction between campaign materials distributed 

by volunteers, which qualify for the exemption, and those that are distributed by paid 

workers of commercial entities or for-profit operations, which do not qualify for the 

exemption. Id. To determine whether the VME applies, the Commission must evaluate 

whether a committee, in fact, used volunteers to distribute campaign materials. 

We acknowledge that there is some uncertainty as to what type of information is 

necessary to show that the VME applies to certain payments. See Draft Final Audit 

Report on Arizona Republican Party at 11(May 7, 2013) (acknowledging the uncertainty 

The Committee also states that it did not intend for the canvassing materials to be independent 

expenditures. However, the regulation defining express advocacy, see 11 C.F.R. § 100.22, does not permit 

an examination of the speaker’s intent. “Express Advocacy; Independent Expenditures; Corporate and 

Labor Organization Expenditures; Final Rule” 60 Fed. Reg. 35,292, 39,295 (July 6, 1995) (explaining that 

subjective intent is not a relevant consideration in evaluating whether a communication constitutes express 

advocacy); FEC v. Wisc. Right to Life, Inc., 551 U.S. 449, 466-472 (2007) (subjective intent is irrelevant); 

see also Final Audit Report on The National Campaign Fund at 11-13 (Nov. 7, 2012) and Final Audit 

Report on The Legacy Committee Political Action Committee, at 10 (Aug. 15, 2012) (communications 

intended as fundraising letters not exempt from independent expenditures). 

1 
Democratic Party of Arkansas IAR 

LRA 1153 

Page 4 of 4 

regarding the amount of volunteer involvement needed to qualify for the volunteer 

materials exemption, as well as the amount of documentation required to support such an 

exemption); Memorandum from Christopher Hughey to John D. Gibson, FAR on the 

Tennessee Republican Party Federal Election Account (LRA 745) at 2-3 -XQ

(discussing Statement of Reasons of Commissioners Petersen, Bauerly, Hunter, and 

Weintraub in MUR 5598, Utah Republican Party, et al.  Memorandum from Christopher 

Hughey to Joseph F. Stoltz, Report of the Audit Division on the Washington State 

Democratic Central Committee (LRA 737) at 2-3 (Feb. 3, 2010) 

(same). The amount of volunteer involvement needed to qualify for the VME is also 

uncertain. See, e.g., Memorandum to Thomas Hintermister from Lisa J. Stevenson, 

DFAR on the Arizona Republican Party at 3-6 (Apr. 8, 2013) (General Counsel’s 

recommendation is informed by the uncertainty regarding the amount of volunteer 

involvement needed to qualify for the exemption). Here, however, the Committee has 

provided no information about volunteer involvement. We believe that a payment may 

not qualify for the VME based solely on the type of campaign material used, such as the 

pledge cards and walking cards at issue here. We conclude, therefore, that the 

Committee must proffer at least some evidence of volunteer involvement before the 

Audit Division can consider whether the VME applies to the Committee’s disbursements.