Interim Audit Report of the 

Audit Division on the Kentucky 

State Democratic Central 

Executive Committee 

(January 1, 2017 - December 31, 2018) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial compliance 

with the Act.1

 The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report.

About the Committee (p. 2)

The Kentucky State Democratic Central Executive Committee is 

a state party committee headquartered in Frankfort, Kentucky. 

For more information, see the chart on the Committee 

Organization, p. 2. 

Financial Activity (p. 3)

 Receipts 

o Contributions from Individuals $ 918,471 

o Contributions from Political 

Committees 802,802 

o Transfers from Affiliated/Other 

Party Committees 709,719 

o Offsets, Refunds, and Other 

Federal Receipts 286,747 

o Transfers from Non-federal 

Account 88,064 

Total Receipts $ 2,805,803 

 Disbursements

o Operating Expenditures $ 188,678 

o Allocated Federal/Non-federal 

Expenditures 813,027 

o Transfers to Affiliated/Other 

Party Committees 63,757 

o Refunds/Other Disbursements 385,724 

o Federal Election Activity 1,259,053 

Total Disbursements $ 2,710,239 

Findings and Recommendations (p. 4) 

 Misstatement of Financial Activity (Finding 1) 

 Receipt of Contributions in Excess of the Limit (Finding 2) 

 Recordkeeping for Employees (Finding 3) 

 Excessive Coordinated Party Expenditures (Finding 4) 

 Failure to File 24-Hour Report (Finding 5) 

 

1

 52 U.S.C. §30111(b). 
Interim Audit Report of the Audit 

Division on the 

Kentucky State Democratic 

Central Executive Committee 

(January 1, 2017 - December 31, 2018) 
Table of Contents 

Page

Part I. Background

 Authority for Audit 1 

 Scope of Audit 1 

 Commission Guidance 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 3 

Part III. Summaries

Findings and Recommendations 4 

Part IV. Findings and Recommendations

Finding 1. Misstatement of Financial Activity 6

Finding 2. Receipt of Contributions in Excess of the Limit 8

Finding 3. Recordkeeping for Employees 11

Finding 4. Excessive Coordinated Party Expenditures 12

Finding 5. Failure to File 24-Hour Report 17
1

Part I

Background 

Authority for Audit

This report is based on an audit of the Kentucky State Democratic Central Executive 

Committee (KSDCEC), undertaken by the Audit Division of the Federal Election 

Commission (the Commission) in accordance with the Federal Election Campaign Act of 

1971, as amended (the Act). The Audit Division conducted the audit pursuant to 52 

U.S.C. §30111(b), which permits the Commission to conduct audits and field 

investigations of any political committee that is required to file a report under 52 U.S.C. 

§30104. Prior to conducting any audit under this subsection, the Commission must 

perform an internal review of reports filed by selected committees to determine if the 

reports filed by a particular committee meet the threshold requirements for substantial 

compliance with the Act. 52 U.S.C. §30111(b). 

Scope of Audit

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

1. the receipt of excessive contributions; 

2. the disclosure of contributions received; 

3. the disclosure of individual contributors’ occupation and name of employer; 

4. the disclosure of disbursements, debts and obligations; 

5. the disclosure of expenses allocated between federal and non-federal accounts;

6. the consistency between reported figures and bank records; 

7. the completeness of records;

8. the disclosure of independent expenditures; and 

9. other committee operations necessary to the review.

Commission Guidance

Request for Legal Consideration by the Commission

Pursuant to the Commission’s “Policy Statement Establishing a Program for Requesting 

Consideration of Legal Questions by the Commission,” several state party committees 

unaffiliated with KSDCEC requested early consideration of a legal question raised during 

audits covering the 2010 election cycle. Specifically, the Commission addressed whether 

monthly time logs under 11 CFR §106.7(d) (1) were required for employees paid with 

100 percent federal funds. 

The Commission concluded, by a vote of 5-1, that 11 CFR §106.7(d) (1) does require 

committees to keep a monthly log for employees paid exclusively with federal funds. 

Exercising its prosecutorial discretion, however, the Commission decided it will not 

pursue recordkeeping violations for the failure to keep time logs or to provide affidavits 

to account for employee salaries paid with 100 percent federal funds and reported as 

such. This audit report does not include any findings or recommendations with respect to 

KSDCEC employees paid with 100 percent federal funds and reported as such. 
2 

Part II

Overview of Committee 

Committee Organization 

Important Dates

• Date of Registration July 12, 1975

• Audit Coverage January 1, 2017 - December 31, 2018

Headquarters Frankfort, Kentucky 

Bank Information

• Bank Depositories Three

• Bank Accounts Four Federal; Three Non-Federal

Treasurer

• Treasurer When Audit Was Conducted M. Melinda Karns (4/12/2013 – Present)

• Treasurer During Period Covered by Audit M. Melinda Karns (4/12/2013 – Present)

Management Information

• Attended FEC Campaign Finance Seminar Yes

• Who Handled Accounting and 

Recordkeeping Tasks

Paid Staff
3 

Overview of Financial Activity 

(Audited Amounts)

Cash on hand @ January 1, 2017 $ 47,671

Receipts

o Contributions from Individuals 918,471

o Contributions from Political Committees 802,802

o Transfers from Affiliated/Other Party 

Committees

709,719

o Offsets, Refunds, and Other Federal Receipts 286,747

o Transfers from Non-federal Account 88,064

Total Receipts $2,805,803

Disbursements

o Operating Expenditures 188,678

o Allocated Federal/Non-federal Expenditures 813,027

o Transfers to Affiliated/Other Party 

Committees

63,757

o Refunds/Other Disbursements 385,724

o Federal Election Activity 1,259,053

Total Disbursements $ 2,710,239

Cash on hand @ December 31, 2018 $ 143,235
4

Part III

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity

During audit fieldwork, a comparison of KSDCEC’s reported financial activity with its 

bank records revealed a misstatement of receipts, disbursements, and beginning and 

ending cash for calendar year 2017, as well as receipts, disbursements, and ending cash 

for calendar year 2018. Specifically, for 2017, KSDCEC understated receipts, 

disbursements, beginning cash and ending cash by $15,838, $38,845, $35,925 and 

$12,917, respectively. For 2018, KSDCEC understated receipts, disbursements and 

ending cash by $116,641, $61,315 and $68,280, respectively. The Audit staff 

recommends that KSDCEC amend its disclosure reports or file a Form 99 (Miscellaneous 

Electronic Submission) to correct the misstatements. 

(For more detail, see p. 6.) 

Finding 2. Receipt of Contributions in Excess of the Limit

During audit fieldwork, the Audit staff reviewed contributions from individuals to 

determine if any exceeded the contribution limit. This review indicated that KSDCEC

received apparent excessive contributions totaling $78,043. The errors occurred as a 

result of KSDCEC not notifying contributors that the excessive portion of the 

contribution was transferred to the non-federal account. The Audit staff recommends that 

KSDCEC provide documentation demonstrating that the contributions were not excessive 

or, if excessive, were resolved in a timely manner. Absent such a demonstration, 

KSDCEC should send notices to those contributors whose contributions are eligible for 

presumptive reattribution and/ or refund any remaining excessive amounts that have not 

been previously transferred to the non-federal account. 

(For more detail, see p. 8.) 

Finding 3. Recordkeeping for Employees

During audit fieldwork, the Audit staff determined that KSDCEC did not maintain any 

monthly payroll logs, as required, to document the percentage of time each employee 

spent in connection with a federal election. For 2017 and 2018, the Audit staff identified 

payments to KSDCEC employees totaling $443,976 for which KSDCEC did not maintain 

monthly payroll logs. This consisted of payroll which was allocated with federal and 

non-federal funds. There was no payroll paid exclusively with non-federal funds. The 

Audit staff recommends that, absent the provision of monthly payroll logs, KSDCEC

implement a plan to maintain such monthly payroll logs in the future. 

(For more detail, see p. 11.) 
5

Finding 4. Excessive Coordinated Party Expenditures 

During audit fieldwork, the Audit staff identified apparent coordinated expenditures for 

one House candidate that exceeded the 2018 coordinated party expenditure limit by a 

total of $558,320. The Audit staff recommends that KSDCEC provide documentation 

demonstrating that the expenditures were not coordinated or seek reimbursement from 

the candidate who benefited. 

(For more detail, see p. 12.) 

Finding 5. Failure to File 24-Hour Report 

During audit fieldwork, the Audit staff reviewed expenditures that KSDCEC disclosed on 

Schedule B (Itemized Disbursements), Line 30(b) (Federal Election Activity Paid 

Entirely with Federal Funds), which appear to be independent expenditures that should 

have been disclosed on Schedule E, Line 24 (Independent Expenditures). KSDCEC may 

have been required to file a 24-hour report for $14,105, the amount KSDCEC paid for a 

door hanger supporting a candidate for federal office, depending upon the dissemination 

date. 

If KSDCEC believes the disbursement did not require reporting as an independent 

expenditure, the Audit staff recommends that KSDCEC provide evidence to support its 

conclusion. Further, the Audit staff recommends that KSDCEC provide documentation 

to support the date of public dissemination for the door hanger to determine whether a 

24-hour report was required. Absent such documentation, KSDCEC should submit and 

implement revised procedures for recognizing and reporting independent expenditures to 

allow for timely filing of 24/48-hour reports. 

(For more detail, see p. 16.) 
6

Part IV

Findings and Recommendations

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of KSDCEC’s reported financial activity with its 

bank records revealed a misstatement of receipts, disbursements, and beginning and 

ending cash for calendar year 2017, as well as receipts, disbursements, and ending cash 

for calendar year 2018. Specifically, for 2017, KSDCEC understated receipts, 

disbursements, beginning cash and ending cash by $15,838, $38,845, $35,925 and 

$12,917, respectively. For 2018, KSDCEC understated receipts, disbursements and 

ending cash by $116,641, $61,315 and $68,280, respectively. The Audit staff 

recommends that KSDCEC amend its disclosure reports or file a Form 99 (Miscellaneous 

Electronic Submission) to correct the misstatements. 

Legal Standard 

Contents of Reports. Each report must disclose:

• The amount of cash on hand at the beginning and end of the reporting period; 

• The total amount of receipts for the reporting period and for the calendar year; 

• The total amount of disbursements for the reporting period and for the calendar year; 

and 

• Certain transactions that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 52 U.S.C. §30104(b)(1), (2), (3), (4), and (5). 

Facts and Analysis 

A. Facts

During audit fieldwork, the Audit staff reconciled KSDCEC’s reported financial activity 

with its bank records for calendar years 2017 and 2018. The reconciliation determined 

that KSDCEC misstated receipts, disbursements, and beginning and ending cash for 

2017, as well as receipts, disbursements and ending cash for 2018. The following charts 

detail the discrepancies between KSDCEC’s disclosure reports and its bank activity. The 

succeeding paragraphs explain why the discrepancies occurred. 
7

2017 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash on hand @ 

January 1, 2017 

$ 11,746 $ 47,671 ($35,925)

Understated

Receipts $605,653 $621,491 ($15,838)

Understated

Disbursements $484,147 $522,993 ($38,846)

Understated

Ending Cash on hand @ 

December 31, 2017

$133,253 $146,170 ($12,917)

Understated

The beginning cash on hand was understated by $35,925 and the discrepancy resulted 

from prior period discrepancies. 

The net understatement of receipts resulted from the following: 

• Contributions from individuals not reported $15,000 

• Transfer from affiliated committee not reported 11,290 

• Transfer from Non-federal account not supported by bank records (10,586) 

• Unexplained differences 134 

Net Understatement of Receipts $15,838 

 The understatement of disbursements resulted from the following: 

• Disbursements not reported or reported incorrectly $26,551 

• Transfer to affiliated committee not reported 11,290 

• Unexplained differences 1,005 

Understatement of Disbursements $38,846

The $12,917 understatement of the ending cash on hand was a result of the reporting

discrepancies described above.

2018 Committee Activity 

Reported Bank Records Discrepancy

Beginning Cash on hand @ 

January 1, 2018

$ 132,996 $ 146,170 ($13,174)

Understated

Receipts $2,067,670 $2,184,311 ($116,641)

Understated

Disbursements $2,125,931 $2,187,246 ($61,315)

Understated

Ending Cash on hand @ 

December 31, 2018 

$ 74,9562 $ 143,236 ($68,280)

Understated

 

2

 The reported 2018 ending cash on hand does not equal beginning cash on hand plus reported receipts 

minus reported disbursements. This was due to a mathematical discrepancy in which the reported 

beginning cash on hand for 2018 did not equal the ending cash on hand reported for 2017. 
8

The understatement of receipts resulted from the following: 

• Contributions from individuals not reported or reported incorrectly $28,980 

• Contributions from political committees not reported 28,187 

• Transfers from Non-federal account not reported 53,190 

• Unexplained differences 6,284 

Understatement of Receipts $116,641 

The net understatement of disbursements resulted from the following: 

• Disbursements not reported or reported incorrectly 20,428 

• Disbursements reported but did not clear the bank (7,454) 

• Disbursements reported twice (35,171) 

• Transfers to Non-federal account not reported 64,636 

• Payments for salaries and wages not reported 20,204 

• Unexplained differences (1,328) 

Net Understatement of Disbursements $ 61,315 

The $68,280 understatement of the ending cash on hand was a result of the reporting 

discrepancies described above. 

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with the KSDCEC representatives during the exit 

conference and provided schedules detailing the misstatements of financial activity. The 

Audit staff explained each reporting error to the KSDCEC representatives and answered 

several questions regarding the details of the misstatement. The KSDCEC

representatives acknowledged their understanding of the differences. In its response to 

the exit conference, KSDCEC did not provide any comments on this finding. 

The Audit staff recommends that, within 30 calendar days of service of this report, 

KSDCEC amend its disclosure reports or file a Form 99 (Miscellaneous Electronic 

Submission)3 to correct the misstatements noted above. In addition, the Audit staff 

recommends that KSDCEC reconcile the cash balance on its most recently filed report 

and correct any subsequent discrepancies. 

Finding 2. Receipt of Contributions in Excess of the Limit

Summary 

During audit fieldwork, the Audit staff reviewed contributions from individuals to 

determine if any exceeded the contribution limit. This review indicated that KSDCEC

received apparent excessive contributions totaling $78,043. The errors occurred as a 

result of KSDCEC not notifying contributors that the excessive portion of the 

contribution was transferred to the non-federal account. The Audit staff recommends that 

KSDCEC provide documentation demonstrating that the contributions were not excessive 

or, if excessive, were resolved in a timely manner. Absent such a demonstration, 

 

3 If KSDCEC chooses to file a Form 99 instead of amending its disclosure reports, the form must contain 

all pertinent information that is required on each schedule.
9

KSDCEC should send notices to those contributors whose contributions are eligible for 

presumptive reattribution and/or refund any remaining excessive amounts that have not 

been previously transferred to the non-federal account. 

Legal Standard 

A. Party Committee Limits. A party committee may not receive more than a total of 

$10,000 per year from any one individual. This limit is shared by the state, district, & 

local party committees. 52 U.S.C. §30116 (a)(1)(D) and 11 CFR §§110.1(c)(5) and 

110.9. 

B. Handling Contributions That Appear Excessive. If a committee receives a 

contribution that appears to be excessive, the committee must either:

• Return the questionable check to the donor; or

• Deposit the check into its federal account and:

 Keep enough money in the account to cover all potential refunds; 

 Keep a written record explaining why the contribution may be illegal; 

 Include this explanation on Schedule A if the contribution has to be 

itemized before its legality is established;

 Seek a reattribution or a redesignation of the excessive portion, following 

the instructions provided in the Commission regulations (see below for 

explanations of reattribution and redesignation); and 

 If the committee does not receive a proper reattribution or redesignation 

within 60 days after receiving the excessive contribution, refund the excessive 

portion to the donor. 11 CFR §§103.3(b)(3), (4) and (5) and 110.1(k)(3)(ii)(B). 

C. Joint Contributions. Any contribution made by more than one person (except for a 

contribution made by a partnership) must include the signature of each contributor on 

the check, money order, or other negotiable instrument or in a separate writing. A 

joint contribution is attributed equally to each donor unless a statement indicates that 

the funds should be divided differently. 11 CFR §110.1(k)(1) and (2). 

D. Reattribution of Excessive Contributions. The Commission regulations permit 

committees to ask donors of excessive contributions (or contributions that exceed the 

committee’s net debts outstanding) whether they had intended their contribution to be 

a joint contribution from more than one person and whether they would like to 

reattribute the excess amount to the other contributor. The committee must inform 

the contributor that: 

• The reattribution must be signed by both contributors; 

• The reattribution must be received by the committee within 60 days after the 

committee received the original contribution; and

• The contributor may instead request a refund of the excessive amount. 11 

CFR §110.1(k)(3). 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper reattribution or refund the excessive portion to the donor. 11 CFR 

§§103.3(b)(3) and 110.1(k)(3)(ii)(B). Further, a political committee must retain 
10

written records concerning the reattribution in order for it to be effective. 11 CFR 

§110.1(l)(5). 

Notwithstanding the above, any excessive contribution that was made on a written 

instrument that is imprinted with the names of more than one individual may be 

attributed among the individuals listed unless instructed otherwise by the 

contributor(s). The committee must inform each contributor: 

• How the contribution was attributed; and

• The contributor may instead request a refund of the excessive amount. 11 

CFR §110.1(k)(3)(B). 

Facts and Analysis 

A. Facts

The Audit staff utilized sample testing and a review of high dollar contributions not 

included in the sample population to identify apparent excessive contributions from 

individuals, as noted below. 

Excessive Contributions – Testing Method

Sample Projection Amount4 $28,798 

High Dollar Review Contribution Error 

Amount $49,245 

Total Amount of Excessive Contributions $78,043 

Reasons for Excessive Contributions

Contributions not resolved via signed 

reattribution letter or refund $78,043 

Total Amount of Excessive Contributions $78,043 

B. Additional Information 

KSDCEC did not maintain a separate account for questionable contributions. However, 

based on its cash on hand at the end of the audit period ($143,235), it appears that 

KSDCEC did maintain sufficient funds to refund the apparent excessive contributions. 

The Audit staff notes that the excessive portions of the contributions reviewed were 

timely transferred to KSDCEC’s non-federal account.

C. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with the KSDCEC representatives during the exit 

conference and provided a schedule of the apparent excessive contributions. The Audit 

staff noted that the contributors may not have been made aware that the excessive 

portions of their contributions were transferred to the non-federal account because 

 

4 The sample error amount ($28,798) was projected using a Monetary Unit Sample with a 95 percent 

confidence level. The sample estimate could be as low as $13,913 or as high as $55,427.
11

KSDCEC has not provided supporting documentation such as letters or solicitations 

cards. In its response to the exit conference, KSDCEC stated that it would provide the 

Audit staff “acknowledgments from donors who donated in excess of the federal limits 

that the funds were to be used for state expenditures.” To date, the Audit staff has not 

received the “acknowledgements” from KSDCEC.

The Audit staff recommends that, within 30 calendar days of service of this report, 

KSDCEC: 

• Provide evidence demonstrating that the contributions in question were not 

excessive, or if excessive, were resolved in a timely manner. This evidence 

should include documentation that was not made available to the Audit staff 

during the audit, including copies of solicitation cards completed by the 

contributors at the time of their contribution that clearly informed the 

contributors of the limitations; timely letters sent to contributors eligible for 

presumptive reattribution; or timely refunds (copies of the front and back of 

negotiated refund checks) or reattributions for excessive contributions. 

• Absent such demonstration, KSDCEC should review its contributions to 

determine which are excessive and how each can be resolved. For any excessive 

contributions that KSDCEC could have resolved by sending a presumptive 

reattribution letter, it may now send letters to inform the contributors how the 

committee reattributed the contribution and/or offer a refund for any remaining 

excessive amounts that have not been previously transferred to the non-federal 

account. KSDCEC must provide evidence of such refunds (copies of the front 

and back of negotiated checks). For a reattribution, both the contributor and the 

individual to whom a contribution was reattributed must be notified. 

• If funds are not available to make the necessary refunds, KSDCEC should 

disclose the contributions requiring refunds on Schedule D (Debts and 

Obligations) until funds become available to make such refunds. 

Finding 3. Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff determined that KSDCEC did not maintain any 

monthly payroll logs, as required, to document the percentage of time each employee 

spent in connection with a federal election. For 2017 and 2018, the Audit staff identified 

payments to KSDCEC employees totaling $443,976 for which KSDCEC did not maintain 

monthly payroll logs. This consisted of payroll which was allocated with federal and 

non-federal funds. There was no payroll paid exclusively with non-federal funds. The 

Audit staff recommends that, absent the provision of monthly payroll logs, KSDCEC

implement a plan to maintain such monthly payroll logs in the future. 

Legal Standard 

A. Maintenance of Monthly Logs. Committees must keep a monthly log of the 

percentage of time each employee spends in connection with a federal election. 

Allocations of salaries, wages, and fringe benefits are to be undertaken as follows:
12

• Employees who spend 25 percent or less of their compensated time in a given 

month on federal election activities must be paid either from the federal account 

or have their pay allocated between federal and non-federal accounts as 

administrative costs;

• Employees who spend more than 25 percent of their compensated time in a given 

month on federal election activities must be paid only from a federal account; and 

• Employees who spend none of their compensated time in a given month on 

federal election activities may be paid entirely with funds that comply with state 

law. 11 CFR §106.7(d)(1). 

Facts and Analysis 

A. Facts

During audit fieldwork, the Audit staff reviewed disbursements for payroll. KSDCEC

did not maintain any monthly payroll logs or equivalent records to document the 

percentage of time each employee spent in connection with a federal election. These logs 

are required to document the proper allocation of federal and non-federal funds used to 

pay employee salaries and wages. For 2017 and 2018, KSDCEC did not maintain 

monthly logs for $443,9765 in payroll. This amount consists solely of payroll for 

employees reported on Schedule H4 (Disbursements for Allocated Federal and NonFederal Activity) and paid with an allocation of federal and non-federal funds during the 

same month. There was no payroll paid exclusively with non-federal funds. 

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with the KSDCEC representatives during the exit 

conference and provided a schedule of the payroll transactions. In its response to the exit 

conference, KSDCEC did not provide any comment on this finding. 

The Audit staff recommends that, within 30 calendar days of service of this report, 

KSDCEC: 

• Provide evidence that monthly time logs were maintained to document the 

percentage of time an employee spent in connection with a federal election; or

• Provide and implement a plan to maintain monthly payroll logs in the future.

Finding 4. Excessive Coordinated Party Expenditures 

Summary 

During audit fieldwork, the Audit staff identified apparent coordinated expenditures for 

one House candidate that exceeded the 2018 coordinated party expenditure limit by a 

total of $558,320. The Audit staff recommends that KSDCEC provide documentation 

demonstrating that the expenditures were not coordinated or seek reimbursement from 

the candidate who benefited. 

 

5

 This total does not include payroll for employee paid with 100 percent federal funds and reported as such 

(see Part I, Background, Commission Guidance, Request for Early Consideration of a Legal Question – 

Recordkeeping for Employees, Page 1). Payroll amounts are stated net of taxes and benefits. 
13

Legal Standard 

A. Coordinated Party Expenditures. National party committees and state party 

committees are permitted to purchase goods and services on behalf of candidates in 

the general election—over and above the contributions that are subject to contribution 

limits. Such purchases are referred to as “coordinated party expenditures.” They are 

subject to the following rules:

• The amount spent on “coordinated party expenditures” is limited by statutory 

formulas that are based on the Cost of Living Adjustment (COLA) and the voting 

age population; 

• Party committees are permitted to coordinate the spending with the candidate 

committees;

• The parties may make these expenditures only in connection with the general 

election;

• The party committees—not the candidates—are responsible for reporting these 

expenditures; and 

• If the party committee exceeds the limits on coordinated party expenditures, the 

excess amount is considered an in-kind contribution, subject to the contribution 

limits described above. 52 U.S.C. §30116(d) and 11 CFR §§109.30 and 109.32. 

B. Assignment of Coordinated Party Expenditure Limit. A political party may 

assign its authority to make coordinated party expenditures to another political party 

committee. Such an assignment must be made in writing, state the amount of the 

authority assigned, and be received by the assignee before any coordinated party 

expenditure is made pursuant to the assignment. The political party committee that is 

assigned authority to make coordinated party expenditures must maintain the written 

assignment for at least three years. 11 CFR §§104.14 and 109.33(a) and (c). 

C. Volunteer Activity. The payment by a state committee of a political party of 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 a 

contribution, provided that the following conditions are met: 

• Such payment is not for cost incurred in connection with any broadcasting, 

newspaper, magazine, bill board, direct mail, or similar type of general public 

communication or political advertising. The term direct mail means any 

mailing(s) by a commercial vendor or any mailing(s) made from commercial lists;

• The portion of the cost of such materials allocable to Federal candidates must be 

paid from contributions subject to the limitations and prohibitions of the Act;

• Such payment is not made from contributions designated by the donor to be spent 

on behalf of a particular candidate for federal office;

• Such materials are distributed by volunteers and not by commercial or for-profit 

operations; 

• If made by a political committee such payments shall be reported by the political 

committee as a disbursement in accordance with 11 CFR §104.3 but need not be 

allocated to specific candidates in committee reports; and
14

• The exemption is not applicable to campaign materials purchased by the national 

party committees. 11 CFR §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR 

§100.147 (a), (b), (c), (d), (e) and (g). 

D. Coordinated Party Communication. A political party communication is 

coordinated with a candidate, a candidate’s authorized committee, or agent of any of 

the foregoing, when the communication satisfies the following conditions: 

(1) The communication is paid for by a political party committee or its agent.

(2) The communication satisfies at least one of the content standards.

• Must expressly advocate a candidate’s election of defeat 11 CFR §100.22(a) 

and (b). 

• Involve the dissemination, distribution or republication of a candidate’s 

campaign materials.

• Refers to a federal candidate, is directed to the candidate’s constituents and is 

distributed within certain time frame before an election.

(3) The communication satisfies at least one of the conduct standards in 11 CFR 

§109.21(d)(1) through (d)(6), subject to the provisions of 11 CFR §109.21(e), (g), 

and (h). 

• Must have been created, produced or distributed at the request of the 

candidate or its’ agent. 

• Developed with a “material involvement” of the candidate. 

• Created, produced or distributed after “substantial discussion” with the 

candidate or his agents.

• The use of a common vendor in the creation, production or distribution of a 

communication. 11 CFR §109.37. 

E. Reporting Coordinated Party Expenditures. Each political committee shall report 

the full name of each person who receives any expenditure from the reporting 

committee during the reporting period in connection with an expenditure under 11 

CFR Part 109, Subpart D (52 U.S.C. §30116(d)), together with the date, amount and 

purpose of any such expenditure as well as the name of, and office sought by the 

candidate on whose behalf the expenditure is made. 11 CFR §104.3 (b)(1)(viii). 

F. Limits on Contributions Made by State and Local Party Committees.

State and local party committees must comply with the contribution limits below:

• $5,000 per election to a Federal campaign if the contributing committee has 

qualified as a multicandidate committee. 

• $2,700 per election to a Federal campaign if the contributing committee has not 

qualified as a multicandidate committee.

• $5,000 per year to a separate segregated fund (corporate or labor PAC) or a 

nonconnected committee. 

• Unlimited transfers to other party committees. 52 U.S.C. §30116(a). 
15

Facts and Analysis

A. Facts

The coordinated expenditure limit during the 2018 election cycle for a House candidate, 

in the state of Kentucky, was $49,700 each for the state and national party committees. A 

review of the Democratic Congressional Campaign Committee’s (DCCC) disclosure 

reports indicated that the DCCC made coordinated expenditures of $99,400 on behalf of 

Amy McGrath for Congress (Kentucky, District 6). KSDCEC did not transfer any of its 

coordinated spending authority to the DCCC. 

During audit fieldwork, the Audit staff’s review of disbursements identified apparent 

coordinated expenditures made on behalf of Amy McGrath for Congress consisting of 13 

mail pieces totaling $613,020 that were reported on Schedule B, Line 30(b). These 

expenditures were in excess of the authorized coordinated spending limit for the 

candidate and resulted in an apparent excessive in-kind contribution to the candidate. 

The Audit staff’s analysis was based on a three-pronged test to determine whether a 

communication is a party coordinated communication. A communication must satisfy all 

three prongs of the test to be considered a party coordinated expenditure. The threeprong test consists of payment prong, content prong and conduct prong. 

• Payment Prong means the communication is paid for, in whole or in part, by a 

person other than the candidate, an authorized committee or a political party 

committee with whom the communication is coordinated. All communications in 

this finding were paid by KSDCEC and traced to its federal account.

• Content Prong means the communication must meet any one of these three 

standards to meet the content prong: 

• expressly advocates the election or defeat of a clearly identified candidate for 

federal office per 11 CFR §100.22(a)or (b); or 

• involve the dissemination, distribution or republication of a candidate’s 

campaign materials; or

• refer to a clearly identified federal candidate and is publicly distributed in the 

identified candidate’s jurisdiction within 90 days of the candidate’s general 

election. 

All communications in this finding contained express advocacy for a clearly 

identified federal candidate per 11 CFR §100.22(a) or (b). 

• Conduct Prong means the communication: 

• must have been created, produced or distributed at the request of the candidate 

or its agents; or 

• developed with a material involvement of the candidate; or 

• created, produced or distributed after substantial discussion with the candidate 

or its agents; or 

• used a common vendor by the candidate committee and the party committee 

in the creation, production or distribution of a communication; or 
16

• former employee/independent contractor uses or conveys information about 

the plans, projects, activities or needs of the candidate to create the 

communication. 

All the communications in this finding contain the following disclaimers: 

• Paid for by the Kentucky Democratic Party and Authorized by the Amy McGrath 

for Congress Committee; or

• Paid for by the Kentucky Democratic Party. 

The following chart details the total amount of apparent coordinated expenditures and the 

resulting apparent excessive in-kind contributions. 

KSDCEC Coordinated Expenditures Amy McGrath for Congress

Reported Expenditures $613,020

Less: KSDCEC Spending Limit ($49,700)

Over Limit (In-Kind Contribution) $563,320

Less: Allowable Contribution to Candidate ($5,000)

Excessive Coordinated Party Expenditures $558,320

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with the KSDCEC representatives during the exit 

conference and provided a schedule of the apparent excessive in-kind contributions. In 

response to the exit conference, a KSDCEC representative stated “the wrong disclaimer 

for the McGrath piece was used, but the mail was run volunteer exempt.” Further the 

KSDCEC representative stated that KSDCEC was in the process of obtaining affidavits 

from its volunteers and would submit them when complete. To date KSDCEC has not 

provided any affidavits to the Audit staff. 

The Commission has addressed the applicability of the volunteer materials exemption in 

the Final Audit Reports of the Arizona Republican Party, the Democratic Executive 

Committee of Florida, and the Tennessee Republican Party. In these reports, the 

Commission recognized a lack of clarity regarding the application of the volunteer 

materials exemption. The Commission had attempted to formulate a consensus policy 

regarding what constitutes substantial volunteer involvement for the purpose of applying 

the exemption6, but this was never achieved. Since a lack of clarity exists concerning the 

application of the volunteer materials exemption, it follows that the type and amount of 

documentation needed to support volunteer involvement is also unclear. 

The Audit staff recommends that, within 30 calendar days of service of this report, 

KSDCEC demonstrate that it did not exceed its coordinated spending limit on behalf of 

Amy McGrath for Congress. Evidence may include sign in sheets and pictures of 

volunteers sorting and bundling the identified mail pieces. Absent such evidence, the 

Audit staff recommends that KSDCEC seek reimbursement from the Amy McGrath for 

Congress committee in the amount of $558,320. 

 

6

 Proposed Interim Enforcement Policy, Agenda document No. 10-16.
17

Finding 5. Failure to File 24-Hour Report

Summary 

During audit fieldwork, the Audit staff reviewed expenditures that KSDCEC disclosed on 

Schedule B (Itemized Disbursements), Line 30(b) (Federal Election Activity Paid 

Entirely with Federal Funds), which appear to be independent expenditures that should 

have been disclosed on Schedule E, Line 24 (Independent Expenditures). KSDCEC may 

have been required to file a 24-hour report for $14,105, the amount KSDCEC paid for a 

door hanger supporting a candidate for federal office, depending upon the dissemination 

date. 

If KSDCEC believes the disbursement did not require reporting as an independent 

expenditure, the Audit staff recommends that KSDCEC provide evidence to support its 

conclusion. Further, the Audit staff recommends that KSDCEC provide documentation 

to support the date of public dissemination for the door hanger to determine whether a 

24-hour report was required. Absent such documentation, KSDCEC should submit and 

implement revised procedures for recognizing and reporting independent expenditures to 

allow for timely filing of 24/48-hour reports. 

Legal Standard 

A. Definition of Independent Expenditures. An independent expenditure is an 

expenditure made for a communication expressly advocating the election or defeat of 

a clearly identified candidate that is not made in cooperation, consultation, or concert 

with, or at the request or suggestion of, a candidate, a candidate’s authorized 

committee, or their agents, or a political party or its agents.

A clearly identified candidate is one whose name, nickname, photograph or drawing 

appears, or whose identity is apparent through unambiguous reference, such as “your 

Congressman,” or through an unambiguous reference to his or her status as a 

candidate, such as “the Democratic presidential nominee” or “Republican candidate 

for Senate in this state.”

Expressly advocating means any communication that: 

• Uses phrases such as “vote for the President” or “re-elect your Congressman” or 

communications of campaign slogan(s) or individual word(s), which in context can 

have no other reasonable meaning than to urge election or defeat of one or more 

clearly identified candidates; or

• When taken as a whole and with limited references to external events, such as 

proximity to the election, could be interpreted by a reasonable person only as 

advocating the election or defeat of one or more clearly identified candidates. 11 

CFR §§100.16(a), 100.17 and 100.22. 

B. Disclosure Requirements – General Guidelines. An independent expenditure shall 

be reported on Schedule E if, when added to other independent expenditures made to 

the same payee during the same calendar year, it exceeds $200. Independent 
18

expenditures made (i.e., publicly disseminated) prior to payment should be disclosed 

as memo entries on Schedule E and as a debt on Schedule D. Independent 

expenditures of $200 or less need not be itemized, though the committee must report 

the total of those expenditures on line (b) on Schedule E. 11 CFR §§104.3(b)(3)(vii), 

104.4(a) and 104.11. 

C. Last-Minute Independent Expenditure Reports (24-Hour Reports). Any 

independent expenditures aggregating $1,000 or more, with respect to any given 

election, and made after the 20th day but more than 24 hours before the day of an 

election must be reported and the report must be received by the Commission within 

24 hours after the expenditure is made. A 24-hour report is required for each 

additional $1,000 that aggregates. The 24-hour report must be filed on a Schedule E. 

The date that a communication is publicly disseminated serves as the date that the 

Committee must use to determine whether the total amount of independent 

expenditures has, in the aggregate, reached or exceeded the threshold reporting 

amount of $1,000. 11 CFR §§104.4(f) and 104.5(g)(2). 

D. Formal Requirements Regarding Reports and Statements. Each political 

committee shall maintain records with respect to the matters required to be reported 

which shall provide in sufficient detail the necessary information and data from which 

the filed reports may be verified, explained, clarified, and checked for accuracy and 

completeness. 11 CFR §104.14(b)(1). 

E. The Get-Out-the-Vote Activity. Informing potential voters, whether by mail 

(including direct mail), e-mail, in person, by telephone (including pre-recorded 

telephone calls, phone banks and messaging such as SMS and MMS), or by other 

means; the location of particular polling places. 11 CFR§100.24(a)(3)(i)(B)(2).

F. Volunteer Activity. The payment by a state committee of a political party of 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 a 

contribution, provided that the following conditions are met: 

• Such payment is not for costs incurred in connection with any broadcasting, 

newspaper, magazine, bill board, direct mail, or similar type of general public 

communication or political advertising. The term direct mail means any 

mailing(s) by a commercial vendor or any mailing(s) made from commercial lists. 

• The portion of the cost of such materials allocable to Federal candidates must be 

paid from contributions subject to the limitations and prohibitions of the Act.

• Such payment is not made from contributions designated by the donor to be spent 

on behalf of a particular candidate for federal office.

• Such materials are distributed by volunteers and not by commercial or for-profit 

operations. 

• If made by a political committee, such payments shall be reported by the political 

committee as a disbursement in accordance with 11 CFR §104.3 but need not be 

allocated to specific candidates in committee reports.
19

• The exemption is not applicable to campaign materials purchased by the national 

party committees. 11 CFR §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR 

§100.147 (a), (b), (c), (d), (e) and (g). 

Facts and Analysis 

A. Facts

During audit fieldwork, the Audit staff identified one disbursement for a door hanger 

totaling $14,105 that required a 24-hour report to be filed. KSDCEC disclosed this 

expenditure on Schedule B, Line 30(b) (Federal Election Activity Paid Entirely with 

Federal Funds). However, it appears that this is an independent expenditure containing 

express advocacy and should have been disclosed on Schedule E, Line 24 (Itemized 

Independent Expenditures). One side of the door hanger contained the phrase “Vote for 

Amy McGrath” expressly advocating for the election of Amy McGrath. The disclaimer

noted on the printed materials was “Paid for by the Kentucky Democratic Party.” 

As a result, the Audit staff concluded that this printed door hanger was an independent 

expenditure which should have been reported as such and that a 24-hour report may have 

been required. 

B. Interim Audit Report & Audit Division Recommendation

The Audit staff presented this matter at the exit conference and provided KSDCEC 

representatives a supporting schedule. Further, the Audit staff requested information 

regarding the door hanger, including its method and date of distribution. In response, a 

KSDCEC representative stated that the door hanger was not a public communication and 

should not be presumed to be an independent expenditure. The KSDCEC representative

also stated that the door hanger was “placed on the doors of voters by volunteers in 

accordance with the FEC’s volunteer exempt activity rules,” was “not sent by mail,” and 

was “designed to be distributed close to the election, or shortly before the day of the 

election.” 

The Commission has addressed the applicability of the volunteer materials exemption in 

the Final Audit Reports of the Arizona Republican Party, the Democratic Executive 

Committee of Florida, and the Tennessee Republican Party. In these reports, the 

Commission recognized a lack of clarity regarding the application of the volunteer 

materials exemption. The Commission had attempted to formulate a consensus policy 

regarding what constitutes substantial volunteer involvement for the purpose of applying 

the exemption7

, but this was never achieved. Since a lack of clarity exists concerning the 

application of the volunteer materials exemption, it follows that the type and amount of 

documentation needed to support volunteer involvement is also unclear. 

The Audit staff recommends that, within 30 calendar days of service of this report, 

KSDCEC provide evidence that would demonstrate that the disbursement in question was 

not an independent expenditure and therefore did not require disclosure as such. 

Evidence should include documentation such as volunteer sign-in sheets, photographs, 

 

7

 Proposed Interim Enforcement Policy, Agenda document No. 10-16.
20

etc., to support the involvement of volunteer processing or distribution. Alternatively, the 

Audit staff recommends that KSDCEC provide documentation to support the date of 

public dissemination for the door hanger to determine whether a 24-hour report was 

required to be filed. Absent such demonstration, KSDCEC should submit and implement 

revised procedures for recognizing and reporting independent expenditures to allow for 

timely filing of 24/48-hour reports. 
Attachment 1

Summary of Previous Audit

Name of Committee: Kentucky State Democratic Central Executive Committee 

Election Cycle Audited: January 1, 2011 – December 31, 2012 

Final Audit Report Release Date: April 20, 2015 

Finding – Recordkeeping for Employees

During audit fieldwork, the Audit staff determined that KSDCEC did not maintain any 

monthly payroll logs, as required, to document the percentage of time each employee spent 

in connection with a federal election. For 2011 and 2012, the Audit staff identified 

payments to KSDCEC employees totaling $833,262, for which KSDCEC did not maintain 

monthly payroll logs. This consisted of $820,979, for which payroll was allocated with 

federal and non-federal funds, and $12,283, for which payroll was exclusively non-federal. 

Subsequent to the exit conference, KSDCEC amended its reports to disclose $503,149 of 

the employee salaries, previously reported as allocated expenses, as 100 percent federal 

expenses. The amended reports did not preclude this matter from the audit report because 

the amendments were filed after notification of the audit. 

The Audit staff verified the accuracy of KSDCEC’s amended reports, and in light of the 

Commission’s guidance with respect to recordkeeping for employees paid with 100 percent 

federal funds and reported as such, the Audit staff concluded that no further action was 

necessary with respect to recordkeeping for the $503,149 in employee salaries. 

In response to the Interim Audit Report recommendation, KSDCEC addressed the 

recordkeeping for the remaining $330,113 by stating it has implemented procedures to 

track and document, to the extent they are paid all or in part with non-federal funds, 

employees that work 25 percent or less of their time in connection with federal elections 

and federal election activities. 

The Commission approved a finding that KSDCEC failed to maintain monthly payroll logs 

for the $820,979 that KSDCEC disclosed as having been paid with an allocation of federal 

and non-federal funds. The Commission did not approve the portion of the recommended 

finding related to the $12,283 in payroll paid exclusively with non-federal funds and, as 

such, these expenses are presented as an “Additional Issue.”

Additional Issue – Recordkeeping for Employees

As detailed in the Finding above, KSDCEC did not maintain any monthly payroll logs, as 

required, to document the percentage of time each employee spent in connection with a 

federal election. For 2011 and 2012, the Audit staff identified payments to KSDCEC

employees totaling $833,262, for which KSDCEC did not maintain monthly payroll logs. 

This consisted of $820,979, for which payroll was allocated with federal and non-federal 

funds, and $12,283, for which payroll was exclusively non-federal. 

The Commission did not approve, by the required four votes, the portion of the Audit 

staff’s recommended finding that KSDCEC failed to maintain monthly payroll logs for the 
Attachment 1

$12,283 in payroll paid from an exclusively non-federal account during certain months. 

Pursuant to Commission Directive 70,1 these expenses are discussed in the “Additional 

Issue” section, and the payroll expenditures of $12,283 are not included in the Finding. 

1 Available at https://www.fec.gov/resources/cms-content/documents/directive_70.pdf