II

Informational copies of this report have been received

by all parties involved and this report may be released to

the public as of today, April 18, 1980.

April 18, 1980

PUBLIC ISSUANCE OF FINAL AUDIT REPORT -

DEMOCRATIC CAMPAIGN COMMIT1EE

'FRED EILAND

PRESS OFFICE ~~..

BOB COSTA f\.!J/

JUDY HAWKINS

W""IlINC 10:". III ~II,\Io1

II.DrRAL ELECTION COMMISSION

cc: FEC Library

RAD

Public Record \

Attached as stated

Attached please find a copy of the final audit report of

the Democratic Campaign Committee which was approved

by the Commission on April 7, 1980.

FRm-1:

SUBJECT:

THROUGH:

MEMORANDUM

TO:

•

•
FEDl:RAl rUCTION COMMISSION

Discrepancy in reported figures due to errors in

reportinq ASDC activity (See Findinq D).

The Committee amended its Statement of Organization on

~1arch 11), 1977 to reflect its ne\V' name, the Democratic

Camoaign Committee.

~/

!/

The audit covered the period January 1, 1976

through November 27, 197R, the final coverage date of the

latest report filed by the Committee at the time of the audit.

The Committee reported a beginning cash balance on January 1,

1976 of $10,933.67, total receipts for the period of $452,548.13,

total exnenditures for the period of ~463,R42.12 and a closing

cash balance on November 27, 1978 of $1,439.21 ~/.

A. Overview

The Committee registered with the Federal F,lection

Commission July 21, 1975 as the '76 Democratic Campaign

Committee, the Federally reporting account of the ~ichiqan

Democratic Party 1/. The Committee maintains its headquarters

in Detroit, Michigan. -

REPORT OF THE AUDIT DIVISION

ON THE

DEMOCRATIC CM~PAIGN CO~l~ITTEE

I. Background.

This report is based on an audit of the Democratic

Campaign Committee (tithe Committee"), und~rtaken by the Audit

Division of the Federal Election Commission in accordance with

the Commission's audit policy to determine whether there has

been compliance with the provisions of the Federal F.lection

Campaign Act of 1971, as amended (tithe Act"). The audit was

conducted pursuant to Section 438(a) (8) of Title 2 of the

United States Code which directs the Commission to make from

time to time audits and field investigations with resnect to

. reports and statements filed under the provisions of the Act.

....

-..

•

•
II. Audit Findings and Recommendations

The Committee maint.:lined separate accounts for Federal

anJ non-Federal activity but only disclosed the activity of its

Federal account in its reports. 6

This audit report is based on documents and working

papers which support each of the factual statements. -They form

part of the record upon which the Commission based its decisions

on the matters in the report and were available to Commissioners

':l1ld appropriate staff for review.

-2-

Allocation of Administrative Expenses

Scope

A.

c.

Section l06.l(e) of Title 11 of the Code of Federal

Regulations states, in part, that party committees which have

established Federal Campaign Committees pursuant to Section

102.6 shall allocate administrative expenses on a reasonable

basis between their Federal and non-Federal accounts in

propo~ation to the amount of funds expended on Federal and

non-FQderal elections, or on another reasonable basis.

The audit included such tests as verification of total

reported receipts and expenditures and individual transactions:

review of required supporting documentation and anlaysis of

Committee debts and obligations; and such other audit procedures

as deemed necessary under the circumstances.

Section 44lb(a) of Title 2 of the United States Code

states, in part, that it is unlawful for any labor organization

to make a contribution or expenditure in connection with any

Federal election to a political office, and it is unlawful for

':lIly political committee to knowingly receive any such -

contribution from a labor organization.

B. Key Personnel

The principal officers of the Committee during the

period audited were Ms. Eileen Marz, Chairman, from January 1,

1976 through August 27, 1978, Mr. Thomas A. Roach, Chairman,

from August 28, 1978 through the present, and Mr •. Morley Winograd,

Treasurer.

•

•.

-
•

.. ';. ....

•

-3-

Duririq the review of the COl1\mi ttee' s renorts and records,

we deter.mined that the ~tate party committee (non-~ederal) naid

the ma;oritv of the administrative exnenses durinq the period of

the audit (1/1/76-11/27/78). _ The State party committee'does accent

contributions from lahor unions which are permissable under '~ichiqan

state law. The Democratic Camnaign Committee did, however,

"reimburse the State oart.v. committee ..for., the, administrative exnenses ., durinq ,the audit period. ,. '

-.. ., The Committee, officals exnlained that' the Committee does

not h0(~nme involved in any Federal activitv.until the elections beqin.·-~he Committee then reimburses the State party committee for

their share of administrative exnenses related to that neriod of,"

timewhenthey are actually, invo'lved. with ,To'ederal, activity. " ' , ,

. " '" ,nasedon the l\uc'l.it- staff's recommendation ',the 'Corrimittee , submitted on October 13, 1979, ,'documentation.detailingits method'

:",:'ot:'allocating administrative exnenses. 'rhe Committee used two" ' , '(2) methods to allocate administrative expenses for the neriod ' " .'. covered by the audit. For calendar. year 197('", the administrative .... exnenses computed \l1ere the actual exnenses for. salaries based on'

payroll time' charqes and,overhead costs based ,on the snace

occupied by the Committee. For the remainder of the neriod, the

.' committee"s' administrativeexnenses were determined bv the,; .... , "

ratio ot: the total amount of Federal receints to the totalof; " .. , ,. all receints, for both the' F'ederaland state cOMmi ttees. ':"he.. ... '" ,Commi ttee will continue, to allocate its administrative exoen'ses ,', ,,'

'based 'on the' recefnts I'lethod in the tuture. '::'h0 l\udit;'staff. ' . finds:the'Committee's methons of allocatinaadmi.nistrative,'

exnenses to·be reasonable. In addition, the Committee T)rovided

nocumentation verifyinq ,the payments to the state Party c6rnmittee j~r thePeder~l nort{on of administ~ative exnen~es.

,I·:, 'commenda tion

The Audit staff recommends no further action on this Matter.

,FO\'!ever, the Audit staff docs recommend that the

administrative expenses continue to be allocated on a reasonable

basis and that the Committee reimburse the account navinqits

,share of administrative exnenses on a timely basis. -

~. Preservation of ~eceints

Section 432{rl) of Title 20f the Pnitec1 ~tates Code

states, in part, that it shall be the dutv oi"the treasurer to

obtain and keen a receinted bill, statinq' the narticulars~ for

every ex?enditure made by or behalf of a political committee in

excess of SlOO in amount, and for suchexnenditures in a lesser

amount, if the aCTarerrate amount of such exnenditures to the same

nerson c'l.u~inCT a ~~le~dar year exceeds~lnO. .
-4-'

Recomr:1endation

rt:'he Audit stafJ: recommends no further action on thi.s matter.

Co Disclosure of Transfers

In adlli tion, the Comroi ttee did not itemize 7 trAnsfers

made to political committees, or organizations, totalinc;T ~245.25.

This renresents 9~ of the total number and .l~ of the dollar

amount oJ: all trllnsfers made .

Duri.nq the audit, it ,,,as determined that the romrnittee

did not i tend. ZP SO transfers received from nolitical committees/

ornanizations, totaling S23,6GS. mhis renresents 3l~ of the numbcl~ and 11-' of the dollar aP10unt of all transfers received.

Sr~ctj()n 434(h) (.~) of 'T'itle 2 of the nnited States

Cnde llnd Section 104.2(b) (4) of ~itle 11 of the Code of Federal

Renulations st.lte, in nart, that each renort shall contain the

name and address of each nolitical committee or other nolitical

orGanization from which the renortina committee received, or to

which that committee made, any transfer o€ funds, toc;rether with

the amounts an~ dates of all transfers.

'J'he Committee officials stated that the ma;ority of

the documentation was available and was retained at the'

headnuarters of the Michic;Tan Democratic Party.in Lansing, p'ichiqan. - - - "' - - -.- , . . Based on the Audit staff's recommendation the

Committee submitted conies of sunryortinq documentation and/or

its best efforts to obtain such documentation for the Audit

staff's review. The Committee nroviderl documentation for q6~

of. the above exnenditures totaling ~l03,436.39.

Our rr~v iew 0 f the Commit tee's exnenditure records

disclosed 251 exncnditures, totalinq ~l05,384.27 each in excess

of or llqqreClatinq in excess of ~1f)() that were lackinq the reauired

surmortincl documentation. However, the cancelled checks were

retained by the Committee. This renresents 82~ of the dollar amount

and 47?-, of the number of exnenrli tures renuirina sunnortinq

documentation. . .

1n a~llition, Rection I02.9(~) (4) of the Code of Federal

Regulations !'lta'I'!l, in nart, that when a receinted bill is not

available, tho ,. n~ilsurer may keep the cancelled check showinc;r

nllvment of the! bill; and the bill, invoice or other.contemporaneous

11\(~morandum.

•

•
.. '. ..

•

-5-

On October 13, 1979, the Committee filed amended

reports disclosing the 50 transfers received totalinq ~23,('65.00,

and the seven (7)Otran~fers made totalina ~245.25, as recommended

by the Audit staff.

RecommendatiOn

'!'he l\udft staff recommends' no further action on this matter.

D. Dil';closure of rrotal·· Receint~ and rxnenditures

Section 434 (b) (8) and (11) of ':r'it1e 2 of the llnitC'd

'States Code states, in part, that each !,">olitical committee shall

renort the total sum of al1receints by or for such committee,

and the total. SUITl of eX1)(~nditurcs made by such committee durin0

the calendar year •

. 0: Durinq our review of the Committee's renorts' and

records, we determined that durinq 1977 the Committee reported

receints totaling $55,fi10.15 and exnenditures tota1inq . S57,409.68 that represented contributions received and exnenditures made in relation to a reqiona1 telephone bank set UP

by the Association of State DemocraticC-hairnersons (ASDC)· to

raise monev on behalf of. narticinatinq State nartv committees.

The actua1'contributions received"'andoexnenditures made were

processed throuqhan account maintained by ~SDC.

~his situation resulted in an over.statement of

r.enorted receints and exnenditures and an understatement of i.~n~linCl cash for 1977, since the COMMittee in actua1itv ne.ither I-r~cei~ed the contributions nor made the exnenditures. In

,January, 1978, the Committee adiusterl its be(Tinnin~ cash on

hand t6 correct the understateMent.

Based on the l\udit staff's recomITlendation, the Committee,

on October 13, 1979, filed an amended report deleting the above,

receipts tota1inq $55,610.15 and the above exnenditures tota1incr

$57,409.68 from their renorts.

R0cormnendation

rrhe Audit staff recommends no further action on this matter

based on the Committee's ahove actions. -