FEDERAL ELECTION COMMISSION WASHINGTON, D.C. 20463

 

 December 14, 2021 

 

MEMORANDUM

TO: Patricia C. Orrock

 Chief Compliance Officer

 Dayna C. Brown 

 Assistant Staff Director

 Audit Division

FROM: Neven Stipanovic 

 Associate General Counsel 

Policy Division

 Lorenzo Holloway 

 Assistant General Counsel

 Compliance Advice 

Joshua Blume 

Attorney 

SUBJECT: Draft Final Audit Report on the Kentucky State Democratic Central Executive 

Committee (LRA 1107) 

 I. INTRODUCTION 

 The Office of the General Counsel has reviewed the Draft Final Audit Report (“DFAR”) 

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

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. We comment on Findings 2, 4 and 5, and 

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

attorney assigned to this audit. 
Comments on the Draft Final Audit Report

Kentucky State Democratic Central Executive Committee (LRA 1107) 

Page 2 

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

The DFAR concludes that the Committee received apparent excessive contributions 

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

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

contributors of its plan to do so. We commented on the legal basis for this finding in our 

comments on the Interim Audit Report (“IAR”), see Memorandum from Neven F. Stipanovic to 

Patricia C. Orrock, Interim Audit Report on the Kentucky State Democratic Central Executive 

Committee (LRA 1107), at 1-2 (May 27, 2021). Our view has not changed since that time and 

we therefore do not reiterate it here.

 In its response to the IAR, the Committee states that each contributor fully understood at 

the time of providing the contribution that the amount provided was to be split between the 

Committee’s federal and non-federal accounts. It observes that nothing in the Commission’s 

regulations requires a political committee to notify a contributor that a contribution is excessive 

and to offer a refund in lieu of splitting the contribution. Finally, it notes that it nevertheless 

notified the contributors and that none of them objected to the splitting of the contributions. 

 In asserting that the contributors fully understood that their contributions were to be split 

between the Committee’s federal and non-federal accounts, the Committee appears to be arguing 

that the contributors intended the total sums contributed to include both a federal and a nonfederal component. In a 2001 advisory opinion, the Commission endorsed a national party 

committee’s stated intention to deposit the total amount of a contribution intended to be split into 

a federal and a non-federal component (hereafter “composite contribution”) in its federal account 

and to transfer the non-federal component of the contribution to its non-federal account. 

Advisory Opinion 2001-17 (DNC Services).1

 That endorsement was accompanied by the 

endorsement of a specific reporting regime for composite contributions proposed by the national 

party committee, with some modifications. Id. 

 Thus, to the extent that contributions deposited in the federal account and partly 

transferred to the non-federal account were composite contributions, the Committee’s treatment 

of these would appear to be permissible under the reasoning set forth in Advisory Opinion 2001-

17 (DNC Services). This would entail the conclusion that such contributions were not excessive

federal contributions. 

 However, there does not currently appear to be evidence to support the Committee’s 

1

 The requestor in that advisory opinion was a national party committee. Although national party 

committees were able at that time to maintain separate federal and non-federal accounts, this is no longer the case. 

See 52 U.S.C. § 30125(a). State party committees are, however, permitted to maintain separate federal and nonfederal accounts, and we therefore believe that the reasoning of the advisory opinion would permit state party 

committees to receive composite contributions. See Memorandum from Lisa J. Stevenson to Patricia C. Orrock, 

Draft Final Audit Report on the New York Republican Federal Campaign Committee (LRA 1038), at 2 (July 7, 

2017) (accepting committee’s argument that treatment of composite contributions acceptable under reasoning of 

Advisory Opinion 2001-17 (DNC Services)). 
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Kentucky State Democratic Central Executive Committee (LRA 1107) 

Page 3 

factual premise that the contributions at issue in this finding were composite.2 In the advisory 

opinion, the national party committee proposed to use a donor card that solicited contributions to 

either the committee’s federal or non-federal account, that advised the donor of the relevant 

limitations on federal contributions, and that informed the donor of the Committee’s intent to 

allocate amounts exceeding the federal contribution limit to the non-federal account. Advisory 

Opinion 2001-17 (DNC Services), at 2. The donor card asked the donor to designate either the 

entire contribution, or such amount as would not exceed the federal limit, to the federal account, 

or to designate the entire contribution to the non-federal account. Id. Thus, the donor’s 

signature on the donor card would constitute the donor’s express permission to split the 

contribution between the federal and the non-federal account. Id. 

 We recommend therefore that the DFAR be revised to solicit evidence from the 

Committee that would show that the contributors intended or directed that their contributions be 

split between the Committee’s federal and non-federal accounts. 

III. EXCESSIVE COORDINATED PARTY EXPENDITURES (Finding 4) 

The DFAR finds that the Committee spent $155,420 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)3 and its contribution limit for that cycle ($5,000). This represents a deduction of 

$402,900 from the amount of $558,320 deemed excessive in the IAR. 

The Audit Division reduced the amount of excessive expenditures in the finding as a 

result of its evaluation of evidence submitted in tandem with the Committee’s response to the 

IAR. The Committee asserted in the response that none of the 13 mailings at issue in the finding 

should be deemed coordinated party expenditures because volunteers prepared them for 

dissemination, thus invoking the “volunteer material exemption” (“VME”), which would exempt 

the communications from being considered expenditures. See 52 U.S.C. § 30101(9)(B)(viii); 11 

C.F.R. § 100.147. 

The Committee submitted evidence to support its assertion that the VME applies with 

respect to 10 of the 13 mailings.4

 This evidence consists of photographs, sign-in sheets and 

affidavits submitted by persons who coordinated the volunteering exercises, or who were 

2

 According to the Audit Division, the Committee has provided bank statements, a contributor check, and a 

merchant account statement for contributions given via “Stripe”, but no documents showing that the donors intended 

or directed that their donations be split between federal and non-federal accounts.

 

3

 The DFAR 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.

4

 We agree with the Audit Division’s decision to maintain the finding with respect to the cost of the three 

mailings for which the Committee submitted no VME documentation. See Memorandum from Adav Noti to 

Patricia C. Orrock, Draft Final Audit Report on the Colorado Republican Committee (LRA 961), at 6 (Aug. 15, 

2016) (Commission has never approved application of VME based solely on general, conclusory assertion that VME 

applies). 
Comments on the Draft Final Audit Report

Kentucky State Democratic Central Executive Committee (LRA 1107) 

Page 4 

otherwise personally familiar with the activities involved. We agree with the Audit Division’s 

discussion and analysis of this evidence, as well as its ultimate disposition of the finding. We 

comment only to recommend that the language in which the conclusion is stated be rephrased so 

that it is consistent with the absence of a clear standard for determining the degree and type(s) of 

volunteer involvement necessary to qualify a mailing for the VME. Specifically, the DFAR 

states that the Audit staff “determined that the affidavits, pictures and sign-in sheets sufficiently

demonstrated volunteer involvement for the ten mailers totaling $402,900”. Given the absence 

of a clear standard, however, we do not believe it would be possible to make a firm positive or 

negative determination regarding the VME. Rather, we recommend that the DFAR state that the 

Audit staff decided not to attribute the cost of the 10 mailers to the Committee’s coordinated 

party expenditure limit. See, e.g., Final Audit Report on the Arizona Republican Party, at 13 

(Nov. 25, 2013). See also Memorandum from Lisa J. Stevenson to Patricia C. Orrock, Draft 

Final Audit Report on the New York Republican Federal Campaign Committee (LRA 1038), at 

3-4 (July 7, 2017). 

IV. FAILURE TO FILE A 24 HOUR REPORT (Finding 5) 

The DFAR concludes that the costs of a door hanger, reported by the Committee as 

Federal Election Activity5

 paid entirely with federal funds, should have been reported instead as 

an independent expenditure because the door hanger expressly urged the election of then-House 

of Representatives candidate, Amy McGrath. 11 C.F.R. §§ 100.16, 100.22(a). In response to the 

IAR, which contained the same conclusion, the Committee disagrees with the classification of 

the door hangers as independent expenditures, asserting that it fully coordinated its activities 

with respect to the door hangers with the candidate. Despite this conceded coordinated activity, 

the Committee argues that the door hangers nevertheless do not qualify as coordinated party 

expenditures because door hangers are not “public communications” as that term is defined in 11 

C.F.R. § 100.26.6 Finally, the Committee states that in any event the door hangers were 

distributed by volunteers and therefore qualify for the VME. The Committee submitted a 

declaration from its executive director, in which she recalls that the door hanger was distributed 

by volunteers in accordance with the pertinent regulatory requirements. The declaration is 

submitted “under penalty of perjury”. 

Commission regulations define an “independent expenditure”, in pertinent part, as an 

expenditure for a communication that expressly advocates the election or defeat of one or more 

candidates for federal office that is not made in cooperation, consultation, or concert with, or at 

the request or suggestion of, a candidate. 11 C.F.R. § 100.16(a). A communication is “made in 

5

 “Federal Election Activity” includes specific types of activities engaged in by a state party committee 

during specific time frames, public communications containing specific content, or activities consuming more than a 

specific percentage of an employee’s time in a given month. 52 U.S.C. § 30101(20); 11 C.F.R. § 100.24. A state 

party committee must pay for the costs of such activities exclusively with federal funds, subject to certain 

exceptions. 52 U.S.C. § 30125(b); 11 C.F.R. § 300.32(a)(2).

6

 A “public communication”, in pertinent part, means “a communication by means of any broadcast, cable, 

or satellite communication, newspaper, magazine, outdoor advertising facility, mass mailing, or telephone bank to 

the general public, or any form of general public political advertising.” 11 C.F.R. § 100.26. See also 52 U.S.C. § 

30101(22).

 

Comments on the Draft Final Audit Report

Kentucky State Democratic Central Executive Committee (LRA 1107) 

Page 6 

communication modalities enumerated in the definition of public communication.7 

At the same time, we note that the Commission has been inconsistent in its treatment of 

door hangers in previous enforcement matters. In several matters, the Commission concluded 

that door hangers should be treated as public communications. See MUR 6778 (David Hale for 

Congress), Factual and Legal Analysis, at 3 (undated, circa Nov. 5, 2015); MUR 6924 (Andrew 

Winer), Factual and Legal Analysis, at 5 n.26 (Aug. 21, 2017). See also MUR 4643 (Democratic 

Party of New Mexico), Letter to Allen Weh from Jonathan Bernstein (June 23, 2005) (advising 

of Commission’s entry into Consent Judgment with respondent and enclosing Order and 

Judgment, United States District Court of New Mexico, Civil No. 02-0372 MCA/RHS (Apr. 29, 

2005), Paragraph A of which notes disbursements from non-federal account for “public 

communications”; communications at issue in enforcement matter included some door hangers).

In another enforcement matter, however, the Commission concluded that a door hanger was not a 

public communication because it qualified as a handbill subject to the “coattails exemption” (11 

C.F.R. § 100.148). See MUR 6673 (Lee), Factual and Legal Analysis, at 5 (Sept. 13, 2013).8

In light of the above history, we recommend that the Audit Division raise the question of 

whether the door hanger is a public communication in the cover memorandum that will 

accompany the transmission of the DFAR to the Commission. 

Regarding the VME and the sufficiency of the declaration, we note that the Commission 

has divided over the question of whether unsworn written assertions suffice in the absence of 

documentation of the nature and extent of volunteer involvement. See Final Audit Report on 

Nebraska Democratic Party, at 19-20 (approved Oct. 23, 2014). Here, as noted above, the 

declaration of the executive director was submitted under penalty of perjury. It is therefore 

somewhat stronger insofar as it may carry the same weight as a sworn statement. 28 U.S.C. § 

1746 (unsworn declaration subscribed as true under penalty of perjury supports matter “with like 

force and effect” as sworn declaration or affidavit). However, in that the declaration is not 

accompanied by documentation of the nature and extent of volunteer involvement, it is arguably 

akin to the unsworn statement at issue in the Nebraska Democratic Party audit. Further, the basis 

upon which the executive director’s recollection is premised, whether upon personal knowledge 

7

 See, e.g., 11 C.F.R. §§ 100.140 (slate card exemption), 100.147 (VME for party committees), which

expressly distinguish communications covered by the exemption from modes of public communication that are not. 

11 C.F.R. §§ 100.140 (exception shall not apply to costs incurred respecting listings made on broadcasting stations, 

newspapers, magazines and similar types of general public political advertising), 100.147(a) (exemption not 

applicable to broadcasting, newspaper, magazine, billboard, direct mail, or similar type of general public 

communication or political advertising).

 

8

 The Commission has also divided over the question of whether the broader category of “door to door 

canvassing” constitutes a public communication. See, e.g., MUR 5564 (Alaska Democratic Party), Statement of 

Reasons of Chairman Robert D. Lenhard, at 3-4 (Dec. 31, 2007) and Statement of Reasons of Vice Chairman David 

M. Mason and Commissioner Hans A. von Spakovsky, at 8-10 (Dec. 21, 2007); Advisory Opinion 2016-21 (Great 

America PAC), at 4 n.3 (Commission could not agree on whether door to door canvassing is public communication); 

Advisory Opinion 2016-21 (Great America PAC), Concurring Statement of Vice Chair Caroline C. Hunter and 

Commissioners Lee E. Goodman and Matthew S. Petersen (concluding door to door canvassing not public 

communication). See also MUR 7521 (Swing Left), Factual and Legal Analysis, at 7 n.34 (Oct. 6, 2021) 

(unnecessary to decide whether door to door canvassing is public communication in light of minimal cost of 

communication at issue).
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Kentucky State Democratic Central Executive Committee (LRA 1107) 

Page 7 

or not, is not clear. We have recommended in the past that even affidavits bearing such 

uncertainties be raised for Commission consideration. See Memorandum from Lisa J. Stevenson 

to Patricia C. Orrock, Draft Final Audit Report on the New York Republican Federal Campaign 

Committee (LRA 1038), at 4 (July 7, 2017); Memorandum from Adav Noti to Patricia C. 

Orrock, Draft Final Audit Report on the Illinois Republican Party (LRA 1006), at 4-5 (Jan. 31, 

2017). We therefore do so again here, recommending that the question be raised in the cover 

memorandum that will accompany the transmission of the DFAR to the Commission.