Final Audit Report of the 

Commission on the Democracy 

Engine, Inc., PAC 

(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 Democracy Engine, Inc., PAC is a separate segregated fund - 

corporation. It is a non-qualified committee and is headquartered 

in Washington, DC. For more information, see the chart on the 

Committee Organization, p. 2. 

Financial Activity (p. 2)

• Receipts

o Contributions from Individuals

o Offsets to Operating

Expenditures

Total Receipts

$ 5,922,872 

284,717 

$ 6,207,589 

• Disbursements

o Contributions to Federal

Candidates/Committees

o Operating Expenditures

Total Disbursements

$ 5,921,334 

284,717 

$ 6,206,051 

Additional Issues (p. 3) 

• Failure to Maintain a Bank Depository (Issue 1)

• Inaccurate Disclosure of Statement of Organization (Issue 2)

• Failure to Maintain Records Sufficient to Verify Reported

Activity (Issue 3)

1

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

Commission on the Democracy 

Engine, Inc., PAC

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

Page

Part I. Background

Authority for Audit 1

Scope of Audit 1

Limitations 1

Audit Hearing 1

Part II. Overview of Committee

Committee Organization 2

Overview of Financial Activity 2

Part III. Summaries

Additional Issues 3

Part IV. Additional Issues

Issue 1. Failure to Maintain a Bank Depository 5

Issue 2. Inaccurate Disclosure of Statement of Organization 9

Issue 3. Failure to Maintain Records Sufficient to Verify Reported Activity 12
1

Part I

Background

Authority for Audit

This report is based on an audit of the Democracy Engine, Inc., PAC (DEI), 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 disclosure of individual contributors’ occupation and name of employer;

2. the consistency between reported figures and bank records;

3. the completeness of records; and

4. other committee operations necessary to the review.

Limitations

The Audit staff was not able to perform a reconciliation of DEI’s bank records to its disclosure 

reports filed with the Commission because the DEI did not deposit funds nor make 

disbursements from a committee depository (see Issue 1 – Failure to Maintain a Bank 

Depository). Without bank records, the Audit staff was unable to verify the accuracy and 

completeness of the DEI disclosure reports filed during the audit period (see Issue 3 – Failure to 

Maintain Records Sufficient to Verify Reported Activity). In addition, because DEI filed 

amended reports of its financial activity during this election cycle, the Audit staff sought to 

perform an analysis of the original reports as compared to the bank records but was unable to do 

so.

Audit Hearing

DEI requested a hearing before the Commission. The request was granted and the hearing was 

held on December 2, 2021. At the hearing, DEI asked that the Commission consider updating its 

bundling regulations and give more guidance to the regulated community regarding online 

fundraising. Lastly, DEI requested that the Commission resolve this audit.
2

Part II

Overview of Committee

Committee Organization

Overview of Financial Activity

(Audited Amounts)3

Cash on hand @ January 1, 2017 $ 276

Receipts

o Contributions from Individuals 5,922,872

o Offsets to Operating Expenditures 284,717

Total Receipts $ 6,207,589

Disbursements

o Contributions to Federal 

Candidates/Committees 5,921,334

o Operating Expenditures 284,717

Total Disbursements $ 6,206,051

Cash on hand @ December 31, 2018 $ 1,814

2

 See Issue 1 – Failure to Maintain a Bank Depository. 3

 The amounts are as reported on DEI’s disclosure reports. The Audit staff was not able to verify the accuracy and

 completeness of the amounts given DEI’s lack of a bank depository and corresponding bank records. See 

 Limitations in Part I and Issue 1 – Failure to Maintain a Bank Depository.

Important Dates

• Date of Registration October 13, 2009

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

Headquarters Washington, DC

Bank Information

• Bank Depositories2 None

• Bank Accounts2 None

Treasurer

• Treasurer When Audit Was Conducted Jonathan Zucker

• Treasurer During Period Covered by Audit Jonathan Zucker (10/13/2009 – Present)

Management Information

• Attended FEC Campaign Finance Seminar No

• Who Handled Accounting and 

Recordkeeping Tasks

Treasurer
3 

Part III

Summaries

Additional Issues 

Issue 1. Failure to Maintain a Bank Depository

DEI failed to maintain a committee bank depository (depository). DEI also failed to 

deposit receipts received and disbursements made, as required by federal statute, using a 

committee-maintained depository. Instead, all DEI’s receipts and disbursements were

processed through the depository of Democracy Engine, LLC4 (DELLC). DEI’s activity 

was processed through DELLC’s transfer account (Transfer Account) along with the 

activity of other DELLC clients, thus combining DEI’s federal activity with the activity 

of other political and non-political entities.

During audit fieldwork, DEI provided bank statements showing that DEI established its 

own depository on September 18, 2019 and provided an April 2020 bank statement 

demonstrating that DEI now processed activity through this depository. In response to 

the Interim Audit Report recommendation, DEI stated that it was filing amendments to 

“correctly characterize [its] activity as non-depository bundled contributions for which 

[DEI] served as a conduit.” DEI amended all its reports for the 2018 cycle to reflect all 

activities as “memo entries.” In response to the Draft Final Audit Report, DEI 

acknowledged that the Commission regulations appear to require that each political 

committee must maintain a depository account and asked that the Commission determine 

that the maintenance of an account without any funds by a committee which has no 

receipts or disbursements is unnecessary and impractical. DEI stated, “it has been our 

experience that banks are less willing to allow their clients to maintain dormant or empty 

accounts and will force close the account after a period of inactivity.” DEI requested a 

hearing before the Commission to discuss this matter. (For more detail, see Audit 

Hearing, p.9.) 

The Commission did not approve, by the required four votes, the Audit staff’s 

recommendation that DEI failed to maintain a bank depository for earmarked 

contributions and disbursements. Pursuant to Commission Directive 70,5 this matter is 

discussed in the “Additional Issues” section of this report. (For more detail, see p. 5.) 

Issue 2. Inaccurate Disclosure of Statement of Organization

DEI disclosed a closed depository on its amended Statements of Organization during the 

audit period. DEI filed an amended Statement of Organization on September 19, 2019,6

disclosing Amalgamated Bank as its committee depository. In response to the Interim 

4

 Democracy Engine, LLC (DELLC) is the sole stockholder of Democracy Engine, Inc. Democracy 

 Engine, Inc. PAC (DEI), the subject of this audit report, discloses Democracy Engine, Inc. as a connected 

 organization on its Statement of Organization.

5

 Available at https://www.fec.gov/resources/cms-content/documents/directive_70.pdf 6

 DEI filed this amended Statement of Organization prior to the October 2, 2019, audit notification.
4

Audit Report recommendation, DEI acknowledged that it should have filed a 

“miscellaneous disclosure” with the Commission that its depository institution had forced 

closed its account due to inactivity. However, DEI believed that no additional 

information was required until a new depository account was established in September 

2019, at which time it filed an amendment to its Statement of Organization. DEI 

provided no formal response to the Draft Final Audit Report. 

The Commission did not approve, by the required four votes, the Audit staff’s 

recommendation that during the audit period, DEI inaccurately disclosed as its depository 

of record, a depository which was closed in 2012. Pursuant to Commission Directive 70,7

this matter is discussed in the “Additional Issues” section of this report. (For more detail, 

see p. 9.)

Issue 3. Failure to Maintain Records Sufficient to Verify 

Reported Activity

DEI failed to maintain sufficient records, specifically bank records (see Issue 1 - Failure 

to Maintain a Bank Depository), to provide sufficient detail that would allow its reports 

filed with the Commission to be reconciled and verified for accuracy and completeness. 

As a part of standard audit procedures, total reported receipts and disbursements, as well 

as reported cash balances, are verified through a review of bank records. However, since 

DEI did not maintain its own depository and its activity was processed with other 

DELLC clients, reported receipts totaling $6,207,589 and reported disbursements totaling 

$6,206,051, could not be verified for accuracy and completeness. In response to the 

Interim Audit Report recommendation, DEI stated that “it objects to this finding [issue]

and characterization that it failed to maintain sufficient records to verify reported 

activity.” By filing the amendments described in Issue 1, DEI believes that this issue is 

“moot and that sufficient records have been provided by DELLC to verify the conduit 

activity.” In response to the Draft Final Audit Report, DEI objected to the Draft Final 

Audit Report’s assertion that it failed to maintain accounts sufficient to verify reported 

activity. Further, DEI stated DELLC has provided the Audit Division with substantial 

documentation to document the transactions that have been disclosed as conduit activity.

DEI requested a hearing before the Commission to discuss this matter. (For more detail, 

see Audit Hearing, p. 15.)

The Commission did not approve, by the required four votes, the Audit staff’s 

recommendation that DEI failed to maintain records, including bank records, to provide 

sufficient detail that would allow its reports filed with the Commission to be reconciled 

and verified for accuracy and completeness. Pursuant to Commission Directive 70,8 this 

matter is discussed in the “Additional Issues” section of this report. (For more detail, see 

p. 12.)

7

 See supra footnote 5. 8

 See supra footnote 5.
5 

Part IV

Additional Issues

Issue 1. Failure to Maintain a Bank Depository 

Summary 

DEI failed to maintain a committee bank depository (depository). DEI also failed to 

deposit receipts received and disbursements made, as required by federal statute, using a 

committee-maintained depository. Instead, all DEI’s receipts and disbursements were

processed through the depository of Democracy Engine, LLC9

 (DELLC). DEI’s activity 

was processed through DELLC’s transfer account (Transfer Account) along with the 

activity of other DELLC clients, thus combining DEI’s federal activity with the activity 

of other political and non-political entities.

During audit fieldwork, DEI provided bank statements showing that DEI established its 

own depository on September 18, 2019 and provided an April 2020 bank statement 

demonstrating that DEI now processed activity through this depository. In response to 

the Interim Audit Report recommendation, DEI stated that it was filing amendments to 

“correctly characterize [its] activity as non-depository bundled contributions for which 

[DEI] served as a conduit.” DEI amended all its reports for the 2018 cycle to reflect all 

activities as “memo entries.” In response to the Draft Final Audit Report, DEI 

acknowledged that the Commission regulations appear to require that each political 

committee must maintain a depository account and asked that the Commission determine 

that the maintenance of an account without any funds by a committee which has no 

receipts or disbursements is unnecessary and impractical. DEI stated, “it has been our 

experience that banks are less willing to allow their clients to maintain dormant or empty 

accounts and will force close the account after a period of inactivity.” DEI requested a 

hearing before the Commission to discuss this matter. (For more detail, see Audit 

Hearing, p.9.)

The Commission did not approve, by the required four votes, the Audit staff’s 

recommendation that DEI failed to maintain a bank depository for earmarked 

contributions and disbursements. Pursuant to Commission Directive 70,10 this matter is 

discussed in the “Additional Issues” section of this report. 

Legal Standard 

A. Depositories. Each political committee shall designate one or more state banks, 

federally chartered depository institutions (including a national bank), or depository 

institutions, the deposits or accounts of which are insured by the Federal Deposit 

Insurance Corporation, Federal Savings and Loan Insurance Corporation, or the National 

Credit Union Administration, as its campaign depository or depositories. Each political 

committee shall maintain at least one checking account or transaction account at one of 

its depositories. 52 U.S.C. §30102(h)(1) and 11 CFR §103.2. 

9

 See supra footnote 4. 10 See supra footnote 5. 
6

B. Deposit of Receipts and Disbursements. All receipts by a political committee shall 

be deposited in account(s) established pursuant to 11 CFR §103.2, except that any 

contribution may be, within 10 days of the treasurer’s receipt, returned to the contributor 

without being deposited. The treasurer of the committee shall be responsible for making 

such deposits. All deposits shall be made within 10 days of the treasurer’s receipt. A 

committee shall make all disbursements by check or similar drafts drawn on an account at 

its designated campaign depository, except for expenditures of $100 or less made from a 

petty cash fund maintained pursuant to 11 CFR §102.11. Funds may be transferred from 

the depository for investment purposes but shall be returned to the depository before such 

funds are used to make expenditures. 11 CFR §103.3(a).

Facts and Analysis

A. Facts

During audit fieldwork, the Audit staff learned that DEI did not maintain its own bank 

depository (see Limitations, p.1.), as the Citi[bank] account, disclosed as the depository

of record on Statements of Organization filed between October 13, 2009, and September 

18, 2019, was closed in January 2012.

11 DEI’s financial activity was instead processed 

through the depository (the Transfer Account) of Democracy Engine, LLC (DELLC). 

DELLC is a for-profit limited liability company whose principal business is the 

processing and distribution of web-based donations to charities, non-profits and political 

committees, including candidate committees at the local, state and federal level. 

DELLC’s Transfer Account processed DEI’s activity, as well as the activity of its other 

clients, thus combining DEI’s federal activity with the activity of other political and nonpolitical entities.

During audit fieldwork, DEI’s representative indicated, in a notarized affidavit, that 

“effective on or around March 1, 2020, earmarked donations to [DEI] will be processed 

by DELLC via a [DEI] owned merchant account and deposited to a [DEI] owned bank 

account (the Amalgamated Bank account on [DEI’s] current Form 1); distributions will 

be made from the [DEI] owned account in the form of checks and ACH transfers. 

DELLC will still serve as a vendor to the PAC, but the funds will now be segregated 

from other DELLC donation volume.” DEI’s representative submitted an April 2020 

bank statement demonstrating that effective that month, DEI processed its activity

through this bank account.

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed the lack of a committee depository with DEI’s representative

during the exit conference.

In response to the exit conference, DEI representatives submitted a response indicating 

that it had no expenditures other than those directly related to earmarked contributions

after January 2012. DEI representatives stated that 11 CFR §100.6 does not require that 

11 As noted on a bank statement provided to Audit staff by a DEI representative, this account was closed in 

 January 2012.
7

earmarked contributions, for which a committee serves as a conduit or intermediary, pass 

through the committee’s depository account. As such, the contributions were processed 

and distributed by DELLC in accordance with the services agreement between DELLC 

and DEI. The representatives also noted it was their understanding that it was common 

practice for political committees, without financial activity, but which remain active and 

file reports with the Commission, not to maintain a depository account with a zero 

balance, given the practice of financial institutions to assess fees even on zero balance 

accounts. Further, if it intended to receive any contributions or make any expenditures 

that required a depository account, it would have immediately reopened its account at 

Citibank or opened a new account and amended its Statement of Organization as it did in 

September 2019 in anticipation of expenditures for merchant account fees from a new 

merchant processor. DEI representatives noted that the Amalgamated Bank account was 

opened prior to any notice of the audit.

Although DEI cited 11 CFR §100.6, which pertains to connected organizations, the Audit 

staff noted that Democracy Engine, Inc. is DEI’s connected organization, as disclosed on 

each Statement of Organization DEI has filed, whereas DEI itself is a political 

committee, registered with the Commission since October 2009. The statute and 

regulations for political committees require the use of a campaign depository as cited 

above. The Audit staff further noted that DEI’s disclosure reports filed during the audit 

period disclosed earmarked contributions on Schedules A (Itemized Receipts) and B 

(Itemized Disbursements) as though the contributions passed through its depository. DEI 

did not report the earmarked contributions as memo entries per 11 CFR § 110.6(c)(1)(iv).

The Interim Audit Report recommended that DEI provide any additional comments it 

deemed necessary with respect to this matter.

C. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, DEI stated, “although the 

Commission’s regulations at 11 C.F.R. § 103.2 appear to “require” the maintenance of a 

campaign depository, such requirement should not be placed upon a dormant committee 

that has no receipts or disbursements and no cash on hand. DEI further stated that, since 

none of its conduit activities passed through a committee depository account, DEI should 

have disclosed all such activities during the 2018 election cycle as memo entries in 

accordance with 11 CFR § 110.6(c)(1)(v). DEI amended all its disclosure reports for the 

2018 cycle to reflect all its activity as “memo entries” with $0 in receipt or disbursement 

activity.

The Interim Audit Report did not recommend that DEI amend its reports; however, DEI 

indicated that it did so to correctly characterize its activity as “non-depository bundled 

contributions for which DEI served as conduit.” DEI amended its reports to change its

entries from deposited earmarked contributions to undeposited earmarked contributions

(memo entries).

Commission regulations require that conduits must comply with special reporting rules, 

which vary depending on whether the contribution was deposited in the conduit’s bank 
8

account or was passed on directly to the recipient committee. In accordance with 11 CFR 

§ 110.6(c)(1)(v), if the committee deposits the earmarked contribution, the committee 

reports the earmarked contributions on Schedules A (Itemized Receipts) and B (Itemized 

Disbursements). If the committee forwards the contribution without depositing it first, 

the committee must itemize the same information in memo entries on Schedules A and B. 

In the case of DEI, the earmarked contributions were not merely forwarded to recipient 

committees, but were first deposited, not in a DEI depository as required by 11 CFR 

§103.2, but instead in the DELLC depository. This was done, as noted by DEI in its

notarized affidavit, in accordance with its service agreement. In addition, DEI’s response 

to the Interim Audit Report recommendation, stated that, “All funds received and 

disbursed in connection with this conduit activity was done through credit card 

processing and DEI utilized a third-party vendor, [DELLC], to process the credit card 

contributions to each benefiting committee that received contributions in connection with 

its conduit fundraising activities.”

The Audit staff did not agree with DEI’s assessment of its reporting requirements. The 

original reporting of the earmarked contributions as deposited earmarked contributions 

was a more accurate representation of DEI’s financial activity. As currently disclosed on 

the amended reports filed in response to the Interim Audit Report recommendation, it 

appears that the earmarked contributions were not deposited and processed by a 

depository, when in fact they were, albeit by DELLC’s depository rather than a DEI 

depository. The Audit staff maintained that DEI failed to maintain a bank depository for 

earmarked contributions and disbursements. DEI is a separate segregated fund, and 

therefore a political committee under the Act and is required to maintain at least one 

campaign depository and deposit all receipts and issue disbursements through such 

account, including earmarked contributions received in DEI’s capacity as an intermediary 

or conduit, as required by the Act and Commission regulations. 52 U.S.C. § 30102(h)(1);

11 C.F.R. §§103.2 and 103.3.

D. Draft Final Audit Report

The Draft Final Audit Report concluded that DEI failed to maintain a bank depository for 

earmarked contributions and disbursements.

E. Committee Response to the Draft Final Audit Report

DEI acknowledged that Commission regulations appear to require that each political 

committee must maintain a depository account and asked that the Commission determine, 

“in its discretion,” that the maintenance of an account without any funds by a committee 

which has no receipts or disbursements is unnecessary and impractical. DEI stated, “it 

has been our experience that banks are less willing to allow their clients to maintain 

dormant or empty accounts and will force close the account after a period of inactivity.” 

Further DEI stated, “it makes no sense to require DEI to reopen an account until and 

unless it has funds to deposit or spend.” DEI noted that it reopened an account in 2019 

and has been depositing funds into and making expenditures from that account. With 

regard to its 2018 cycle activity, DEI indicated that it amended its reports to “properly 

reflect the activities as memo entries since none of the earmarked contributions passed 

through a bank account of DEI” and stated that, “[i]n hindsight, even this level of 
9 

reporting may have been more than necessary since DEI never ‘handled’ any of the 

contributions and donors used a for-profit vendor to process and forward the 

contributions to the candidates.” 

F. Audit Hearing

During the Audit Hearing, the Treasurer stated that “through 2018, the PAC has never 

made a contribution to a candidate independently of an earmark and the only funds the 

PAC has had that were for its own use was an initial $5,000 donation deposited into the 

Citibank account to cover a handful of operating expenses.” The Treasurer further stated 

the funds were exhausted by 2012, and sometime after that the bank forcibly closed the 

account.

The Audit staff noted during the Audit Hearing that DEI received contributions during 

the audit period for potential nominees and, as such, the nominee funds should have been 

deposited into a DEI bank account and not a DELLC bank account. The Treasurer 

acknowledged that it was factually correct that DEI received limited contributions for 

nominee funds. In a response subsequent to the audit hearing, counsel for DEI detailed 

that DEI received nominee funds totaling approximately $377,000.12

Commission Conclusion 

On January 27 and February 17, 2022, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission find that DEI failed to maintain a bank depository for earmarked 

contributions and disbursements. 

On February 17, 2022, the Commission did not approve, by the required four votes, the 

Audit staff’s recommendation. Some Commissioners voted to approve the Audit staff’s 

recommendation. Other Commissioners did not vote to approve the Audit staff’s 

recommendation, stating that terminating the audit would be the best use of Commission 

resources. 

Pursuant to Commission Directive 70,13 this matter is presented as an “Additional Issue.”

Issue 2. Inaccurate Disclosure of Statement of 

Organization

Summary 

DEI disclosed a closed depository on its amended Statements of Organization during the 

audit period. DEI filed an amended Statement of Organization on September 19, 2019,14

disclosing Amalgamated Bank as its committee depository. In response to the Interim 

Audit Report recommendation, DEI acknowledged that it should have filed a 

“miscellaneous disclosure” with the Commission that its depository institution had forced 

12 This amount could not be verified by the Audit staff, see Issue 3. 13 See supra footnote 5. 14 DEI filed this amended Statement of Organization prior to the October 2, 2019, audit notification. 
10

closed its account due to inactivity. However, DEI believed that no additional 

information was required until a new depository account was established in September 

2019, at which time it filed an amendment to its Statement of Organization. DEI 

provided no formal response to the Draft Final Audit Report.

The Commission did not approve, by the required four votes, the Audit staff’s 

recommendation that during the audit period, DEI inaccurately disclosed as its depository 

of record, a depository which was closed in 2012. Pursuant to Commission Directive 

70,15 this matter is discussed in the “Additional Issues” section of this report.

Legal Standard

A. Registration. A separate segregated fund must file a Statement of Organization no 

later than 10 days after establishment. 52 U.S.C. §30103(a).

B. Contents. The Statement of Organization shall include a listing of all banks, safety 

deposit boxes, or other depositories used by the committee. 52 U.S.C. §30103(b)(6).

Facts and Analysis

A. Facts

DEI disclosed a closed depository on its Statements of Organization. DEI filed its 

original Statement of Organization with the Commission in October 2009, disclosing its 

depository as Citi[bank]. As previously noted in Issue 1 above, the Citibank depository 

was closed in January 2012.

From February 2012 through September 18, 2019, DEI continued to disclose Citibank as 

its depository.

16 DEI filed an amended Statement of Organization on September 19, 

2019, to report Amalgamated Bank as its committee depository. Amalgamated Bank is 

also the depository used by DELLC.

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with DEI’s representative during the exit 

conference.

In response to the exit conference, DEI representatives submitted a response stating that 

as of January 2012, its depository account had a zero balance and while it had no specific 

recollection of requesting that the account be closed, noted that it may have made such a 

request after being informed that Citibank would continue to assess fees on the account. 

DEI representatives stated it was their understanding that it was common practice for 

political committees without financial activity, but which remain active and file reports 

with the Commission, not to maintain a depository account with a zero-balance given the 

practice of financial institutions to assess fees, even on zero balance accounts. 

As noted above, 52 U.S.C. §30103(b)(6) requires that committees disclose all bank 

accounts, safety deposit boxes, or other depositories used. The Audit staff noted that 

15 See supra footnote 5. 16 DEI filed two amended Statements of Organization during the audit period with the incorrect disclosure.
11

from February 2012 through September 18, 2019, including two amended Statements of 

Organization filed during the 2017-2018 election-cycle, DEI incorrectly disclosed 

Citibank as the depository it was using, although this depository was closed in January 

2012.

The Interim Audit Report recommended that DEI provide any additional comments it 

deemed necessary with respect to this matter.

C. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, DEI acknowledged that it 

should have filed a “miscellaneous disclosure” to notify the Commission that its 

depository institution had forced closed its account due to inactivity. Further, DEI stated

it believed that no additional information was required until a new depository account 

was established in [September] 2019, at which time it filed an amendment to its 

Statement of Organization.

D. Draft Final Audit Report

The Draft Final Audit Report acknowledged that DEI disclosed a closed depository on its 

amended Statements of Organization during the audit period.

E. Committee Response to the Draft Final Audit Report

DEI provided no formal response to the Draft Final Audit Report on this issue.

F. Audit Hearing

DEI did not address this issue during the Audit hearing.

Commission Conclusion

On January 27 and February 17, 2022, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission find that DEI inaccurately disclosed as its depository of record, a depository 

which was closed in 2012.

On February 17, 2022, the Commission did not approve, by the required four votes, the 

Audit staff’s recommendation. Some Commissioners voted to approve the Audit staff’s 

recommendation. Other Commissioners did not vote to approve the Audit staff’s 

recommendation, stating that terminating the audit would be the best use of Commission 

resources.

Pursuant to Commission Directive 70,

17 this matter is presented as an “Additional Issue.”

17 See supra footnote 5.
12 

Issue 3. Failure to Maintain Records Sufficient to Verify 

Reported Activity 

Summary 

DEI failed to maintain sufficient records, specifically bank records (see Issue 1 - Failure 

to Maintain a Bank Depository), to provide sufficient detail that would allow its reports 

filed with the Commission to be reconciled and verified for accuracy and completeness. 

As a part of standard audit procedures, total reported receipts and disbursements, as well 

as reported cash balances, are verified through a review of bank records. However, since 

DEI did not maintain its own depository and its activity was processed with other 

DELLC clients, reported receipts totaling $6,207,589 and reported disbursements totaling 

$6,206,051, could not be verified for accuracy and completeness. In response to the 

Interim Audit Report recommendation, DEI stated that it “objects to this finding [issue] 

and characterization that it failed to maintain sufficient records to verify reported 

activity.” By filing the amendments described in Issue 1, DEI believes that this issue is 

“moot and that sufficient records have been provided by DELLC to verify the conduit 

activity.” In response to the Draft Final Audit Report, DEI objected to the Draft Final 

Audit Report’s assertion that it failed to maintain accounts sufficient to verify reported 

activity. Further, DEI stated DELLC has provided the Audit Division with substantial 

documentation to document the transactions that have been disclosed as conduit activity. 

DEI requested a hearing before the Commission to discuss this matter. (For more detail, 

see Audit Hearing, p. 15.)

The Commission did not approve, by the required four votes, the Audit staff’s 

recommendation that DEI failed to maintain records, including bank records, to provide 

sufficient detail that would allow its reports filed with the Commission to be reconciled 

and verified for accuracy and completeness. Pursuant to Commission Directive 70, 18

this matter is discussed in the “Additional Issues” section of this report. 

Legal Standard 

Contents of Reports. Each political committee required to file any report or statement 

shall maintain all records as follows: 

• Maintain records, including bank records, with respect to the matters required to be 

reported, including vouchers, worksheets, receipts, bills and accounts, 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; 

• Preserve a copy of each report or statement required to be filed under 11 CFR parts 

102 and 104, and all records relevant to such reports or statements; and

• Keep all reports required to be preserved under this section available for audit, 

inspection or examination by the Commission or its authorized representative(s) for a 

period of not less than 3 years after the report or statement is filed. 11 CFR 

§104.14(b)(1), (2) and (3). 

18 See supra footnote 5.
13

Facts and Analysis

A. Facts

The Audit staff could not verify the reported receipts and disbursements totaling 

$6,207,589 and $6,206,051, respectively, for accuracy and completeness, due to DEI’s 

failure to maintain sufficient records, specifically bank records.

19 Although DEI 

maintained an accounting of receipts and disbursements processed by DELLC, the Audit 

staff notes the regulations go beyond simple documentation requirements and specifically 

require that committee records provide information sufficient to verify, explain and check 

for accuracy and completeness of reports, in addition to the requirement to use a 

campaign depository as cited above. Use of a campaign depository ensures a clear 

financial trail of records linking receipts and disbursements to a third-party financial 

institution and provides a complete and verifiable disclosure history for audit purposes.

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed the recordkeeping issue with the DEI representative during the 

exit conference. The DEI representative noted that DEI’s practice of using the DELLC 

bank account predated the audit period and offered to provide further detailed 

information related to the reported transfers to candidates. However, DEI’s 

representative stated that DEI would not be able to provide further information regarding 

receipts.

In response to the exit conference, DEI representatives provided the Audit staff with 

additional disbursement data files from DELLC. The data files contained information

regarding the gross disbursement amounts paid to candidates and the portion of the 

disbursements attributed to DEI, as DEI’s activity was often a subset of gross amounts 

paid to candidates/committees. The Audit staff was able to trace gross DEI transfer 

amounts and gross DEI check amounts on the DELLC bank statements. However, the 

Audit staff was not able to verify that the data files contained the entire population of DEI 

records since its activity was processed with other DELLC clients on the bank statements.

The Interim Audit Report recommended that DEI provide any additional comments it 

deemed necessary with respect to this matter.

C. Committee Response to Interim Audit Report

In response to the Interim Audit Report recommendation, DEI stated that it “objects to 

this finding [issue] and characterization that it failed to maintain sufficient records to 

verify reported activity.” By filing the amendments described in Issue 1, DEI believes 

that this issue is “moot and that sufficient records have been provided by DELLC to 

verify the conduit activity.”

The Audit staff noted that DEI provided no additional documentation to verify the 

conduit activity. As noted in Issue 1, DEI filed amendments to change the 

characterization of its activity from deposited earmarked contributions (non-memo 

19 See Limitations, p. 1.
14 

entries) to earmarked contributions forwarded directly to recipients without first being 

deposited (memo entries). The Audit staff reviewed these amendments and noted that, in 

addition to changing the entries from non-memo entries to memo entries, the amended 

reports also reflect the following changes: 

• DEI reduced the total receipt and disbursement activity reported by $107,049 and 

$584,339, respectively. 

The decrease in total reported receipts was due to the following: 

2017 - 2018

Amendments 

filed March 23, 

2021

Audited Reports Difference

Contributions from 

Individuals

Schedule A, Line 11(a)

$6,006,306 $5,922,872 $83,434 

Increase

Offsets to Operating 

Expenditures (Refunds)

Schedule A, Line 15

$0.00 $284,717 ($284,717) 

Decrease

Refunds of Federal 

Contributions

Schedule A, Line 16

$94,234 $0.00 $94,234 

Increase

Net Decrease in Total 

Reported Receipts

($107,049)

Decrease

The decrease in total reported disbursements was due to the following: 

2017 - 2018 Amendments filed 

March 23, 2021 Audited Reports Difference

Operating Expenditures

Schedule B, Line 21(b)

$0.00 $284,717 ($284,717)

Decrease

Contributions to Federal 

Candidates

Schedule B, Line 23

$5,535,578 $5,921,334 ($385,756)

Decrease

Refunds of Contribution s 

to Individuals/Persons 

other than Political 

Committees

Schedule B, Line 28(a)

$86,134 $0.00 $86,134

Increase

Net Decrease in Total 

Reported Disbursements

$584,339

DEI did not provide an explanation for the change in disclosure amounts. 

• Prior to the audit, DEI reported earmarked contributions from individuals 

received and forwarded totaling $5,922,872 and $5,921,334, respectively, a 

difference of $1,538 ($5,922,872 less $5,921,334). The amended reports now 

reflect, via memo entries, that the earmarked contributions from individuals 
15

received and forwarded were $6,006,306 and $5,535,578,

20 respectively, a 

difference of $470,728 ($6,006,306 less $5,535,578). DEI did not provide an 

explanation for the change in disclosure amounts.

Since DEI’s financial activity was processed through the depository of DELLC and 

combined with DELLC’s other activity,

21 the Audit staff could not verify the total 

original reported receipts and disbursements totaling $6,207,589 and $6,206,051, 

respectively. In addition, the Audit staff was also unable to verify the total reported 

amounts of the receipt and disbursement memo entries totaling $6,100,540 and 

$5,621,712, respectively, that DEI disclosed in the amended reports filed in response to

the Interim Audit Report. The Audit staff maintained that DEI failed to maintain records, 

including bank records, to provide sufficient detail that would allow its reports filed with 

the Commission to be reconciled and verified for accuracy and completeness.

D. Draft Final Audit Report

The Draft Final Audit Report acknowledged that since DEI’s financial activity was 

processed through the depository of DELLC and combined with DELLC’s other activity, 

the Audit staff could not verify the total original reported receipts and disbursements 

totaling $6,207,589 and $6,206,051, respectively. The Audit staff was also unable to 

verify the total reported amounts of the receipt and disbursement memo entries totaling 

$6,100,540 and $5,621,712, respectively, that DEI disclosed in the amended reports filed 

in response to the Interim Audit Report.

E. Committee Response to the Draft Final Audit Report

In response to the Draft Final Audit Report, DEI objected to the Draft Final Audit 

Report’s assertion that it failed to maintain accounts sufficient to verify reported activity. 

Further, DEI stated that DELLC provided the Audit staff with substantial documentation 

to document the transactions that were disclosed as conduit activity.

F. Audit Hearing

During the Audit Hearing, the Treasurer stated that DEI provided everything that was 

requested by the Audit staff, from detailed reports by DELLC of every donor transaction 

processed and disbursed, to the DELLC bank statements through which the donor funds 

flowed.

Commission Conclusion

On January 27 and February 17, 2022, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission find that DEI failed to maintain records, including bank records, to provide 

sufficient detail that would allow its reports filed with the Commission to be reconciled 

and verified for accuracy and completeness.

20 Recipient committees disclosed on FEC reports approximately $4.5 million from DEI as the conduit 

committee, per the Data Disclosure database. Without DEI bank records, the Audit staff is not able to 

 determine if the material discrepancy is DEI’s error. 21 DELLC had bank receipt and disbursement activity of approximately $71 million and $68 million, 

 respectively.
16

On February 17, 2022, the Commission did not approve, by the required four votes, the 

Audit staff’s recommendation. Some Commissioners voted to approve the Audit staff’s 

recommendation. Other Commissioners did not vote to approve the Audit staff’s 

recommendation, stating that terminating the audit would be the best use of Commission 

resources. 

Pursuant to Commission Directive 70,

22 this matter is presented as an “Additional Issue.”

22 See supra footnote 5.