FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM 

TO: Patricia C. Orrock 

Chief Compliance Officer 

Dayna C. Brown 

Acting Assistant Staff Director 

Audit Division 

FROM: Neven F. Stipanovic 

Associate General Counsel 

Policy Division 

Lorenzo Holloway 

Assistant General Counsel 

Compliance Advice 

Margaret J. Forman 

Attorney 

LH by 

November 23, 2020

SUBJECT: Interim Audit Report on Democracy Engine, Inc., PAC (LRA 1110) 

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

(“Proposed IAR”) on Democracy Engine, Inc., PAC (“DEI”). The IAR contains three findings: 

Failure to Maintain a Bank Depository (Finding 1), Inaccurate Disclosure of Statement of 

Organization (Finding 2), and Recordkeeping for Receipts and Disbursements (Finding 3).1 

We concur with the findings, and comment on Findings 1 and 3. If you have any questions, 

please contact Margaret J. Forman, the attorney assigned to this audit. 

1 We recommend that the Commission consider this document in Executive Session because the 

Commission may eventually decide to pursue an investigation of matters contained in the proposed IAR. 

11 C.F.R. §§ 2.4(a), (b)(6). 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LRA 1110 

IAR for Democracy Engine, Inc., PAC 

Page 2 of 4 

I. ALL POLITICAL COMMITTEES ARE REQUIRED TO MAINTAIN A 

CAMPAIGN DEPOSITORY (FINDING 1). 

DEI is a separate segregated fund, and therefore a political committee under the Act. 52 

U.S.C. 30101(4)(B); 11 C.F.R. § 100.5(b); see 52 U.S.C. § 30118(b)(2)(C); see also 

Democracy Engine, Inc., PAC, Statement of Organization, FEC Form 1 at 2 (Aug. 7, 2017), 

(Nov. 26, 2018), (Sept. 19, 2019). The Audit Division determined that DEI did not maintain a 

campaign depository during the audit period, and, consequently, neither deposited receipts, nor 

made disbursements from its depository account.2

 52 U.S.C. § 30102(h)(1); see Proposed IAR 

at 5-6 (Finding 1). 

DEI acknowledges that it did not maintain a campaign depository, but argues that it was 

not required to do so because its financial activity during the audit period was limited to 

receiving earmarked contributions as an intermediary or conduit.3 Email from Jonathan 

Zucker, Treasurer, Democracy Engine, Inc., PAC, to Paula Nurthen, Auditor, FEC (May 27, 

2020). DEI contends that “11 CFR 100.6 does not require that earmarked contributions for 

which a committee serves as a conduit or intermediary pass through the committee’s depository 

account.” Id.4 

DEI asserts that these earmarked contributions instead passed through the account of 

Democracy Engine, LLC. Id. Democracy Engine, LLC is the sole stockholder of Democracy 

Engine, Inc. Advisory Opinion 2011-06 (Democracy Engine). Democracy Engine, Inc. is the 

connected organization of the separate segregated fund, DEI. Id.; see Statement of 

Organization, FEC Form 1 at 3 (Aug. 7, 2017), (Nov. 26, 2018), (Sept. 19, 2019). 

We disagree with the Committee’s arguments. The Act and Commission regulations 

require all political committees to maintain at least one campaign depository. 

52 U.S.C. § 30102(h)(1); 11 C.F.R. § 103.2. All receipts by a political committee must be 

2 DEI used Democracy Engine, LLC’s account to receive contributions and make disbursements. 

Democracy Engine, LLC is the sole stockholder of DEI’s connected organization, Democracy Engine, Inc. See 

infra. This raises the issue of whether DEI unlawfully commingled its funds. The Act prohibits a political 

committee from commingling its funds with the personal funds of an individual. 52 U.S.C. § 30102(b)(3). The 

Commission has also recognized that commingling of contributions and corporate funds would be inconsistent 

with the Act and Commission regulations. See AO 2017-06 (Stein-Gottleib) at 8 (concluding that a proposal by a 

vendor collecting and forwarding contributions to political committees would comply with the Act and 

Commission regulations because, among other reasons, the vendor would keep contributions in an account separate 

from its own treasury funds). However, Democracy Engine, LLC is organized and taxed as a partnership, not a 

corporation. Zucker Aff. ¶ 1; see 11 C.F.R. § 110.1(g). Nevertheless, we do not know whether all of the funds in 

Democracy Engine, LLC comply with the requirements of the Act, nor do we know whether DEI’s funds could be 

accounted for separately in that account from the LLC’s funds. All of DEI’s financial activity ran through the 

LLC’s bank account, an account that processed a multitude of financial transactions encompassing the LLC’s 

activities. 

3 Because DEI did not maintain a campaign depository account, the Audit Division has not been able to 

verify DEI’s financial activity as reported on its disclosure reports. Proposed IAR at 1, Para. Limitations, 2, note 

2, 3, 7-9. 

4 Section 100.6 defines a “connected organization” as an organization that is not a political committee but 

that establishes, administers, or financially supports a political committee. The provision does not address any 

requirements related to separate segregated funds like DEI.