FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

MEMORANDUM 

March 9, 2021 

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

Danita Alberico

Attorney

SUBJECT: Interim Audit Report of the Audit Division – Connecticut 

Democratic State Central Committee (LRA 1112) 

I. INTRODUCTION

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

(“Report”) on the Connecticut Democratic State Central Committee (“Committee”). The 

Report contains five findings: (1) Contributions from Unregistered Political 

Organizations; (2) Recordkeeping for Employees; (3) Recordkeeping for Disbursements; 

(4) Reporting of Debts and Obligations; and, (5) Reporting of Apparent Independent 

Expenditures. We concur with the findings, and comment on Finding 1 and Finding 2. If 

you have any questions, please contact Danita Alberico, the attorney assigned to this 

audit. 
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II. CONTRIBUTIONS FROM UNREGISTERED POLITICAL 

ORGANIZATIONS (Finding 1)

 The Audit Division identified 41 contributions from unregistered political 

organizations totaling $45,609 that may have been made with impermissible funds. 

Audit staff recommends that the Committee: 1) demonstrate that the contributions were 

made with permissible funds, 2) refund the impermissible funds, 3) transfer the 

impermissible funds to its non-federal account, or 4) disgorge the impermissible funds to 

a governmental entity. In its cover memorandum transmitting the Report, the Audit 

Division asks whether the Committee may, alternatively, disgorge the impermissible 

funds to a qualified charitable organization. 

Whether the disgorgement to a charitable organization is permissible depends on 

whether the organization engages in any election-related activity. The Bipartisan 

Campaign Reform Act (“BCRA”) prohibits a state, district or local committee of a 

political party from soliciting, making, or directing any donations to any tax exempt 

organization described in section 501(c) of the Internal Revenue Code that “makes 

expenditures or disbursements in connection with an election for Federal office 

(including expenditures or disbursements for Federal election activity).” 52 U.S.C. § 

30125(d); 11 C.F.R. § 300.51(a)(1); “Prohibited or Excessive Contributions: NonFederal Funds or Soft Money; Final Rule” 67 Fed. Reg. 49,064, 49,089 (July 29, 2002) 

(explaining the rationale for adopting section 300.51 following the passage of BCRA). In 

implementing this prohibition, the Commission explicitly considered whether to exempt 

charitable organizations organized under section 501(c)(3) of the Internal Revenue Code 

because such organizations “are required by tax law to undertake only election-related 

activity that cannot benefit any particular candidate or party.” 67 Fed. Reg. at 49,090. 

The Commission opted not to adopt the exemption, however, explaining that “the plain 

language of BCRA applies to all 501(c) organizations that make disbursements or 

expenditures in connection with Federal election, including expenditures and 

disbursements for Federal election activity.” Id. Accordingly, the Commission 

concluded that “[b]ecause Congress clearly could have excluded 501(c)(3) organizations 

from this provision but chose not to do so, the final rules do not include any such 

exclusion or exemption.” Id. Donating nonfederal funds to a charitable organization 

engaging in activities covered by this provision therefore is prohibited. Cf. Advisory 

Opinion 2019-02 (Bill Nelson) (Commission concluded that donating excess recount 

funds to a charitable organization was permissible because the committee intended to 

donate exclusively to charitable organizations under section 501(c)(3) that are prohibited 

from participating or intervening in political campaigns. As a result, the donated funds 

could not be used to influence a federal election). 

The Committee, however, may donate funds to a charitable organization 

organized under 501(c) that does not engage in the activities prohibited by section 

300.51. Indeed, the Commission implemented a safe harbor that allows state and local 

party committees to obtain and rely upon a certification from a section 501(c) 

organization that it is not engaging in activity prohibited by section 300.51. 11 C.F.R. § 

300.51(c), (d), (e). We, therefore, recommend that the Audit Division not present 
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disgorgement to charitable organizations that engage in activities prohibited by section 

300.51, but that the Committee may disgorge funds to charitable organizations that do not 

engage in such activity. 

III. RECORDKEEPING FOR EMPLOYEES (Finding 2)

The Report found that the Committee did not maintain any monthly payroll logs 

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

election. For 2017 and 2018, the Audit Division identified payments to Committee 

employees totaling $111,812 for which the Committee did not maintain monthly payroll 

logs. This amount includes payroll expenses totaling $32,764 for employees paid 

exclusively with nonfederal funds. The Audit Division recommends that, in addition to 

monthly logs for employees paid solely with federal funds or allocated funds, the 

Committee provide evidence that monthly logs were maintained for employees paid 

solely with nonfederal funds, or provide and implement a plan to maintain monthly 

payroll logs in the future. 

The Audit Division’s decision to include the employees paid exclusively with 

nonfederal funds raises a legal issue as to whether the requirement that a State or local 

party committee keep a monthly log “of the percentage of time each employee spends in 

connection with a Federal election” applies to employees who work exclusively on 

nonfederal matters and are paid solely with nonfederal funds. 11 C.F.R. § 106.7(d)(1). 

We believe that it does, as explained below. However, the Commission has not been 

consistent on this issue. We, therefore, recommend that the Audit Division raise the issue 

in the cover memorandum to the Commission. 

Section 106.7(d)(1) requires state and local party committees to maintain “a 

monthly log of the percentage of time each employee spends in connection with a Federal 

election.” Id. Depending on the percentage of time the employee spends on federal 

activities, the regulation dictates which accounts the committee may use to pay for the 

salary and benefit of the employee. Accordingly, salaries and benefits for employees 

who spend more than 25% of their compensated time on federal election activity (“FEA”)

or activities in connection with a federal election in a given month must be paid only 

from a federal account. 52 U.S.C. § 431(20)(A)(iv); 11 C.F.R. § 106.7(d)(1)(ii); see 

52 U.S.C. § 30125(b)(2). Employees who spend 25% or less of their time on FEA or 

activities in connection with a federal election may be paid from a federal account as 

well, but the provision also allows such costs to be allocated as administrative costs. 

11 C.F.R. §§106.7(c)(1) and 106.7(d)(1)(i). Employees who spend none of their 

compensated time on FEA or activities in connection with a federal election may be paid 

entirely from a nonfederal account as long as the funds comply with state law. 11 C.F.R. 

§§ 106.7(c)(1), 106.7(d)(1)(iii).

Although a committee may use nonfederal funds to pay the salary and benefits of 

employees who spend no time on federal activities, the regulation nonetheless requires 

committees to maintain a monthly log for “each employee.” This necessarily includes all 

of the committee’s employees, including those who spend no time in connection with 

federal elections, because zero percent is also a percentage of time spent in connection 
 

 

 

 

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with federal elections. This reasoning parallels the reasoning that the Commission 

adopted when considering whether committees must maintain monthly logs for 

employees spending 100% of their time in connection with federal elections. See 

Memorandum from Lisa J. Stevenson to Commission on Request for Consideration of a 

Legal Question involving the Vermont Democratic Party (LRA 917) at 2-3 (Oct. 23, 

2012) (Commission approved OGC recommendation to require logs for employees who 

spend 100% of time in connection with federal elections); Memorandum from Lisa J. 

Stevenson to Commission on Request for Consideration of a Legal Question on 

Democratic Party of Illinois (LRA 921) at 2 (Oct. 31, 2012) (same). 

Moreover, maintaining a log for all staff, including those who did not spend time 

on federal activity, is necessary to ensure that the Commission can verify that those 

employees did not spend any time on federal activity. 11 C.F.R. § 104.14(b)(1). As a 

practical matter, the Commission has no way of knowing whether any employees spent 

none of their time on federal-related activities unless it can review documentation such as 

a log that indicates that information. The Commission has adopted this rationale in the 

two most recent audits involving this recordkeeping requirement. See Final Audit Report 

on Democratic Party of Hawaii (Feb. 16, 2018) at 25 (approving a finding that the 

committee failed to maintain a monthly payroll log for each employee, including those 

employees on the payroll who worked exclusively on nonfederal activities) Final Audit 

Report on Illinois Republican Party (Apr. 6, 2015) at 12 (same). 

We note, however, that in several earlier audits the Commission could not agree 

whether monthly payroll logs were required for employees who were paid exclusively 

with nonfederal funds. See Final Audit Report on Utah Republican Party (Jan. 23, 2017), 

Final Audit Report on South Dakota Democratic Party (Apr. 27, 2015), Final Audit 

Report on Kentucky State Democratic Central Committee (Apr. 20, 2015), Final Audit 

Report on Democratic Party of Wisconsin (Apr. 6, 2015), Final Audit Report on 

Democratic Party of Illinois (Nov. 5, 2014), Final Audit Report on State Democratic 

Executive Committee of Alabama (May 12, 2014), Final Audit Report on Republican 

Party of Iowa (Mar. 18, 2014).1 In these audits, the Commission moved the findings 

related to this issue to the additional issues section of the respective final audit reports 

because there were not four affirmative votes to include the findings. Commission 

Directive 70 at 4 (Apr. 26, 2011). 

Given this inconsistent treatment of the audits on this issue, we recommend that 

the Audit Division raise this issue in the cover memorandum to the Commission that will 

accompany this audit report. 

OGC and the Audit Division have consistently recommended that the Commission find that 

monthly payroll logs are required for employees paid with 100% nonfederal funds. See, Memorandum 

from Lisa J. Stevenson to Patricia C. Orrock, IAR on the Democratic Party of Wisconsin (LRA 952) 

(Jan.29, 2014) and Interim Audit Report on the Democratic Party of Wisconsin (Apr. 10, 2014). 

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