Draft Final Audit Report of the 

Audit Division on the Democratic 

Party of South Carolina 

(January 1, 2009 - December 31, 2010) 

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 com^iance 

with the Act.!^^^ audit 

determines 

commit 

the limitations^ 

prohibitions and 

disclosure requiremii 

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 Democratic Party of Soi^^^oll^is^tat e party 

committee headquartered ii^E^i^bie^^^ti Carolina. For more 

information, see the chart cj^the Coin^n^^^rganization, p. 2. 

Financial Activity 

• Receipts 

o Contributioi 

Transfers 

Account 

dividuals 

eral 

blitical 

ursei 

Operating Expenditures 

ederal Election Activity 

Coordinated Expenditures 

Other Disbursements • 

Total Disbursements 

Levin Receipts 

Levin Disbursements 

670,971 

301,155 

$ 2,963,986 

$ 1,597,632 

1,307,227 

50,366 

83,850 

$ 3,039,075 

$ 51,000 

$ 51,000 

Findings and Recommendations (p. 4) 

• Recordkeeping for Employees (Finding 1) 

• Coordinated Party Expenditures (Finding 2) 

2 U.S.C. §438(b). 
Draft Final Audit Report of the Audit 

Division on the Democratic Party of 

South Carolina 

(January 1, 2009 - December 31, 2010) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 

Scope of Audit 

Commission Guidance 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Recommendations 

Finding 1. Recordkeeping for Employees 

Finding 2. Coordinated Party Expenditures 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Democratic Party of South Carolina (DPSC), 

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 2 U.S.C. §438(b), which permits the 

Commission to conduct audits and field investigations of any political committee that is 

required to file a report under 2 U.S.C. §434. Prior to con^^p^Wiy J^it under this 

subsection, the Commission must perform an intemal re^^wm r^^^filed by selected 

committees to determine if the reports filed by a partic^ar comm^^^g^t the threshold 

requirements for substantial compliance with the Act. 

Scope of Audit 

Following Commission-approved procedures, the Audit staff 

factors and as a result, this audit examined: 

1. the disclosure of individual contributors' o£!i$Q^l^..and name 

the disclosure of disbursements, debts 

the disclosure of expenses allocated bet 

the consistency between reported p 

the completeness of records; 

other committee operations n 

Commission 

Reque 

PUTSU 

of 

question ral 

required unde 

funds. 

led various risk 

-federal accounts; 

.on Cj^sideration of a Legal Question 

stablishing a Program for Requesting Consideration 

ion," DPSC requested early consideration of a legal 

iPSC questioned whether the monthly time logs 

l)(l) applied to employees paid with 100 percent federal 

The Commission conMded, by a vote of 5-1, that 11 CFR § 106.7(d)(1) does require 

committees to keep amonthly log for employees paid exclusively with federal funds. 

Exercising its prosecutorial discretion, however, tiiie Commission decided it will not 

pursue recordkeeping violations for the failure to keep time logs or to provide affidavits 

to account for employee salaries paid with 100 percent federal funds and reported as 

such. The Audit staff informed DPSC Counsel of the Commission's decision. 

Finding 1 - Recordkeeping for Employees of this audit report does not include any DPSC 

employees paid with 100 percent federal funds and reported as such. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 
Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand @ January 1,2009 $ 125,742 

Receipts 

o Contributions fi'om Individuals 501,313 

o Transfers from Non-federal Account 736,973 

o Transfers from Affiliated Committees 753,574 

o Transfers from Other Political Committees 670,971 

o Other Receipts 

Totai Receipts 

Disbursements 

o Operating Expenditures 

o Federal Election Activity 

o Coordinated Expenditures 

o Other Disbursements 

Total Disbursements 

Cash-on-hand @ December 31,2010 

Levin Cash-on-hand @ January 1 

Total Levin Receipts 

Total Levin DisburseraiiSg^^^ 

Levin Cash-on-hg 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Recordkeeping for Employees 

During audit fieldwork, the Audit staff determined that 

monthly payroll logs, as required, to document the perc 

spent on federal election activity. For 2009 and 2010, 

to DPSC employees totaling $481,956^'^ for which pa; 

This amount consisted of payroll which was allocated b' 

funds. 

In response to the Interim Audit Report recommendation, DPS 

maintain monthly payroll logs to track federal ^^^^ctivity for 

are paid all or in-part with non-federal funds.^uie A^^^taff cons 

resolved. (For more detail, see p. 5.) 

Finding 2. Coordinate^ 

The Audit staff determined that 

party expenditures limij^^Jje 

audit fieldwork^ 

reclassifyi 

Paid Entii^^th Federal 

Audit R^^rt reconunendation 

mattj 

ntain any 

employee 

tified payments 

d. 

eral 

it agrees to 

employees who 

the matter 

ures 

appeared t^^p^xceeded the 2010 coordinated 

use candidate by $5,117. In response to the 

ocumentation and filed an amended report 

;d expS^^^to Line 30(b) (Federal Election Activity 

us TCsWmng the overage. In response to the Interim 

C pro'^ded no additional information regarding this 

This total does not include payroll for employees paid with 100 percent federal funds and reported as 

such. (See Part I, Background, Commission Guidance, Request for Early Commission Consideration of 

a Legal Question, p. 1.) 

^ Payroll is stated net of taxes and benefits. 
Part IV ^ 

Findings and Recommendations 

Finding 1. Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff determined that DPSC did not maintain any 

monthly payroll logs, as required, to document the percentage of time each employee 

spent on federal election activity. For 2009 and 2010, the Audit ^aff identified payments 

to DPSC employees totaling $481,956^'^ for which payrd^^Pv^u^maintained. 

This amount consisted of payroll which was allocated bj^een fe^^bmd non-federal 

funds. 

In response to the Interim Audit Report recommendatior^^^p stated th^^^p^es to 

maintain monthly payroll logs to track federal election ei^r^^^those emp^^es who 

are paid all or in-part with non-federal funds. The Audit staff ^^d.ers the matter 

resolved. 

Legal Standard 

Maintenance of Monthly Logs. Party co: 

percentage of time each employee sp^^in conn 

Allocations of salaries, wages, an^-ipge benefii 

• employees who spend 25ii^i t or less o 

month on fej 

or have 

emp! 

monthly log of the 

federal election, 

undertaken as follows: 

mpensated time in a given 

must be paid either from the federal account 

as afflt^kj^^ve costs; 

than ^^^ent of their compensated time in a given 

;tivitie§|nust be paid only from a federal account; and 

f their compensated time in a given month on federal 

d entirely with funds that comply with State law. 11 

Facts and A: 

A. Facts 

During fieldwork, th^Audit staff reviewed disbursements for payroll. DPSC 

did not maintain any monthly logs or equivalent records to document the percentage of 

time each employee spent in connection v^th federal election activity. These logs are 

required to document the proper allocation of federal and non-federal funds used to pay 

employees. For 2009 and 2010, logs were not maintained for $481,956^'^ in payroll. 

^ This total does not include payroll for employees paid with 100 percent federal funds and reported as 

such . (See Part I, Background, Commission Guidance, Request for Early Consideration of a Legal 

Question, p. 1.) 

^ Payroll is stated net of taxes and benefits. 
This amount consisted of payroll which was allocated between federal and non-federal 

funds. DPSC had no employees paid with exclusively non-federal funds. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the payroll recordkeeping matter with DPSC representatives 

during audit fieldwork and at the exit conference. DPSC representatives stated that they 

did not maintain payroll log documentation and no further information was provided. 

For DPSC employees paid with an allocation of federal and non-federal funds, the 

Interim Audit Report recommended that DPSC provide and implement a plan to maintain 

monthly payroll logs to track the percentage of time each eitmloyg^ spends on federal 

election activity. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendatid|^^^^ stated ^^^^^^^^ 

maintain monthly payroll logs to track federal election ^^^^^or those e^^^^s who 

are paid all or in-part with non-federal fimds. Such acti^is'^^^tent with Commission 

guidance with respect to the payroll logs. (See Commission Gym^ ^ V'^) The Audit 

staff considers the matter resolved. 

I Finding 2. Coordinated P 

Summary 

The Audit staff determined that 

party expenditure! 

audit fieldwo^ 

reclassifyii^^e of the coorl 

Paid Ei^ ^ with Federal Funi 

Audit^^^Lrecommendation, 

matror, 

speared to HPe exceeded the 2010 coordinated 

candidate by $5,117. In response to the 

lentation and filed an amended report 

expencpeores to Line 30(b) (Federal Election Activity 

lus resiolving the overage. In response to the Interim 

>C provided no additional information regarding this 

Legal Stani 

A. Coordinated l^^l^^j^nditures. National party committees and state party 

committees are penri^p^ purchase goods and services on behalf of candidates in the 

general election, oven^d above the contributions that are subject to contribution limits. 

Such purchases are termed "coordinated party expenditures." They are subject to the 

following rules: 

• the amount spent on "coordinated party expenditures" is limited by statutory 

formulas that are based on the Cost of Living Adjustment (COLA) and the voting 

age population; 

• party committees are permitted to coordinate the spending with the candidate 

committees; 

• the parties may make these expenditures only in connection with the general 

election; 
• the party committees—^not the candidates—are responsible for reporting these 

expenditures; and 

• if the party committee exceeds the limits on coordinated party expenditures, the 

excess amount is considered an in-kind contribution, subject to the contribution 

limits. 2 U.S.C. §441a(d) and 11 CFR §§109.30 and 109.32. 

B. Assignment of Coordinated Party Expenditure Limit. A political party may 

assign its authority to make coordinated party expenditures to another political party 

committee. Such an assignment must be made in writing, state the amount of the 

authority assigned, and be received by the assignee before any coordinated party 

expenditure is made pursuant to the assignment. The poM^^oaS^ co^nittee that is 

assigned authority to make coordinated party expenditu^^^^ n^^Sn the written 

assignment for at least three years. 11 CFR §§104.14 ^ 109.33^^||,(c). 

Facts and Analysis 

A. Facts 

The combined coordinated party expenditure limit for a House 

Candidate in South Carolina for the 2010 electiog^^t? 

limit for both the state party (DPSC) and the 

Committee (DNC)). DPSC reported coordi 

(Itemized Coordinated Party Expenditures) 

of Representatives (the Candidate), l^^ported 

state party limit by $5,117. 

Of the $48,617 reE,c 

spend $20,250 

requested 

spendin; 

doc 

Audfft s 

party coon 

SC provi 

ority to DPSC 

n to support the as' 

luded that the D 

xpenditure lj 

resejatative's 

a $43,500 

((Domestic National 

f$«^,617 on Scheduler 

candidate for the House 

expenditures exceeded the 

SC disclosed that the DNC^ designated it to 

^^During fieldwork, the Audit staff 

assigtiEfi|^letters to document the assignment of 

repre^^tatives did not provide any letters or other 

lent of DNC s spending authority. Therefore, the 

I's expenditures for the Candidate exceeded the state 

It. 

B. Interim Audr^^tort^^udit Division Recommendation 

After the exit confe^^^^ response to the Audit staffs request for documentation to 

show that DPSC had mi exceeded the coordinated expenditure limit, DPSC 

representatives stateothat DPSC had mistakenly reported a $10,250 disbursement for 

door hangers as a coordinated expenditure that should have been reported as Federal 

Election Activity on Schedule B, Line 30(b). DPSC's counsel stated that this 

disbursement was an "exempt slate card activity" and DPSC filed an amended report, 

reclassifying the $10,250 expenditure to Line 30(b) as "exempt canvassing material." 

DNC did not report any coordinated expenditures on behalf of the Candidate, but the Democratic 

Congressional Campaign Committee (DCCC) filings disclosed additional coordinated expenditures of 

$15,118 for the Candidate, which is below the spending limit of $43,500. 

The Audit staff requested that DPSC officials provide letters from both the DNC and the DCCC to 

document the assigning of its coordinated spending authority. 
Based upon a review of the content of the door hanger and the timing of the invoice 

relative to the election (it appears to have fallen within the established FEA timelines), 

the Audit staff agreed with the reclassification and concluded that DPSC did not make 

excessive coordinated expenditures. 

The Interim Audit Report recommended that DPSC provide any additional information or 

written comments that it considered relevant to this finding. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, DPSC provided no additional 

information regarding this matter.