FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM 

Nay 16, 2012 

TO: 

FROM: 

Patricia Carmona 

Chief Compliance Officer 

Thomas Hintermister 

Assistant Staff Director 

Audit Division 

Lawrence L. Calvert, Jr. 

Associate General Couns 

Lorenzo Holloway 

Assistant General Counsel 

For Public Finance and Audit Advice 

SUBJECT: 

Delanie DeWitt Painter ^ ^P ^ 

Attomey ^ 

Proposed Interim Audit Report on Mississippi Democratic Party Political Action 

Committee (LRA 906) 

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

("lAR") for the Mississippi Democratic Party Political Action (Committee. We concur with the 

findings in the proposed lAR and have no comments.^ If you have any questions, please contact 

Delanie DeWitt Painter, the attomey assigned to this audit. 

cc: Christopher Hughey, Deputy General Counsel 

' 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 lAR. 11 CF.R. §§ 2.4(a) and 

(bX6). 
FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

August 1, 2012 

MEMORANDUM 

TO: 

FROM: 

Patricia Carmona 

Chief Compliance Officer 

Thomas Hintermister 

Assistant Staff Director 

Audit Division 

Lisa J. Stevenson 

Special Counsel to 

the General Counsel 

Lawrence L. Calvert, Jr. /^[^^^^ ^ 

Associate General Coun^^/^\^ 

Lorenzo Holloway _ 

Assistant General Counsel 

For Public Finance and Audit Advice 

Delanie DeWitt Painter 

Attomey 

SUBJECT: Proposed Interim Audit Report on Mississippi Democratic Party Political Action 

Committee (LRA 906) 

I. INTRODUCTION 

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

("lAR") for the Mississippi Democratic Party Political Action Committee ("the Committee"). We 

commented on a previous draft of the lAR on May 16,2012, and concurred with the findings in 

that draft.' Subsequently, the auditors added another finding to the draft lAR: Finding 4. 

Recordkeeping for Payroll, and requested our review of that finding. Our comments focus on an 

issue related to that finding of the recordkeeping requirements for employees who are paid and 

reported as solely 100% federal fiinds. If you have any questions, please contact Delanie DeWitt 

Painter, the attomey assigned to this audit. 

' 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 lAR. 11 C.F.R. §§ 2.4(a) and 

(b)(6). 
Audit Division Recommendation Memorandum 

Mississippi Democratic Party Political Action Committee (LRA 906) 

Page 2 

II. RECORDKEEPING FOR PAYROLL (Finding 4.) 

The auditors found that the Conunittee did not maintain a monthly log or any supporting 

documentation stating the percentage of time that each employee spent on activities in connection 

with a federal election. The Committee paid a total of $227,888 for payroll from its federal 

account in 2009 and 2010. Hie payroll paid fix>m the Committee's federal account included: 

$39,970 for 11 employees reported as federal election activity ("FEA") on Schedule B, line 30b, 

$49,177 for 4 employees reported as other federal operating expenditures on Schedule B, line 21b, 

and $138,741 for 6 employees reported as shared federal/non-federal activity on Schedule H-4, 

Line 21a. According to the auditors, all payroll was paid fix>m the federal account, including both 

the federal and non-federal portions of amounts reported as shared activity; thus, no payroll was 

paid from a non-federal account. The draft lAR states that there were 17 paid employees, and 

some employees were reported on more than one line. Based on information provided by the 

Audit staff, it appears that 11 of the Committee's employees may have spent 100% of their time on 

activities in connection with a federal election and were paid with 100% federal fiinds. The 

Committee informed the auditors that it has not located any payroll logs or other payroll 

documentation. The proposed lAR recommends that, unless the Committee provides any monthly 

logs, the Conunittee should provide and implement a plan to maintain monthly payroll logs to 

track the percentage of time that each employee spends on activities in connection with a federal 

election. 

This proposed finding raises the issue of whether state party committees must maintain a 

monthly log under 11 C.F.R. § 106.7(d)(l) for employees who are paid from and reported as 

solely 100% federal funds. We reiterate the informal advice on this issue that we provided in the 

context of another audit. 

A state party committee '*must keep a monthly log of the percentage of time each employee 

spends in connection with a Federal election." 11 C.F.R. § 106.7(d)(1) (emphasis added). To 

determine if a state party committee must allocate the salary, wages and benefits of its employees, 

it must examine the percentage of time that the employees spent on federal election activity 

("FEA") or activity in connection with federal elections. Salaries and benefits for employees who 

spend more than 25% of their compensated time on FEA or activities in connection with a federal 

election in a given month must be paid only fix)m a federal account. 11 C.F.R. § 106.7(d)(l)(ii). 

Employees who spend less than 25% of their time on FEA or activities in connection witii a federal 

election may be allocated as administrative costs or paid from the federal account. 11 C.F.R. 

§ 106.7(d)(l)(i). Employees who spend none of their compensated time on FEA or activities in 

connection with a federal election may be paid entirely with fimds that comply with State law. 

11 C.F.R. §§106.7(c)(l)and 106.7(d)(l)(iii). 

We conclude that, read literally, the regulations support the conclusion that state party 

conunittees must maintain a monthly log under 11 C.F.R. § 106.7(d)(1) for employees who are 

paid from and reported as solely 100% federal funds. The regulations require a state party 

committee to keep a log of the percentages of time that each employee spends in connection with a 

federal election. 11 C.F.R. § 106.7(d)(1). Although 100% of the time spent on federal activity 

represents the whole or complete time spent on federal activity, this is still a percentage. 
Audit Division Recommendation Memorandum 

Mississippi Democratic Party Political Action Committee (LRA 906) 

Page 3 

Whether the Audit Division should pursue findings of this nature, however, raises practical 

questions. Section 106.7(d) works in support of the statute's requirement that state and local party 

committees treat as "federal election activity," payable with 100% federal funds, the salaries and 

benefits of any employee who spends more than 25% of his or her compensated time during the 

month on activities in connection with a federal election. 2 U.S.C. §§ 43 l(20)(A)(iv), 441i(b)(l). 

Here, it appears that all of the employees were paid with 100% federal funds, so there is no concern 

that an inadequate share of federal fiinds was used. The only difference that could possibly be 

made by keeping the log would be to identify those employees who spent less than 25% of their 

compensated time during a month on activities in connection with a federal election, but whose 

salaries and benefits the Committee voluntarily chose to pay with 100% federal funds. Because 

the salaries and benefits of those employees are not "federal election activity," they would not 

have been reported as such on line 30(b) of the Detailed Summary Page, but could instead have 

been reported as federal operating expenses on line 21(b), 11 C.F.R. § 106.7(d)(1); see 

11 C.F.R. §§ 104.14(b)(1) and 104.17(a)(4), or as payments for allocable operating expenses on 

line 21(a) and on Schedule H4.^ Here, it appears that those employees are identified because the 

Committee reported payroll payments of $49,177 for 4 employees as other federal operating 

expenditures on Schedule B, line 21b, and $138,741 for 6 employees as shared federal/non-federal 

activity on Schedule H-4, Line 21a. If the Audit Division believes that logs (or the equivalent 

substitute) are needed to verify this reported information, then you should consider whether a 

recordkeeping finding or a limitation on the scope of the audit is appropriate. 

We provide these comments, however, recognizing the Conunission's 3-3 split on a similar 

issue in the Georgia Federal Elections Committee audit involving employees whom the committee 

asserted spent no time on activity in connection with federal elections. In that audit, the 

Conunission split on the issue of whether the Conunission could require a committee to keep a log 

for such employees, notwithstanding that zero (as well as 100) is a percentage. For those 

employees, presumably, there would be considerably more reason to require the log, to ensure that 

their salaries were properly paid with 100% non-federal funds. Nevertheless, in a motion that 

failed 3-3, three Conunissioners asserted that "the Commission does not have jurisdiction to 

impose recordkeeping and documentation requirements on employee activity that a State party 

committee claims is solely non-Federal." See Commission Agenda Document No. 11-10-B 

(Motion on Audit Division Recommendation memorandum on the Georgia Federal Elections 

Committee, considered in Open Session Mar. 3,2011). Here, unlike with the Georgia Federal 

Elections Committee, the Committee employees at issue undisputedly were paid with 100% 

federal funds and 11 of the Committee's 17 employees apparently spent 100% of their time on 

activities in connection with a federal election so the three Commissioners' concern regarding 

jurisdiction over "solely non-federal" activity may be reduced. Nevertheless, given that there is 

some uncertainty on a related issue, we recommend that you raise this issue in the memorandum 

that forwards the report to the Commission. 

^ According to the Reports Analysis Division ("RAD"), if a committee asked RAD how to disclose payroll that 

could be allocated with shareid federal/non-federal funds, but was paid with 100% federal funds, RAD would advise 

them to disclose it on Schedule B as a 100% federal operating expense. However, ifthe committee opted to disclose 

the expense as allocated on Schedule H4, RAD would consider that acceptable. RAD explained that there is no 

requirement to reimburse the federal account the non-federal share and some committees that initially disclose 

expenses as allocated later decide they do not want to reimburse the federal account the non-federal share. 
FEDERAL ELECTION COMMISSION 

WASMINCilUN. D.C. :;u4(i:) 

September 26, 2012 

MEMORANDUM 

TO: 

FROM: 

SUBJECT: 

Patricia C. Orrock 

Chief Compliance Officer 

Thomas Hintermister 

Assistant Staff Director 

Audit Division 

Lisa J. Stevenson 

Special Counsel to 

the General Counsel 

Lorenzo Holloway 

Assistant General Counsel 

For Public Finance and Audit Advice 

Delanie DeWitt Painter 

Attorney 

Proposed Interim Audit Report on Mississippi Democratic Party Political Action 

Committee (LRA 906) 

1. INTRODUCTION 

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

("lAR") for the Mississippi Democratic Party Political Action Committee ("the Committee"). We 

commented on a previous draft of the lAR on May 16, 2012, and concurred with the findings in 

that draft.' Subsequently, the auditors added another finding to the draft lAR: Finding 4. 

Recordkeeping for Payroll, and requested our review of that finding. Our comments focus on an 

issue related to that finding of the recordkeeping requirements for employees who are paid and 

reported as solely 100% federal funds. We initially commented on this issue on August 1,2012. 

However, the Audit staff subsequently provided additional factual information that required 

substantive changes to our analysis. Therefore, we are withdrawing our August 1,2012 comments 

and replacing them with this memorandum. If you have any questions, please contact Delanie 

DeWitt Painter, the attomey assigned to this audit. 

' We reconunend that the Conuni.ssion consider this document in Executive Session because the Commission 

may eventually decide to pursue an investigation of matters contained in the proposed lAR. 11 C.F.R. 2.4(a) and 

(b)(6). 
Comments on Proposed Interim Audit Report 

Mississippi Democratic Party Political Action Committee (LRA 906) 

Page 2 

11. RECORDKEEPING FOR PAYROLL (Finding 4.) 

The auditors found that the Committee did not maintain a monthly log or any supporting 

documentation for any of its paid employees. The proposed I AR recommends that, unless the 

Committee provides monthly logs, the Committee should provide and implement a plan to 

maintain monthly payroll logs to track the percentage of time that each employee spends on 

activities in connection with a federal election. 

The monthly logs should have stated the percentage of time that each employee spent on 

activities in connection with a federal election. 11 C.F.R. § 106.7(d)(1). The Committee paid a 

total of $227,888 for payroll fiom its federal account in 2009 and 2010. Included in this amount 

was $39,970 for 11 employees reported as federal election activity (**FEA") on Schedule B, line 

30b, and S49,l 77 for four employees reported as other federal operating expenditures on Schedule 

B, line21b.^ 

The auditors reviewed the Committee's accounts and found that the Committee's 

payments to those employees that were reported as FEA or federal operating expenditures were 

paid with 100% federal fiinds. The proposed finding, therefore, raises the issue of whether state 

party committees must maintain a monthly log under 11 C.F.R. § 106.7(d)(1) for employees who 

are paid from and reported as solely 100% federal funds. We reiterate the infomial advice on this 

issue that we provided in the context of another audit. 

A stale party committee "must keep a monthly log of the percentage of time each employee 

spends in connection with a Federal election." 11 C.F.R. § 106.7(d)(1) (emphasis added). To 

determine if a state party committee must allocate the salary, wages and benefits of its employees, 

it must examine the percentage of time that the employees spent on federal election activity or 

activity in connection with federal elections. Salaries and benefits for employees who spend more 

than 25% of their compensated time on FEA or activities in connection with a federal election in a 

given month must be paid only from a federal account. 11 C.F.R. § 106.7(d)(l)(ii). Employees 

who spend less than 25% of their time on FEA or activities in connection with a federal election 

may be allocated as administrative costs or paid from the federai account. 11 C.F.R. 

§ 106.7(d)( l)(i). Employees who spend none of their compensated time on FEA or activities in 

connection with a federal election may be paid entirely with fiinds that comply with State law. 

11 C.F.R. §§ 106.7(c)(1), 106.7(d)(l)(iii). 

We conclude that, read literally, the regulations support the conclusion that state party 

committees must maintain a monthly log under 11 C.F.R. § 106.7(d)(1) for employees who are 

paid from and reported as solely 100% federal funds. The 11 employees reported as FEA may 

have spent as much as 100% of their time on federal activity. Although 100% of the time spent on 

federal activity represents the whole or complete time spent on federal activity, this is still a 

percentage. 

' The four employees who were paid wilh 100% federal funds and reported as federal operating expenses for 

some of their work time were also paid as shared federal/nonfederal activity for the remainder of their work time. 
Comments on Proposed Interim Audit Repon 

Mississippi Democratic Party Political Action Committee (LRA 906) 

Pages 

Whether the Audit Division should pursue findings of this nature, however, raises practical 

questions. Section 106.7(d) works in support of the statute's requirement that state and local party 

committees treat as "federal election activity," payable with 100% federal funds, the salaries and 

benefits of any employee who spends more than 25% of his or her compensated time during the 

month on activities in connection with a federal election. 2 U.S.C. §§ 431(20)(A)(iv), 441i(b)(l). 

Since the Committee paid the employees at issue with 100% federal funds for all or a portion of 

their work time, there is no concern that an inadequate share of federal funds was used to pay these 

employees. The only difference that could possibly be made by keeping the log for these 

employees for the time paid with 100% federal funds would be to identify those employees who 

spent less than 25% of their compensated time during a month on activities in connection with a 

federal etection, but whose salaries and benefits the Committee voluntarily chose to pay with 

100% federal funds. Because the salaries and benefits of those employees are not "federal election 

activiiy," they would not have been reported as such on line 30(b) of the Detailed Summary Page, 

but could instead have been reported as federal operating expenses on line 21(b), 

11 C.F.R. § 106.7(d)(l);jee 11 C.F.R. §§ 104.14(b)(1) and 104.17(a)(4). Here, it appears that the 

Committee recognized this distinction because the Committee reported payroll payments of 

S49,l 77 for four employees as olher federal operating expenditures on Schedule B, line 21b.^ If 

the Audit Division believes that logs (or the equivalent substitute) are needed to verify this 

reported information, then you should consider whether a recordkeeping finding or a limitation on 

the scope of the audit is appropriate. 

We provide these comments, however, recognizing the Commission's 3-3 split on a similar 

issue in the Georgia Federal Elections Committee audit involving employees whom the committee 

asserted spent no time on activity in connection with federal elections. In that audit, the 

Commission split on the issue of whether the Commission could require a committee to keep a log 

for such employees, notwithstanding that zero (as well as 100) is a percentage. For those 

employees, presumably, there would be considerably more reason to require the log, to ensure that 

their salaries were property paid with 100% non-federal funds. Nevertheless, in a motion that 

failed 3-3, three Commissioners asserted that "the Commission does not have jurisdiction to 

impose recordkeeping and documentation requirements on employee activity that a State party 

committee claims is solely non-Federal." See Commission Agenda Document No. 11-10-B 

(Motion on Audit Division Recommendation memorandum on the Georgia Federal Elections 

Committee, considered in Open Session Mar. 3, 2011). Here, unlike with the Georgia Federal 

Elections Committee, the Committee paid the employees at issue with 100% federal funds for 

salary payments reported as FEA or federal operating expenses, so the three Commissioners' 

concern regarding jurisdiction over "solely non-federal" activity may be reduced. Nevertheless, 

given that there is some uncertainty on a related issue, we recommend that you raise this issue in 

the memorandum that forwards the report to the Commission. 

A log is also required for the work performed by these four employees thai was paid as shared activity.