Draft Final Audit Report of the 

Audit Division on the 

Democratic Party of Arkansas 

January 1, 2007 - December 31, 2008 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

mvestigations 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 \^'A 

substantial compliand 

with the Act.' The audif 

determines^^wl 

committeel! 

with the^imitations, 

prohibiti'();[^sand 

disclosure r^^quirements 

of the Act. 

Future Actioil 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to the 

matter discussed in this 

report. 

About the Coinmittee (p. 2) 

The Democratic Party of Arkansas a state party committee 

headquartered in Little Rock. .Arkansas. For more information, see 

the chart on the Committee ()i'.:.iniiCation, p. 2. 

i 

Financial Activity (p. 2) 

• Receipts j 

o Contribittioiis Irom Individuals $ 620,492 

o Contributions from OthersPolitical 

Committer 326,600 

o ^^f^sfers from iffnli.iuil Party 

ConiiT^tees 113,217 

o l^sl^^^gi Non-1-ederal Accounts 1,507,775 

o OihcrRei^N . ' 119,305 

Total Receipts $ 2,687,389 

SM)ur.sements 

perating DiNbursements $ 2,213,994 

T oaii Repaymenis Made 31,319 

I vdc!..ii Llcciioir^ctivity 107,908 

Translers in Non-Federal 

kccount 224,349 

r Disbursements 117,600 

ilbursements $ 2,695,170 

Finding and Recommendation (p. 3) 

• Misstatement of Financial Activity 

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

Audit Division on the 

Democratic Party of Arkansas 

January 1, 2007 - December 31. 2008 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity ^ 2 

Part III. Summary 

Finding and Recommendation t 3 

Part IV. Finding and Recommendation 

Misstatement of Financial Activity 4 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Democratic Party of Arkansas (DPA), 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 condiiciing any audit under this 

subsection, the Commission must perform an inteni.il rc\ icw of reports filed by selected 

committees to determine if the reports filed by a pai i u iihir c^mittee meet the threshold 

requirements for substantial compliance with ihc Act'. 2 I '.S.C. ^8(b). 

Scope of Audit 

Following Commission approved procedur«:^ 

factors and as a result, this audit exammed: 

.Vudit suilTevaluak-d various risk 

1. The disclosure of disbursemem >, cl|^^and obligai^^s. 

2. The disclosure of expenses all^^^^ipiwccii fede^^^^non-federal accounts. 

3. The disclosure of individual coi^ft^tors" in^^io n aJ®iame of employer. 

4. The consistency K(ffS?ben reported^gures and b.ink iI'coras. • 

5. The completenfcN-III Kvi'uls. 

6. Other committe operations nccessary^i) ihe review. ^ 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration March 8,1976 

• Audit Coverage January 1,2007 - December 31,2008 

Headquarters Little Rock. /\rkansas 

Bank Information A 

• Bank Depositories lour 

Bank Accounts im ^en F^cral. Five Non-federal, One 

^4 • Levin (unuNcdK 

Treasurer 

Treasurer When Audit Was Conducted Karen Q.arcia 

• Treasurer During Penod Covered_by Audit K.IN'SI (iarcia_ 

Management Information 

• Attended FEC Campaign Finance l^ninai | Ye^ ^ 

• Who Handled Accounting and ReconH^wcpin!: Paid sUiTr 

Tasks 

i%erviei|| of Financial Activity 

(Audited Amounts) 

Cash ojhand («- Junijin^ U 2007 ^ $ 68,560 

o ColBjutions from Eli j\uliials' ^ 620,492 

o ContiTF^^ns from Otlicr Pol ii icaTTniiiMiittees 326,600 

o Transferll^m Affiliated l\iri\ ComBtees 

o Transfers from Nmi-Fedci.il \icounts 

113,217 

1,507,775 

o Other Receipts 119,305 

Total Receipts . v . $2,687,389 

o Operating Disbursenf^B 2,213,994 

o Loan Repayments Made^ 31,319 

o Federal Election Activity 107,908 

o Transfers to Non-Federal Account 224,349 

o Other Disbursements 117,600 

Total Disbursements $2,695,170 

Cash on hand @ December 31,2008 $ 60,779 
Part III 

Summary 

Finding and Recommendation 

Misstatement of Financial Activity 

During audit fieldwork, a comparison of DPA's reported activity to bank records 

revealed a misstatement of receipts and disbursements iir2^bi DPA understated receipts 

and disbursements by $148,974 and $146,561, respecii\cl>? 

In response to the Interim Audit Report, DPA ame^i^|ed its^cpuiis to materially correct 

the misstatements. (For more detail, seep. 4) > 
Part IV 

Finding and Recommendation 

Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of DPA's reported activity to bank records 

revealed a misstatement of receipts and disbursements in 2007. DPA understated receipts 

and disbursements by $148,974 and $146,561, respectively. 

In response to the Interim Audit Report, DPA ame^lccl iis reports to materially correct 

the misstatements. 

Legal Standard 

Contents of Reports. Each report must di^clu^j: 

• the amount of cash on hand at the beginning' and end uf the reporting period; 

• the total amount of receipts lor ihc reportmg pv-i itui and tor the calendar^e^; 

• the total amount of disbursenicniNjn! ili;; repoi i MIL' p^'iiod and for the calendar year; 

and, 

• certain transactions that require :\.-ni/.iiinif|onvSchetlnlc ,\ (liemized Receipts) or 

Schedule B (Itemi/ccl Di-bursem^'). 2 U.S C ? \?4(lo){ I (3), (4) and (5). 

Facts and Analysis ^ 

\ \ 

A. Facts ^ ^ , v.*. 

As pari of l icklwork. tlic Aiieiii >ialT rcvonciled'DBA's reported activity to its bank 

records for 2007. I'lic lollou iiiii chart oiiilincs iHc discrepancies for the beginning cash 

balance, receipts, disbui ^cineniN and the ending'cash balance. Succeeding paragraphs 

address IIK- reasons foi ilic inisst.iicni:ents, if known. 

2007 Comiioiinee Acti\it\ | 

1 1 Reported Bank Records Discrepancy 

Beginning Ca^Ralancc 

@ January 1,2007 

$67,443 $68,560 $1,117 

Understated 

Receipts $1,410,249 $1,559,223 $148,974 

Understated 

Disbursements $1,400,534 $1,547,095 $146,561 

Understated 

Ending Cash Balance 

©December 31, 2007 

$77,158 $80,688 $3,530 

Understated 

The beginning cash balance was understated by $1,117 and is unexplained, but likely 

resulted from prior period discrepancies. 
The understatement of receipts resulted from the followmg: 

• Unreported fundraising proceeds $ 87,496 

• Unreported reimbursement from non-federal account 66,000 

• Unexplained difference (4,522) 

Net understatement of receipts $ 148,974 

The understatement of disbursements resulted from the following: 

• Unreported transfer of fundraising proceeds to non-federal 

account $ 87,496 

• Unreported payment of non-federal activity " > 66,000 

• Unexplained difference (6,935) 

Net understatement of disbursements $ 146,561 

i 

The $87,496 adjustment included in both the nnilcrstatemeni nl^^ipts and 

disbursements represents net non-federal ])itiCwtU from fimdra^^tevents in which DPA 

received both federal and non-federal conti • lemons. The contribulion^ were received in 

the form of the ticket price paid to attend tli%; events and were coUecti-d li\ a commercial 

ticket processing company. The company subNcc|1iienil> ^^nbinitted a check lo DPA for the 

proceeds, less its service fee. DP'K deposited thc check inin its federal accoimi, then 

calculated the non-federal share .nul iiansferred thai amoimt to the non-federal accoimt 

but failed to report the receipt ot thc nun- leileuil portiomol ilie proceeds and the transfer 

to the non-federal account ($87,4961. The ledeial portion iHolrii' with the service fees 

were reported by DP A. ^ 

The $66,000 adju^iiri'cnt inclii^k in bothlhc iindcrstatcinciiBbf receipts and 

disbursements represent non-^^ral activii\ lliat was mistakenly paid for out of a 

federal account, then reiinbiirxai iisini: non-rcder<il fimds. The reimbursement occurred 

appro.\iinalcl\ ihrcc \KeekN :!lier lhe c\|ien«e ^^aN paid, but neither transaction was 

reported by 

Tlic S3.5.i() understate ine III tl^thc^cluiing cash balance was the result of the misstatements 

described .ibove. 

B. Interim .\iiilit Report & .\udit Division's Recommendation 

The Audit staff ili>cu->ed the niisstatements for 2007 with DPA representatives at die exit 

conference and pnn ided rck-\ .mt work papers detailing the reporting errors. Regarding 

the reportuig of the non-federal proceeds and subsequent transfer, DPA representatives 

explained they excluded from the report both the receipt and the transfer because they 

only deposited the proceeds in the federal account after receiving a single, co-mingled 

check, which included both federal and non-federal fimds. They further added that they 

would amend the appropriate schedules as necessary to correct the misstatements. 

Regarding the non-federal activity that was paid for mistakenly out of a federal account 

and subsequently reimbursed using non-federal fimds, DPA representatives contend that 

since both transactions occurred during the same reporting period, they were justified in 

excluding them from the report. 
In the Interim Audit Report, the Audit staff recommended that DPA amend its 2007 

reports to correct the misstatements noted above. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report, DPA filed amended reports that materially 

corrected the misstatements. 

In addition, DPA provided evidence demonstrating that some adjustments suggested in 

the Interim Audit Report were not necessary. The amounts shown in the table above 

have been revised to reflect these changes.