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May 15, 1980

PUBLIC ISSUANCE OF FINAL AUDIT REPORT -

NATIONAL DEMOCRATIC PARTY AFFAIRS COMMITTEE

OF TilE ARKANSAS DEMOCRATIC STATE COMMITTEE

FRED EILAND

PRESS OFFICE

BOB COSTA

JUDY HAWKINS'~ .

HDf.RAI III eTION COMMISSION

Attached as stated

,'c: r'EC Libr.:u·y

RAD

Public Record"/

Informational copies of this report have been received

by all barties involved and this report may be released to

the public as of today, May 15, 1980.

Attached please find a copy of the final audit report of

the National Democr~ttic Party Affairs Conunittee of the

Arkansas Democratic Sl:;tle Conunittee which was approved by

the Conunission on May 8, 1980.

FROM:

THROUGH:

r-mMORANDUM

TO:

:;IJBJECT: .-

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!/. The Committee ",as 'exempt froM reportinq receints and

exnenditures for the firstouarter of 1978. AFF.C

forM 3a was, tiled in lieu thereof~

FEDERAL ELECTION COMMISSION

WASllING TON. U C 204ft I .' .

REPORT OF THE AUDIT DIVISION .. -.~."

ON THE

NATIONAL DErmCRATIC PARTY APFAIRS COMMITTEE

OF TilE ARKANSAS DElmCRATIC STATE COr.t~ITTEE

A. Overview

1. Background

This report is based on an audit of the National

Democratic Party Affairs Committee of the Arkansas Democratic

State Committee (lithe Committee"), undertaken bv the Audit

Division of the Pederal Election Commission in accordance with

the Commission's audit policy to determine whether there has

been compliance with the provisions of the ~ederal Election

Car.lpaign Act of 1971, as amended (lithe Act"). The audit was

conducted pursuant to Section 438(a) (8) of Title 2 of the Unitec1

States Code which directs the Commission to make from time to

time audits and field investiqations with respect to reports and

statements filed under the provisions of the Act.

, The Committee re<;listered with the nnited States

Senate on January 31, 1975 as the Federal Affairs, Committee

of the Democratic Party of Arkansas. '0n ~~arch 8, 1976, the

Committee changed its name to the National Democratic Party

Affairs Committee of the Arkansas Democratic State Committee.

,The Committee maintains its headquarters in'Little Fock,

Arkansas.

The audit covered the neriod from January 1, 1976

throuqh March 31, 1978, the final coverage date of the most

", recent re!1ort filed by the Committee at t.he time of the audit.

,The Committee reported a beginninq cash balance on ~anuary 1,

1976 of ~3,050.l9,. total receipts ,for the period of'$22,8l0.l7,

total expenditures for the period of $25,663.90 and a closinq

cash balance on December 31 1977' of $196.46. !/

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This audit re~ort is based on documents and working

·panerH \oJhich support each of the factual statements. mhey form

part of" the record upon which the rommission based its decisions

on thl' 1'1.,tters in the renort and were available to COJ'lmissioner!":

and ap'l\"c)nriate staff for review. -

B. Kev Personnel

The principal officers of the Committcp. durinq the

period audited were Hr. Kaneaster Hodqes, Chairman and ~'r.

~req B. Brown, Treasurer.

C. Scope

~he audit included such tests as verification of

total renorted receints and expenditures and individual transactions; review of reouired sunportinq docuMentation and analvsis

of Committee debts and obligations; and such other audit nrocedures

as deemed necessary under the circuMstances.

II. J\.udi t 'Pindinm:; and Recommonclations

A. Allocation of AdminiRtrative Fxnenses

Section 434(b) (2) of "'itle 2 of the priit~d States

Code states, in nart, that each renort shall disclose the full

name and mailinq address of each nerson who has made one or

more contributions to or for such committee within the calendar

year in an a9qregate amount or value in excess of ~lOO, together

with the amount and date of such contributions.

Section 104.3(a) of Title 11 Code of Federal Reaulations

states, in part, that each in-kind contribution shall be valued

at the usual and normal charge on the elate received and renorted

if in excess of $100 on the annronriate schedule of receiots

and exnenditures, identified as to its nature and listed as an

"in-kind contrihution".

Section ln6.l(e) of mitle 11 Code of 'Peeleral

Requlations states that narty committees and other nolitical

committees which have establishen Federal camnaian committee!":

nursuant to Section 102.6 shall allocate administrative expenRes

on a reasonable basis between their ~ederal and non-Peeleral

accounts in nronortion to the aMount of funds exnended on Federal

and non-Federal elections, or on another reasonable basis.
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It was determined that the Arkansas Democratic State

Conunil.l:ee (lithe State Committee ll) paid all of the administrative

expennes incurred by the Committee". On February 5, 1980, the

Committ:oe notified the Audit staff by letter that the State

Committee had accepted corporate and labor contributions which

nre 1cUn1 for state elections in Arkansas. Based on the

Audit staff's recommendation, the Committee submitted documentation

detailing its method of allocating its share of the administrative

expenses as a proportinate share of the actual exnenses for the

period of time the Committee was active. For the" period covered

by the audit the Committee's administrative expenses were

determined by the ratio of the total amount of Federal receipts

to the total of nIl receipts for both the Federal and state

committees. The Audit staff has reviewed the documentation submitted, and it appears to be reasonable for the period the

Committee was in existance. In addition, the Committee filed

amended reports for the period of the audit disclosing a debt

owed to the State Committee for its share of the allocable

administrative expenses.

Recommendation

Based on th0. Committee's actions, the Audit staff

recommends no further action on this matter.

However, the Audit staff docs recommcmd that the administrative expenses continue to be allocated on a reasonable basis

and that the Committee reimburse the account paying its share

of administrative expenses on a timely basis.

B. Recordkeepina of Contributions

Section 432(c) (2) of Title 2 of the United States Code

requires the treasurer of a political committee to keep a detailed

and exact account of the identification of every person making a

contribution in excess of $50, together with the date and amount

thereof and, if a person's contributions aggregate more than $100,

the account shall include the occu~ation and princi~al place of

business (if any).

During the course of the audit, it was determined that

bank deposit slips with contributors' names contained thereon

were the onIv contribution documentation retained bv the Committee.

A revimv of the deposit slips disclosed that the Coinmittee did not

maintain adequate records containing the contributor's address for

17 contributions, each in excess of s50, totaling $1,486.50. In

addition, the records did not include the contributor's address,

occupation, and principal place of business for 13 contributions

which aggregated in excess of $100, and totaled $1,930.00. The

inadequately recorded contributions represented all of those

requiring such record retention.
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TheCornrnitteeofficia1s were informed of the record- keepin~requirements set forth in the statute, and were nrovided

information necessarv to establish. a recordkeeninq svstem that

wouln assist the Committee in the future in comn1vinq with the

apnrotJriate orovisions of the ~ct. The officials' stated that

thev would attempt to obtain the required missinq information. _

. On Set.>tember 15, 1979, the Committee 1?rovirledthe'

Audit staff with the required contributor information.

ReCOMMendation

'rhe Audit staff reco~ends no further action on thi~

matter.

c. Preservatio~ of Receipts

Section 432 (d) .of Title 2 of the TJnited Stat.es Code

states, in nart, that it shall be the duty of the treasurer to

obtain and keen a receinted bill, stating the narticu1ars, for

-every expenditure made bv or on behalf of a political committee

in excess of S100 in amount, and for anv such expenditure in a

lesser amount, if the aCTgregate amount of, such expenditures to

the saJTie person during: a calendar year exceeds: ~100.·

In addition, Section 102.9(c) (4) of Title 11 C.ode of

Federal Requ1ations states, in part, that when a receipted bill

is not, available, the treasurer may kee~the. cancelled check

showing payment of the bill: and the bill, invoice, or other

contemnoraneous memorandum.

Our review of the Committee's expenditure records

disclosed 37 ex~~nditures, each in excess of or aCT~regatinCTi~

excess ofSlOO and tot.aling SR, 719.69, not supnorted bv recei"te,-l

bills or other contemnoraneous Memoranda. The unsupported

exnenditures represent aporoximatel" 65% of the total numher anC!

56% of the total dollar amount of expenditures requirina such

sunnort. Cancelled checks were available to sunport all of the

eXT)enditures.

The Committee officials were of the oninion that th0

documentation was contained within .the records, but they were

.un.J.b10 to present it. ':'hev stated that attempts would be made

to ohtain the information.'
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On September 10, 1979, the COMmittee orovided the

Audit staff with the required sunportinq documentation or

evidence of their best efforts to' obtain the documentation for

approximately 95% of the number of expenditures totaling ~8,096.54.

Recommendation

Based on the Committee's actions, the Audit staff recomMends

no additional action be taken on this matter.

D. Itemization of Contributions

Section 434(b) (2) of ~itle 2 of the United States Code

requires a cOMmittee to disclose the full name and mailinq

address (occu~ation and the nrincipal place of business, if any)

of each person who has made one or more contributions to such

committee within the calendar year in an aqcrreqate amount or

value in excess of ~100.·· . .

It was determined that the COmMittee did not iteMize

13 contributions which were in excess of or acrqreqated in excess

of SlOO totalinq Sl,930.00. ~hese contrihutions represent all

o~ the individual contributions reouirinq itemization.

Based on the Audit staff's recommendation, the

COI'!U!littee filed an aITlenc1ed report on J\uqust 30, 197q itemizinq

the contributions.

Recommendation

The Audit staff recoJTUTlenc1s no further action on this

matter.

E. Disclosure of Exnenditures

Section 434(b) (9) of ~itle 2 of the United States C.ode

states, in nart, that each report shall contain the identification of each person to whom expenditures have been made by such

committee within the calendar year in an aq~reqate amount or

value in excess of $100, the amount, date, and purnose of each

such expenditure.

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Recommendation

Recommendation

F. Disclosure of Transfers

The Audit staff recommends no further action in this

matter.

Based on the Audit staff's recon~endation, the Committee

filed an amended renort on August 30, 1979, itemizing the

transfers.

The Audit staff recommends no further action in this

matter.

During the audit, it was determined that the Committee

did not itemize 30 transfers totalinq ~3,682.00 received from

other political cOMmittees. These trans~ers renresent annroximately 75% of the total number and 35~ of the total dollar amount

of. all transfers received.

Section 434(h) (4) of ~itle 2 of the tTnited States

Code states, in part, that each renort shall contain the name

and address of each political committee from which the renortino

committee received any transfer of funds, together with the

amounts and dates of all transfers.

Based on the Audit staff's recommendation, the

Committee filed an amended report on Auqust 30, 1979, itemizing the expenditures.

The Committee did not itemize 29 expenditures, each

aggregating in excess of $100, totaling $1,416.41. ~his represents

approximately 59% of the total number and 17% of the total dollar

amount of the operating expenditures required to be itemized by

the Committee.

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April 21, 1980

FEDERAL ELECTION COMMISSION

Charles N. Steelor~/~

General Counsel

Robert J. Costa.t

Orlando B.. Potter .'

Stu ff Dirr~ctor ... _

This office concurs in all of audit 's recommendations,

A-F. Pursuant to dincussions between Audit and General

Counsel staff, howev(~r, we recommend that Finding A specifically state that tlw Committee used the "Receipts Method" of

allocating its shan! of administrative expenses.

The Office of General Counsel has reviewed the Final

Audit Report of the National Democratic Party Affairs

Committee ("Cornmitte(~"), and offers the following comments.

SUBJECT: Comments on the Final Audit Report - National

Democratic Party Affairs Committee of the

Arkansas Democratic State Committee A-732

1"Rml:

TO:

MEMORANDUM

'rHROUGH:

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