FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

STATEMENT OF CHAIR ANN M. RAVEL, 

COMMISSIONER STEVEN T. WALTHER, AND 

COMMISSIONER ELLEN L. WEINTRAUB 

Audit of the South Dakota Democratic Party (All-20) 

This audit presents concerns regarding the South Dakota Democratic Party's failure to 

keep monthly time-logs for payroll payments associated with its contract workers and nonfednal employees. We raised these same concerns in our Statement on the Audits of the 

Vermont Democratic Party (All-12), Dallas Comity Republican Party (A11-14), Democratic 

Party of South Carolina (A11-19), and Republican Party of Iowa (A11-24) and our Statement on 

the Audit of the Rqjublican Party of Iowa (All-24). See Attachments A and B. We continue to 

assert that the Act and Commission regulations require committees to maintain logs documenting 

the time that all employees, including contract workers, spend on federal election activity. 

^ 

Date Ann M. Ravel 

Chair 

Date Steven T. Walther 

Commissioner 

Ellen L. Weintraub 

Commissioner 
Attachment A 

FEDERAL ELECTION COMMISSION 

WASHINGTON. D.C. 20463 

STATEMENT OF VICE CHAIR ANN M. RAVEL, COMMISSIONER STEVEN T. 

WALTHER, AND COMMISSIONER ELLEN L. WEINTRAUB 

Audits of the Vermont Democratic Party (All-12), Dallas County Republican 

Party (All-14), Democratic Party of South Carolina (All-19), and Republican Party 

of Iowa (All-24) 

These four audits all presented the same question of whether "contract labor" workers 

(i.e., independent contractors) should be treated as "employees" for purposes of the 

Commission's state party committee recordkeeping requirements.' We support the Office of 

General Counsel's position that independent contractors are "employees" for purposes of the 

recordkeeping requirements, and therefore that committees must maintain logs documenting the 

time that Aese employees spend on federal election activity ("FEA"). Unfortunately, however, 

none of the recordkeeping findings in these Audit Reports includes any analysis of contract 

workers' time.^ We write this statement to ensure that our strong views on this issue are 

' Documents related to Commission audits can be accessed at www.fec.gov/auditsearch/auditsearch.do. 

^ This issue was first raised in a request for Commission guidance made pursuant to Directive 69 with respect to the 

Dallas County Republican Party ("DCRP") audit. See LRA 903, Request for Commission Directive 69 Guidance 

Involving the DCRP (Sept. 2S, 2012) (hereinafter "Directive 69 Guidance"); see also Commission Directive 69 

(providing a mechanism through which the Office of Compliance C'OC") and the GfTice of General Counsel 

C'OGC") may bring certain legal questions to the Commission for early consideration in the reports analysis or audit 

process), available at www.fec.gov/directives/directive 69.t)df. The OGC and the OC recommended that the 

Commission conclude that a state party's "contract labor" be treated as "employees" under the provisions addressing 

FEA at2 U.S.C. § 431(20)(a)(iv) and 11 C.F.R. § 106.7(d)(1). Directive 69 Guidance at 2-4. Commissioners 

Bauerly, Walther, and Weintraub voted to support the recommendations; Commissioners Hunter, McGahn, and 

Petersen dissented. Certification for LRA 903, dated Oct. 16,2012. At the time of this vote. Chairman Goodman 

and Vice Chair Ravel were not yet members of the Commission. 

Under Directive 69, if the Commission is unable to provide guidance on how to proceed with an affirmative vote of 

four or more Commissioners within 60 days, the Audit Division (part of the OC) must proceed with the audit 

process. After the Republican Commissioners opposed the recommendation of the OGC and the OC in the 

Directive 69 matter, however, this audit and the audits of the Vermont Democratic Party ("VDP"), the I3emocratic 

Party of South Carolina ("DPSC"), and the Republican Party of Iowa C'RPIA") did not include analysis of the 

committees' records of their contract workers. 

While Vice Chair Ravel was not yet a member of the Commission when the Directive 69 matter was considered, the 

undersigned all agree that party committees should keep time records for all their employees — both direct 

employees and contract workers. 
Statement of Vice Chair Ravel, Commissioner Walther, and Commissioner Weintraub 

Page 2 of3 

reflected in the public record.^ 

Under the Federal Election Campaign Act of 1971, as amended ("the Act") and the 

Commission's regulations, whether and how a state party committee may permissibly allocate 

the salary, wages, and benefits of its employees between its federal and non-federal accounts is 

dependent on the percentage of time that its employees spend on PEA or activity in connection 

with federal elections.* To document this time, the Commission's regulations require that a state 

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

connection with a Federal election." Neither the statute nor the regulations define "employee" 

for these purposes. 

Independent contractors should, however, be subject to the same recordkeeping 

requirements as other employees. In the past, the Commission has promulgated other regulations 

that expressly include independent contractors when interpreting provisions of the Act that use 

the statutory term "employees."^ Although the Commission did not expressly include 

independent contractors in the regulation at issue here, the same rationale previously cited by the 

Commission in those other rulemakings—^namely, to "preclude circumvention by the expedient 

of characterizing an 'employee' as an 'independent contractor' where the characterization makes 

no difference in the individual's relationship with the... political party committee"—certainly 

applies to recordkeeping requirements as well.^ 

Accordingly, we voted to amend the Recordkeeping Finding in each of the Audit Reports 

to include the failure to maintain monthly time logs for contract workers.' With each of the 

' This statement does not address our additional concerns regarding the RPIA's recordkeeping requirements for nonfederal payroll payments. We set out those concerns separately in our Statement on the RPIA (At 1-24), dated 

March 18,2014. 

* Salaries and benefits for employees who spend more than 23% 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. 2 U.S.C. 

§ 431(20)(A)(iv): 11 C.F.R. § I06.7(d)(l)(ii); see 2 U.S.C. § 441i(b)(2). Salaries and benefits for employees who 

spend 23% or less of their time on FEA or activities in connection with a federal election must either be paid only 

ffom the federal account or allocated as administrative costs. 11 C.F.R. §§ 106.7(c)(1) and I06.7(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 funds that comply with state law. 11 C.F.R. § 106.7(d)(l)(iii). 

' 11 C.F.R. § 106.7(d)(1) (emphasis added). 

' See Directive 69 Guidance at 3 (citing the Commission's coordination rules at 11 C.F.R. § 109.21(d)(3), which 

expressly include independent contractors as falling under the statutory term "employees"). Documents related to 

all Commission rulemaking proceedings are available at www.fiic.gov/fosers/. 

^ See Final Rules for Coordinated and Independent Expenditures, 68 Fed. Reg. 421,438 (Jan. 3,2003). 

' Certification in Audit Division Recommendation Memorandum ("ADRM") on DCRP, dated Jan. 30,2014.(Vice 

Chair Ravel and Commissioners Walther and Weintraub voting to amend the Recordkeeping Finding to include the 

S36,407 paid to contract workers); Certification in ADRM on VDP, dated Jan. 16,2014 (Vice Chair Ravel and 

Commissioners Walther and Weintraub voting to amend the Recordkeeping Finding to include S630 paid to contract 

workers); Certification in ADRM on DPSC, dated Jan. 16,2014 (Vice Chair Ravel and Commissioners Walther and 

Weintraub voting to amend the Recordkeeping Finding to include the SI 1,920 paid to contract workers); 

Certification in ADRM on RPIA, dated Jan. 30,2014 (Vice Chair Ravel and Commissioners Walther and Weintraub 
Statement of Vice Chair Ravel, Commissioner Walther, and Commissioner Weintraub 

Page 3 of3 

deadlocked votes, the contract workers issue continues to be excluded from the Commission's 

Audit Reports and, as a result, the Reports represent an incomplete picture of the federal activity 

of these committees. Moreover, this result, which effectively permits state party committees to 

avoid keeping records of their federal activity simply by hiring federal staffers as "independent 

contractors," is directly contrary to the purpose of the Bipartisan Campaign Reform Act. 

IS, 

Date ' 

Date Steven T. Walther 

Commissioner 

Date if A EllenL. Weintraub 

Commissioner 

voting to amend the Recordkeeping Finding to include SS8,424 paid to contract workers). Chairman Goodman and 

Commissioners Hunter and Petersen dissented in each of the motions. Id. 
Attachment B 

FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

STATEMENT OF VICE CHAIR ANN M. RAVEL, COMMISSIONER STEVEN T. 

WALTHER, AND COMMISSIONER ELLEN L. WEINTRAUB 

Audit of the Republican Party of Iowa (Ail-24) 

In the Commission's audit of the Republican Party of Iowa ("RPIA"), the Audit Division, 

in consultation with the Office of General Counsel, recommended that the Commission approve 

a finding that RPIA failed to maintain monthly time logs for $476,442 in payroll consisting of 

both payments allocated between federal and non-federal funds and 100% non-federal fimds.' 

We supported this recommendation. The Commission could not agree by the required four 

votes, however, that $141,066 of this amount, consisting of payments to employees paid solely 

out of the RPIA's 100% non-federal account, should be included in the audit fmding. ^ We write 

to explain why we support recordkeeping requirements for non-federal employees.^ 

The purpose of the Commission's audit process is to ensure that audited committees are 

conducting Aeir federal activity in accordance with the Federal Election Campaign Act, as 

amended ("the Act"). Disbursements for federal activity must be reported to the Commission 

and made with funds subject to the limitations, prohibitions, and reporting requirements of the 

Act. Whether and how a state party committee may permissibly allocate the salary, wages, and 

benefits of its employees between its federal and non-federal accounts is dependent on the 

percentage of time that its employees spend on federal election activity ("FEA") or activity in 

cormection with federal elections. ^ To document this time, our regulations require that a state 

' Documents related to Commission audits can be accessed at www.l 

' See Certification of the Audit Division Recommendation Memorandum on the Republican Party oflowa, dated 

January 30,2014. The Commission could agree only to include $336,369 worth of payments in the recordkeeping 

finding. Because our colleagues disagreed with the Audit Division's recommendations as to $141,066 of 100% nonfederal payments in the recommended finding, the Report discusses this issue in the "Additional Issues" section 

rather than in the Report's "Findings." See Proposed Final Audit Report of the Commission at 10-12. 

^ This statement does not address our additional concerns regarding this committee's recordkeeping requirement fbr 

its contract workers. We set out those concerns separately in our Statement on the Audits of the Vermont 

Democratic Party (AI1-12), Dallas County Republican Party (A11-14), Democratic Party of South Carolina 

(A11-19), and Republican Party of Iowa (Al 1-24), dated March 18,2014. 

* Salaries and benefits for employees who spend more than 23% 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. 2 U.S.C. § 

43 l(20XA)(iv); 11 C.F.R. § 106.7(d)(l)(ii): see 2 U.S.C. § 441 i(b)(2). Salaries and benefits for employees who 

spend 23% or less of their time on FEA or activities in connection with a federal election must either be paid only 

fiom the federal account or allocated as administrative costs. 11 C.F.R. §§ 106.7(cXl) and 106.7(dXI)(i). 

Employees who spend none of their compensated time on FEA or activities in connection with a federal election 

may be paid entirely with funds that comply with state law. 11 C.F.R. §§ 106.7(c)(1) and 106.7(d)(l)(iii). 
A11-24 (Republican Party of Iowa) 

Statement of Vice Chair Ravel, Commissioner Walther, and Commissioner Weintraub 

Page 2 of2 

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

connection with a Federal election." In the audit process, the Commission compares these logs 

against a committee's reporting of federal activity to verify that the committee used the proper 

amount of federal funds to pay for federal activity. In the absence of such documentation, Ae 

Commission has no way of determining whether a state party committee has paid its federal 

employees with impermissible non-federal funds. 

The Corrunission's regulations make clear that state party committees have an obligation 

to maintain appropriate records for all employees. The unwillingness to require any 

documentation for expenses that a committee simply claims to be 100% non-federed severely 

limits the Corrunission's ability to implement the Act. This approach is both contrary to the 

plain language of the recordkeeping requirements in the Commission's regulations and creates a 

perverse incentive for state party corrrmittees to avoid keeping records of their activities. On the 

other hand, requiring committees to keep logs of their employees' federal activity—even when 

the percentage of federal activity is zero—^provides a strong prophylactic reminder to committees 

to monitor their employees' federal and non-federal activity to ensure that all employees who 

spend any time on federal activity are paid with the appropriate mount of federal fimds. Given 

this benefit, it is not overly burdensome for committees to maintain regular logs for their 

employees who have spent no time on federal activity. 

There is no jurisdictional question here; the Commission is empowered to review records 

of both state and federal spending for federally-registered political committees.^ Our ability to 

comprehensively audit committees that influence federal elections is central to the Commission's 

mission. 

^Aim M. Ra^l 

Vice Chair 

Date Steven T. Walther 

Commissioner 

3/1? 

Date ' Ellen L. Weintraub 

Commissioner 

^ 11 C.F.R. § 106.7(d)(l} (emphasis added). 

*5ee 2 U.S.C.§ 438(b).