Interim Report of the 

Audit Division on the 

Kansas Republican Party 

January 1, 2007 - December 31, 2008 

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). TheCommission 

generally conducts such 

audits when a 

committee appears not 

to have met the 

threshold requirements 

for substantial 

compliance with the 

Act. The audit 

determines whether the 

committee complied 

with the limitations, 

prohibitions and 

disclosure requirements 

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 Kansas Republican Party is a state party committee 

headquartered in Topeka, Kansas. For more information, see the 

chart on the Committee Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals $ 645,470 

o Contributions from Other 50,877 

Political Committees 

o Transfers from Affiliated/Other 45,475 

Party Committees 

o Transfers from Non-federal 22,239 

Account 

o All Other Receipts . 14.774 

o Total Receipts $ 778,835 

Disbursements 

o Operating Disbursements $781,733 

o All Other Disbursements 6,485 

o Total Disbursements $ 788,418 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Receipt of Apparent Prohibited Contributions (Finding 2) 

• Payment of Federal Activity Out of Non-federal Accounts 

(Finding 3) 

2 U.S.C. §438(b). 
Interim Report of the 

Audit Division on the 

Kansas Republican Party 

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

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Limitations 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Findings and Recommendations 3 

Part IV. Findings and Recommendations 

Finding 1. Misstatementof Financial Activity 4 

Finding 2. Receipt of Apparent Prohibited Contributions 6 

Finding 3. Payment of Federal Activity Out of Non-federal Accounts 8 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Kansas Republican Party (KRP), 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 conducting any audit under this subsection, the 

Commission must perform an intemal review of reports filed by selected committees to 

determine if the reports filed by a particular committee meet the threshold requirements 

for substantial compliance with the Act. 2 U.S.C. §438(b). 

Scope of Audit 

Following Commission approved procedures, the Audit staff evaluated various risk 

factors and, as a result, this audit examined: 

1. The disclosure of disbursements, debts and obligations. 

2. The disclosure of expenses allocated between federal and non-federal accounts. 

3. The disclosure of individual contributors' occupation and name of employer. 

4. The receipt of contributions from prohibited sources. 

5. The consistency between reported figures and bank records. 

6. The completeness of records. 

7. Other committee operations necessary to the review. 

Limitations 

In maintaining its disbursement records, KRP satisfied the minimum recordkeeping 

requirements of 11 CFR §102.9; however, the Audit staffs testing of disbursements was 

limited by the lack of extemal documentation, such as invoices. This lack of third party 

records limited the testing for recordkeeping and the proper reporting of debts and 

obligations; as well as the adequacy of disclosure of information, such as, payee, address 

and purpose for disbursements. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates Kansas Republican Party 

• Date of Registration March 15, 1979 

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

Headquarters Topeka, Kansas 

Bank Information 

• Bank Depositories One 

• Bank Accounts Six Federal and Four Non-federal 

Treasurer 

• Treasurer When Audit Was Conducted Steve Fitzgerald 

• Treasurer During Period Covered by Audit Emmitt Mitchell (thru 2/04/07) 

David Thome (2/05/07 thm 12/17/07) 

Morey Sullivan (12/18/07 thm 2/17/09) 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

No 

• Used Commonly Available Campaign 

Management Software Package 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand ^ January 1,2007 $ 14,426 

Receipts 

o Contributions from Individuals $ 645,470 

o Contributions from Other Political Committees 50,877 

o Transfers from Affiliated/Other Party Committees 45,475 

o Transfers from Non-federal Account 22,239 

o All Other Receipts 14,774 

Total Receipts $ 778,835 

Disbursements 

o Operating Disbursements $781,933 

o All Other Disbursements 6,485 

Total Disbursements $ 788,418 

Cash on hand @ December 31,2008 $ 4,843 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

A comparison of KRP's reported figures to bank records revealed a misstatement of receipts, 

disbursements and cash-on-hand in both 2007 and 2008. For 2007, KRP overstated beginning 

cash on hand by $4,628, overstated receipts by $11,885, understated disbursements by $11,370 

and overstated ending cash-on-hand by $27,883. In 2008, receipts were understated by 

$111,149, disbursements understated by $176,956 and the ending cash-on-hand was overstated 

by $93,690. The Audit staff recommends that KRP amend its disclosure reports to correct the 

misstatements for both 2007 and 2008. (For more detail, see p. 4) 

Finding 2. Receipt of Apparent Prohibited Contributions 

Based on a review of contributions received by KRP, the Audit staff identified four contributions 

totaling $52,498 which appear to be from prohibited sources. The Audit staff recommends that, 

absent evidence that these contributions were made with permissible funds, KRP should refund 

these contributions to the contributors or transfer the funds to a non-federal account. 

(For more detail, see p. 6) 

Finding 3. Payment of Federal Activity Out of Non-federal 

Accounts 

KRP appears to have improperly made payments, totaling $104,859, from its non-federal 

accounts for federal expenses. The Audit staff recommends that KRP demonstrate that these 

disbursements are for non-federal expenses. Absent such a demonstration, KRP will be required 

to amend its reports to show these transactions as memo entries. (For more detail, see p. 8) 
Part IV 

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity 

Summary 

A comparison of KRP's reported figures to bank records revealed a misstatement of receipts, 

disbursements and cash-on-hand in both 2007 and 2008. For 2007, KRP overstated beginning 

cash on hand by $4,628, overstated receipts by $11,885, understated disbursements by $11,370 

and overstated ending cash-on-hand by $27,883. In 2008, receipts were understated by 

$111,149, disbursements understated by $176,956 and the ending cash-on-hand was overstated 

by $93,690. The Audit staff recommends that KRP amend its disclosure reports to correct the 

misstatements for both 2007 and 2008. 

Legal Standard 

Contents of Reports. Each report must disclose: 

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

• The total amount of receipts for the reporting period and for the calendar year; 

• The total amount of disbursements for the reporting period and for the calendar year; and 

• Certain transactions that require itemization on Schedule A (Itemized Receipts) or Schedule 

B (Itemized Disbursements). 2 U.S.C. §434(b)(l), (2), (3), (4) and(5). 

Facts and Analysis 

The Audit staff reconciled reported activity to bank records for calendar years 2007 and 2008. 

The following charts outline the discrepancies for the beginning cash balances, receipts, 

disbursements, and the ending cash balances for each year. Succeeding paragraphs address the 

reasons for the misstatements. 

2007 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

® January 1,2007 

$19,054 $14,426 $4,628 

Overstated 

Receipts $184,566 $172,681 $11,885 

Overstated 

Disbursements $172,457 $183,827 $11,370 

Understated 

Ending Cash Balance @ 

December 31, 2007 

$31,163 $3,280 $27,883 

Overstated 

The beginning cash on hand was overstated by $4,628 and is unexplained, but likely resulted 

from prior period discrepancies. 
The overstatement of receipts was the result of the following: 

• Contribution amount incorrectly reported (see details below) 

• Reported non-federal caucus receipts in error 

• Transfer of funds from non-federal not reported 

• Unexplained difference 

Net Overstatement of receipts 

The understatement of disbursements was the result of the following: 

• Transfer to non-federal account not reported (see details below) 

• Disbursements not reported 

Understatement of disbursements 

$ 8,220 

(25,000) 

2,599 

2.296 

$ n 1.885^ 

$ 8,220 

3.150 

$ 11.370 

KRP received a $15,000 contribution from an individual and deposited the funds to its federal 

account on October 24,2007. KRP reported the amount of this contribution as $6,780, which 

represented the contribution limit for individuals $10,000 less $3,220 the amount of 

contributions already received from the individual prior to October 24, 2007, thus 

understating receipts by $8,220 ($15,000-$6,780). In addition, KRP transferred $8,220 the 

excess portion of the contribution, from its federal account to its non-federal account on 

October 25,2007, but did not include the disbursement on its 2007 November monthly report. 

The $27,883 overstatement of the closing cash on hand was the result of the misstatements 

described above. 

In 2008, one of five accounts that KRP considered to be non-federal bank accounts had a 

significant number of transactions which appeared to be federal in nature. Nearly all receipts 

and expenditures related to attendance at the Republican National Convention. The Audit staff 

has included all activity from this account in reportable activity. 

2008 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2008 

$31,163 $3,280 $27,883 

Overstated 

Receipts $495,005 $606,154 $111,149 

Understated 

Disbursements $427,635 $604,591 $176,956 

Understated 

Ending Cash Balance @ 

December 31,2008 

$98,533 $4,843 $93,690 

Overstated 

The understatement of receipts resulted from the following: 

• Receipts deposited into National Convention account not reported 

• Refund received from Paychex not reported 

• Receipts from various federal accounts not reported 

74,320 

2,846 

25,822 
• Permissible cash deposit for sale of yard signs not reported 13,236 

• Reported non-federal caucus receipts in error (10,000) 

• Transfers from the non-federal account not reported 13,737 

• Unexplained difference (8.812) 

Net Understatement of receipts $ 111.149 

The $74,320 in receipts deposited into the National Convention account included $42,498 that 

represents three possible prohibited contributions which were used to defray the cost of hotel 

rooms, breakfasts for the delegates, and entertainment as discussed in Finding 2 below. 

The understatement of disbursements resulted from the following: 

• Transfers to the non-federal account not reported $ 5,500 

• Disbursements from National Convention account, as discussed above, 

not reported 105,243 

• Disbursements not reported 66.213 

Understatement of disbursements $ 176.956 

The majority of the $105,243 disbursements from the National Convention account were used 

for convention lodging expenses at the hotel and payroll costs. 

The $93,690 overstatement of the closing cash on hand was the result of the misstatements 

described above. 

The Audit staff discussed the misstatements for 2007 and 2008 with a KRP representative during 

the exit conference and provided copies of relevant workpapers detailing the misstatements. The 

KRP representative stated that corrective amendments would be filed. 

Interim Audit Report Recommendation 

The Audit staff recommends that, within 30 calendar days of receipt of this report, KRP: 

• Amend its reports to correct the misstatements for 2007 and 2008 as noted above; and, 

• Amend its most recently filed report to correct the cash on hand balance with an 

explanation that the change resulted from a prior period audit adjustment. Further, KRP 

should reconcile the cash balance of its most recent report to identify any subsequent 

discrepancies that may impact the $93,690 adjustment recommended by the Audit staff. 

Finding 2. Receipt of Apparent Prohibited Contributions 

Summary 

Based on a review of contributions received by KRP, the Audit staff identified four contributions 

totaling $52,498 which appear to be from prohibited sources. The Audit staff recommends that, 

absent evidence that these contributions were made with permissible funds, KRP should refund 

these contributions to the contributors or transfer the funds to a non-federal account. 
Legal Standard 

A. Receipt of Prohibited Corporate Contributions. Political committees may not accept 

contributions made from the general treasury funds of corporations. This prohibition applies to 

any type of corporation including a non-stock corporation, an incorporated membership 

organization, and an incorporated cooperative. 2 U.S.C. §44lb. 

B. Definition of Limited Liability Company. A limited liability company (LLC) is a business 

entity that is recognized as an LLC under the laws of the state in which it was established. 11 

CFR §110.1(g)(1). 

C. Application of Limits and Prohibitions to LLC Contributions. A contribution from an 

LLC is subject to contribution limits and prohibitions, depending on several factors, as explained 

below: 

1. LLC as Partnership. The contribution is considered a contribution from a partnership if 

the LLC chooses to be treated as a partnership under Internal Revenue Service (IRS) tax 

mles, or if it makes no choice at all about its tax status. A contribution by a partnership is 

attributed to each partner by his or her share of the partnership profits. 11 CFR §110.1 

(e)(1) and (g)(2). 

2. LLC as Corporation. The contribution is considered a corporate contribution—and is 

barred under the Act—if the LLC chooses to be treated as a corporation under IRS rules, 

or if its shares are traded publicly. 11 CFR § 110.1 (g)(3). 

3. LLC with Single Member. The contribution is considered a contribution from a single 

individual if the LLC is a single-member LLC that has not chosen to be treated as a 

corporation under IRS mles. 11 CFR §110.1(g)(4). 

D. Limited Liability Company's Responsibility to Notify Recipient Committee. At the time 

it makes a contribution, an LLC must notify the recipient committee: 

• That it is eligible to make the contribution; and 

• In the case of an LLC that considers itself a partnership (for tax purposes), how the 

contribution should be attributed among the LLC's members. 11 CFR §110.1(g)(5). 

£. Questionable Contributions. Ifa committee receives a contribution that appears to be 

prohibited (a questionable contribution), it must follow the procedures below: 

1. Within 10 days after the treasurer receives the questionable contribution, the committee 

must either: 

• Return the contribution to the contributor without depositing it; or 

• Deposit the contribution (and follow the steps below). 11 CFR §103.3(b)(1). 

2. If the committee deposits the questionable contribution, it may not spend the funds and 

must be prepared to refund them. It must therefore maintain sufficient funds to make the 

refunds or establish a separate account in a campaign depository for possibly illegal 

contributions. 11 CFR §103.3(b)(4). 

3. The committee must keep a written record explaining why the contribution may be 

prohibited and must include this infonnation when reporting the receipt of the 

contribution. 11 CFR §103.3(b)(5). 

4. Within 30 days of the treasurer's receipt of the questionable contribution, the committee 

must make at least one written or oral request for evidence that the contribution is legal. 
Evidence of legality includes, for example, a written statement from the contributor 

explaining why the contribution is legal or an oral explanation that is recorded by the 

committee in a memorandum. 11 CFR § 103.3(b)(1). 

5. Within these 30 days, the committee must either: 

• Confirm the legality ofthe contribution; or 

• Refund the contribution to the contributor and note the refund on the report covering 

the period in which the refund was made. 11 CFR § 103.3(b)(1). 

Facts and Analysis 

The Audit staff reviewed contributions received by KRP and identified four contributions 

totaling $52,498 from apparent corporate entities. The Audit staff verified with the Secretary of 

State that three of these entities were incorporated when the contributions ($42,498) were made. 

These amounts were deposited into the account discussed in Finding 1 above used for national 

convention expenses that KRP did not consider to be a federal account. These contributions were 

to defray the cost of hotel rooms, breakfasts for the delegates and entertainment at the 

convention. 

The one remaining contribution ($10,000) was determined to be from a limited liability company 

which may choose a corporate tax filing status. As such, a limited liability company was 

required to affirm to KRP that it was eligible to make the contribution based on its tax filing 

status being other than corporate. Records provided by KRP did not contain any such 

affirmations or any follow-up by KRP to verify eligibility. 

The Audit staff presented this matter to a KRP representative during the exit conference along 

with a schedule of the apparent prohibited contributions. The KRP representative stated they 

would send a letter requesting the tax filing status for the limited liability company and would 

refund any remaining prohibited contributions. 

Interim Audit Report Recommendation 

The Audit staff recommends that, within 30 calendar days of service ofthis report, KRP provide 

documentation detailing the tax filing status for the contribution from the limited liability 

company and demonstrate that the remaining three contributions were made with permissible 

funds. Absent such evidence, KRP must refund the $52,498 to the contributors or transfer the 

funds to a non-federal account and also provide documentation of such refunds (i.e., copies of 

each negotiated refund check, front and back) or transfer. If funds are not available to make the 

refunds or transfer, then the refunds or transfer due should be disclosed on Schedule D (Debts 

and Obligations) until funds become available to make the refunds or transfer. 

Finding 3. Payment of Federal Activity Out of Non-federal 

Accounts 

Summary 

KRP appears to have improperly made payments, totaling $104,859, from its non-federal 

accounts for federal expenses. The Audit staff recommends that KRP demonstrate that these 

disbursements are for non-federal expenses. Absent such a demonstration, KRP will be required 

to amend its reports to show these transactions as memo entries. 
Legal standard 

A. Accounts for Federal and Non-federal Activity. A party committee that finances political 

activity in connection with both federal and non-federal elections must establish two 

accounts (federal and non-federal) and allocate shared expenses—those that simultaneously 

support federal and non-federal election activity—^between the two accounts. Altematively, 

the committee may conduct both federal and non-federal activity from one bank account, 

considered a federal account. 11 CFR §102.5(a)(l)(i). 

B. Paying for Allocable Expenses. Commission regulations offer party committees two ways 

to pay for allocable, shared federal/non-federal expenses. 

• They may pay the entire amount of the shared expense from the federal account and 

transfer funds from the non-federal account to the federal account to cover the nonfederal share of that expense; or 

• They may establish a separate, federal allocation account into which the committee 

deposits funds from both its federal and non-federal accounts solely for the purpose of 

paying the allocable expenses of shared federal/non-federal activities. 11 CFR 

§106.5(g)(l)(i)and(ii)(A). 

C. Reporting Allocable Expenses. A political committee that allocates federal/non-federal 

expenses must report each disbursement it makes from its federal account (or separate 

allocation account) to pay for a shared federal/non-federal expense. Committees report these 

kinds of disbursements on Schedule H-4 (Joint Federal/Non-federal Activity Schedule). 11 

CFR§104.10(b)(4). 

D. Allocation Ratio for Administrative & Non-Candidate Specific Voter Drive Costs. State 

and local party committees must allocate their administrative expenses and non-candidate 

specific voter drive costs according to the fixed percentage ratio. Under this method, if a 

Presidential candidate and Senate candidate appear on the ballot, the committees must 

allocate at least 36% of expenses to their Federal funds. 11 CFR §106.7(d)(2)(ii) and (3)(ii). 

Facts and Analysis 

Distinct from the National Convention account addressed previously in Finding 1. Misstatement 

of Financial Activity, the Audit staff determined that KRP maintained four non-federal bank 

accounts. KRP made payments from two of its non-federal account totaling $104,859 that 

should have been paid from a federal account. Most of these payments were for allocable 

administrative and non candidate specific voter drive expenses, which KRP should have paid 

from a federal account and reported on Schedule H-4 using the fixed percentage ratio of 36% 

federal and 64% non-federal in accordance with 11 CFR §106.7(d)(2)(ii) and (3)(ii). Below is a 

breakdown of the $104,859 in federal activity paid from the non-federal account: 

Payment and Disclosure of Non Allocable Federal Election Activity (FEA) 

Two payments totaling $7,639 were disbursed from one of the non-federal accounts for a mailer 

($6,000) which mentions a federal candidate and purchase of convention pins^ ($1,639). It 

appears KRP should have paid these expenses from a federal account. 

^ The Audit staff is unable to verify that this disbursement was properly made from a non-federal account. The 

purchase of the pins was in close proximity to the convention and other payments made to that vendor were for 

convention gifts. However, should a copy of the pin or a description of its content be provided indicating the nature 

ofthis expense to be allocable or solely non-federal, the Audit staff will revise its conclusion. 
10 

Payment and Disclosure of Lodging Expense 

Also, KRP paid $5,000 from one of their non-federal accounts for lodging pertaining to the 

national party convention. This expense should have been paid from a federal account. 

Payment and Disclosure of Allocable Administrative Costs 

Additional expenses totaling $83,861 disbursed from two non-federal accounts for postage, rent, 

consulting, travel reimbursements, printing, phone service and office supplies, were identified as 

apparent allocable administrative costs. Available documentation does not indicate that any of 

these payments were for solely non-federal activities; therefore, they are treated as allocable 

administrative expenses. The federal share for these expenses is $30,190 ($83,861 x 36% Federal 

share). 

Payment and Disclosure of Printed Materials 

Further, $8,359 was disbursed from a non-federal account for printed materials for which copies 

of the printed materials were not available to assess the nature of these expenditures. As such, 

the Audit staff could not verify that these expenditures were properly made from the non-federal 

account and were not required to be reported to the Commission. Should documentation be 

provided to indicate these expenditures are other than solely non-federal in nature, KRP should 

properly disclose these transactions. 

The Audit staff compared reimbursements received from the non-federal account for its share of 

allocable activity. This analysis indicated the non-federal account could have reimbursed an 

additional amount that is in excess of the amounts at issue. Therefore, after considering all 

adjustments, it is concluded that there was no net funding of federal activity by the non-federal 

committee at the end of the two year audit period and only the disclosure issues need to be 

addressed by KRP. 

At the exit conference, the Audit staff addressed these matters and provided schedules 

identifying the transactions noted above to a KRP representatiye. The KRP representative stated 

that they would file amended reports to include these memo entries. 

Interim Audit Report Recommendation 

The Audit staff recommends that, within 30 calendar days of service of this report, KRP: 

• Demonstrate that the identified disbursements paid from the non-federal account are 

solely non-federal expenses; 

• Obtain and provide samples of the printed materials ($8,359) and a sample or description 

of the pin to demonstrate the nature of these expenditures; or 

• Absent such a demonstration, KRP should amend its reports to disclose, as memo entries, 

the above noted disbursements on Schedules B (Itemized Disbursements) or H-4 (Joint 

Federal/Non-federal Activity Schedule), as appropriate.