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~lease Date 10/01/82

FEDERAL ELECTION COf...V,,1ISSION

\\ "'SHI:-'CTO~. 0 C ::041>3

A8l-26

REPORT OF THE AUDIT DIV!S!C~

ON THE

DEMOCRATIC EXECUTIVE COMMITTEE OF FLORIDA

I. Background

A. Overview

This report is based on an audit of the Democratic

Executive Committee of Florida (lithe ComITlitt~ell), undertaken by

the Audit Division of the Federal Election Commission in

accordance with the Commission's audit policy to determine

whether there has been compliance with the ;~ovisions of the

Federal Election Campaign Act of 1971, as a~ended (lithe Act ll ).

The audit was conducted pursuant to Section 438(b) of Title 2 of

the ~~ited States Code which states that t~e Commission may

conduct audits and field investigations of any political co~~ittee required to file a report under Section 434 of this

title. Prior to conducting any audit unde~ this section, the Com~ission shall perform an internal review of reports filed by selected committees to determine if the reports filed by a

particular co~~ittee meet the threshold ~e;~irements for

sucstantial compliance with the Act.

The Committee registered with tte Office of the Clerk

of the U~ited States House of Representatives on April 19, 1972.

The Co~mittee mai~tains its headquarters i~ Tallahassee, Florida.

- ~~e a~dit covered the period Ja~ua~~ 1, 1980, through Dece~~er 31, :960. The Committee reported a cas~ balance at

January 1, 1980, of $333.16; total receipts for the period of

$270,934.68; total expenditures for the p~r:od of 5194,291.67;

and a cash balance on December 31, 1980, cf 576,976.17.

T~is audi~ report is based on ccc~~e~ts and work papers ~~~ch support ~ach of its factual staterr.e~ts. They form part of t~e record ~pon ~hich the Commission casec :~S decisions on the ~a~t~rs in t~e report a~d were avai:able :0 ~~~ Com~issioners and appro;~iate staff for ~eview.
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B. Kev Personnel

The Treasurer of the Committee was William H.Marshall

from Jariuary 1, 1980, through April 26, and Monnie J. Yungkans

from ~p~~l 2~ through December 3l~ 1960 •.

C. ScoDe

The aud i f included such tests asve-ri fica tion of total

reported receipts and expenditures and individual transactions;

review of required supporting documentation; analysis of

Committee debts and obligations; and such other audit procedures

as deemed necessary under .the circumstances. . ",-

II•. Audit Findings and Recommendations

A. Allocation of Administrative Ex~enses

_. Section 102.5(a) (1) of Title 11, Code of Federal

,Regulations states, in part,·,that.a political party committee

which finances political activity in connection with both federal

and non~federal elections shall either: (i) Establish a separate

federal account in a depository in accordance with 11 C.F.R. 103.

Such acco~nt shall be treated as a separate federal political

committee which shall comolv'with the reauirements of the Act; or

(ii) Establish a politicai; committee which shall receive only

contributions subject to the prohibitions and. limitations,of the

Act,regarclessof whether such contrib~tions are for use inconnection with federal or non-federal elections.

Section 106.l(e) of Title 1:, Code of Federal . Resu1atior.sstates ttat' party cor..mittees and other "political ' co:r::ni ttees ~·hich. have established Federal campaign commi ttees

pursuant to 11 C.F.R. 102.5 shall allocate administrative

expenses on a reasonable basis betwee~ their Federal and non-.

Federal' accounts in proportion to tb.e arr.ount of funds expended' on

Federal a~d non-Federal elections, orer. another reasonable

cas,f,s_. -

T~e .Com~ittee has established a separate account and

has treatec it as a seDarate Federal =olitical committee.

Rowe7er, the Com:nittee-has not allcca~ed administrative expenses

oetween :~S :ede:al and non-Federal accou~ts as recuired bv 11

C.F.R. l~6.l(e). Instead, ~~e ncn~=~:e=al accounts ~ave been ~sed to ;ay ~~e ad~inistrative expe~ses ~or both ~ederal a~d ,nonFederal ~:e=t·io~s.
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In response to the interim a~cit report finding the

committee devised a method to allocate ex~enditures and

determined that the Federal account's share of administrative

expenditures is $780.

The Audit staff has reviewed t~e Com~ittee allocation

method and determined it to be deficient. The Committee had

allocated only a portion of one individual's salary for

administration of the Federal account. It ignored any overhead

expenses such as utilities, rent, etc.

The Audit staff has applied a formula which recognizes

not only a portion of the salary for ad~inistration of the

account, but a reasonable amount of the attendant overhead

expense.

The Audit staff believes that 52,674 represents a reasona~le amount of administrative ex?e~ses which should have

been borne by the Federal account. Ho~e~er it is our opinion

that the difference $1,894 ($2,674 - $,20) is not material at

this time.

Recom~endation

The Audit staff recommends that the Comm:ttee adjust its a~location method to include all alloca::e ad~inistrative

expe~ses (salaries, rent, utilities, etc.) and allocate such

expenses in a timely ~anner in order to avoid future allocation

problems.

B. Sxcessive Contributions to Fe=eral Candidates

Section ~41a(a) (2) (A) of ~itle 2 of the United States

Code states that no multicandidate political committee shall make co~tributicns to any candidate and ~is ;~~r.orized political co~~ittees "it~ respec~ to any electic~ :0: ?ederal office which, :~ t~e agg:egate, exceed S5,OOO.

~he Cc~~ittee ~ade contrib~t:=~s in excess of the li~ita~ions ~o :ede:al candidates as :o::~ws:

1) ~he Co~~ittee contri~~te= 57,500 on September 18,

l~:O, :c a ca~cida:e :c~t~e u.s. ~~~se == Re?~ese~tatives. The ~xec~tive Di:ec~or of the Committee tcl= ~he a~ditors that $2,500

0: ~~is a~cu~~ ~as jes:g~atec for t~e ca~=ida~e's ?ri~ary

e:ec~:0~. ~o~~7er, ~o evidence was ~=e:e~ted :0 the auditors in s~;~crt of this assertion.
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2) The Committee contrib~t~d $7,500 on September 18,

1980, and $2,500 on October 10, 1980, ~o a candidate for the U.S.

House of Representatives. On December 15, 1980, $2,500 was

refunded to the Committee. The Exec~t:ve Director stated that

the Committee sought a refund of the r!=aining excessive amount

($2,500), but was unable to obtain it. ~he auditors were told

that the candidate was in debt, and ~n~~le to refund the

remaining $2,500. The candidate's .d:s:losure reports, as filed

with the Commission, indicate that his campaign committee owed

$65,600 in debts and obligations at th~ time of the October

contribution. The latest report filed by the candidate indicates

that his campaign committee owes $57,6:0 in debts and

obligations.

3) The Committee contrib~t!d $7,500 on October 10,

1980, to a candidate for the U.S. Hous~ of Representatives. The

Committee sought and obtained a refund 0:: $2,500 on December 1,

1980.

4) The Committee contrib~t~d $20,000 on October 9,

1980, to a candidate for the U.S. Se~a~e. On October 16, 1980,

S15,000 was refunded to the Committee.

The interim audit reoort cor.~ained a recommendation

that with respect to item 1), the Cc~~:t~ee provide evidence

supporting the assertion that $2,500 c: the contribution was

designated for the retirement of pri=.a:y debts. ~ith respect to

:tem 2), the Committee either obtain a refund 0= the remaining excessive portion of the contributio~, recognize the excessive

oortion as a debt, or submit evidence ~~at the arr.ount was

designated as a'primary election cor.~r:t~tion. ~o further action

was recommended with respect to ite~s 3: and 4).

~ith respect to item 1), o~ ~ecember 21, 1981, the

Committee provided to the auditors e7:=ence supporting that

S2,500 of the contribution was inter.=~= =or the retirement of the ?ri~ary ceccs. For t~e other excess:,~ ccntric~tion of S2,500

(item 2), the Committee filed an a~e~c~c =EC Sctedu1e 0 and

recognized the a~ount as a debt o~ec := t~e Cor.~ittee.

Recommendation

Eased U?o~ :he ac~ion of ~he :c~=~:~ee, ~te A~dit staff =ecc~~e~ds ;'0 f~rther action.
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C. Misstatement of Financial Activ:tv

Section 434(b) (1) and (2) of ~i~le 2 of the United

States Code requires disclosure of the amount of cash on hand at

the beginning of the reporting period and t~e total sum of all

receipts.

Section 434(b) (4) and (5) of Ti~le 2 of the United

States Code requires disc10sur~ of the tc~al sum of all

expenditures and the name and address of ~ach person to whom an

expenditure in an aggregate amount or val~e in excess of $200

within the calendar year is made by the reporting committee to

meet a candidate or committee operating expense, together with

the date, amount, and purpose of such operating expenditure.

A reconciliation of the Co~~it~ee's bank records'to its

disclosure reports covering the period January 1, 1980, through

December 31, 1980, indicated that:

Reported receipts were overstated $:0,800.00

Reported expenditures were understa~ed $7,025.05

Cash on hand as of Dece~ber 31, 1980, was

overstated $17,825.05

The overstatement of receipts :$10,800.00) was the

result of a $1,200 transfer erroneo~sly reported as $12,000 on

October 28, 1980. , "

Ij'1-.p c·e· r--a,"c"'en'" o~ ex~-"'c'~ - '''es ($"'; 02~ 0") resu' '"ea' .....l_ ;:)t.. w_ .... '- ~'= •• --_.. 'I -Ie:> - -\,.,

:rc~ a $2,500 expendit~re which was repc:tec and the check

subsequently voided, and a $9,525.05 ex~~~cit~=e ~hich was not

reported. Committee personnel were net ;~a=e of these errors

until brought to t~eir attention by t~e a~d:tors.

~~e cversta~effient of cast C~ ~~~= as 0: December 31,

192.0, (Sli,S25.C:) res~lted froIT'. t::~ :~;:=:ting errors noted

abo"..,·e.

On Dece~ber 21, 1981, as =ecc~=en~ed in the interim a~dit report, t~e Cc~mit~ee filed a~e~d~~nts to its disclosure repc:~s ~t~c:: ~:cpe:ly c:sc~cse t~e a=~~~ ::a~~actions.

?.-=cc:':":~er.cat ic~

Basec upon ~~e action of the ::~~:::~e, ~~e nudit staff

reco~~e~ds no f~=~~e~ :ct:on.
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D. Disclosure of Co-ordinated Ez~~nditures

Section l04.2(a) of Title 11, :ode of Federal Reg~lations states that each repor~ £i:e= ~y a political

committee shall be filed on the approp::;te FEC for~ as set

forth at 11 C.F.R. l04.2(e).

Section l04.2(e) of Title 11, :cde of Federal

Regulations states that political co~~:t~ees other thar.

authorized committees shall file repor~s en FEC Form 3-X.

FEC Form 3-X, Schedule F, fo: co-ordinated expenditures

on behalf of candidates for Federal office, requires the

disclosure of the following: The full ~~~e, mailing address and

zip code of each payee; the name of tte :ederal candidate

supported, state, district, and office s~~ght, as well as the

aggregate general election expenditu~e.:o: that candidate;

purpose of expenditure; date and amo~~~ 0: the ex?enditure •

The Audit staff determined t~a~ the Co~~ittee made 18 expendi~ures, totaling $90,726.24, e~ =e~alf of candida~es for

Federal office. Eleven of these expe~=:~~:es, tctali~g

$82,119.54, were disclosed on Schedule = as ooeratinc

expenditures instead 0: Schedule F as =co:dinated expenditures.

Therefore, cert3i~ other in:ormation :ec~:red to be disclosed on

Schedule F was not (i.e., the name of tfe candidate, stat~,

district and office sough~ as well as t~e aggregate general

election expenditure for that candida~e~ .

c~ Dece~ber 21, 1981, as rec=~~;ndec l~ the

audit report, the Committee filed a~ ~~e~=ment ~~ich d t~e required i~for~ation.

Recommendation

nterim

sclosed

Basec upo~ t~e action of the Cc~=:~~ee, the Audit s~aff

:ecorr~e~cs no f~rt~er action.

E. Get-Out-The-Vote and Vo~e= ~e=::tration

Exoenc:t~res ~ade From ~o~-?e~e:al Accou~ts

Sec-::on 102.5(=) (1) of ':':''=le :1, Code of Federal Regu:atic~s sta~es, i~ par:, t~at a~y S~a~e cr ~ocal pa=ty ~~ga~iza~icn t~a~ makes co~tri~u~:c~s, ~x?e~cit~=~s a~c exemptec

pa~·:nents ""::1ce:- :: ':.=.R. lOO.i{~: (9:, ::5:\ and ~:7) a~c

100.2 (=l (:'0), (:'6; a~e ',13) shal~ e:-::-:-:=: (i) Es-:a=-l:'s:: a

separate ac=o~~t to w~:c~ only funes ;~=ject to :he prchititior.s

and liffiita~ions of t::e ~=t shall =e ee~=s:'tec ar.= fro~ which

contributions, expenditures and exe~~~e= ~ay~ents shall ~e made.
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(ii) Demonstrate through a reasonable accounting method that

whenever such organization makes a contribution, expenditure or

exempted payment, that organization ~as recei~ed sufficient funds

subject to the limitations and prohibitions 0: the Act to make

such contribution, expenditure or payment.

Section 100.8(b) (18) of Title 11, Code of Federal

Regulations states, in part, that the pay~er.t by a State or local

committee of a political party for the costs o~ voter

registration and get-out-the-vote activities conducted by such

committee on behalf of the Presidential and Vice Presidential

nominee(s) of that party is not an expenditure for the purpose of

influencing the election of such candidates provided that the

following conditions are met: (ii) The portion of the costs

of such activities allocable to Federal candidates is caid from

contributions subject to the limitations and prohibitions of the

Act.

The Committee maintained separate accounts for Federal . and non-Federal activities, and reported on:y the activity of the

Federal account. A Committee official s~ated that the nonFederal account contained funds that are;roh:bited ~nder the Act

(i.e, contributions from corporations and lacor organizations) ~~t ?er~issible under Florida statute.

In addition, the Executive Director s~ated that the

non-Federal accounts also contained filing fees, paid by non- Federa~ candicates to the Florida Secreta=~ c: State.

Individuals ~ho wish to aualifv as candidates and be placed on ~~e.ballot ~ust pay a fiiing f~e to t~e ~scretary of State. The :~l:ng fee 15 an amount equal to 5% 0: tne salary of the office

for w~ich the individua: is a candidate.

During the course of the audit, it ~as determined that ex?e~dit~res, totaling $393,579, were made :er voter registration

and GOTV purposes. ~~e majority of these ex;enditures ($310,220) ~ere ~ade frem the non-Federal accounts. ~~e ~xecutive Director f~rtter s~a~ed t~at ~hese funcs ~e=e ~s~= ~~ ~~cc~~ag~, contact,

and ~:ans?o:t people to register and ~o vote .. 7te p~r?ese of the

voter registration and GOTV activity ~a5 tc ;ain rni~ority voter

support for t~e De~ocratic Pres:de~tial a~c Vice Presidential

nominees, as well as for State and loca: candidates. According ~c t~e Cc~n:~~e~, ~~ere was ~o ~ention cf :~=eral candica~es for

ei~he~ ~~e c.s. E~~se c= ~e?~ese~tat:~es == :.s. Se~ate.

~c~ev~~, ~~e C~~~:ttee ag~eed ~~at t~e =e~~==: ca~cicates

~~c;e o:::=~s ~e~efit~ed f~ow ~~ese a=~:~:::~~.

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The interim audit report contai..ed a recommendation

that the Committee determine a portion of the GOTV expenditures

allocable to Federal candidates. It was also recommended that

the Committee provide documentation in support of the allocation.

In its response, the Committee provided ir.formation concerning

the number of State and Federal candidates on the ballot in

Florida. The Co~~ittee stated that $83,358.58 was expended from

the Federal account for GOTV activities. The Committee

maintained that this amount was greater t:'an the amount allocable

to Federal candidates, and therefore no corrective action was

necessary. The Committee based its deter~ination of allocable

expenses on a one-to-one relationship of !ederal candidates to

State candidates.

The Audit staff disagrees wit~ the Committee method of

allocation among Federal and non-Federal candidates on a one-toone basis. In an Informational Letter, dated October 6, 1976,to

the Illinois Republican State Central Corn=ittee, the Commission

stated that exoenditures should not be allocated between Federal

and non-Federai cand:dates on a one-to-one basis. However, based

upon information contained in the Committee's response, the Audit

staff applied a formula to the amount ex?~nced for GOTV. This

formula gives proportionate weight to Fec~ral and non-Federal

candidates. The application of the for~u:a when applied to the

total expenditures for voter registration a~d GOTV purposes

($393,5i9) indicates that the oortion 0= exoenditures allocable

to Federal candidates is $51,'~7.· -

Recommendation

Si'n=e t~e a::,.ount e~:perlded by the Cr........:.ittee ($83,358.58)

exceeded the amount allocable to Federa: candidates (S52,4i7), t~e A~c:t staff ~ecommends no further act:on.

F. Trans=~~ Fro~ a ~on-Federal Acc~unt

Section l02.5(a) (1) of Title :1, Code of Federal

Regulations states, in part, that a pol:t:cal party committee

which fi~ances political activity in co~n~c~ion with both federal

and non-federal elections shall estaclish a separate federal

account in a depository ic accordance w:t:' :1 C.F.R. 103. Such

account shall be treated as a separate :e=eral political co~~ittee ~~ic~ s~al: c?mply w~~~ ~he re~:i:7rn7nts,of the Act.

Only f~nds s~~ject to tne proh~o:tlOr.S a~= ~:~l~atlCr.s of the Act s~a:l ~e deposited in such separate fe~e~~l account. No t=a~s~~:s ~ay ~e ~ade :~ s~ch f~de=al ac~~~~~ from a~y other

account(s) wa n~ai~ed oJ such organizat~c~ :or t~e purpose of

financing act vity i~ con~ection wit~ no~-=eceral elections.