Final Audit Report of the 

Commission on the Utah State 

Democratic Committee 

(January 1, 2011 - December 31, 2012) 

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). The 

Conimission generally 

conducts such audits 

when a committee 

appears not to have met 

the threishold 

requirements for 

substantial compliance 

with the Act.' Ilie 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. 3) 

The Utah State Democratic Committee is a state party committee 

headquartered in Salt Lake City, Utah. For more information, see 

the chart on the Committee Organization, p. 3. 

Financial Activity (p. 4) 

• Receipts 

o Contributions from Individuals 

o Contributions from Other Political 

Committees (PACs) 

o Transfers from Affiliated/Other Party 

Committees 

o Transfers from Nonfederal Accounts 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Federal Election Activity 

o Coordinated Party Expenditures 

o Other Disbursements 

o Transfers to Affiliated/Other Party 

Committees 

Total Disbursements 

• Levin Receipts 

• Levin Disbursements 

$ 448,066 

206,626 

771,602 

550,073 

119,872 

S 2,096,239 

$1,119,344 

709,716 

134,156 

67,902 

65,000 

$ 2,096,118 

$104,500 

$103,500 

Commission Findings (p. 5) 

• Misstatement of Financial Activity (Finding 1) 

• Recordkeeping for Employees (Finding 2) 

• Improper Bank Account Structure (Finding 3) 

• Receipt of Levin Fund Donations (Finding 4) 

• Receipt of Contributions that Exceed Limits (Finding 5) 

52 U.S.C. §30111(b). 
Final Audit Report of the 

Commission on the Utah State 

Democratic Committee 

(January 1, 2011 - December 31, 2012) 
Table of Contents 

Page 

Parti. Background 

Authority for Audit 1 

Scope of Audit 1 

Conunission Guidance 1 

Audit Hearing 2 

Part II. Overview of Committee 

Committee Organization 3 

Overview of Financial Activity 4 

Part III. Summaries 

Commission Findings 5 

Part IV. Commission Findings 

Finding!. Misstatement of Financial Activity 7 

Finding 2. Recordkeeping for Employees 10 

Finding 3. Improper Bwk Account Structure 12 

Finding 4. Receipt of Levin Fund Donations 14 

Finding S. Receipt of Contributions that Exceed Limits 16 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Utah State Democratic Committee (USDC), 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 52 U.S.C. §30111(b), which permits the Conunission to conduct audits and 

field investigations of any political committee that is required to file a report under 52 U.S.C. 

§30104. Prior to conducting any audit under this subsection, the Commission must perform an 

internal review of reports filed by selected conunittees to determine if the reports filed by a 

particular committee meet the threshold requirements for substantial compliance with the Act. 

52 U.S.C. §30111(b). 

Scope of Audit 

Following Commission-approved procedures, the Audit staff evaluated various risk factors and 

as a result, this audit examined: 

1. the receipt of excessive contributions; 

2. the receipt of contributions from prohibited sources; 

3. the disclosure of individual contributors' occupation and name of employer; 

4. the disclosure of disbursements, debts and obligations; 

5. the disclosure of expenses allocated between federal and non-federal accounts; 

6. the consistency between reported figures and bank records; 

7. the completeness of records; 

8. the disclosure of independent expenditures; and 

9. other committee operations necessary to the review. 

Commission Guidance 

Request for Elarly Commission Consideration of a Legal Question 

Pursuant to the Commission's "Policy Statement Establishing a Program for Requesting 

Consideration of Legal Questions by the Commission," several state party committees 

unaffiliated with USDC requested early consideration of a legal question raised during audits 

covering the 2010 election cycle. Specifically, the Commission addressed whether monthly time 

logs under 11 CFR § 106.7(d)(1) were required for employees paid with 100 percent federal 

frmds. 

The Commission concluded, by a vote of 5-1, that 11 CFR § 106.7(d)(1) does require committees 

to keep a monthly log for employees paid exclusively with federal fUnds. Exercising its 

prosecutorial discretion, however, the Commission decided it would not pursue recordkeeping 

violations for the failure to keep time logs or to provide affidavits to account for employee 

salaries paid with 100 percent federal funds and reported as such. The Audit staff informed 

USDC representatives of the payroll log requirement and of the Commission's decision not to 

pursue recordkeeping violations for failure to keep payroll logs for salaries paid and correctly 
reported as 100 percent federal. This audit report does not include any findings or 

recommendations with respect to USDC employees paid with 100 percent federal funds and 

reported as such. 

Audit Hearing 

USDC declined the opportunity for a hearing before the Commission on the matters presented in 

this report. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

e Date of Registration November 16,1978 

• Audit Coverage January 1,2011 - December 31,2012 

Headquarters Salt Lake City, Utah 

Bank Information 

a Bank Depositories Two 

• Bank Accounts Six federal and four non-federal 

Treasurer 

e Treasurer When Audit Was Conducted Brian King: 9/20/13-3/16/15 

Peter Corroon: 3/17/15 - Present 

0 Treasurer During Period Covered by Audit Kathleen Snyder: 1/01/11 - 10/10/11 

Robert Miller: 10/11/11-12/31/12 

Management Information 

e Attended Commission Campaign Finance Seminar Yes 

• Who Handled Accounting and Recordkeeping 

Tasks 

Paid Staff 
Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand ® January 1,2011 S 82,729 

Receipts 

o Contributions from Individuals 448,066 

o Contributions from Other Political Committees 

(PACs) 206,626 

o Transfers from Affiliated/Other Party Committees 771,602 

o Transfers from Nonfederal Accounts 550,073 

o Other Receipts 119,872 

Total Receipts 2,096,239 

Disbursements 

o Operating Expenditures 1,119,344 

o Federal Election Activity 709,716 

o Coordinated Party Expenditures 134,156 

o Other Disbursements 67,902 

o Transfers to Affiliated/Other Party Committees 65,000 

Total Disbursements 2,096,118 

Cash-on-hand ® December 31,2012 $ 82,850 

Levin Cash-on-hand ® May 8,2012 SO 

Total Levin Receipts 104,500 

Total Levin Disbursements 103,500 

Levin Cash-on-hand @ December 31,2012 $1,000 
Part III 

Summaries 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of USDC's reported financial activity with its bank 

records found that, for 2011, USDC understated its opening cash by $17,885 and 

overstated its receipts and ending cash by $92,203 and $74,545, respectively. For 2012, 

only the opening and ending cash were misstated. Opening cash was overstated by 

$74,545 and ending cash was overstated by $75,866. Subsequent to audit notification, 

USDC amended its reports, which materially corrected the opening cash for 2011. 

In response to the Interim and Draft Final Audit Report recommendations, USDC stated 

that it disagreed with the dollar amount of the receipts misstatement, $92,203, and 

requested that the finding be reduced by $90,439, the amount of its over reported 

transfers. 

The Commission approved a finding that USDC misstated its financial activity for the 

calendar year 2011 and its opening and ending cash balances for 2012. (For more detail, 

see p. 7.) 

Finding 2. Recordkeeping for Employees 

For the period covered by the audit, USDC did not maintain monthly payroll logs for 

some of its payroll, as required, to document the percentage of time each employee spent 

in connection with a federal election. For 2011 and 2012, the Audit staff identified 42 

payroll transactions totaling $62,135, for which monthly payroll logs were missing or 

incomplete. This consisted entirely of payroll which was allocated between federal and 

non-federal funds. In response to the Interim Audit Report recommendation, USDC 

stated that it has procedures in place [that were implemented in 2012] to ensure that 

payroll logs are maintained to track the amount of time employees spent on federal 

activities. USDC did not provide any additional comments in response to the Draft Final 

Audit Report. 

The Commission approved a finding that USDC failed to maintain monthly payroll logs 

to document the time employees spent on federal election activity, totaling $62,135. (For 

more detail, see p. 10.) 

Finding 3. Improper Bank Account Structure 

USDC maintained a bank account in which all funds, including both federal and nonfederal, were temporarily transferred from linked subaccounts (federal and non-federal) 

to a parent account that served as a temporary holding account for all USDC funds. This 

account structure was maintained for ten months in 2011 and then its use discontinued. 
The Audit staff determined the account was not a federal account in accordance with 11 

CFR §102.5(a)(l)(i), which provides for the permissible account structure pertaining to 

federal and non-federal activity. Upon review of the account activity, the Audit staff 

concluded that USDC did not improperly use non-federal funds to pay for federal 

activity. In response to the Interim Audit Report recommendation and the Draft Final 

Audit Report, USDC made no comment. 

The Commission approved a finding that USDC used an improper bank account structure 

during 2011. (For more detail, see p. 12.) 

Finding 4. Receipt of Levin Fund Donations 

The Audit staff identified two donations to the Levin Fund that exceeded the donation 

limitation by $12,000. In response to the Interim Audit Report recommendation, USDC 

filed amended reports disclosing different contributors of Levin funds to replace those the 

Audit staff identified as making excessive Levin contributions. USDC did not 

demonstrate through a reasonable accounting method that it had sufficient Levin-eligible 

funds to make the Levin disbursements at the time when it spent the monies acquired 

from the two excessive donations on Levin activities and it did not demonstrate that the 

most recently disclosed Levin donations were, in fact. Levin-eligible. 

However, in response to the Draft Final Audit Report, USDC stated that it used the lastin, first-out accounting method and provided the accounting documentation requested by 

the Audit staff. The Audit staff verified USDC's Levin accounting and determined that 

USDC did not exceed the Levin Donation Limit. 

The Commission approved a finding that USDC did not exceed the Levin Fund limit. 

(For more detail, see p. 14.) 

Finding 5. Receipt of Contributions that Ebeceed Limits 

USDC accepted contributions from two political action committees that exceeded the 

limitation by $8,500. Both of the excessive contributions were refunded; however, the 

refunds were not made timely. In response to the Interim Audit Report recommendation and 

the Draft Final Audit Report, USDC made no comment. 

The Commission approved a finding that USDC accepted contributions that exceeded the 

limitation by $8,500 and the funds were untimely reftinded. (For more detail, see p. 16.) 
Part IV 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of USDC's reported financial activity with its bank 

records found that, for 2011, USDC understated its opening cash by $17,885 and 

overstated its receipts and ending cash by $92,203 and $74,545, respectively. For 2012, 

only the opening and ending cash were misstated. Opening cash was overstated by 

$74,545 and ending cash was overstated by $75,866. Subsequent to audit notification, 

USDC amended its reports, which materially corrected the opening cash for 2011. 

In response to the Interim and Draft Final Audit Report recommendations, USDC stated 

that it disagreed with the dollar amount of the receipts misstatement, $92,203, and 

requested that the finding be reduced by $90,439, the amount of its over reported 

transfers. 

The Commission approved a finding that USDC misstated its financial activity for the 

calendar year 2011 and its opening and ending cash balances for 2012. 

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). 52 U.S^C. §30104(b)(l), (2), (3), (4) and (5). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reconciled USDC's reported financial activity 

with its bank records for the calendar years 2011 and 2012 and identified misstatements 

for 2011 in its opening cash balance, receipts and ending cash balance. The following 

chart outlines the discrepancies between USDC's disclosure reports and its bank records, 

and the succeeding paragraphs explain, to the extent possible, the reasons for the 

misstatements. 
2011 Committee Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance @ 

January 1,2011 $64,844 $82,729^ $17,885 

Understated 

Receipts $477,497 $385,294 $92,203 

Overstated 

Disbursements $458,632 $458,859 $227 

Understated 

Ending Cash Balance 

@ December 31,2011 $83,709 $9,164 $74,545 Overstated 

The overstatement of receipts resulted from the following: 

• Transfers from non-federal accounts over reported 

• Fidelity investment account receipts over reported 

• Unexplained difference 

Net Overstatement of Receipts 

$ (90,439) 

(2,170) 

406 

$ f92.2Q3) 

The misstatement of the opening cash balance in 2011 resulted primarily from USDC not 

reporting the proper opening balance and activity for the Karen Shepherd Fund.^ 

Subsequent to audit notification, USDC amended its reports to adjust the opening cash 

balance for this fund, which materially corrected the opening cash balance for 2011. The 

misstatement of the ending cash balance in 2011 resulted primarily from the opening 

cash adjustment for the Karen Shepherd Fund and the net overstatement of receipts 

detailed above. 

For 2012, USDC overstated its opening cash balance by $74,545 and overstated its 

ending cash balance by $75,866. The overstatements resulted primarily from the 

discrepancies during calendar year 2011 noted above. USDC has not filed amendments 

to correct the misstated cash balances for 2012. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff explained the misstatements above, and other 

possible misstatements related to a bank account in which all funds, including both 

federal and non-federal funds, were temporarily transferred from linked subaccounts 

(federal and non-federal) to a parent account that served as a temporary holding account 

for all USDC funds. Schedules of the misstatements were provided to USDC 

The opening cash balance was adjusted to include a federal cash balance from USDC's parent account 

discussed in Finding 3. 

The Karen Shepherd Fund consisted of amounts originally donated from the Karen Shepherd for 

Congress Committee in 1995. During 2011, total receipts were $1,100 and there were no disbursements. 

The opening cash balance at the beginning of 2011 was $35,620 and the closing balance at the end of 

2011 was $56,720. These balances were included in the amendments filed by USDC after notification of 

the audit. It is also noted that USDC closed the account for the Karen Shepherd Fund in March 

2014. 
representatives and Counsel. Counsel stated that they would review the schedules and 

might seek Commission consideration regarding the inclusion of the parent account as a 

federal account. Subsequently, USDC filed a Request for Commission Consideration of 

a Legal Question; however, the matter was withdrawn after the Audit staff, in further 

consultation with the Office of General Counsel, decided hot to include activity from the 

parent account as part of the misstatement finding, since USDC did not use the parent 

account to pay any of its expenses and it was not used as a Federal allocation account.^ 

The Interim Audit Report recommended that USDC file amended disclosure reports to 

correct the remaining overstatements of ending cash and receipts for 2011 and the 

misstated cash balances for 2012. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, USDC said it disagreed that 

receipts were overstated by $92,203 and requested that this amount be reduced by 

$90,439, the amount of over reported H3 transfers. USDC contended that if it h^ made 

electronic transfers (or written checks) from its holding account and deposited them into 

its Federal account, the funds would have been returned to its parent account by 

automatic transfers, so in effect, no transfers could have been made. Therefore, it 

recorded the transfers on its books and reported them as such. 

The Audit staff maintained that USDC overstated the amount of transfers fi-om its nonfederal account and recommended that USDC amend its reports to reflect the amount of 

funds that were actually transferred between the accounts. Such an adjustment would be 

consistent with the reporting of other transfers'between these accounts which USDC 

properly reported during the audit period. 

D. Draft Final Audit Report 

The Draft Final Audit Report restated the finding from the Interim Audit Report, that 

USDC over reported $90,439 in H3 transfers to its federal account, and that it should 

amend its reports to reflect the amount of funds that were actually transferred. 

E. Committee Response to the Draft Final Audit Report 

USDC responded to the Draft Final Audit Report by reiterating its response to the Interim 

Audit Report, as described above, and requesting a reduction of the misstatement finding 

for the amount of the H3 transfers. 

Commission Conclusion 

On January 14,2016, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission adopt a 

finding that USDC misstated its financial activity for calendar year 2011 and its opening 

and ending cash balances for 2012. 

The Commission approved the Audit staffs recommendation. 

* The parent account is the subject of Finding 3- Improper Bank Account Structure. 
10 

Finding 2. Recordkeeping for Employees 

Summary 

For the period covered by the audit, USDC did not maintain monthly payroll logs for 

some of its payroll, as required, to document the percentage of time each employee spent 

in connection with a federal election. For 2011 and 2012, the Audit staff identified 42 

payroll transactions totaling $62,135, for which monthly payroll logs were missing or 

incomplete. This consisted entirely of payroll which was allocated between federal and 

non-federal funds. In response to the Interim Audit Report recommendation, USDC 

stated that it has procedures in place [that were implemented in 2012] to ensure that 

payroll logs are maintained to track the amount of time employees spent on federal 

activities. USDC did not provide any additional comments in response to the Draft Final 

Audit Report. 

The Commission approved a finding that USDC failed to maintain monthly payroll logs 

to document the time employees spent on federal election activity, totaling $62,135. 

Legal Standard 

Maintenance of Monthly Logs. Committees must keep a nionthly log of the percentage 

of time each employee spends in connection with a federal election. Allocations of 

salaries, wages, and fringe benefits are to be undertaken as follows: 

• employees who spend 25 percent or less of their compensated time in a given 

month on federal election activities must be paid either from the federal account 

or have their pay allocated as administrative costs; 

• employees who spend more than 25 percent of their compensated time in a given 

month on federal election activities must be paid only from a federal account; and 

• employees who spend none of their compensated time in a given month on federal 

election activities may be paid entirely with funds that comply with State law. 11 

CFR § 106.7(d)(1). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reviewed disbursements for payroll. USDC was 

required to maintain monthly logs or equivalent records to document Ae percentage of 

time each employee spent in connection with a federal election for $358,530 in payroll. 

These logs are required to document the proper allocation of federal and non-federal 

funds used to pay employee salaries and wages. For some employee time records, USDC 

properly utilized a payroll log to record the time spent on federal election activity. 

However, some payroll logs were either missing or were not complete for payroll totaling 

$62,135.^ The total of $62,135 consisted entirely of payroll reported on Schedules H4 

and paid with an allocation of federal and non-federal fimds.^ 

^ This total does not include payroll for employees paid with 100 percent federal funds and reported as 

such (see Part 1, Background, Commission Guidance, Request for Early Commission Consideration of a 

Legal Question, Page 1). Payroll amounts are stated net of payroll taxes and benefits. 

' All payroll described in this finding, S3S8,S30, was required to be allocated between federal and nonfederal activity. 
11 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference and during audit fieldwork, the Audit staff discussed the payroll 

recordkeeping issue with USDC representatives. The representatives noted that most of 

the missing records were for three individuals, one of whom is now deceased. The 

representatives stated that, starting in 2012, USDC adopted new employee policies and 

procedures that required all employees to sign timesheets that track^ the percentage of 

time spent on federal election activity. A sample of the new timesheet and a copy of the 

policies and procedures were provided to the Audit staff. The Audit staff found the 

planned changes sufficient for tracking the amount of time spent by USDC employees on 

federal election activity. 

For USDC employees that were paid with an allocation of federal and non-federal funds 

for which payroll logs were missing or incomplete, the Interim Audit Report 

reconunended that USDC: 

• provide evidence that the missing or incomplete monthly time logs were 

maintained to document the percentage of time an employee spent in connection 

with a federal election; and 

• continue to maintain payroll logs according to the policy provided to the Audit 

staff. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report reconunendation, USDC stated that it now has 

procedures in place to ensure that payroll logs are maintained to track the amount of time 

employees spent on federal activities. The Audit staff concluded that USDC did not 

maintain monthly logs for payroll totaling $62,135. 

D. Draft Final Audit Report 

The Draft Final Audit Report reaffirmed the Audit staffs earlier conclusion that USDC 

had not maintained monthly payroll logs for $62,135 in payroll. 

E. Committee Response to the Draft Final Audit Report 

USDC did not provide any additional comments in response to the Draft Final Audit 

Report. 

Commission Conclusion 

On January 14,2016, the Conunission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Comihission adopt a 

finding that USDC failed to maintain monthly payroll logs to document the time 

employees spent on federal election activity, totaling $62,135. 

The Commission approved the Audit staffs recommendation. 
12 

Finding 3. Improper Bank Account Structure 

Summary 

USDC maintained a bank account in which all Itmds, including both federal and nonfederal, were temporarily transferred from linked subaccounts (federal and non-federal) 

to a parent account that served as a temporary holding account for all USDC funds. This 

account structure was maintained for ten months in 2011 and then its use discontinued. 

The Audit staff determined the account was not a federal account in accordance with 11 

CFR §102.S(a)(l)(i), which provides for the permissible account structure pertaining to 

federal and non-federal activity. Upon review of the account activity, the Audit staff 

concluded that USDC did not. improperly use non-federal funds to pay for federal 

activity. In response to the Interim Audit Report recommendation and the Draft Final 

Audit Report, USDC made no comment. 

The Commission approved a finding that USDC used an improper bank account structure 

during 2011. 

Legal Standard 

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

political activity in connection ivith both federal and non-federal elections may establish 

two accounts (federal and non-federal) and allocate shared expenses - expenses that 

simultaneously support federal and non-federal election activity - between the two 

accounts. Altematively, the conunittee may conduct both federal and non-federal activity 

from one bank account, which is considered a federal account. 11 CFR §102.S(a)(l)(i). 

B. Federal v. Non-Federal Account. The federal account may contain only those funds 

that are permissible under the federal election law. The non-federal account may contain 

fimds that are not permitted under the federal law (but are legal under state law), such as 

contributions that exceed the limits of the federal law and contributions from otherwise 

prohibited sources, such as corporations and labor organizations. 11 CFR §102.S(a)(l)(i) 

and (a)(3). 

C. Transfers. Generally, a political committee may not transfer ftmds from its nonfederal account to its federal account, except when the committee follov^ specific rules 

for paying for shared federal/non-federal election activity. 11 CFR §§102.5(a)(l)(i) and 

106.5(g). 

D. Faying for Allocable Expenses. The 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 &nds from the non-federal account to the federal account to cover the 

non-federal share of that expense; or 

• They may establish a separate allocation account into which the conunittee 

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). 
13 

E. Reporting Allocable Expenses. A political committee that allocates federal/nonfederal expenses must report each disbursement it makes from its federal account (or 

separate allocation account) to pay for a shared federal/non-federal expense. Conunittees 

report these kinds of disbursements on Schedule H-4. 11 CFR §104.17(b). 

Facts and Analysis 

A. Facts 

Prior to audit freldwork, USDC informed the Audit staff that a previous Executive 

Director had maintained a bank account that included both federal and non-federal funds, 

obtained primarily through automatic transfers (sweeps) from linked subaccounts (a 

federal bank account and a non-federal bank account). The parent account also 

automatically transferred money back to the subaccounts to pay for checks and other 

debits from ^e subaccounts. Ilie effects of these transfers, on a daily basis, were to 

maintain zero balances in these subaccounts." 

USDC did not deposit funds directly into the parent account, other than small credit card 

contributions, totaling $41,784, and the aforementioned automatic transfers. The account 

was not used to pay bills, except for credit card fees associated with contributions that 

totaled $2,435. All transfers for allocated costs were paid directly by check or internet 

transfer from a non-federal account to a federal account. The automatic sweeps function 

was discontinued in October of 2011.' Thereafter, the parent account served only as a 

credit card processing account. 

Under 11 CFR §102.5, committees must use a federal account to deposit and pay all 

federal activity. Alternatively, a committee may choose to establish a special account, 

called an allocation account, solely for the purpose of paying mixed federal/non federal 

expenses. Funds are then transferred from the federal and nonfederal accounts into the 

allocation account to pay for allocable activity. USDC's account structure as described 

above does not comply with the regulations pursuant to 11 CFR §102.5. 

The commingling of federal and non-federal funds into the parent account increased the 

risk of utilizing non-federal funds for federal activity. However, based on a fluiding 

analysis of all USDC's accounts, the Audit staff concluded that no overfunding of federal 

activity from non-federal accounts existed during the audit period. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed the improper account structure with 

USDC representatives and Counsel and it was subsequently presented as a finding. 

Counsel stated that USDC agreed that the account structure was improper and that its use 

had been discontinued. Subsequent to the exit conference. Counsel provided sufficient 

The parent account also received credit card contributions from both federal and non-federal 

donors, and was used to pay expenses relating to the processing fees for those credit card 

contributions. 

Other than the linked federal sub-account, USDC did not maintain a federal account for its daily 

operational activities. 

Of the contributions and fees mentioned in this paragraph, only S7,SI7 was processed and deposited after 

October 2011; the fees totaled S163. 
14 

explanation to assure the Audit staff, in conjunction with their own analysis, that no 

overfunding of federal activity resulted from the commingling of federal and non-federal 

funds in the parent account. 

The Interim Audit Report recommended that USDC provide any additional information 

or written comments W it considered relevant to this matter. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, USDC provided no additional 

comments. The Audit staff concluded that USDC used an account structure for ten 

months during 2011 that was not in compliance with regulations pursuant to 11 CFR 

§102.5. 

D. Draft Final Audit Report 

The Draft Final Audit Report concluded that USDC used an improper bank account 

structure for ten months in 2011 and then its use discontinued. 

E. Committee Response to the Draft Final Audit Report 

USDC did not provide any additional comments in response to the Draft Final Audit 

Report. 

Commission Conclusion 

On January 14,2016, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission adopt a 

finding that USDC used an improper bank account structure during 2011. 

The Commission approved the Audit staffs recommendation. 

Finding 4. Receipt of Levin Fund Donations 

Summary 

The Audit staff identified two donations to the Levin Fund that exceeded the donation 

limitation by $12,000. In response to the Interim Audit Report recommendation, USDC 

filed amended reports disclosing different contributors of Levin funds to replace those the 

Audit staff identified as making excessive Levin contributions. USDC did not 

demonstrate through a reasonable accounting method that it had sufficient Levin-eligible 

funds to make the Levin disbursements at the time when it spent the monies acquired 

from the two excessive donations on Levin activities and it did not demonstrate that the 

most recently disclosed Levin donations were, in fact. Levin-eligible. 

However, in response to the Draff Final Audit Report, USDC stated that it used the lastin, first-out accounting method and provided the accounting documentation requested by 

the Audit staff. The Audit staff verified USDC's Levin accounting and determined that 

USDC did not exceed the Levin Donation Limit. 

The Commission approved a finding that USDC did not exceed the Levin Fund limit. 
15 

Legal Standard 

Party Committee Limits. A state, district or local committee of a political party must 

not solicit or accept from any person (including any entity established, financed, 

maintained, or controlled by such person) one or more donations of Levin funds 

aggregating more than $10,000 in a calendar year. If the state limit is less than $10,000, 

the committee must adhere to that limit. 11 CFR §300.3 l(d)(l)-(2). 

Levin Funds Accounts and Accounting. For Levin fund expenditures. Committees 

must either: 

• Establish a separate Levin account (in addition to the non-federal and federal 

accounts); or 

• Deposit Levin funds into the non-federal account, and demonstrate through a 

reasonable accounting method that it has sufficient Levin funds in the account to 

cover any expenses allocated to Levin funds.11 CFR §§ 102.S(a)(3) and 

300.30(c). 

Facts and Analysis 

A. Facts 

USDC deposited its Levin funds into its non-federal account, and reportedly "flagged" 

(tracked) its donations. It later transferred these Levin donations, as needed, into its 

Levin account. During the audit period, USDC made two lump-sum transfers from its 

non-federal account into its Levin account, in anticipation of making Levin 

disbursements. The Audit staff reviewed these donations and identified two donations in 

2012 that exceeded the Levin donation limit. 

USDC exceeded the Levin donation limit by $12,000. Utah state law does not address 

limits for Levin fund donations; therefore, the federal limit of $10,000 per donor in a 

calendar year should have been followed. One donor made donations totaling $18,000, 

and exceeded the donation limit by $8,000 and the other donor made, donations totaling 

$14,000, and exceeded the donation limit by $4,000. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed this matter with USDC representatives 

who replied that Levin funds were transferred from USDC's non-federal account to its 

Levin account, and that because of a clerical error, the wrong Levin donors were 

disclosed. USDC proposed amending its report to disclose different Levin eligible 

donors. 

The Audit staff, in consultation with the Office of General Counsel, agreed that the 

amendments would resolve the issue of excessive Levin donations, but sought more 

information about the accounting method utilized and the related clerical disclosure 

errors. 

The Interim Audit Report recommended that USDC provide evidence these donations 

were not excessive or show through a reasonable accounting method that total Leviri 

Levin funds cannot be deposited into a federal account. 
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funds were sufficient and that the proposed substitute Levin donors were Levin eligible at 

the time Levin expenditures were made. Absent such action, USDC should refund the 

$12,000 in excessive donations and provide evidence of such refunds (to include copies 

of the front and back of the cancelled checks). 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, USDC stated that it would file 

amendments within 30 days to disclose different Levin eligible donors, which it has since 

done. However, no information was provided regarding USDC's accounting method to 

demonstrate that total Levin funds were sufficient and that the proposed substitute Levin 

donors were Levin eligible at the time Levin expenditures were made. 

The Audit staff agreed the amendments filed for the excessive Levin amount would be 

sufficient as long as associated records were provided that showed the adequacy of Levin 

Funds and the eligibility of Levin donors. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that the amendments filed for the excessive 

Levin amount would be sufficient to demonstrate that Levin fund limits were not 

exceeded as long as associated records were provided that showed the adequacy of Levin 

Funds and the eligibility of Levin donors. 

E. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, USDC stated that it used the last-in, first-out 

accounting method and provided the accounting documentation requested by the Audit 

staff. The Audit staff verified USDC's Levin accounting and determined that USDC did 

not exceed the Levin Donation Limit. 

Commission Conclusion 

On January 14,2016, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission adopt a 

finding that USDC did not exceed the Levin Donation limit. 

The Commission approved the Audit staffs recommendation. 

I Finding 5. Receipt of Contributions that ESxceed Limits 

Summary 

USDC accepted contributions from two political action committees that exceeded the 

limitation by $8,500. Both of the excessive contributions were refunded; however, the 

refunds were not made timely. In response to the Interim Audit Report recommendation and 

the Draft Final Audit Report, USDC made no comment. 

The Commission approved a finding that USDC accepted contributions that exceeded the 

limitation by $8,500 and the funds were untimely refunded. 
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Legal Standard 

A. Party Committee Limits. A state, district or local committee of a political party may 

not receive more than a total of $5,000 per calendar year from a multicandidate 

political committee. 52 U.S.C. §30116(a)(2)(C) and 11 CFR §110.2(d). 

B. Handling Contributions That Appear Excessive. If a committee receives a 

contribution that appears to be excessive, the committee must either: 

• Retum the questionable check to the donor; or 

• Deposit the check into its federal account and: 

o Keep enough money in the account to cover all potential refunds; 

o Keep a vritten record explaining why the contribution may be illegal; 

o Include this explanation on Schedule A if the contribution has to be 

itemized before its legality is established; 

o Seek a reattribution or redesignation of the excessive portion, following 

the instructions provided in the Commission regulations; and 

o If the committee does not receive a proper reattribution or redesignation 

within 60 days after receiving the excessive contribution, refund the 

excessive portion to the donor. 11 CFR § 103.3(b)(3), (4) and (5). 

Facts and Analysis 

A. Facts 

USDC accepted contributions from two multicandidate political action committees that 

exceeded the limitation by $8,500. One of the contributions was made in 2011 for 

$10,000 and the other was made in 2012 for $8,500, resulting in excessive contributions 

of $5,000 and $3,500, respectively. Both of the excessive contributions were refunded; 

however, the refimds were not m^e timely (refunds were made 129 days and 373 days 

later, respectively). 

B. Interim Audit Report & Audit Division Recommendation 

Subsequent to the exit conference, the Audit staff presented this matter to USDC 

representatives. USDC acknowledged the errors and noted that they had addressed them. 

The Interim Audit Report recommended that USDC provide any additional comments it 

considered relevant to this matter. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, USDC made no additional 

comments. The Audit staff concluded that USDC accepted contributions that exceeded 

the limitation by $8,500 and the funds were untimely refunded. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that USDC accepted contributions that 

exceeded the limitation by $8,500 and the funds were untimely refunded. 

E. Committee Response to the Draft Final Audit Report 

USDC did not provide any additional comments in response to the Draft Final Audit 

Report. 
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Commission Conclusion 

On January 14,2016, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission adopt a 

finding that USDC accepted contributions that exceeded the limitation by $8,500 and the 

funds were untimely refUnded. 

The Commission approved the Audit staffs recommendation.