Interim Audit Report of the 

Audit Division on 

Djou for Hawaii 

(January 1, 2009 - December 31, 2010) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political conimittee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Conunission 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 Campaign (p. 2) 

Djou for Hawaii is the principal campaign committee for 

Charles Kong Djou, Republican candidate for the House of 

Representatives from the state of Hawaii, 1^^ District, 

headquartered in Honolulu, Hawaii. For more information, see 

the Chart on the Campaign Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Other 

Political Committees 

o Transfers from Other Authorized 

Conunittees 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Contribution Refunds 

Total Disbursements 

$ 1,917,158 

717,032 

38,069 

$ 2,672,259 

$ 2,597,123 

5,985 

$ 2,603,108 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Failure to File 48-Hour Notices (Finding 2) 

• Reporting of Debts and Obligations (Finding 3) 

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

it Division on 

Djou for Hawaii 

(January 1, 2009 - December 31, 2010) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Part II. Overview of Campaign 

Campaign Organization 2 

Overviewof Financial Activity 2 

Part III. Summaries 

Findings and Recommendations 3 

Part IV. Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 4 

Finding 2. Failure to File 48-Hour Notices 5 

Finding 3. Reporting of Debts and Obligations 5 
Part I 

Background 

Authority for Audit 

This report is based on an audit of Djou for Hawaii (DFH), 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 fried by selected committees to 

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

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

Scope of Audit 

Following Conunission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

1. the receipt of excessive contributions and loans; 

2. the receipt of contributions from prohibited sources; 

3. the disclosure of contributions received; 

4. the disclosure of disbursements, debts and obligations; 

5. the consistency between reported frgures and bank records; 

6. the completeness of records; and 

7. other campaign operations necessary to the review. 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration November 23,2007 

• Audit Coverage January 1,2009 - December 31,2010 

Headquarters Honolulu, Hawaii 

Bank Information 

• Bank Depositories One 

• Bank Accoimts One checking 

Treasurer 

• Treasurer When Audit Was Conducted Chris S. Mashiba 

• Treasurer During Period Covered by Audit Chris S. Mashiba 

Management Information 

• Attended FEC Campaign Finance Seminar No 

• Who Handled Accounting and 

Recordkeeping Tasks 

Volunteer Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand @ January 1,2009 $ 123,939 

Receipts 

o Contributions from Individuals 1,917,158 

o Contributions from Other Political Committees 717,032 

o Transfers from Other Authorized Committees 38,069 

Total Receipts $2,672,259 

Disbursements 

o Operating Expenditures 2,597,123 

o Contribution Refunds 5,985 

Total Disbursements $2,603,108 

Cash-on-hand @ December 31,2010 $ 193,090 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of reported figures with bank records revealed that 

DFH overstated its December 31,2010 cash-on-hand balance by $53,302. The Audit 

staff recommends that DFH amend the cash balance on its most recently filed report. 

(For more detail, see p. 4.) 

Finding 2. Failure to File 48-Hour Notices 

During audit fieldwork, the Audit staff noted that DFH failed to file 48-hour notices for 

28 contributions, totaling $50,700, that were received prior to the special election and 

subsequent primary and general elections. The Audit staff recormnends that DFH 

provide evidence tiiat 48-hour notices were filed or that the contributions in question 

were not received within the 48-hour notice period. (For more detail, see p. 5.) 

Finding 3. Reporting of Debts and Obligations 

During audit fieldwork, the Audit staff identified debts totaling $168,990 that were not 

disclosed on Schedules D (Debts and Obligations). The Audit staff recommends that 

DFH amend its disclosure reports to include these debts on Schedule D (Debts and 

Obligations). (For more detail, see p. 5.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of reported figures with bank records revealed that 

DFH overstated its December 31,2010, cash-on-hand balance by $53,302. The Audit 

staff recommends that DFH amend the cash balance on its most recently filed report. 

Legal Standard 

Contents of Reports. Each report must disclose: 

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

• the total amount of receipts for the reporting period and for the election cycle; and 

• the total amount of disbursements for the reporting period and for the election cycle. 

2 U.S.C. §434(b)(l), (2), and (4). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reconciled DFH's reported activity with its bank 

records for the period covered by the audit and determined that DFH overstated the 

ending cash-on-hand balance as of December 31,2010 by $53,302. This was due 

primarily to reporting discrepancies noted in disclosure reports filed during the audit 

period. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff explained the misstatement and subsequently 

provided DFH representatives with schedules detailing the discrepancy identified during 

the audit period. The representatives indicated that the necessary amendment would be 

filed. 

The Audit staff reconmiends that, within 30 calendar days of service of this report, DFH 

amend the cash balance on its most recently filed report with an explanation that the 

change resulted from a prior period audit adjustment. Further, DFH should reconcile the 

cash balance of its most recent report to identify any subsequent discrepancies that may 

affect the adjustment reconunended by the Audit staff. 
Finding 2. Failure to File 48-Hour Notices 

Summary 

During audit fieldwork, the Audit staff noted that DFH failed to file 48-hour notices for 

28 contributions, totaling $50,700, received prior to the special election and subsequent 

primary and general elections. The Audit staff recommends that DFH provide evidence 

that 48-hour notices were filed or that the contributions in question were not received 

within the 48-hour notice period. 

Legal standard 

Last-Minute Contributions (48-Hour Notice). Campaign committees must file special 

notices regarding contributions of $1,000 or more received less than 20 days but not more 

than 48 hours before any election in which the candidate is miming. This rule applies to 

all types of contributions to any authorized committee of the candidate, including: 

• contributions from the candidate; 

• loans from the candidate and other non-bank sources; and 

• endorsements or guarantees of loans from the banks. 11 CFR § 104.5(f). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff identified 199 contributions, totaling $338,471, 

that were greater than $1,000 and were received during the 48-hour notice period for the 

special general election, as well as subsequent primary and general elections. A review 

of these contributions indicated that DFH did not file 48-hour notices for 28 contributions 

totaling $50,700. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided DFH representatives with schedules 

detailing the discrepancy. In response to the exit conference, DFH demonstrated that it 

had not received 20 of the contributions, totaling $37,000, within the notice period. 

Those contribution amounts have been removed from the above total ($50,700). 

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

provide documentation demonstrating that it fried 48-hour notices for the contributions in 

question or documentation establishing the contributions were not subject to 48-hour 

notification. 

Finding 3. Reporting of Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff identified debts totaling $168,990 that were not 

disclosed on Schedules D (Debts and Obligations). The Audit staff recommends that 
DFH amend its disclosure reports to include these debts on Schedule D (Debts and 

Obligations). 

Legal standard 

A. Continuous Reporting Required. A political conunittee must disclose the amount 

and nature of outstanding debts and obligations until those debts are extinguished. 2 

U.S.C §434(b)(8) and 11 CFR §§104.3(d) andl04.11(a). 

B. Separate Schedules. A political conunittee must file separate schedules for debts 

owed by the conimittee and debts owed to the committee, together with a statement 

explaining the circumstances and conditions under which each debt and obligation was 

incurred or extinguished. 11 CFR § 104.11 (a). 

C. Itemizing Debts and Obligations. 

• A debt of $500 or less must be reported once it has been outstanding 60 days from 

the date incurred (the date of the transaction); the committee reports it on the next 

regularly scheduled report. 

• A debt exceeding $500 must be disclosed in the report that covers the date on 

which the debt was incurred. 11 CFR § 104.11 (b). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff noted that the DFH disclosure reports filed during 

the audit period did not disclose any debt owed. Although DFH paid the majority of its 

vendor invoices in a timely manner, the review of DFH disbursements identified 40 

debts, totaling $168,990^, that should have been reported on Schedule D. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff informed DFH representative of this matter at the exit conference and 

subsequently provided schedules detailing the undisclosed debts for each reporting period 

of the audit cycle. DFH representatives indicated that DFH would file amended reports. 

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

amend its reports to disclose all unreported debts and obligations. 

^ Each debt in this amount was counted once even if it required disclosure over multiple reporting periods. 

In order for DFH to correctly file amended reports, the schedule provided included the amount of each 

debt required to be reported for each reporting period.