FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM 

TO: 

FROM: 

NOVf2206 

Patricia C. Orrock 

Chief Compliance Officer 

Thomas E. Hintermister 

Assistant Staff Director 

Audit Division 

Lisa J. Stevenson 

Deputy General Counsel - Law 

Lorenzo Holloway 

Assistant General Counsel 

Compliance Advice 

Joshua Blume 

Attorney 

SUBJECT: Draft Final Audit Report on the Utah State Democratic Committee (LRA 983) 

I. INTRODUCTION 

The Office of the General Counsel has reviewed the Draft Final Audit Report ("DFAR") 

on the Utah State Democratic Committee ("the Committee"). The DFAR contains five findings: 

Misstatement of Financial Activity (Finding 1); Recordkeeping for Employees (Finding 2); 

Improper Bank Account Structure (Finding 3); Receipt of Levin Fund Donations that Exceed the 

Limit (Finding 4); and Receipt of Contributions that Exceed Limits (Finding 5). We agree with all 

of the findings; however, we provide comment on the Committee's response to the Interim Audit 

Report on Finding 1. If you have any questions, please contact Joshua Blume, the attorney 

assigned to this audit. 
Comments on the Draft Final Audit Report 

Utah State Democratic Committee (LRA 983) 

Page 2 

II. MISSTATEMENT OF FINANCIAL ACTIVITY (Finding 1) 

The DFAR concludes that the Committee misstated its cash on hand and receipts at various 

times during the audit cycle. In particular, the DFAR concludes that the Committee overstated its 

receipts by $90,439 due to its having reported transfers between its non-federal and its federal 

operating accounts that are not conoborated by the available bank records.' The Committee 

contests this conclusion. It argues that because of an unusual bank account structure that the 

Committee maintained during part of the audit period^ in which a "parent" account accepted 

transfers from both the Committee's non-federal and Federal operating accounts on a daily basis, 

there was no physical transfer of funds between its non-federal and federal operating accounts. 

The Committee, therefore, documented the transfers as bookkeeping entries in its internal records. 

We agree with the Audit Division's conclusion. Political committees are required to 

maintain records, including bank records, with respect to matters required to be reported that 

provide information in sufficient detail so as to facilitate the verification of filed reports and 

statements. 11 C.F.R. § 104.14(b)(1). Here, while the Committee maintained internal records of 

the transfers, the available bank records do not corroborate the occurrence of the reported 

transfers, and thus the Committee's internal accounts alone do not enable the auditors to verify the 

reports. 

In drawing this conclusion, we do not overlook the possibility that a political committee's 

internal records might suffice for certain kinds of transactions. One such hypothetical case, for 

example, might involve a committee's maintenance of more than one Federal account and die 

transfers of funds between a committee's Federal accounts. Because the funds involved in such a 

case are all Federal funds, neither reporting nor external verification would generally appear to 

serve any public purpose. Here, however, the transaction involves a transfer from the Committee's 

non-federal account to its Federal account to fund allocable expenses in accordance with 11 C.F.R. 

§ 106.7(f), and consequently the public interest in the reporting and verification of this transaction 

is greater. This is because section 106.7(f) is an exception to the general rule that Federal accounts 

may not accept transfers from non-federal accounts. 11 C.F.R. § 102.S(a)(l)(i). The auditors need 

to verify that the Committee complied with the rule and the exception in transferring funds from its 

non-federal account to its federal account.^ 

' The Comminee reported such transfers for the months of January. March and June of 2011. 

^ The Comminee maintained two bank accounts at its depository - a Federal operating account and a 

non-federal operating account. At the same time, the Committee maintained a "parent account," the function of which 

was to accept daily transfers of funds from both the Federal and the non-federal operating accounts, and to transfer 

funds in turn to the operating accounts for the payment of Federal and non-federal expenses. Thus, the parent account 

contained commingled Federal and non-federal funds in violation of 11 C.F.R. § 102.S, as discussed in Finding 3. 

The account structure that caused the parent account to accept daily transfers of Federal and non-federal 

funds in the first place is a violation of 11 C.F.R. § 102.5, as noted in Finding 3 of the DFAR.