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 

Conunission generally 

conducts such audits 

when a conunittee 

appears not to h^vc met 

the threshold 

requurements for 

substantial compliance 

with the Act." The audit 

determines whether il ^ 

committee complied mih 

the limitations, 

prohibitidMs 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. 

Draft Final Audit Report of the 

Audit Division on the Mississippi 

Democratic Party Political 

Action Committee 

(January 1, 2009 - December 31, 2010) 

Ahout the Conunittee (p. 2) 

The Mississippi Democratic Party Political Action Committee is 

a state party committee hcadc|uartered in Jackson, Mississippi. 

For more information, sec the chart on the committee 

organization, p. 3. 

Financial Activity (p. 2) 

• Receipts « 

• Contributions from Individuals 

• Croniributions from Other 

Polilical Commiiiees 

• Transfers fn)m Af I il iaied/Other 

l ^ y CominiUecs 

• 'minsfers from Non-federal 

Account 

• Other Receipts 

Total KeccipLs 

• Disbursements 

• Operatmg Disbursements 

• Other Disbursements 

TcitiSl Disbursements 

$ 153,038 

30,550 

568,534 

88,144 

951 

$ 841^17 

$437,223 

389,693 

$826,916 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Disclosure of Disbursements (Finding 2) 

• Disclosure of Occupation/Name of Employer (Finding 3) 

• Recordkeeping for Employees (Finding 4) 

2U.S.C.§438(b). 
Draft Final Report of the Audit 

Division on the Mississippi 

Democratic Party Political Action 

Committee 

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

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Request for Early Commission Consideration of a Legal (Question 1 

Part n. Overview of Committee 

Committee Organization 3 

Overview of Fmancial Activity ^ ^ 3 

Part III. Summaries 

Findings and Recommendations 4 

Part IV. Findings and Recommendations .J 

Finding!. Misstatement of Financial Activity 4 

Finding 2. Disclosure of Disbursements 6 

Finding 3. Disclosure of Occupation/Name of F.mployer 7 

Finding 4. Recordkeeping for En^)yces 9 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Mississippi Democratic Party Political Action 

Committee (MDP), 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 au^ts and field investigations 

of any political conunittee that is required to file a report under 2 U.S.C. §434. Prior to 

conducting any audit under this subsection, the Commissj^i must perform an intemal 

review of reports filed by selected committees to determine whether the reports filed by a 

particular conunittee meet the threshold requirements for substantial compliance with the 

Act. 2U.S.C.§438(b). ^' ^ 

Scope of Audit i 

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

factors and as a result, this audit examined: . . 

1. the receipt of contributions from prohibited soui^^^ ^ 

2. the disclosure of individual coiuribuiors' occupatii^ and name of employer; 

3. the consistency between reported Qgurcs and bank records; 

4. the disclosure of disbursements, ddiis. and obligalions; 

5. the completeness of records; and 

6. other committee operations necessary to the review. 

Commission GuMance 

Request for Kiirly Commis.slon Con.sideration ol^Legal Question 

Pursuant iB'thc "Polic}^^temcii^tablishing a Program for Requesting Consideration 

of Legal Qaestions by^^pomn^^n," MDP requested early consideration of a legal 

question^^^^ during thel^^. MK^uestioned whether the monthly time logs 

required u^^ ^ CFR §10<^d)( 1) a]^Pd to employees paid with 100 percent federal 

funds (See Fii^mg 4.) ^ 

The Conunission con^^l . by a vote of 5-1, that 11 CFR §106.7(d)(l) does require 

conunittees to keep a i^wjy- log for employees paid exclusively with federal funds. 

Exercismg its prosecutori%[iscretion, however, the Conunission decided it will 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 MDP Counsel of the Commission's decision on MDP's 

request. This audit report does not include any finding or recommendation with respect 

to MDP's employees paid with 100 percent federal fimds and reported as such. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration February 8,1982 

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

Headquarters Jackson, Mississippi 

Bank Information 

• Bank Depositories One 

• Bank Accounts Six federal and one non-federal 

Treasurer i 

• Treasurer When Audit Was Conducted M^iaarris 

• Treasurer During Period Covered by Audit Aiid^y Seale 

Management Information 

• Attended the Conunission Campaign 

Finance Seminar 

No ^. 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff W 

Overview of 

^ (Audited 

al Activity 

ounts) 

Cash-on-hand @ Januaiy 1.2009 $(10,177)^ 

Receipts 

o " •• 153,038 

o Corilributions firom Other Poliibal ^ 

Committes ^^'^ 

P 30,550 

o Transfere^om Affiliated/Oi her Party ^ 

Committees „ ^ ^ 

568,534 

o Transfers fromHllon-federal Account 88,144 

o Other Receipts 951 

Total Receipts $841,217 

o Disbursements 

o Operating Disbursements 437,223 

o Other Disbursements 389,693 

Total Disbursements $826,916 

Cash-on-hand @ December 31,2010 $ 4,124 

^ MDP's bank statement did not show a negative cash-on-hand balance at January 1,2009. due to an 

outstanding check that had not cleared its federal bank account. 
Part III 

Simimaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

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

records revealed a misstatement of receipts and disbursements in calendar year 2009. In 

response to the Interim Audit Report reconunendation, MDP filed amended reports that 

materially correaed the misstatements. 

In addition, MDP filed original reports for 2010 that were materially understated. 

Specifically, MDP's original reports understated receipts S221.646 in 2010. MDP did 

amend its reports prior to the notification of this audit to correct the mMtated receipts 

activity for 2010. In response to the Interim Audit Report recommendation. MDP noted 

that it has made improvements to its reportmg and accounting system to ensure more 

accurate reporting. (For more detail, see p. 4.) 

Finding 2. Disclosure of Disbursements ^ 

The Audit staff reviewed disburscmenLs itemi/cd on the disclosure reports and identmed 

disbursements totaling $361,109 with missing pavcc addresses. In response to the 

Interim Audit Report reconunendation, MDP^tcnally corrected its reports by filing 

amended reports to disclose the missing pay^ information. (For more detail, see p. 6.) 

Finding 3. Disclosure of Occupd^ion/Name of Employer 

A review of all contribution.s from mdividuals requiring itemization uidicated that 73 

contributions totalmg $17,426 lacked disclosure of occupation and/or name of employer. 

Furthermore, "best efforts" to obtain, mainmin and suMnit information had not been 

sufficientiy documented ibr these ainiributions. 

In response lo the Interim Audiil^cport recommendation, MDP amended its reports to 

materially corrcci ilic disclosure of the missii^pccupation and/or name of employer 

information. Ml )P also described the best eff<^ procedures that have been developed 

and implemented since the audit. (For more detail, see p. 7.) 

r 

Finding 4. Recordkeeping for Employees 

During audit fieldwork, the Audit >taff determined that MDP did not maintain any 

monthly payroll logs, as required, to document the percentage of time each employee 

spent on federal election activity. For 2009 and 2010, the Audit staff identified payments 

to MDP employees totalmg $138,741, for whom MDP was required to maintain mondily 

payroll logs. In response to the Interim Audit Report recommendation, MDP 

implemented a plan to track employees' time spent on federal election activities. (For 

more detail, see p. 9.) 
Part IV 

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity | 

Summary 

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

records revealed a misstatement of receipts and disbursements for calendar year 2009. In 

response to the Interim Audit Report reconunendation, MDP filed amended reports that 

materially corrected the misstatements. 

In addition, MDP filed original reports for 2010 that were materially understated. 

Specifically, MDP's original reports understated receipts b}- $221.646 in 2010. MDP did 

amend its reports prior to the notification of this audit to correct the misstated receipts 

activity for 2010. In response to the Interim Audit Report rccommcndai^n, MDP noted 

that it has made improvements to its reporting and accf)unting system to ensure more 

accurate reporting. ^ 

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 ^ 

• certam transaction^: that reciuirc itemizaS^ on Schedule A (Iicnii7cd Receipts) or 

Schedule B (Itemi/cd Disbursements). 2^.S.C:. §434(b) (1). (2). (3), (4) and (5). 

Pacts and Aaalysis 

A. Misstatement of Finunciul Activity - 2009 W 

1. Facts 

The Audit staff reconciled MD!''s reportc^ctivity with its bank records and 

identified a misstatement of receipts and iSfibursements for calendar year 2009. 

The following chart details the^iscrepancies and succeeding paragraphs explain the 

reasons for the mis>tatcmcnts. 
The beginning cash balance, as of January 1,2009, was overstated by $34,750 because of 

prior-period discrepancies. 

2009 Activity 

Reported'' Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2009 

$24,573 ($10,177) $34,750 

Overstated 

Receipts $202,756 $210,042 $7,286 

^ Understated 

Disbursements $174,855 $199,388 $24,533 

Understated 

Ending Cash Balance 

©December 31,2009 

$46,366 S477 $45,889 

Overstated 

The understatement of receipts was the result of tlic following: 

Receipts not reported « 

Transfer from the non-federal account not reporti^ 

Transfer from the non-federal account reported tmcc 

Over-reported receipts 

Unexplained difference 

Net Understatement of Receipts 

,S 8.607 

6.803 

(6,?47) 

(1,080) 

(297) 

$ 7.286 

The understatement of dLsburscmcnis was the result of the following: ^ 

• Disbursements not reported $ 25,780 

• Disbursements reported but not supgorted by check or debit (1,135) 

• Unexplained difference ^ I (112) 

Net Understatcmcnl of Di.sbursements $ 24.533 

The $45,889 overstatement ol the ending cash balaru^vas the result of the reporting 

discrepancies noted above. 

2. Interim .Audit Report & )iudit Divi^i Recommendation 

The misstatement uf financial aciiyity was discussed at the exit conference and the 

Audit staff provided relevant schclules detailing the transactions. An MDP 

representative acknou l^cd the mscrepancies in the reports and indicated that 

corrective amendments would he filed. 

The Audit staff recommended that MDP: 

• amend its reports to correct the misstatements for 2009; and 

• amend its most recentiy filed report to correct the cash-on-hand balance with 

an explanation that the change resulted firom a prior period audit adjustment 

^ This column does not total because MDP amended Ending Cash Balance on its 2008 Year-end Rq)ort but 

did not carry forward this adjustment on subsequent reports. 
and reconcile the cash balance on its most recent report to identify any 

subsequent discrepancies that may impact the $45,889 adjustment 

recommended by the Audit staff. 

3. Committee Response to Interim Audit Report 

In its response, MDP noted that it amended the 2009 reports and made correspondmg 

amendments to subsequent reports. The Audit staff notes that as a result of these 

amendments, MDP materially corrected the misstatements. 

B. Misstatement of Financial Activity - Increased Activity 

1. Facts 

The Audit staff compared the original reports filed with the bank records and 

discovered a $228,932 understatement of receipts from January 1. 2009 through 

December 31,2010. This amount represents the differe^ between receipts as 

originally reported and the amount of receipts per the rccorjjs. This figure also 

includes the $7,286 understatement of receipts from 2009 in Seilon :\ (Misstatement 

of Financial Activity - 2009) noted above. The increase m activity in 2010 was 

largely due to MDP not reportmg transfers fr#i the national party committee on its 

original reports totaling $198,597. ^ 

2. Interim Audit Report & Audit Division Recommendatiiin h 

The Audit staff discussed the misstatements for 2009 and 2010 w ith MDP 

representatives during the exit conference. Tiie Audit staff recommended that MDP 

submit any additional information or written conimcnts it considered relevant to the 

matter. 

i. 

3. Committee Respon.se to Interim Audit Report 

In its response, MDP noted that the increased disclosed activities relate to minor 

bookkeeping errors that occurred during the 2009 calendar year and that it has made 

improvements to its reporting and accounting system to ensure more accurate 

reporting now and in Ihe fiiture. ^ 

I Finding 2. Disclosl3i|e of Disbursements 

Smnmaxy . 

The Audit staff revised disbursements itemized on the disclosure reports and identified 

disbursements totaling $.^61.109 wiih missing payee addresses. In response to the 

Interim Audit Report rccommcndalion. MDP materially corrected its reports by filing 

amended reports to disclose the missing payee information. 

Legal Standard 

Reporting Operating Expenditures. When operating expenditures to the same person 

exceed $200 in a calendar year, the committee must report the: 

• amount; 

• date when the expenditures were made; and 

• name and address of the payee and purpose. 11 CFR § 104.3(b)(3). 
Facts and Analysis 

A. Facts 

During audit fieldwork, tiie Audit staff reviewed all disbursements and identified 172 

itemized transactions, totaling $361,109 that did not include the payees' addresses. 

This accoimted for 54 percent of the total dollar value of itemized disbursements. The 

majority of these omitted addresses were for disbursements made m 2010. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with MDP representatives at the exit conference and 

subsequendy provided them with a schedule of disbursements with missing payee 

addresses. At the exit conference, MDP representatives agreed to file amended reports to 

disclose the missing addresses. The Audit staff recommended thai MDP amend its 

reports to disclose these omissions. 

C. Committee Response to Interim Audit Report ^ 

In its response, MDP noted that it has amended the reports to provide the missing payee 

information. The Audit staff notes that as a result of these amendments, MDP materially 

corrected its disclosure of payee information. 

I Finding 3. Disclosure of Occupation/Same of Employer^ 

Summary 

A review of all contributions from individuals requiring itcmi/uiion indicated that 73 

contributions totaling $ 17,426 lacked disclosure of occupation and/or i^pe of employer. 

Furthermore, "best cflorts" to obtain, maintain and submit information nad not been 

sufficiently documented ibr these contributions. ^ 

In response to tlic Interim Audit Report recommendation. MDP amended its reports to 

materially coiaf^ct the disclosure ol' the missing occup^on and/or name of employer 

information. Mt^P also described the best effi)rts procedures that have been developed 

and implemcnicd since the audit. 

Legal Standi 

A. Itemization required for contributions from Individuals. A political committee 

other than an authori^ committee must itemize any contribution from an individual 

if it exceeds $200 p^iilcndar year, either by itself or when combined with other 

contributions from the same contributions. 2 U.S.C §434(b)(3)(a). 

B. Required Infomiation for Contributions from Individuals. For each itemized 

contribution fi:om an individual, the committee must provide the following 

information: 

• the contributor's full name and address (including zip code); 

• the contributors occupation and the name of his or her employer; 

• the date of receipt (the date the committee received the contribution); 
• tiie amount of the contribution; and 

• the calendar year-to-date total of all contributions from the same individual. 

11 CFR §§100.12 and 104.3(a)(4) and 2 U.S.C §434(b)(3)(A). 

C. Best Efforts Ensures Compliance. When the treasurer of a political committee 

shows that the committee used best efforts (see below) to obtain, maintain, and 

submit the information required by the Act, the committee's reports and records will 

be considered in compliance with tiie Act. 2 U.S.C §432(h)(2)(i). 

D. Definition of Best Efforts. The treasurer and the committee will be considered to 

have used "best efforts" with respect to contributions if the committee satisfied all of 

the following criteria. 

• All written solicitations for contributions included: 

o a clear request for the contributors fiill name, mailing address, occupation, 

and name of employer; and ^ 

o the statement that such reporting is require^p* federal law. 

• Within 30 days of receipt of tiie contribution, t|ie treasurer made at least one 

effort to obtain the missing information, in cither a written request or a 

documented oral request. 

• The treasurer reported any contributor information thai, although not initially 

provided by the contributor, was obtained in a^^low-up commimicaticni^ 

was contained in the committees' records or u^^)r reports that die 

committee filed during the same two-year cycle.^ 1 CFR § 104.7(b). 

Facts and Analjrsis 

A. Facts . 

A review of itemized coliribiiiions from individuals indicated lhat contributions 

totalmg $17,426, or 52 percent uf the dollar value of individual contributions requued to 

be itemized by ^^yC£^ lacked disclosure of occupation,^/or name of employer. During 

audit fieldwork, MDP provided no evidence showing u^pt had utilized "best efforts" to 

obtain, maintain, and submit die missing information. Vrost of the contributor entries 

with missing information were citherlisclosed with the notation "Best Effort" or left 

blank on tiic Schedules A (Itemi/cd Receipts) filed with the Commission. 

The Audit staff asked MDP representatives to describe MDP's best efforts policy. MDP 

representatives respomlcdjthat no policy was in effect during tiie period covered by the 

audit. The Audit staff p^Wcd .MDP with a list of contributors for whom occupation 

and/or name of employer iMonriation was missing. MDP retumed this list to the Audit 

staff with the missing information filled in but noted that MDP had not contacted tiie 

contributors to obtam tiiis information. The Conunittee explained that MDP 

representatives had obtained the information from personal knowledge of the uidividuals 

and research on the intemet after receiving the list from the Audit staff. 
B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the disclosure of occupation and name of employer with MDP 

representatives at the exit conference. MDP representatives reiterated that they had 

provided the missing information to the Audit staff and that they have established a 

standard new policy to collect all the required contributor information at the time 

contributions are accepted. 

The Audit staff recommended that MDP provide documentation that it exercised best 

efforts durmg the audit period to obtain, maintain and submit tiie required contributor 

information. In addition, MDP should file amended Schedules A to disclose the 

contributor information obtained subsequent to audit fieldwork. 

C. Committee Response to Interim Audit Report 

In its response, MDP filed Schedules A that provided the missing occupation and name 

of employer information. Further, MDP explained that it has been unable to locate 

records that indicate it had made follow-up requests for d^nor informalicm during the 

2010 cycle, but noted that its solicitation materials rcgularly^included a reguest for 

occupation and employer information. The Audit staff notes that as a result of these 

amended reports, MDP materially corrected the (^sclosure of its contributors' occupation 

and name of employer. 

MDP also pointed out that it has developed best efforts procedures such that all 

solicitations include requests for occupation and employer inibrmation. In addition, the 

procedures include follow-up requests for donors' missing information within 30 days of 

receipt of a contribution. Furthermore, donors missing such information at the time a 

report is required to be filed trigger an internal review to ensure that MI ^ has not 

inadvertentiy omitted uiformaiioii contained w%iiii committee recordsWthe time of 

filing. Any informationf received subsequent to a filed report will lij^cluded on 

amended reports. 

Finding 4. RecordkeiE^ng for fenplo^es 

Summa^ 

During audit fie^ork, the Audit stuff deicniiined that MDP did not maintam any 

monthly payroln^. as requued. to docuincntpie percentage of time each employee 

spent on federal el^bn activity. 1-or 2009 and 2010, the Audit staff identified payments 

to MDP employees totaling $138,741. for whom MDP was required to maintain monthly 

payroll logs. In response to ilic Interim Audit Report recommendation, MDP 

implemented a plan to track employees' time spent on federal eleaion activities. 

Legal Standard 

Maintenance of Monthly Logs. Party conunittees must keep a monthly log of the 

percentage of time each employee spends m connection with a federal election. 

Allocations of salaries, wages, and fringe benefits as follows: 
10 

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

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

or be 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 enturely with fimds that comply with state 

law. llCFR§106.7(d)(l). 

Pacts and Analjrsis 

A. Facts 

During fieldwork, the Audit staff reviewed disbursements for payroll. MDP did not 

maintam any montiily logs or equivalent records to document the percentage of time each 

employee spent in connection with federal election activity. These Ic^s are required to 

document the proper allocation of federal and non-federal Hinds used to pay employee 

salaries and wages. For 2009 and 2010, logs were required for $138,741 in payroll.^ 

This amount represents the total payroll for employees paid with an allocation of federal 

and non-federal fiinds durmg the audit period. Nd^P had no employees paid v. iih 

exclusively non-federal funds. 

B. Interim Audit Report & Audit Division Recommendation 

After tiie exit conference, the Audit staff discussed^ payroll recordkeeping issue with 

MDP representatives. An MDP represental|cc resf^dcd thai .MDP had not located any 

payroll logs or other payroll documentation. . 

Absent provision of any iiionthl\ logs, the Audit .staff recommer^^tiiat, MDP provide 

and implement a plan to niiiiiitaui such nj^onihly payi-oll logs to track the percentage of 

time each employee spends on federal election activiiy. 

C. Comm^^e Response to Interim Audit Report 

In its respl^^MDP noted thc^it now maintains monthly logs to track employee time 

spent on federal election activities. 

* Payroll is stated net of taxes and benefits.