FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

May 29,2014 

MEMORANDUM 

To: 

Through: 

From: 

The Commission 

Alec Palmer 

Staff Director 

Patricia C. Orrock ^ * 

Chief Compliance Officer 

^om Hintermister 

Assistant Staff Director 

Audit Division 

Marty Favin 

Audit Manager 

•fej^lex Boniewicz 

Audit Manager-^ 

By: 

Subject: 

Bill Antosz 

Lead Auditor 

Audit Division Recommendation Memorandum on the Democratic Party of 

Illinois (DPIL) (All-15) 

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit Reports), the 

Audit staff presents its recommendations below and discusses the findings in the attached Draft 

Final Audit Report (DFAR). The Office of General Counsel has reviewed this memorandinn and 

concurs with the recommendations. 

Finding 1. Misstatement of Financial Activity 

In response to the Intisrim Audit Report, DPIL filed amendments for 2010 that materially 

complied with the recommendation. DPIL had no additional comments in its response to 

the DFAR. 

The Audit staff recommends that the Commission find that DPIL misstated its receipts and 

disbursements for calendar year 2010. 
Finding 2. Recordkeeping for Employees 

In response to the Interim Audit Report recommendation, DPIL acknowledged that it 

needed to improve its system for maintaining monthly payroll logs, and provided a 

sample payroll log that it intends to use as part of its general compliance procedures in 

the future. DPIL had no additional comments in its response to the DFAR. 

The Audit staff recommends that the Conunission find that DPIL failed to maintain 

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

federal election activity totaling $729,125. This amount includes payroll paid as follows 

to DPIL employees. 

• Employees reported on Schedule H4 and paid with allocated federal and nonfederal funds during the same month (totaling $412,809); 

• Employees reported on Schedule H4 or Schedule B and also paid with 100 

percent non-federal funds during the same month (totaling $1,269), and 

• Employees paid exclusively with non-federal funds in a given month (totaling 

$315,047). 

It should be noted that this finding does not contain contract labor totaling $21,850. 

Finding 3. Fundraising Receipts 

For the period covered by the audit, DPIL received and deposited into its federal account 

$68,300 from fundraising events that were held to benefit non-federal candidates and 

DPIL's non-federal account. Contemporaneous documentation to demonstrate the intent 

of the donors was not available. In response to the Interim Audit Report 

recommendation, DPIL transferred $75,800 to its non-federal account. 

DPIL requested an audit hearing before the Commission because it believed that the audit 

report still asserted potential violations by the committee related to proceeds fixim joint 

fundraising events, allocation of event costs between federal and non-federal accounts 

and notice requirements to donors. Its request for a hearing was granted and 

subsequently held on April 23,2014. 

During the hearing, DPIL Counsel discussed how the party had already transferred the 

$75,800 noted in the DFAR finding to its non-federal account. He described how the 

bulk of DPIL's program is focused on non-federal activities and the Democratic Chair in 

the state of Illinois is also the state legislative leader. Thus, DPIL spends extensively in 

state legislative races and in "down ballot races." 

' The finding in the DFAR included a total of $75,800, but at the audit hearing held April 23,2014, DPIL Counsel 

noted that one contribution in the amount of $5,000 included in that total was designated for the federal account 

Upon closer examination, the Audit staff found that this check, along with one other in the amount of $2,500, did 

have accompanying letters from the contributors that designated these funds to the federal account. As a result the 

Audit staff will revise this figure to $68,300 in the Proposed Final Audit Report ($75,800 - $5,000 - $2,500). 
DPIL Counsel noted that the auditors reviewed batch deposits and identiHed fundraising 

events that raised federal contributions. Some of the events were sponsored by the 

Democratic Chair's own campaign committee and other events were held to raise funds 

for DPIL's non-federal account. Fiinds totaling $75,800 were deposited in DPIL's 

federal account, while a total of $1,103,925 was raised from these fimdraising events. He 

added that DPIL transferred $75,800 to its non-federal account to cooperate with the 

recommendation and because it had ample use for the non-federal funds. However, DPIL 

believes that 11 CFR §102.5 is being applied as a source restriction on whether the party 

can or cannot deposit money received from these non-federal events into its federal 

account. He fur&er stated that, in this case, there is not a clear unambiguous record of 

what the donors were told at the time that they made their contributions and he questions 

whether there is an actual basis for a finding. 

Finally, DPIL Counsel questioned the universe of the funds deposited from the 

fundraising events. He stated that not all batched contributions were actually raised at 

these events and mentioned one event in particular where he believed that contributions 

from a group of trial lawyers were incorrectly batched and included with actual event 

contributions. He stated that this represented the core problem with this finding. It was a 

reflection of limitations in the audit process; dealing with activities that happened long 

ago and dealing with records that were open to multiple interpretations. This suggested 

that the universe of contributions from this event is somewhat smaller than proposed and 

called into some doubt the financial amount of the entire finding. 

In conclusion, DPIL Counsel asked the Commission to modify or remove Finding 3 from 

the audit report, so there would not be a suggestion that DPIL had engaged in prohibited 

joint fundraising, and that these funds were ineligible for deposit in the federal account 

because they did not meet the source restrictions and contribution limitations of the Act. 

The Proposed Final Audit Report will reflect the following modifications to Finding 3. 

• The amount in violation will be revised from $75,800 to $68,300 (See footnote 1); 

• Any references to the joint fundraising requirements at 11 CFR §102.17 will be 

removed; 

• Any references to the requirements for the allocation of expenses between the 

federal and non-federal accounts at 11 CFR § 106.7(d) will be removed; and 

• A statement that the Audit staff confirms that the contributions in question do not 

facially appear to violate contribution limits or source restrictions will be added. 

The Audit staff recommends the Commission find that DPIL did not maintain sufHcient 

records to support that these contributions totaling $68,300 may be dqjosited into a 

federal account under the notification requirements of 11 CFR §102.5. 
Finding 4. Unreported Levin Fund Activity 

In response to the Interim Audit Report, DPIL filed amendments that materially complied 

with the recommendation. DPIL had no additional comments in its response to the 

DFAR. 

The Audit staff recommends that the Coiiunission find that DPIL did not report Levin 

funds totaling $115,274 on its Levin Schedules and incorrectly disclosed a shared federal 

election activity expenditure in the amount of $144,375 as a shared operating 

expenditure. 

If this memorandum is approved, a Proposed Final Audit Report will be prepared within 30 days 

of the Commission's vote. Should an objection be received, Directive No. 70 states that the 

Audit Division Recommendation Memorandum will be placed on the next regularly scheduled 

open session agenda. 

Documents related to this audit report can be viewed in the Voting Ballot Matters folder. Should 

you have any questions, please contact Bill Antosz or Marty Favin at 694-1200. 

Attachment: 

- Draft Final Audit Report of the Audit Division on the Democratic Party of Illinois 

cc: Office of General Counsel 
Draft Final Audit Report of the 

Audit Division on the 

Democratic Party of Illinois 

(Januaiy 1, 2009 - December 31, 2010) 

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 Commission 

generally conducts 

such audits when a 

committee appears not 

to have met the 

threshold requii«ments;;-f 

for substantial ' 

compliance with the 

Act. The audit ,. ; 

determines;.^etheri^e;^,. 

commiQ^'complied 

with..th^^itations, 

proh^lbitiS^^d 

disclosure 

requirements df|| 

Act. 

About the Committee (p.2) 

The Democratic Party of Illinois (DPIEifis a state party committee 

with headquarters in Springfield, lyini 

the chart on the Committee Orga;|!»tioi 

Financial Activity .lS^2)P 

• Receipts ..r 

o Individual Coritributions 

o Political Committ^b,C;pntributions 

o Transfers from AffiliaifeJ; 

o Transfers from Non-fedei^.^. 

Accoiint^.,^^ 

Total Receip^.;j^>;..... 

• Disbursement 

S. Operating %pienditures 

•ip^^;Federal Bledion Activity 

o'.;:.iCoordinated Expenditures 

o. ^Transfers to Affrfrated Committees 

. p:-" dtRgr;pis|)ur5.efiients 

Total fiisbutsieihents 

S-S-, 

•ws;-. 

or more information, see 

•'#^7,542 

/n ,337,075 

844,950 

1,504,443 

S 4,284,010 

$ 1,922,328 

705,871 

1,257,848 

292,178 

62,545 

$ 4,240,770 

r^ndizi^ and Recommendations (p. 3) 

•0. Misstatement of Financial Activity (Finding 1) 

Recordkeeping for Employees (Finding 2) 

f Fundraising Receipts (Finding 3) 

Future Action * Unreported Levin Fund Activity (Finding 4) 

The Commission may . ' 

initiate an enforcement 

action, at a later time, 

with respect to any of 

the matters discussed 

in this report. 

' 2 U.S.C. §438(b). 

' DPIL did not maintain a Levin bank account, but during the period covered by the audit DPIL raised S2S4,774 of 

Levin receipts that it deposited into its non-federal bank account. DPIL transferred S100,000 of Levin fends to its 

federal account for federal election activity during this same period. See Finding 4 for Levin reporting issues. 
Draft Final Audit Report of the Audit 

Division on the 

Democratic Party of Illinois 

(January 1, 2009 - Deceqjljer 31, 2010) 

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Table of Contents 

Page 

Part I. Background 

Authority for Audit 

Scope of Audit 

Commission Guidance 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Recommendations 

2 

2 •% 

Part IV. Findings and RecommeiradUpns 

Finding!. Misstatement of Financial Activity '-

Finding 2. Recordkeeping for Employees 

Findings. FundraisingReceipts 

Finding 4. Unreported Levin Fund Activifefc^^, 

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9 

13 

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Parti 

Background 

Authority for Audit 

This report is based on an audit of the Democratic Party of Illinois (DPIL), 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,p^t^its the 

Commission to conduct audits and field investigations of any ppjilical cbmmittee that is 

required to file a report under 2 U.S.C. §434. Prior to conductlng^a^y audit under this 

subsection, the Commission must perform an internal review of filed by selected 

committees to determine whether the reports filed by a,particular colfl^hittee meet the 

threshold requirements for substantial compliance with^the Act. 2 U.S^;^438(b). 

Scope of Audit \ ' 

Following Commission-approved procedures, the'^A^it st^'lvj|luated variou^isk 

factors and as a result, this audit examined: 

1. the disclosure of Individual conUjibutors* occupation'^d,name of employer; 

2. the disclosure of disbursements, {i^t| jnd obligations;*^^^^ 

3. the disclosure of expenses allocate^ei^^ federal and h^hr^eral accounts; 

4. the consistency between reported figuj^s ah^^^re 

5. the completeness of records; and 

6. other committee necessary t^e'review. 

\ 

Commissio.i^.^idai^]^ \ 

SS; 

Request f(^^Eqrly Comniissidh^€On$ldcraM^^^^ of a Legal Question 

Pursuant;t<^the~'^$ph^^ Statement Estabfishlhg a Program for Requesting Consideration 

of LegilT Questiori^^the Commission," DPIL requested early consideration of a legal 

question raised during the audit. 'bRlL questioned whether the monthly time logs 

requi^'under 11 CFR §j06.7(d)(.i j applied to employees paid with 100 percent federal 

funds. (S^vpinding 2.) 

The CommisM^ii;gonclu^ied, by a vote of 5-1, that 11 CFR §106.7(d)(l) does require 

committees to k^p^,(nBhthly log for employees paid exclusively with federal funds. 

Exercising its pros^Storial discretion, the Commission will not, however, 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 DPIL counsel of the Commission's decision on DPIL's request. 

This audit report does not include any finding or recommendation with respect to DPIL's 

employees paid with 100 percent federal funds and reported as such. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration May 4.1983 

• Audit Coverage January 1.2q09^ii^cember 31.2010 

Headquarters Springfield^illinoiS^^. 

Bank Information 

• Bank Depositories Twfi/' 

• Bank Accounts 3c;F&deral, 4 Non-federal Ac^'^ts 

Treasurer • 

• Treasurer When Audit Was Conducted MicbaeliKaspbr 

• Treasurer During Period Covered by Audit Michael^i^per, January 1,2009 -

December-i;^a010 

Management Information 'tai- 'ir ..1,. 

• Attended Commission Campaign Finance 

Seminar 

• Who Handled Accountinjgand . 

Recordkeeping Tasks^>"^'^-% 

c:. 

Ovel 

• 

.»«»cial Activity 

Cash-aiirSsnd @ Januai^yj:2009 

P<M>ointa Receipts •'••••'" 

o Individual Cogfributions "P' 

o Political Corfimittee Contributions 

o Transfers from Afftiiates 

o Transfers from Nohrfederal Accounts 

Total Receipts 

Disbursements 

o Operating Expenditures 

o Federal Election Activity 

o Coordinated Expenditures 

o Transfers to Affiliated Committees 

o Other Disbursements 

Total Disbursements 

Cash-on-hand @ December 31,2010 

$ 298.984 

597,542 

1,337,075 

84^50 

1,504,443 

S 4J84.010 

1,922,328 

705,871 

1,257,848 

292,178 

62,545 

$4,240,770 

$ 342,224 
Part III 

Summaries 

lents noted 

sy 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of DPIL's reported financial>^tivity with its bank 

records revealed a misstatement of receipts and disbursements iri^lendar year 2010. 

DPIL understated receipts by $203,666 and disbursements by^$^1^677. The 

misstatements were mainly the result of unreported transfe^ lroti^|^non-federa! 

accounts and affiliated committees, as well as unreportej^, 6'^rating ^^^jnditures and 

transfers to affiliated committees. In response to the^Interhn °Audit 

recommendation, DPIL amended its reports to ma^'rially correct the mi: 

above. (For more detail, see p. 5.) -strSSs-s. V 

Finding 2. Recordkeeping for Bmpr^^es 

During audit fieldwork, the Audit staff/ound that DPIL ^d^pot maintain monthly logs, as 

required, to document the percentage 6f;tii^,each employ^^^pept on federal election 

activity. DPIL maintained payroll logs'&fmjpipmh of Septdt^r 2010; the information 

contained in these logs, however, did nbfjnciude'j|(^i^ntage%f ^ each employee 

spent on federal election activity. For 200^ an^~ibli^'T@{B^ere required for DPIL 

payroll totaling $729,12Sf;|in.];esponse to Wgjinterim Awlf Report recommendation, 

DPIL acknowledg^Sfiat it i^^pd to improveits systemlfor maintaining monthly payroll 

logs, and it proyid^^ sample^yroll log that'h^intends to use as part of its general 

compliance procedu^$|?^^For m^rp detail, see 

Findiai^;ii;wdii^ 

During'audit fieidwo|i^.the A^it^^taff identified 10 fiindraising events that raised funds 

fprlDPIL's federal anli^npn-fedeniljaccounts. The federal account received $75,800 from 

fiiese ieypnts. Although %|:federafl£ccount was the recipient of these funds, DPIL did not 

share in'm^..pf the costs i^urred in raising these funds. Four of the events were held to 

benefit a rid^ff^eral cam^lgn and therefore appear to be prohibited contributions. For 

the remaining1si^:|vents,;^e Audit staff lacks sufficient information to conclude whether 

the events were jPinU^hdraising events with other political committees or DPIL 

fiindraising events^lely benefiting DPIL's federal and non-federal accounts. 

In response to the Interim Audit Report recommendation, DPIL tnmsferred $75,800 to its 

non-federal account. DPIL's response also stated that the Interim Audit Report presented 

neither evidence of any failure on DPIL's part to allocate the event costs, nor any 

indication that the events in question were somehow joint fundraisers under 11 CFR 

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

such. (See Part I, Background, Commission Guidance, Request for Early Consideration of a Legal 

Question on Page I.) 
§ 102.17. The response further stated that all of the events were non-federal fundraising 

events, and that the amounts identified by the auditors were insubstantial, when compared 

with the total amounts raised through these events. (For more detail, see p. 9.) 

Finding 4. Unreported Levin Fund Activity 

During audit fieldwork, an analysis of DPIL's Levin iiind activity indicated that DPIL 

raised Levin funds during the period covered by the audit that totaled $254,774. Of this 

amount, DPIL did not report Levin funds totaling $115,274 on its Levin Schedules L 

(Aggregation Page: Levin Funds) or on its Schedules L-A (Itemize^Jleceipts of Levin 

Funds). In addition, DPIL incorrectly disclosed a shared federal jsl^ction activity 

expenditure in the amount of $144,375 as a shared operating^ek^nditure. In response to 

the Interim Audit Report recommendation, DPIL filed ame^isd '&j^]^ that materially 

corrected the reporting of Levin activity. (For more detaij^^e p. 13'^.. 

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Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of DPIL's reported financial ^tivity with its bank 

records revealed a misstatement of receipts and disbursements in cai^dar year 2010. 

DPIL understated receipts by $203,666 and disbursements by ^^'5,677. The 

misstatements were mainly the result of unreported transfers;£f6li^e non-federal 

accounts and affiliated committees; as well as unreported^operating^xpenditures and 

transfers to affiliated committees. In response to the Iritj^riirh Audit!_ . 

recommendation, DPIL amended its reports to ma^eft^ly correct the mi^l^ments noted 

above. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• the amount of cash on hand ayhe beginning and ei^tof the reporting period; 

• the total amount of receipts f6lt!iiff|^eporting period ¥ndj>;for the calendar year; 

• the total amount of disbursemenib fdr^M^irfjm penid|aTid for the calendar 

• certain transactions that require itelniz^ibh oh SS^Qle A (Itemized Receipts) or 

Schedule B (IteMiztosbursemen^^'2 U.S.C. p4(b)(l), (2), (3), (4) and (S). 

Facts and Analgia 

•.•'i-.... ??•" 

A. Facts.,,..... 

As part .oif addit-$eldyi'ork,dig^udit stan reconciled DPIL's reported activity with its 

bank. hraords and idimdfied mis|^ements of receipts and disbursements for calendar year 

201'|)j'r,The chart beloi^q^ails the^i^repancies and succeeding paragraphs explain the 

—the misstatei^^ts. 

2010Adli^tv ¥ 

Reported Bank Records Discrepancy 

Beginning CasfrBalance 

^ January 1,2610 

$324,676 $324,676 $0 

Receipts $3,727,446 $3,931,112 $203,666 

Understated 

Disbursements $3,697,887 $3,913,564 $215,677 

Understated 

Ending Cash Balance 

^ December 31.2010 

$354,235 $342,224 $12,011 

Overstated 
The understatement of receipts was the result of the following; 

• Contributions from Individuals not reported 

• Transfers from non-federal accounts not reported 

• Transfers from an affiliated committee not reported 

• Contributions received via ACTBLUE reported net of 

processing fees 

• Reported receipts not supported by deposit or credit 

Net Understatement of Receipts 

The understatement of disbursements was the result of the following: 

Operating expenditures not reported 

Transfer to an affiliated committee not reportedDisbursements not supported by check or d^bif 

Unreported In-kind contributions 

Disbursements incorrectly reported 

ACTBLUE processing fees not reported 

Net Understatement of Disbursements 

«• 

$1,525 

79,316 

138,089 

296 

n5.5601 

$155,347 

137,089 

(77,607) 

150 "%>••• 7 

691 

$215.677 

The $12,011 overstatement of the endipg -cash balance resultei^from the reporting 

discrepancies noted above. •v..... 

S-1 • B. Interim Audit Report & Audit Division! [Ration 

At the exit conference^-tbCv^.udlt staff provldi^'DPIL rep^^ntatlves with work papers 

detailing the mlsstat^ehtiWjgpanclal actlvHy and discussed the reporting errors that 

caused the mlssta^ent. A representatTye stated that DPIL made the unreported 

transfer to the afniri^jLQpmmjll^ in error, and^j^ade the unreported transfers received 

from the same affillat^t|^ii^ra^||Q:;.o^er^tQ^rrect the original transfer. DPIL was 

prepare^@i^^^n^i$s repo^^ correS^t^Uh'Tsstatement. 

TheTpterIm Audit Relppil; recomitiended that DPIL: 

' ^• '^>iamend Its repoiti to correct tlie misstatements for 2010 as noted above; 

• amend Its most recent report to correct the cash-on-hand balance with an 

explanation that the. change resulted from a prior period audit adjustment; and 

• reconcile the cash balance of Its most recent report to Identify any subsequent 

discrepancies that may affect the adjustment recommended by the Audit staff. 

. I 

C. Committee Rdiponse to Interim Audit Report Recommendation 

In response to the Interim Audit Report recommendation, DPIL filed amended reports 

that materially corrected the misstatement of financial activity. The response also noted 

that DPIL Is reviewing and revising Its procedures for reconciling and verifying Its 

reports to ensure that such misstatement errors do not recur In future reporting periods. 
Finding 2. Recordkeeping for Employees J 

Summary 

During audit fieldwork, the Audit staff found that DPIL did not maintain monthly logs, as 

required, to document the percentage of time each employee spent on federal election 

activity. DPIL maintained payroll logs for the month of September 2010; the information 

contained in these logs, however, did not include the percentage of time each employee 

spent on federal election activity. For 2009 and 2010, logs were rqqui^ for DPIL 

payroll totaling $729,125.* In response to the Interim Audit Re^H Commendation, 

DPIL acknowledged that it needed to improve its system forj 

logs, and it provided a sample payroll log that it intends to^i 

compliance procedures. 

ining monthly payroll 

of its general 

•Ml,-.. 

Legal Standard 

Maintenance of Monthly Logs. Party commitHlramust keep a monthly logii^f t^e. 

percentage of time each employee spends in conn^tion with :a federal election]^' 

Allocations of salaries, wages, and fringe benefits aiei^.bp;^md^ken as follows: 

• employees who spend 25 percent or less of theiK^^pensated time in a given 

month on federal election acti^^es must be paid ei^q^from the federal account 

or have their pay allocated as ^m'ihisfrative costs; " 

• employees who spend more thah'2S pe^ptpf their coihi^nsated time in a given 

month on federal election activiti^must S'pi|id;.Qn^^ from a federal account; and 

• employees who jjpeiii^ none of thei'r^mpc"s^^-@pc in a given month on federal 

election activities may-lie paid entirely with frinds'that comply with state law. 11 

CFR§106;^)(1). \ 

L-.. 

Facts and Anal3rs% 

; audit fieldw^^^e Audj^^feff reviewed all payroll disbursements made from 

pPI^^ederal, non-fed^gl and cM^inated campaign accounts. The only payroll log 

bpnJ'^^ained was f^^e month of September 2010. This log listed the number of 

hours wo'Kgd.by each emp1[byee and the activities performed each day. The information 

provided duf^^. howevecjiiinclude the percentage of time that the employees spent in 

connection witH'ibdera|.ei'ection activity. During audit fieldwork, DPIL representatives 

explained that DPlL.did not realize that logs were required until September 1,2010, and 

that some staff left Before the end of September without turning in their logs. Such logs 

were required to document the proper allocation of federal and non-federal funds used to 

pay employee salaries and wages. 

In addition to the aforementioned logs for the month of September 2010, DPIL provided 

agreement-for-services contracts, campaign employment applications, and IRS W-4 

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

such. (See Part I. Background, Commission Guidance, Request for Early Consideration of a Legal 

Question on Page 1.) 
V-iA.. 

forms (Employee's Withholding Allowance Certificate) for most of its employees. For 

employees paid from the non-federal account, the campaign employment applications 

noted the non-federal candidates to which the employees were assigned, and for 

employees paid from the federal account, the applications noted that the employee was 

assigned to DPIL's headquarters. Further, DPIL provided copies of in-kind letters that 

were addressed to non-federal candidates. These letters listed salaries and expenses paid 

to employees from its non-federal accounts as in-kind contributions made on behalf of 

non-federal candidates. The documentation provided by DPIL supports its position that 

the employees it considered non-federal could be paid from its non-federal accounts. 

DPIL did not, however, maintain sufficient payroll logs to docu^^hf^he percentage of 

time each employee spent in connection with federal election a^vity. 

For 2009 and 2010, logs were required for $729,125 in pa^ll ($41^^$Q9 paid with an 

allocation of shared federal/non-federal funds and witH^non-federal 

funds).® 

tivities. While the 

e not sufficient to fulfill the 

id maintained prior to the 

B. Interim Audit Report & Audit Division R^j^mend^^gn 

At the exit conference and during audit fieldwork,'thti^^udjf'^Mdiscussed the 

recordkeeping issue with DPIL representatives. The r^j^i^entatives provided notarized 

and sworn affidavits by DPIL's executive director and co^idinated campaign director that 

identified DPIL's employees and discoss<^. the amount of c^'i^pensated time spent by 

each employee on activities in connection Witii^fei^eral electioris^'^DPlL did not provide 

documentation of the actual percentage df time 

affidavits were useful for allocation purposes, tht^ aid! 

recordkeeping requiiptex^^pse they wd|^not ( 

issuance of the audt|hotificil£rO|; letter. ^^4, 

For DPIL employees of j^eral and non-federal funds, and for 

those employes paid emifety wi^h^qoiir^^ the Interim Audit Report 

recommended^afi^^ P^y,i4c and implement a plan to maintain such monthly payroll 

logs jp'track the pi^htage oiftime each employee spends on federal election activity. • •• C. Gl^mittee RespoiH^|o Intqi-im Audit Report Recommendation 

In respoKi^ the Interin^udit lieport recommendation, DPIL acknowledged that it 

needed to ifi^ave its sysj^ for maintaining monthly payroll logs. It also provided a 

sample payrdf|^,that itfiAtends to use as part of its general compliance procedures in 

the future. The'sq^^^ayroll log contained columns for each employee to track nonfederal hours work^i federal election activity hours worked and the type of federal 

election activity that the employee performed. If DPIL uses this log properly, it should 

result in compliance with the 11 CFR 106.7(d)(1) recordkeeping requirements. 

' DPIL paid 59 employees from its non-federal account. Forty-six of these employees were paid 

exclusively with non-federal funds totaling $221,641. The other 13 employees were paid $94,675 from the 

non-federal account, but also received payments from the federal account. 

* Payroll is stated net of taxes and benefits. 
I Finding 3, Fundraising Receipts 

Summary 

During audit fieldwork, the Audit staff identified 10 flindraising events that raised funds 

for DPIL's federal and non>federal accounts. The federal account received $75,800 from 

these events. Although the federal account was the recipient of these funds, DPIL did not 

share in any of the costs incurred in raising these funds. Four of the events were held to 

benefit a non-federal campaign and therefore appear to be prohibited contributions. For 

the remaining six events, the Audit staff lacks sufficient informati^i;to^conclude whether 

the events were joint fimdraising events with other political comrtlfttees'or DPIL 

flindraising events solely benefiting DPIL's federal and non-fed^l accounts. 

. 

In response to the Interim Audit Report recommendatign, DPIL trah^ieinred $75,800 to its 

non-federal account. DPIL's response also stated that the Interim Audif R^j^rt presented 

neither evidence of any failure on DPIL's part tp alibcate the event costsi tiipt any 

indication that the events in question were somehow Joint fundraisers under ifiCjpi 

§102.17. The response further stated that all of tHbfeyents ^ereunon-federal fu^Hraising 

events, and that the amounts identified by the auditof^ivi^'insu&stantial, when compared 

with the total amounts raised through these events. 

Legal Standard • j. 

A. Written Agreement. Participants in joihit friiid^ising activpes must enter into a 

written agreement. The written agreement shall identij^^e fundraising representative 

and state a formula for the allocation of the fundraiser proci^s. 11 CFR §102.17(c)(l). 

B. Fundraising Notice. A Jo|nt fundraising notice shall be included with every 

solicitation for dbrilFi^tions. ^is notice shall include the following: 

• the names of aii^i^i]^ij^ej;:ps|tj[ci^^^^ the joint fundraising activity; 

• the,:dlp^jQn form^l^to be usibii«f^»id^ joint fundraising proceeds; 

•.^:i?statemi^^i^rmin^ ftat they may designate their contributions for 

v'/ a particular p^jglpant m^^igipants; and 

• V;!;if one or more p^jpipants ^h lawfully accept contributions that are prohibited 

iinder the Act, a ^itement informing contributors that contributions from 

prohibited sources^will be distributed only to those participants that can accept 

them/^i CFR§lQil7(c)(2). 

C. Required Infohmatiou on Solicitations. All written solicitations for contributions 

will include a cleartequest for the contributor's full name, mailing address, occupation 

and name of employer, and must include an accurate statement of federal law regarding 

the collection and reporting of individual contributor identifications. 11 CFR 

§104.7(b)(l). 

D. Fundraising for Federal and Non-Federal Accounts. If federal and non-federal 

funds are collected by a state party committee through a joint fundraising activity, that 

committee must allocate its direct fundraising costs using the funds received method. If 

the non-federal account has paid more than its allocable share, the committee shall 
10 

transfer funds from its federal to its non-federal account. The committee shall make note 

of any such adjustments and transfers in its report for any period in which a transfer was 

made, and shall also report the date of the fiindraising program or event that serves as the 

basis for the transfer. 11 CFR § 106.7(d)(4). 

E. Depositing Contributions into Federal Accounts: Only contributions meeting any 

of the following conditions may be deposited in a federal account: 

• contributions designated for the federal account; 

• contributions that result from a solicitation that expressly^tates that the 

contributions will be used in connection with a federal;^^tion; or 

• contributions from contributors who are informed jh^t'alf^ptributions are subject 

to the prohibitions and limitations of the Act. 

• -v-.V-.'. 

t. ll C#R§102;5|8)(2)(i)-(iiO 

Facte and Analysis 

A. Facts' 5' 

During audit fieldwork, the Audit staff identified 10 fo^dj^'Sing'events that raised funds 

for DPIL's federal and non-federal accounts. DPIL diif^t disclose the events on 

Schedules H-2 (Allocation Ratios). Ip^dition, DPIL did l^^y any expenses related to 

these fundraising events from its federa^Q^onjfederal accb~uh&>.^^pm the available 

documentation, the Audit staff determiiil^ fl^'|j^.ralicitationS^rsome of the events 

requested that checks be made out to the'Wiends ^^^ael J. I^adigan committee,' (2) 

organizations other than. I^IL paid the cos^ foTsome 'd^^tivents, and (3) most of the 

disclaithers on the eVjChit raTi|itot^ did nbtmclude an accurate statement of federal law 

regarding the collection and ^'brting of individual contributor information. DPIL 

provided In-kind Contribution Notification fonhito document some of the costs of three 

of the fundraising events: :: .Thc^:^rqis noted thafthe in-kind contributions for the costs 

were mad,e, p^. bchalf of jFngiids'of Nli^^ not DPIL. From the 

docuin^enrafibii tH^it^as m£S^^vailable,irkppeared that the solicitations for these 

furidriising events w^^not int^^pd to raise money for the federal account. 

the^^^|al account recei|^ $75,^0 and the non-federal account received $1,103,925 

from the^yents. It is no^plear whether any other committees received funds from these 

events. AiJifqph the fed^pl account was the recipient of funds, it did not appear to have 

shared in any oTilie costS/mcuired in raising these funds. Documentation for three of the 

10 events showed %iMnn-kind contributions were made to Friends of Michael J. Madigan 

in the amount of $5,-677 for some of the costs of these events. There were no written 

agreements available that identified the fundraising representatives and stated the 

allocation formulas, the allocation percentages for distribution of Joint fundraising 

proceeds and expenses among the participants. The Audit staff has grouped the 10 

fundraising events into two categories. 

^ Friends of Michael J. Madigan is a non-federal committee. Michael J. Madigan is the Speaker of the 

Illinois House of Representatives and Chainnan of DPIL. 
11 

1. Fundraising Events Held to Benefit the Non-federal Campaign Committee of 

DPIL's Chairman. Michael J. Madigan 

DPIL received and deposited into its federal account contributions totaling $5,650 

from four of the 10 events. DPIL contends that the events were not DPIL events 

and that it did not solicit the contributions. The four fundraisers were: 

• 2009 Lake Event held in April, 2009; 

• 2010LakeEventheldon April 26,2010; 

• Luciana Event held on September 21,2010; and . 

• Union League Event held oh September 23,2O.l!0i<., 

Based on the content of the solicitations for these four events,;.it appears that these 

events may have been solely for the benefit of the non-federal campaign account 

of Michael J. Madigan. All solicitations from these events asked'that... 

contributor's checks be made payable to.:l!^riends ofMichael J. Madigan."....No 

documentation was available to demohstrate^at DP^tSolicited funds ^m or 

participated in these events. 

As cited above, 11 CFR §102:S(a)(2)(i)-(iii) provii^^uidance on when funds 

may be deposited into a comniiitee.'S;f^eral account!!^^^§^,on the 

documentation provided, the Au^.jt staff rancluded thatijprfe of the funds that 

DPIL received as a result of these four evpi^fS'i^as .pennttted to be deposited into 

DPIL's federal Kcount. Therefore^.the;funds to^liiig $5,650 were impermissible 

and should b&frafrisfisi^ to DPIL's h6h-federal a^unt. 

2. The Six Rgmaming Furidraising Events^|s^„.. 

DPU^:^l^iyed arid'9^osi'teaTntp,|[&fdderal account contributions totaling 

^:;$fO,150 :TOm .t^ six'^l^aining fiin^raising events. These events may be either 

•... joint fundra;isSjg.-eventis1m^ other political committees or fundraising events that 

solely benefiteU^PIL's fi^leiral and non-federal accounts. The six events are as 

•^%llows: 

2009 ^ji^ent, held on November 4,2009; 

• '^esjPAMBEW Event held on Februaiy 24,2010; 

• Re^|il)inner held on August 12,2010; 

• Jans^n Event held on September 28,2010; 

• Hospitality Event held on October 6,2010; and 

• 2010 DC Event held on October 14,2010. 

The Audit staff lacks sufficient information to be able to determine into which 

category these events fall. Despite event solicitations directing contributors to 

make their checks payable to the "Democratic Party of Illinois," the Audit staff 

does not have information suggesting that DPIL participated with any other 

committees, shared any of the costs, or received any of the shared proceeds for 
12 

these events. Although some of the solicitations requested contributors to mail 

their checks to the event sponsor and/or include "paid for by" language to identify 

the political committee that paid for the solicitation, this alone does not establish 

that the events were joint fundraisers with other political committees in 

connection with a federal election. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff presented this issue to the DPIL representatives 

and requested that they document the costs associated with these events, as well as who 

paid for such expenses. DPIL representatives acknowledged that^l^ufbf the events in 

which DPIL received federal funds were not DPIL events, buti^ed that the amount of 

federal funds received from the events was de minimis. 

The Audit staff recommended that DPIL: 

• demonstrate that it could permissibly deposit funds totaling $S,6S0 &^,.thp four 

fundraising events identified above; add' . ; 

• demonstrate that it could permissibly deposit flindisitofeling $70,1 SO from the 

remaining six events. Further, for these events,'^e Interim Audit Report 

recommended that DPIL identi^ which, if any, wi^pint fimdraising events with 

other political committees, or whichjlf any, were D^^vmts benefiting solely 

its federal and non-federal accouttte7-^Iiii|^npectio^ withpdse events that 

benefited solely DPIL's federal a^d non-f^ei^a^unt^, the Interim Audit . 

Report recommended that DPIL de|[ip^^rate t^!^-i|H^d properly allocated costs 

between its fe^^fC^pon-federal i^)unts. 

Absent such dembh^^Jon, the:i7S,800 deposit^^jn its federal account would be 

considered impermissii{l|e andjji&lnt^rim Audi0Lbport would recommend that DPIL 

transfer thero,fe to its-nb^^b^^ 

C. ipbinmlttee Resjjijiii^se to Thitbrim Audit Report Recommendation 

In< response to the Intn^Audit R^pri recommendation, DPIL transferred $75,800, to 

its ndhrfederal account (^"^eptem.ber 18,2013 and provided a copy of the check (front 

only). DPIL submitted that the Interim Audit Report presented no evidence of any failure 

on DPIL's i»it to allocate';ihe event costs, nor any indication that the events in question 

were somehow joint fundraisers under 11 CFR §102.17. 

I;'" 

The response furtli^^stated that all of the events were non-federal fimdraising events, and 

that the amounts identified by the auditors were insubstantial, when compared with the 

total amounts raised through these events. The response also stated that neither the 

allocation rules nor the joint fimdraising rules were triggered when a bona fide nonfederal fundraising event elicits a de minimis number of federal contributions, and the 

Interim Audit Report presented no evidence that DPIL or the Friends of Michael J. 

Madigan Committee sought federal contributions through any of these events. However, 

because of the limited documentation available, and to eliminate any question of 

noncompliance, DPIL nonetheless made the recommended transfer. 
13 

Although DPIL has complied with the Audit staffs recommendation to transfer the 

$75,800 to its non-federal account, we do not agree with its assertions. DPIL did not 

show that any of the funds it deposited in its federal account met the criteria in 11 CFR 

§102.S(a)(2)(i)-(iii). There Is no exception to the Commission's rules that would permit a 

de minimis amount of funds, the origins of which are either related to a non-federal event 

or an event for which the political purpose (federal^on-federal) cannot be determined, to 

be deposited in a committee's federal account. 

I Finding 4. Unreported Levin Fund Activity 

Summary , 

During audit fieldwork, an analysis of DPIL's Levin fund^tivity'i^jpated that DPIL 

raised Levin funds during the period covered by the au4it that totale^1|^4,774. Of this 

amount, DPIL did not report Levin funds totaling $.tlS^74 on its Levim^hedules L 

(Aggregation Page: Levin Funds) or on its Schedules L-A (Itemized Recei^of Levin 

Funds). In addition, DPIL incorrectly disclos^d^s|iared federal election actHit;^/'' 

expenditure in the amount of $144,375 as a shared-^ratin^cpenditure. In r^^nse to 

the Interim Audit Report recommendation, DPIL fil^dTamjpded reports that materially 

corrected the reporting of Levin activity. '• . 

Legal standard 

A. Reporting. If a state, district or local party co^mi^e's combined annual receipts 

and disbursements for federal election actiyity (FEA) fptal. $S«obO or more during the 

calendar year, the comtnittee must disclose receipts and disbursements of federal funds 

and Levin funds us«f for ^BA^.l I CFR §300.36 (b)(2). ' 

• .'y'.'* V. 

B. Receipt of l^evih'iFunds. L^vin funds expell^ed or disbursed by any state committee 

must be raised solely by^e or disburses them. Each donation 

must be Jgwjy.;undCT the l^ws,pf the the committee is organized and the 

funds .stfliciti^ rh^usV^^t agg^^late more than $10,000 in a calendar year. Consequently, 

funds^hom national p^^commi^i^^other state, district and local committees, and from 

fdderkl: candidates or accepted as Levin funds. 11 CFR 

§300.5^;. •V:-

C. Content^b^ Levin Rjgports. Each report must disclose: 

• the amount bri^slf^on-hand for Levin funds at the beginning and end of the reporting 

period; 'W 

• the total amount of Levin fund receipts for the reporting period and the calendar year; 

• the total amount of Levin fund disbursements for the reporting period and the 

calendar year; and 

• certain transactions that require itemization on Schedule L-A (Itemized Receipts of 

Levin Funds) or Schedule L-B (Itemized Disbursements of Levin Funds). 11 CFR 

§300.i36 (b)(2). 
r 

14 

Facts and Analysis 

A. Facts 

As part of audit fieldwork, the Audit staff found that DPIL raised Levin funds totaling 

$234,774 that it deposited into its non-federal account. It reported Levin funds totaling 

$139,300 on its Schedules L-A. DPIL did not report Levin funds totaling $113,274. In 

addition, DPIL incorrectly disclosed a shared federal election activity expenditure of 

$144,373, of which the Levin share was $114,036, as a shared operating expenditure. 

DPIL did not have a Levin fund bank account for its Levin fundjM^ipts^ DPIL 

representatives explained that DPIL kept all Levin funds raise^ihits non-federal account 

in accordance with 11 CFR §300.30(C)(2) and (3). DPIL providfelj^e Audit staff with a 

reasonable accounting of its Levin fund receipts. A daily i^h an^y§|s..of DPIL's nonfederal accounts demonstrated that DPIL had sufficientl,evrn funds at^^ time DPIL 

transferred the funds to the federal account. 

During the period covered by the audit, DPIL share^jfederal election'^Hvity 

expenditures totaling $180,000. The Levin share df/j^K^^K^hditures was $139,300. 

DPIL transferred only $100,000 to its federal accounf%|i^e Levin share of the allocable 

expenditures. Levin funds totaling $:1J4,774 remain in D]^!a non-federal account. 

B. Interim Audit Report & Audit Divisioihlli^inmendatidj^^^ 

At the exit conference, the Audit staff provided i)P&;i9presentati^ with workpapers 

that detailed a possible oyerfunding by DAL'S ndn-i^^.^account. DPIL 

representatives respondedl^atPPlL had incbircctly repoi^ a disbursement in the 

amount of $144,373 on Sch^^le H-4 (SharedFederal^lon-Federal Activity) instead of 

Schedule H-6 (Shai^ Federal flection Activlfji;), and that it could have used Levin funds 

to pay the $114,036 share of the dii^ect mail expi^diture. They argued that DPIL had 

sufficient Levin j^nds on hand'td jSayi^or.th share, and stated that the reports 

would be amehd^^^^ correct j|ijs matter! %e Audit staff concurred that Levin funds 

could::^ave been truisfeired tb^l^bTederal account in regard to this expenditure, and that 

DPi&did have sufr!clra|Levin i^Wuvailable to be transferred. Purser, by classifying 

this ti^[^ction as such, tlvere no longer would be an overfiinding by the non-federal 

account.--^-;. 

The Interim A'it^t Report recommended that DPIL amend its reports to disclose the 

additional Levin i^ipts in the amount of $113,274 on Schedules L-A and disclose the 

expenditure in the ^ount of $144,373 as a shared federal election activity expenditure 

on Schedule H-6. 

C. Committee Response to Interim Audit Report Recommendation 

In response to the Interim Audit Report recommendation, DPIL filed amended reports 

that materially corrected the reporting of Levin activity.