Perkins Coie 

700 Thirteenth Stitet, N.W.. Suite 600 

Washington, D.C. 20005-3960 

Brian G.Svoboda PHOM: 202.6546200 

PHO.M202) 434-1654 202.65^.621, 

KAX. {202)654-9150 ^ . www.perkinseoie*om 

EMAIL'; BSvoboda@perkinscoie.coin 

September 18,2013 

Mr. Thomas Hintermister 

Assistant Staff Director 

Audit Division 

Federal Election Commission 

999 E Street. NW 

Washington, DC 20463 

Dear Mr. Hintemiister: 

We write on behalf of the Democratic Party of Illinois and its treasurer (collectively, "DPIL"), in 

response to the Interim Audit Report of the Audit Division regarding DPlL's 2010 election cycle 

activities. DPIL has complied with the recommendations of the Audit Division and is taking 

additional steps to strengthen its.compliance with the Federal Election Campaign Act of 1971, as 

amended ("the Act"), and with Federal Election Commission (the "Commission") regulations, as 

described further below. 

INTRODUCTION 

During the 2010 election cycle, DPIL was heavily.active in nonfederal elections, in a state which 

permitted unlimited corporate and union contributioiis in these same elections. The Interim 

Audit Report presents no finding of excessive contributions, or contributions from prohibited 

sources. Nor does it present any finding that DPIL overpaid expenses with nonfederal funds. 

Rather, the findings closely track the unique and complex obligations that state parties heavily 

active in nonfederal elections face under the Bipartisan Campaign Reform Act of 2002 

("BCRA").' They resulted from compliance processes which, while tailored for DPIL's Illinois 

state law obligations, did not adequately account for Commission regulations. DPIL divides its 

compliance functions between its permanent staff and external accountants, whose focus 

primarily is on state law compliance. DPIL has already begun working to strengthen its federal 

procedures. It has sent one of its headquarters staff to a Commission training and is developing 

an internal compliance manual. 

' The Commi'ssion has not audited DPIL-since before BCRA's passage. 

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Finally, DPIL has taken the remedial actions recommended by the auditors, amending its reports 

and transferring $75,800 in contributions to its nonfederal account. ITiese matters are discussed 

further below. 

DISCUSSION 

Finding 1. Misstatement of Financial Activity 

DPIL is amending its. reports to conform to the auditors' recommendations. A majority of the 

cited misstatements arise from a single erroneous transaction; the mistaken wire transfer of 

$137,089 to Illinois Victory, and the return of these same funds. DPIL is reviewing and revising 

its procedures for reconciling and verifying its reports, to ensure that such errors do not recur. 

Finding 2. Recordkeeping for Employees 

The Interim Audit Report confirms that DPIL properly paid for its employee salaries and 

benefits. As the Report acknowledges, many of these ehiployecs were made available to work 

on specific nonfederal campaigns, with their salaries and expenses treated as in-kind 

contributions under state law. DPIL maintained and provid^ to the auditors extensive 

documentation that supported the nature of the employees' duties: contracts, employment 

applications and IRS W-4 forms. The Report correctly states: "The documentation provided by 

DPIL supports its position that the employees it considered non-federal could be paid from its 

non-federal accounts."^ 

Nonetheless, DPIL acknowledges the need to improve its system for maintaining monthly 

payroll logs. A copy of the log it intends to use, as part of its general compliance procedures, has 

been sent separately to the auditors. 

Finding 3. Fundraising Receipts 

The Interim Audit Report identifies $75,800 in contributions to the federal account that.it says 

were raised through ten fundraising events, four of which benefited a nonfederal campaign. The 

Report recommends either that DPIL transfer these funds to its nonfederal account, or that it 

provide documentation to demonstrate the permissibility of their deposit. 

To comply with the auditors' recommendations, DPIL has transferred $75,800 to its nonfederal 

account. However, DPIL respectfully submits that the Report presents no failure to allocate the 

event costs, nor does it present any indication that the events in question were sorhehow "joint 

fundraisers" under 11 C.F.R. § 102.17. 

All of the events in question were nonfederal fundraising events. The amounts identified by the 

auditors were accordingly insubstantial, when compared with the total amounts raised through 

^ Interim Audit Report at 7. 
these same events. The contributions identified by the auditors comprise only 6.4 % of the 

$1,179,725 raised from the ten identified events; this percentage was much lower in the case of 

some individual events.' 

Even these small percentages overstate the amounts of federal frinds that might have been 

received in connection with these events. The auditors apparently relied on batch deposit slips to 

link individual checks to a particular event. Because some batch deposit slips were annotated 

with the name of the event that generated the bulk of the checks, the auditors seem to have 

assumed that a check was raised by an event when included in such a batch. Yet frequently, 

these batches included non-event checks that were received around the same time period. For 

example, the auditors identified $23,030.00 in federal contributions in association with a 

September 28,2010 'Janssen Event.' However, at least $19,500 of these contributions show no 

indicia of association with this event, other than their inclusion in the batch. They were issued 

far in advance of the event, and they were solicited by an individual not associated with the 

event. 

Neither the allocation rules nor the joint frindraising rules are triggered when a bona fide 

nonfederal fundraising event elicits a de minimis number of federal contributions. The allocation 

regulations address the direct costs of fundraising programs or events in which a committee 

raises both federal and non-federal funds for itself.^ The joint fundraising rules apply when 

multiple committees engage in "[cjombined fundraising campaigns."' But the Interim Audit 

Report presents no evidence that DPIL sought federal contributions through any of these events, 

or that the nonfederal campaign in question actively sought contributions for DPIL through its 

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

of noncompliance, DPIL has nonetheless made the recommended transfer. The fmal report 

should reflect the resolution of this finding. 

Finding 4. Unreported Levin Fund Activity 

Finding 4 involves a federal election activity expenditure of $144,375 that DPIL initially 

disclosed incorrectly as a shared operating expenditure. Because DPIL reported the expense in 

this way, it did not initially show the expense on Schedule H-6, nor did it identify the 

corresponding Levin receipts on Schedule L-A. There is no dispute that the underlying expense 

was Levin-eligible, and that DPIL.had sufficient Levin funds on hand to pay the Levin share of 

the expense; "The Audit staff concurs that Levin funds could have been Uransferred to the federal 

^ See Interim Audit Report at 10. Event-specific percentages were derived from a spreadsheet provided by the 

auditors at the Exit Conference. The auditors also later provided the DPIL with a spreadsheet listing the discrete 

contributions at issue in this finding. 

* Commission Regulations on Prohibited and Excessive Contributions, Explanation and Justification, 67 Fed. Reg. 

49064,49079 (July 29.2002). 

^ Advisory Opinion I979-7S, cited in Transfer of Funds; Collecting Agents; Joint FUndraising, 48 Fed. Reg. 26,296, 

26,298(1983). 
account in regard to this expenditure, and that DPIL did have sufficient Levin funds available to 

be transferred."^ DPIL is amending its reports to conform to the auditors' recomniehdation. 

We appreciate the Commission's attention to our response. 

Very truly yours, 

/i. ^ 

Brian G. Svoboda 

Daniel B. Nudelman 

BGS 

' Interim Audit Report'at 13.