FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

December 30,2013 

MEMORANDUM 

To: The Commission 

Through: 

From: 

Alec Palmer 

Staff Director 

Patricia C. Orrock 

Chief Compliance Officer 

Thomas E. Hintermister'""^^ 

Assistant Staff Director 

Audit Division 

Doug Kodish ^jt j 

Audit Manager O 

By: 

Subject: 

Paula Nurthen 

Lead Auditor 

Audit Division Recommendation Memorandum on the Dallas County 

Republican Party ((DCRP) A l 1-14) 

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 memorandum and concurs with the recommendation(s). 

Finding 1. Misstatement of Financial Activity 

The Audit staff determined that DCRP understated its reported receipts and 

disbursements by $31,817 and $32,201, respectively. Ih response to the Interim 

Audit Report recommendation, DCRP amended its reports and materially 

corrected its misstatements. DCRP had no additional comments in response to the 

DFAR. 

The Audit staff recommends that the Commission find that DCRP misstated its 

financial activity for calendar year 2010. 

Finding 2. Recordkeeping for Employees 

For the period covered by the audit, DCRP 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 

DCRP employees totaling $85,520 for which monthly payroll logs were not 

maintained. This consisted of $70,520, for which DCRP allocated payroll between 

federal and non-federal funds, and $15,000 that DCRP paid exclusively with nonfederal funds. 

In response to the Interim Audit Report recommendation, DCRP stated that it 

agreed to maintain monthly payroll logs to track federal election activity for nonfederal payroll and payroll allocated between federal and non-federal activity. 

DCRP did not file an additional response to the DFAR. 

The Audit staff recommends that the Commission find that DCRP failed to 

maintain logs to document the time employees spent on federal election activity 

totaling $85,520. 

DCRP did not request an audit hearing. 

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

30 days of the Commission's vote. 

In case of an objection. 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 Paula Nurthen or Doug Kodish at 694-

1200. 

Attachment: 

- Draft Final Audit Report of the Audit Division on Dallas County Republican Party 

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

Audit Division on the Dallas 

County Republican Party 

(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 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 .. .'.ss-:.: : : .. 

requirements fbj^i^l^SKif^:;:^^ 

substantial cgoafoiiance 

with the p0Z The audit 

determ|^^b|^hether the 

convi^%6^^to}lied with 

the limitati 

prohibitions 

disclosure requin 

of the Act. 1111^=^ 

About the Committee ^. 2) 

The Dallas County Repubj^^^a^^^ i$^ local party committee 

headquartered in Dallas^lreiicas. F^pipre information, see the 

chart on the Conimittee^:prgamzation^^:2,^ 

.... 

Financial Activity 

. Receipts "^^.. J 

o Contribu^Qi^i^m Individti^ij;^^' 

o Transf^tS frbr^^^&jii-fedcral 

Accoilit 

o p^er'-Sisider^ Rec^ljp-^ 

Tp|iRcceipt{g;. | ' 

• .jEjlilbursemen^i^^lp?^ 

i=*^^;:|i§perating Expenditures 

o""=%|i^§.ral Election Activity 

Sil^ . o Oli^ipisbursements 

• •€ii|Totai I^^rsements 

•.•7.wy. f •.<f-.tn 

$350,116 

196,000 

1,009 

$ 547,125 

$ 480.62S 

36,372 

31,000 

$547,997 

m ngs and Recommendations (p. 3) 

$^ Misstatement of Financial Activity (Finding 1) 

Recordkeeping for Employees (Finding 2) 

Future Action 

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). 

' On August 16,2011, the Dallas County Republican Party changed its name to Dallas County Republican 

Party - Primary. 
Draft Final Audit Report of the 

Audit Division on the 

Dallas County Republican Party 

(January 1, 2009 - December 31, 2010) 

..••iy>:-
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Conunission Guidance 1 

Part II. Overview of Committee 

Committee Organization ..si:?^;i:;; %. ^ 

Overview of Financial Activity ^^'^^^^ ^^g^ 2 

Part III. Summaries 

Findings and Recommendations ""^l^'if^l-:. '"'^^W^ 

.•••i-'-Cfi'iii. 

Part IV. Findings and Recommendations'-^|||::. 

Finding 1. Misstatementof Financial Activity::::::!;:^ 4 

Finding 2. Recordkeeping for Employeesi:/;"" " 5 

j.^ •:•:'.•.; 

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•.'.••.v:.f-S-:::-^ 

>!•: 

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Part I 

Background 

Authority for Audit 

This report is based on an audit of the Dallas County Republican Party (DCRP), 

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 condvtg^ng'iany ^dit under this 

subsection, the Commission must perform an internal reyie#''6irc|l||t|| filed by selected 

committees to determine if the reports filed by a partic^ar commpi^l^^t the threshold 

requirements for substantial compliance with the Act. 1%|^S.Q!^§438(D^^^^^^^ 

Scope of Audit ./%^ . 

Following Commission-approved procedures, the Audit staff d^|^ted various risk 

factors and as a result, this audit examined: '''%%^v:«'' 

1. the disclosure of individual contributors' QQ,@nPa|^i|p..and name ^ji^niployer; 

2. the disclosure of disbursements, debts an^obligapi^^j:., ^ 

3. tiie disclosure of expenses allocated bet^^^ fe|^rarip:^$)[i-federal accounts; 

4. the consistency between reported gj^^^'^d hiikrec<W;-

5. the completeness of records; arj4 f^'"*' '0i^-^.-^iS 

6. other committee operations n^^^^ry to the r^^yii^'' 

Commissioniiii^lllliU^ 

Reque|^L»or Early ComiiQ||iipon Cftihsideration of a Legal Question 

Pursuiu^||.^the Commission "Ppp^ Statement Establishing a Program for Requesting 

Constcie^ll^f Legal Question|j;py tiie Commission," several state party committees 

unaffiliated'^j|[^CRP reques^'early consideration of a legal question raised during an 

audit. Specifi^S^^jtihe Comi^ilsion addressed whether monthly time logs under 11 CFR 

§ 106.7(d)(1) wer^^||^re4>#r employees paid with 100 percent federal funds. 

The Commission conciliated, by a vote of 5-1, that 11 CFR §106.7(d)(l) does require 

committees to keep ^' monthly log for employees paid exclusively with federal fimds. 

Exercising its prosecutorial discretion, however, the Commission decided not to 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. 

Audit staff informed DCRP's representative ofthe payroll log requirement and ofthe 

Commission's decision not to pursue recordkeeping violations for failure to keep payroll 

logs for salaries paid and correctiy reported as 100 percent federal, excluding amended 

filings. Finding 2 of this audit report (Recordkeeping for Employees) does not include 

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

Overview of Committee 

Committee Organization 

Important Dates 

• Dateof Registration February 5,1999 

• Audit Coverage January l,^QP9^Pecember 31,2010 

Headquarters Dallas...3« 

Bank Infonnation i 

• Bank Depositories Onem^ , 

• Bank Accounts One fei[€ieiy%ree non-f§jpiy .<^iie 

Levin .m. . W 

Treasurer 

• Treasurer When Audit Was Conducted Honorable Wad^g|^^ ' 

• Treasurer During Period Covered by Auditjs ••:!jQlc|Lthisn NeermaSili-'^" 

Management Information :..vX-v--. J» 

• Attended Commission Campaign Finandi||^ 

Seminar ^^s^ 

• Who Handled Accounting and :j, 

Recordkeeping Tasks .^lllii. 

..•.••sjWA-'iJvv. •\-w-:.>r.:.. 

of Fi|iihcial Activity 

ed'-Amounts) 

Cash-on-tii^^ January 1,2jS09 $ 1374 

Receipts 

o Contribution^^^ii^-j[ndkt3uals 350.116 

o Transfers from !^^|^eral Account 196.000 

o Other Federal Receipts 1.009 

Total Receipts S 547,125 

Disbursements 

o Operating Disbursements 480.625 

o Federal Election Activity 36.372 

o Other Disbursements 31.000 

Total Disbursements $ 547,997 

Cash-on-hand @ December 31,2010 S 502 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

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

records revealed tiiat. for 2010. DCRP understated its reported re9eipts and 

disbursements by $31,817 and $32,201, respectively. In r^$j^<jf^e|9^,t^^^^ Audit 

Report recommendation. DCRP amended its reports an^i^'^riall^^l^ected its 

misstatements. (For more detail, see p. 4.) 

not maintain any 

eacli employee 

Finding 2. Recordkeeping for Emploj 

During audit fieldwork. the Audit staff determined that |^rar:|^v,,. 

monthly payroll logs, as required, to document the percentage oi 

spent on federal election activity. For 2009 and Z^l^^e Audit si^||eiltified payments 

to DCRP employees totaling $85,520^ for whicti'McS^^^payroll lo|s-"Were not 

maintained. This consisted of $70,520. for wHich D^l^p.pcated=ipayroll between 

federal and non-federal funds, and $15,000 ^DC$]? p^t^j^lusively with non-fedeial 

fimds. 4i« 4 i'-^' 

In response to the Interim Audit | 

monthly payroll log^.^j 

allocated betwe 

Ml 

resolved. 

.A? 

ore detail,' 

. jon-fedca 

•»wy.v>. 

recommeiiSSIiig^'i DCRP agreed to maintain 

ion activity for non-fedeial payroll and payroll 

ill^tiviw. The Audit staff considers tiie matter 

' 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 fbr Early Consideration of a Legal 

Question on Page 1). 
Part IV 

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity 

Summary 

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

records revealed that, for 2010. DCRP understated its re^^^ire^ptsi^d 

disbursements by $31,817 and $32,201, respectively. Ici^i'i^tpohsei^j^e Interim Audit 

Report recommendation, DCRP amended its reports aii| material jP^'Si 

misstatements. -fefe. 

'^'•A'-l^-'^: 

# 

:ted its 

Wife?'.. 

Legal Standard 

Contents of Reports. Each report must disclose: 

^ Iggferiod; 

ti^hdar year; 

the total amount of disbursements 

and 

certain transactions that require itQiii|it2ati6ii on::Schedu{^''A (Itemized Receipts) or 

Schedule B (Itemized Disbursemeiiits). 2 U.sJ|^S4:?J^)(l), (2), (3), (4) and (5). 

Facts and AnalysjjBi;: 

the amount of cash-on-hand at tiie beginning and cnd of the i^lla n 

the total amount of receipts for the reporting'^-p^iimij^d for the cjpielr 

, . .1. J. , the,|«portiijg=^|^d a^d fbx the calendar year; 

During aiu^ft fieldwork, the Ati^l ' 

:;itf.'i 

A. Facts 

recpfibiled reported financial activity with bank 

record^^j^^4jfalendar years 2009^^ 2010 and identified a misstatement of receipts and 

dishi^e1l||i^ for 2010. The foM^ng chart outiines the discrepancies. 

2010 Activity"^^i^?85:,x# 

Reported Bank Records Discrepancy 

Opening Cash Balance 

@ January 1,2010 $1,178 $2,045 $867 

Understated 

Receipts $287,185 $319,002 $31,817 

Understated 

Disbursements $288,344 $320,545 $32,201 

Understated 

Ending Cash Balance 

@ December 31,2010 $19 $502 $483 

Understated 
The understatement of receipts resulted firom the following. 

• Credit card deposit not reported $ 24,277 

• March 2010 deposits not reported 5.995 

• On-line deposit not reported 1,720 

• Miscellaneous identified amounts (175^^ 

Net Understatement of Receipts $ 31.817 

The understatement of disbursements resulted from the following. 

• Transfers to non-federal account not reported $ 31.000 

• Miscellaneous identified disbursements not reported 1.341 

• Unidentified difference |i:w--4^i4Q) 

Net Understatement of Disbursements l^gj^fil 

B. Interim Audit Report & Audit Division Recomm£fi|i|;dbn ^^Ip^:-:^:-

At the exit conference, the Audit staff explained the missjE^^^aats and provided 

schedules to DCRP representatives. The representatives' offeir8||^^. comments during or 

subsequent to the exit conference. .i-^ 

The Interim Audit Report recommended that.|>CRI^ its repox^'^to correct fhe 

misstatements noted above. | 

C. Committee Response to Interim-piuTdit Rep^]^^ 

In response to the Interim Audit R><^^ recommefitd^^^^DCRP filed amended reports 

for 2010 tiiat materially correcte^i^^l^sstatements!'" ' 

:-;\":v:!vi*'''j'.-. •> f SK*-^ •^:::s:S::-5s,.5:fo::. ••;-.••::>«:. 

I Finding^'. RecordK^ging f<|^lBmployees 

Summfjii^-v 

During auiS^^^l^work, the Auc^'^taff determined that DCRP did not maintain any 

monthly payrSll|lj^., as requir^, to document the percentage of time each employee 

spent on federar^l|^|[pn actijsaty. For 2009 and 2010, the Audit staff identified payments 

to DCRP employe^lii^l^jittg $85,520^ for which montiily payroll logs were not 

maintained. This con'^pted of $70,520. for which DCRP sJlocated payroll between 

federal and non-fedei^ funds, and $15,000 that DCRP paid exclusively with non-federal 

funds. 

In response to the Interim Audit Report recommendation. DCRP agreed to maintain 

monthly payroll logs to track federal election activity for non-federal payroll and payroll 

allocated between federal and non-federal activity. The Audit staff considers the matter 

resolved. 

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

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

Question on Page 1). 
Legal Standard 

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

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

Allocations of salaries, wages, and fringe benefits are to be undertaken as follows: 

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

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

or have their pay allocated as administrative costs; 

• employees who spend more than 25 percent of their compensated time in a given 

montii on federal election activities must be paid only fiom a federal account; and, 

• employees who spend none of their compensated tin^^ {;^vei]L:.;nonth on federal 

election activities may be paid entirely with fund^^^toi^ag^^th state law. 11 

CFR§106.7(d)(l). i » 

Facts and Analysis W^N':-'^ 

A. Facts •^=i^jv 

During fieldwork, the Audit staff reviewed disbursements for p^i|i]^. DpRF did not 

maintain any monthly logs or equivalent record$:,ti^'^^pnent the jiiiii^ltkge of time each 

employee spent in connection with federal el^tibn1i|t||||i^. These jogs are required to 

document the proper allocation of federal an^non-f(^ei^^d| us'ed to pay employee 

salaries and wages. For 2009 and 2010^^.1ogs|§ere.|^ot mat|i| ^ for $85,520^'^ in 

payroll. The $85,520 consisted of $7gp|ib. for w^h pa^oli'was allocated between 

federal and non-federal funds, and Jl|,bOO that v^f^^^^xclusively with non-federal 

funds. 

B. Interim A^fFKt::£^:eplb^4| Diviii|ji|L^(e^commendation 

At the exit ^.^liference and S^ppgudit fiei|p$rk, the Audit staff discussed tiie payroll 

recordke^^g issue with DCI^I^^resentatives. The representatives offered no 

additiQ^'^pmments or docume!^|^ion to support the expenses. 

For DCRP cll^p^ees that were|^|'aid with exclusively non-federal funds or an allocation 

of federal andlli^i^^eral furt^^ the Interim Audit Report recommended that DCRP 

provide the follovJiftii:;.. 

• evidence that £}!CRF had maintained monthly time logs to document how much 

time the employee had spent on federal election activity; 

or 

• provide and implement a plan to maintain monthly payroll logs to track the 

percentage of time each employee spends on federal election activity. 

' Amounts are net of payroll taxes and benefits totaling $22,896. 

' 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 1). 
C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report reconmiendation, DCRP agreed to maintain 

monthly payroll logs to track federal election activity for non-federal payroll and payroll 

allocated between federal and non-federal activity. Such action is consistent with 

Commission guidance with respect to payroll logs. The Audit staff considers the matter 

resolved. 

•^.•:y.-A:: 

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