Draft Final Audit Report of the 

Audit Division on the 

Republican Party of Orange 

County (Federal) 

(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 appei 

to have met the 

threshold requiremdfi 

for sii*"-*— 

About the Commjiirc- (p.2) 

The Republican Party o^ County (Federal) is a local party 

committee headquart^^ in, California. For more 

information, see the nmittee organization, p. 2. 

Financial Ari ivity (p. 2) 

• Receipts 

o Indi^ I 

slitical C 

sfers fro 

srs fro 

ntributions 

;es 

deral Accounts 

Levf^ unt 

tures 

• |l|-|-l|l -• III! Ill-

. s wheth 

" • '^complied 

with the l^tetions. 

prohibition!^^ 

disclosure requ^ments 

of the Act. 

Future Auction 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of 

the matters discussed in 

this report. 

menditures 

abn Activity 

Refunds 

^ oans Repaid 

I "I iLDisbursements 

•. • Levin Receipts 

I • Levin Disbunements 

l<'indings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Reporting of Debts and Obligations (Finding 2) 

• Recordkeeping for Employees (Finding 3) 

• Use of Levin Fund Transfers (Finding 4) 

$ 299,234 

81,000 

76,923 

230,078 

73,466 

6,205 

3,661 

S 770,567 

$613,029 

149,571 

8,850 

6,205 

$ 777,655 

$ 74,132 

$ 73,465 

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

Audit Division on the 

Republican Party of Orange 

County (Federal) 

(January 1, 2009 ^ Dc- • nber 31, 2010) 
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 

2 

3 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Riecoinmvndaliciiis 

Finding 1. Misstatement of Fi^cial / 

Finding 2. Reporting of De^^||El 

Findings. Recordkeepingfo^ 

Finding 4. Use of Levin Fund' 

5 

7 

8 

9 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Republican Party of Orange County (Federal) 

(RPOC), 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 coimnittee that is required to file a report under - C. §434. Prior to 

conducting any audit under this subsection, the C( 

review of reports filed by selected committees to < 

particular committee meet the threshold requiremc 

Act. 2 U.S.C. §438(b). 

St perform an internal 

e reports filed by a 

ntial compliance with the 

Scope of Audit | 

Following Commission-approved procedur 

factors and as a result, this audit examined: 

1. the disclosure of individual t 

2. the disclosure of disburseme 

3. the disclosure of expenses al 

4. the consistency between repi 

5. the completer s; 

6. the disclosur&i 

7. other commi^i 

Commissiun Ciiiicl.mc-f 

Audit valui 3 risk 

ameofen. , f; 

m-federal accounts; 

|iifsi; for ] .nil 

Pun o the Comrrf 

Con tipn of Legal 

unaffiliatOT^th RPOC re 

audit. Specin^y, the C< 

§106.7(d)(l)w» re 

dill III 

in's " 

III c ••ii^ideration of a Legal Question 

Statement Establishing a Program for Requesting 

IS Commission," several state party committees 

;d ean^consideration of a legal question raised during an 

sion addressed whether monthly time logs under 11 CFR 

mployees paid with 100 percent federal funds. 

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

committees to keep a monthly log for employees paid exclusively wiA federal fimds. 

Exercising its prosecutorial discretion, however, the Commission 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. Finding 3, Recordkeeping for Employees, of this audit report does not include 

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

Overview of Cotninittee 

Committee Organization 

Important Dates 

• Date of Registration July 6,1982 

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

Headquarters Tusti ' Ilia 

Bank Information 

• Bank Depositories TWQi 

• Bank Accounts ^Two Levin and Eight 

Treasurer >• 

• Treasurer When Audit Was Conducted^. • -ark W. 

• Treasurer During Period Covered by Auli "ark W. Bucher 

Management Information 

• Attended Commission Cam] lance 

Seminar 

i 

• Who Handled Accounting ai 

Recordkeeping Tasks 

'y 

w 
Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand @ January 1,2009 S 6,092 

Receipts 

o Individual Contributions 299,234 

o Political Committee Contributions 81,000 

o Transfers from Affiliates 76,923 

o Transfers from Non-federal Accounts 230,078 

o Transfers from Levin Account ^ ^ 73,466 

o Loans Received 6,205 

o Offsets to Operating Expenditures 3,661 

Total Receipts S 770,567 

•>SSjj>r -K 

Disbursements 

o Operating Expenditures 1 i613,029 

o Federal Election Activity ^571 

o Contribution Refunds 

o Loans Repaid 6,W 

Total Disbursements ^ S 777,655 

Cash-on-hand (jSi December 31 *•• 10 ' ($ 996)' 

Levin Cash-on-haqd^P ••••• iry 1, $10 

Total Levin RecgJl^'^ "*1 . " $ 74,132 

Total Levin DisB^emein $ 73,465 

Levin Cash-on-hal^ .• Heci IIIIM I -1,2i'iu $677 

w 

^ RPOC overdrew its bank accounts in the amount of S996. On January 12,2011, RPOC's balance was no 

longer overdrawn. 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

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

records revealed a misstatement of receipts and disbursemei^s for calendar year 2009. 

RPOC understated its receipts by $ 17,420 and disb ly $ 17,420. The 

misstatements were due mainly to unreported trans rom non-federal accounts 

and unreported in-kind contributions. In response 1 in Audit Report 

recommendation, RPOC amended its reports to m^ the misstatements 

noted above. (For more detail, see p. S.) 

Finding 2. Reporting of De^ s .• iid Obligal imis 

Audit fieldwork indicated that RPOC failed lort debts^and oblig. 

totaling $60,296 on Schedule D Qebts and onse tc 

Audit Report recommendation, mended its» 'erially inc 

debts and obligations. (Formor^ '.) 

Finding 3. Recordkeepiii^liir l'.iii|iloyffs 

3r 12 vendors 

•rim 

these 

During audit fieldv 

payroll logs, as i 

federal election i 

required was $187,^ 

federa' ' ie 

elei activities fori 

recomm^ation, RPOC 

payroll lo^nd documenif 

non-federal»| i activit) 

• not maintain monthly 

:h employee spent on 

amount ofpayroll for which logs were 

'roll disbursements as allocated between 

^ided aiT^^^vit that listed the time spent on federal 

jloyees. In response to the Interim Audit Report 

•dl future payrolls, it will maintain monthly 

ceh^e of time each employee spends on federal and 

r more detail, see p. 8.) 

Finding 4. Uiu nf Levin Fund Transfers 

During audit fieldwc 'w of Levin fund activity determined that RPOC received 

$74,132 from the Ca epublican Party's Levin-account for reimbursement of 

voter registration expenses. RPOC then transferred $73,465 from its Levin account to its 

federal accounts, as reimbursement for voter registration expenses. In accordance with 

11 CFR §300.31(a), Levin funds expended must be raised solely by the committee that 

expends them. In response to the Interim Audit Report recommendation, RPOC 

disclosed $73,465 on Schedule D of its 2013 November monthly report as a debt to its 

Levin account. (For more detail, see p. 9.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

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

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

RPOC understated its receipts by $17,420 and disburseme^by $17,420. The 

misstatements were due mainly to unreported transfers t^^pfrom non-federal accounts 

and unreported in-kind contributions. In response |^mm Audit Report 

recommendation, RPOC amended its reports to m ct the misstatements 

noted above. 

Legal Standard 

A. Contents of Reports. Each report mi 

• the amount of cash-on-hand at the 

• the total amount of recei^for the 1 

• the total amount of disbui ir the 

year; and 

• certain transactions that n 

Schedule 1 isbur^ ts).' 

B. Definition ofi* •• Gift, 

• a gift, su^^Ltion, 1- idvance 

byanypers^ ii ii 

1. 

^ • e prov 

^n the usual 

IE 100.S2(a) 

Facts an dutii 

of the I pg period; 

d for the cal^MM year; 

period and for thi^alendar 

A (Itemized Receipts) or 

1), (2), (3), (4) and (5). 

ice or deposit of money, 

if moii^ or anything of value made 

ng any election for Federal office is a 

hd contributions, 

or serviCdSf^thout charge or at a charge that is less 

; for such goods or services is a contribution. 11 

sis 

A. Facts 

During audit field parison of RPOC's reported financial activity with its bank 

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

The following chart details the discrepancies between RPOC's disclosure repoits and its 

bank records. Succeeding paragraphs explain why the discrepancies occurred. 
2009 Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand 

® January 1,2009 $6,092 $6,092 $0 

Receipts $311,572 $328,992 ($17,420) 

Understated 

Disbursements $303,419 $320,839 ($17,420) 

Understated 

Ending Cash-on-Hand 

@ December 31,2009 $14,245 ,245 $0 

The understatement of receipts resulted from the f 

• Under reporting of receipts -

• In-kind contribution, not reported as ipt 

• In-kind rent for December, not re; a receipt 

• Duplicate reported receipt (in-kim ution) 

• Unexplained difference 

Net Understatement of! 

The understatement of disburse fro 

• In-kind contribution, not 

• Disburse] )orted 

• In-kind n er, nc ^ 

• Disburse! vei j^ed 

• Duplicate ed dis^^ement ( 

Net Und(i-• imm Hi-i-ni41 inmSf 

owing. 

m 

tntribution) 

$ 10,000 

9,382 

3,904 

(866) 

(5,000) 

$ 17.42Q 

B. lull 11 %ii-lii A \M-iii l>i* 1 i>^ •{•• •mmendation 

A1 <it conferei^^ roviS DCs treasurer with workpapers 

de e misstateiTOi 'er asked general questions regarding the 

reporti rements. 

The Interim i^UReport mmended that RPOC amend its disclosure reports to 

correct the miss^^ receipts and disbursements for 2009. 

C. Committee Re^l interim Audit Report 

In response to the Interim Audit Report recommendation, RPOC amended its reports to 

materially correct the misstatements. 

^ This was a partial payment for a fiindraising event. 

* RPOC originally reported this as a loan and repayment. It was later reported as an in-kind contribution. 
Finding 2. Reporting of Debts and Obligations 

Summary 

Audit fieldwork indicated that RPOC failed to report debts and obligations for 12 vendors 

totaling $60,296 on Schedule D (Debts and Obligations). In response to the Interim 

Audit Report recommendation, RPOC amended its reports to materially include these 

debts and obligations. 

Legal Standard 

A. Continuous Reporting Required. A political committee must disclose the amount 

and nature of outstanding debts and obligations until tho! " > are extinguished. 

2 U.S.C. §434(b)(8) and 11 CFR §§ 104.3(d) and 104. 

B. Separate Schedules. A political committee mi 

owed by and to the committee with a statemc 

conditions under which each debt and obi 

11 CFR §104.11 (a). 

schedules for debts 

)iaining ti^^Kumstances and 

as incurred^ uished. 

C. Itemizing Debts and Obligations. 

Once it has been outstanding^O days fro 

must be reported on the m 

A debt exceeding $500 must 

the debt was incurred. 11 CFR 

iv scheduli 

i in the 

ed, a debt of^lO or less 

1 covers the date on which 

Facts and 

A. Facts 

During audU fieldw( 

repor 

to l^^dors 1 

$4^^ro was inci 

perio^nd remained oi 

noted fl^^OC did dis 

period. Hosier, the debt 

in the debt ai^ porte 

lit pern 

sbt^ 

unts ic 

disbursement records and disclosure 

This review identified debts owed 

report on Schedule D. Of these debts, 

1,660 was incurred prior to the audit 

the beginning of the audit period. It should be 

to some of these vendors during the audit 

itified by the Audit staff above were not included 

B. Interim And l< p-1 • .\ \udit Division Recommendation 

At the exit conferenc . ^ dit staff discussed the reporting of debts and obligations 

with RPOC's treasurer and provided schedules detailing the transactions requiring 

disclosure. The treasurer had no comments on this matter. 

The Interim Audit Report recommended that RPOC amend its disclosure reports to 

correctly include debts and obligations of $60,296 on Schedule D. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, RPOC amended its reports to 

materially include these debts and obligations. In addition, RPOC stated that it has 

tightened procedures for reporting accounts payable. RPOC also added that staff and 
board members have been informed that all its obligations need to be reported to the 

treasurer at the time they are incurred. 

Finding 3. Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff determined that RPOC did not maintain monthly 

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

federal election activity. For 2009 and 2010, the amoimt of payroll for which logs were 

required was $187,281. RPOC reported these payroll disbursements as allocated between 

federal and non-federal funds. 

After audit fieldwork, RPOC provided an affidavit thM the time spent on federal 

election activities for each of its employees. In res^pj; le Interim Audit Report 

recommendation, RPOC stated that, for all fu ' ^rolls, if^ aintain monthly 

payroll logs and document the percentage ach employ . on federal and 

non-federal election activity. ^ 

Legal Standard 

Maintenance of Monthly Log> 

percentage of time each employ 

Allocations of salaries, wages,: 

• Employees who spend 25 

. month on ff 

or be allocai 

• Employi 

month on 

• Emnlovees w 

'commi 

in conne« 

lefits i 

it 01 

on actives m 

istrativi 

than 

lecti activities 

ir ci 

in. 

p a monthly 1 f the 

/ith a federal election, 

idertaken as follows: 

sated time in a given 

•itl gpm the federal account 

time in a given 

paid only from a federal account; and, 

isated time in a given month on 

dy with funds that comply with State 

Fill-Is .iKif Analysis 

A. Facta 

During fie 

RPOC did not 

percentage of time 

These logs are requ: 

aff reviewed payroll disbursements totaling $187,281.^ 

inthly payroll logs or equivalent records to document the 

yee spent in connection with federal election activity, 

jment the proper allocation of federal and non-federal 

funds used to pay employee salaries and wages. This entire amount ($187,281) 

represents payroll disbursements allocated between federal and non-federal funds during 

the audit period. RPOC had no employees paid exclusively from a non-federal account. 

RPOC's staffing consisted of eight individuals all of whom were hired via an 

employment company. In its reports, RPOC disclosed the purpose of the payroll 

expenditures as "Leased Employees." In addition, RPOC included a statement in its 

^ This total does not include payroll for employees paid with 100 percent federal funds (see Part I, 

Background, Commission Guidance, Request for Early Commission Consideration of a Legal Question, 

page 1). 
reports noting that the time spent on federal election activity and federal campaigns was 

tracked on a monthly basis and no employee spent 25 percent or more of their 

compensated time on federal election activity. RPOC did not maintain a monthly time 

log to support its statement above and as required by 11 CFR § 106.7(d)(1). 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference and during audit fieldwork, the Audit staff discussed the payroll 

recordkeeping matter with RPOC's treasurer. At the exit conference, the treasurer 

provided an affidavit from RPOC's chairman that listed the time spent on federal election 

activities for its employees. This document, however, did not resolve the recordkeeping 

finding because RPOC provided the affidavit only after Jtified of the 

recordkeeping requirement during the audit. 

The Interim Audit Report recommended that, for. 

plan to maintain monthly payroll logs to tra 

spends on federal election activity. 

C. Committee Response to Interim Audii iti |-ort 

In response to the Interim Audit Report rec • 

payrolls, it will maintain monthb logs ats 

employee spends on federal and| ral elect 

document the amount of hours sj I ai 

semi-monthly basis in a spreadsl 

'rolls, RPOC implement a 

le each employee 

~*^0C stai for all future 

^the percenta^^time each 

ty. RPOC stated mat it will 

ral election activity on a 

Finding 4. I'sr iil l.fvin I'liml Tr.iiiv|i-is 

Summary 

During audit fieldwo^ 

$7 

vo 

fei icounts, ^ 

11 ^00.31(a), 

expend^^m. Inrespon 

disclosed^ > on Sch 

Levin accoui 

vm tivity determined that RPOC received 

/in account for reimbursement of 

C tl $73,465 fi:om its Levin account to its 

^ for voti .tration expenses. In accordance with 

'?^^nded must be raised solely by the committee that 

le Audit Report recommendation, RPOC 

D of it^013 November monthly report as a debt to its 

Legal Standard ^ 

A. Expending of Lei^i^ nn 1 . Levin funds expended or disbursed by any State, 

district or local committee must be raised solely by the committee that expends or 

disburses them. Consequently, funds from national party committees, other State, district 

and local committees and Federal candidates or officeholders, may not be accepted as 

Levin funds. 11 CFR §§300.31(a) and 300.34(b). This includes any entity directly or 

indirectly established, financed, maintained or controlled by any national. State, district 

or local committee of a political party. 2 U.S.C. §441i(b)(2)(B)(iv). 

B. Levin Fund Transfers. A State, district, or local committee of a political party must 

not use any Federal funds transferred to it from or otherwise accepted by it from any 

other State, district, or local committee as the Federal component of an expenditure or 
10 

disbursement for Federal election activity under 11 CFR §300.32. A State, district, or 

local committee of a political party must itself raise the Federal component of an 

expenditure or disbursement allocated between federal funds and Levin funds under 11 

CFR §§300.32 and 300.33. 11 CFR §300.34(a). 

Levin funds must be raised solely by the State, district, or local committee of a political 

party that expends or disburses the funds. A State, district, or local committee of a 

political party must not use as Levin funds any funds transferred or otherwise provided to 

the committee by any State, district, or local committee of a political party of the national 

conunittee of any political party. 11 CFR §300.34(h). 

Facts and Analysis 

A. Facts 

During the audit period, RPOC made 23 transfe 

account to its federal accounts and reported i 

Levin Funds Received for Allocated Fe 

expended by RPOC® ($73,465) were recer^ 

Levin account, which transferred $74,132 to^ 

While there is no prohibition 

Levin fimds to local party commr 

local committees using flinds trans 

or Levin shares of disbursements alld^ted bS 

RPOC did not m nent tl^-he Li 

conunittee that e ;s the 

^5, from its Levin 

on s^^ule H5 (Transfers of 

:tion Activity). « i he Levin funds 

)m the Califomia 1 an Party's 

s L( icount. 

1 

ty (CRP) transterring 

, there is a prohibition on 

imittee for either the federal 

in fiinds.^ As such, 

ised solely by the 

B. Interim Aud & iii-lit DIVIM-n ll> commendation 

Atl 

trea 

Thi 

id exi 

•m Au( 

exp- funds, 

refund it^ i account 

refund. 

'discussed this matter with RPOC's 

: this matter. 

led that^OC demonstrate that it solely raised the 

ionstration, it was recommended that RPOC 

federal account and provide evidence of this 

C. Committo ll 1 • rim Audit Report 

In response to the eport recommendation, RPOC added the Levin fund 

transfers ($73,465) to il^Shedule D on the 2013 November monthly report, as a debt 

owed to its Levin account.® 

However, RPOC contends that the Commission should not accept this finding. RPOC 

stated that it is a vendor to CRP and its agent in conducting voter registration activities in 

' RPOC had a beginning cash balance of S10 in its Levin account that was not transferred from the 

California Republican Party. 

^ This matter was addressed in a Request for Commission Directive 69 Guidance involving the Democratic 

State Central Committee of Califomia (LRA #819) dated April 22,2011. 

' As of April 30,2014, this amount remains outstanding on Schedule D and the reported cash-on-hand 

balance is $3,802. 
11 

Orange County. RPOC noted that it has operated under the CRP's "Operation Bounty" 

agreement by which RPOC is compensated by the CRP on the basis of valid Republican 

voter registrations it obtains and which the CRP verifies as valid voter registrations 

throughout each election cycle. RPOC stated that, for the 2010-2011 election cycle, this 

included registrations obtained outside the Federal Election Activity (PEA), Type 11^ 

period, as well as, registrations obtained during the PEA, Type II period. RJPOC stated 

that it received consideration in the form of payment per valid registration to defray its 

cost in obtaining, processing, verifying and submitting the voter registrations to CRP 

through the Operation Bounty program. RPOC contends that without the Operation 

Bounty reimbursement, it would be less likely and able to conduct effective voter 

registrations using the volunteer resources of Republican vgj^teer organizations, groups 

and activists. Further, RPOC stated that the Operat ^program is a bona fide 

party building program, which engages Republican : groups and individual 

Republican activists in voter outreach, voter comrm md spreading the 

Republican identification and brand in the comm^itj. n luilmer added that if the CRP 

was not able to utilize the RPOC as its a{ '^bndor, CRP^^}d have to seek 

alternatives, such as commercial vendors i^o not offer the^ ral party building 

benefits that the RPOC-CRP relationship ites. 

RPOC contests whether this frm 

statutory and constitutional groi 

non-federal funds transferred by 

reimburse it's federal account for 

outside the PEA, 1 

§300.32(b)(l)(i). -

prohibited from 

political party us' 

period under 11 C 

ivin 

should be a] 

OC Stat 

or di; 

i 

irth uf 

ic 

n acti 

; Commissiomon both 

not prohibited ^m using 

ittee of a political party to 

registration conducted 

ion 11 CPR 

ilitical party is not 

or district committee of a 

during the PEA, Type II 

irsf 

In I 

fun - ainedii 

age . w. Alt 

U.S- - : J (2)(iv)(: 

protectiomi e of the P 

RPOC beli j|^is would 

engaging in vo^^gistrati 

with its contract 

to other vendors that 

funds. 

|hould allow it to accept and use Levin 

)ugh^^^tion Bounty as a matter of contract and 

so noted that the Commission should not enforce 2 

suse it^|s such enforcement would violate the equal 

lent to the United States Constitution, 

linate against a political party and its members for 

ilitical activity using Levin funds received in coimection 

RPOC further added that such a decision would not apply 

: to engage in voter registration activity payable with Levin 

' The Audit staff believes RPOC is actually referring to FEA, Type I. These are voter registration 

activities conducted by a state or local political party committee within a period starting 120 days before 

the date of a scheduled federal election and ending on the date of the election. The FEA, Type I periods 

were 2/08/10 -6/08/10 for the 2010 CA Primary election and 7/05/10- 11/02/10 for the 2010 General 

election. 
12 

RPOC stated that guidance provided by the Commission's Reports Analysis Division and 

the CRP Final Audit Report of the Commission both confirm payments to local 

committees for voter registration activities were within the statute and the regulations. 

The Audit staff does not dispute this fact. CRP transferred Levin funds to RPOC, which 

is not prohibited by the Act. However, RPOC used the transferred funds for Type I PEA 

- voter registration activities, which is not permitted under 11 CFR §300.31(a). This is 

the distinction between the activities performed by these two committees. 

Based on the above, the Audit staff considers that RPOC improperly spent $73,465 on 

Type IFEA - voter registration activities using Levin funds transferred from CRP.