Interim Audit Report of the 

Audit Division on the Mississippi 

Democratic Party Political 

Action Committee 

(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 

requirements for 

substantial compliance 

with the Act.' The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Committee (p. 2) 

The Mississippi Democratic Party Political Action Committee is 

a state party committee headquartered in Jackson, Mississippi. 

For more information, see the chart on the committee 

organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

• Contributions from Individuals 

• Contributions from Other 

Political Committees 

• Transfers from Affiliated/Other 

Party Committees 

• Transfers from Non-federal 

Account 

• Other Receipts 

Total Receipts 

• Disbursements 

• Operating Disbursements 

• Other Disbursements 

Total Disbursements 

$ 153,038 

30,550 

568,534 

88,144 

951 

$841,217 

$ 437,223 

389,693 

$ 826,916 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Disclosure of Disbursements (Finding 2) 

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

• Recordkeeping for Payroll (Finding 4) 

2 U.S.C. S438(b). 
Interim Audit Report of the Audit 

Division on the Mississippi 

Democratic Party Political Action 

Committee 

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

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Request for Early Commission Consideration of a Legal Question 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Findings and Recommendations 3 

Part IV. Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 4 

Finding 2. Disclosure of Disbursements 6 

Finding 3. Disclosure of Occupation/Name of Employer 7 

Finding 4. Recordkeeping for Payroll 9 
Part I 

Background 

Authority for Audit 

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

Committee (MDP), undertaken by the Audit Division of the Federal Election 

Commission (the Commission) in accordance with the Federal Election Campaign Act of 

1971, as amended (the Act). The Audit Division conducted the audit pursuant to 2 

U.S.C. §438(b), which permits the Commission to conduct audits and field investigations 

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

conducting any audit under this subsection, the Commission must perform an intemal 

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

particular committee meet the threshold requirements for substantial compliance with the 

Act. 2 U.S.C. §438(b). 

Scope of Audit 

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

factors and as a result, this audit examined: 

1. the receipt of contributions from prohibited sources; 

2. the disclosure of individual contributors' occupation and name of employer; 

3. the consistency between reported figures and bank records; 

4. the disclosure of disbursements, debts, and obligations; 

5. the completeness of records; and 

6. other committee operations necessary to the review. 

Request for Early Commission Consideration of a Legal 

Question 

Pursuant to the "Policy Statement Establishing a Program for Requesting Consideration 

of Legal Questions by the Commission," MDP requested early consideration of a legal 

question raised during the audit. MDP questioned whether the monthly time logs 

required under 11 CFR § 106.7(d)(1) applied to employees paid with 100 percent federal 

fiinds (See Finding 4.) 

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

committees to keep a monthly log for employees paid exclusively with federal funds. 

Exercising its prosecutorial discretion, however, the Commission will not pursue 

recordkeeping violations for the failure to keep time logs or to provide affidavits to 

account for employee salaries paid with 100 percent federal funds and reported as such. 

The Audit staff informed MDP Counsel of the Commission's decision on MDP's request. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration Februarys, 1982 

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

Headquarters Jackson, Mississippi 

Bank Information 

• Bank Depositories One 

• Bank Accounts Six federal and one non-federal 

Treasurer 

• Treasurer When Audit Was Conducted Melton Harris 

• Treasurer During Period Covered by Audit Audrey Scale 

Management Information 

• Attended the Commission Campaign 

Finance Seminar 

No 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand ® January 1,2009 $(10,177)' 

Receipts 

o Contributions from Individuals 153,038 

o Contributions from Other Political 

Committees 

30,550 

o Transfers from Affiliated/Other Party 

Committees 

568,534 

o Transfers from Non-federal Account 88,144 

o Other Receipts 951 

Total Receipts $841,217 

o Disbursements 

o Operating Disbursements 437,223 

o Other Disbursements 389,693 

Total Disbursements $826,916 

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

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

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

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

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

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

The Audit staff recommends that MDP amend its disclosure reports to correct these 

misstatements. 

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

Specifically, MDP's original reports understated receipts by $221,646 in 2010. MDP did 

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

activity for 2010. The Audit staff recommends that MDP provide any additional 

information or written comments that it considers relevant to the matter. 

(For more detail, see p. 4.) 

Finding 2. Disclosure of Disbursements 

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

disbursements totaling $361,109 with missing payee addresses. The Audit staff 

recommends that MDP file amended reports to include this information. 

(For more detail, see p. 6.) 

Finding 3. Disclosure of Occupation/Name of Employer 

A review of all contributions from individuals requiring itemization indicated that 73 

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

Furthermore, "best efforts" to obtain, maintain and submit information had not been 

sufficiently documented for these contributions. 

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

efforts to obtain, maintain and submit the required contributor information or amend its 

reports to disclose the new occupation and/or name of employer information. 

(For more detail, see p. 7.) 

Finding 4. Recordkeeping for Payroll 

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

monthly payroll logs, as required, for the percentage of time each employee spent on 

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

required was $138,741. Absent provision of any monthly payroll logs, the Audit staff 

recommends that MDP implement a plan to maintain monthly payroll logs to track the 

percentage of time each employee spends on federal election activity. 

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

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity 

Summary 

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

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

The Audit staff recommends that MDP amend its disclosure reports to correct these 

misstatements. 

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

Specifically, MDP's original reports understated receipts by $221,646 in 2010. MDP did 

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

activity for 2010. The Audit staff recommends that MDP provide any additional 

information or written comments that it considers relevant to the matter. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• the amount of cash-on-hand at the beginning and end of the reporting period; 

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

• the total amount of disbursements for the reporting period and for the calendar 

year; and 

• certain transactions that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 2 U.S.C. §434(b) (1), (2), (3), (4) and (5). 

Facts and Analysis 

A. Misstatement of Financial Activity - 2009 

1. Facts 

The Audit staff reconciled MDP*s reported activity with its bank records and 

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

The following chart details the discrepancies and succeeding paragraphs explain the 

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

prior-period discrepancies. 

2009 Activity 

Reported^ Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2009 

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

Overstated 

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

Understated 

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

Understated 

Ending Cash Balance 

@ December 31,2009 

$46,366 $477 $45,889 

Overstated 

The understatement of receipts was the result of the following: 

• Receipts not reported $ 8,607 

• Transfer from the non-federal account not reported 6,803 

• Transfer from the non-federal account reported twice (6,747) 

• Over-reported receipts (1,080) 

• Unexplained difference (297) 

Net Understatement of Receipts $ 7.286 

The understatement of disbursements was the result of the following: 

• Disbursements not reported $ 25,780 

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

• Unexplained difference (112) 

Net Understatement of Disbursements $ 24 533 

The $45,889 overstatement of the ending cash balance was the result of the reporting 

discrepancies noted above. 

2. Interim Audit Report & Audit Division Recommendation 

The misstatement of financial activity was discussed at the exit conference and the 

Audit staff provided relevant schedules detailing the transactions. MDP 

representatives acknowledged the discrepancies in the reports and indicated that 

corrective amendments would be filed. 

The Audit staff recommends that, within 30 calendar days of service of this report, 

MDP: 

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

• amend its most recently filed 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 on its most recent report to identify any 

This column does not total because MDP amended Ending Cash Balance on its 2008 Year-end Report but 

did not carry forward this adjustment on subsequent reports. 
subsequent discrepancies that may impact the $45,889 adjustment 

recommended by the Audit staff. 

B. Misstatement of Financial Activity - Increased Activity 

1. Facts 

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

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

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

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

includes the $7,286 understatement of receipts from 2009 in Section A (Misstatement 

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

largely due to MDP not reporting transfers from the national party committee on its 

original reports totaling $198,597. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the misstatements for 2009 and 2010 with MDP 

representatives during the exit conference. The Audit staff recommends that, within 

30 calendar days of service of this report, MDP submit any additional information or 

written comments it considers relevant to the matter. 

Finding 2. Disclosure of Disbursements 

Summary 

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

disbursements totaling $361,109 with missing payee addresses. The Audit staff 

recommends that MDP file amended reports to include this information. 

Legal Standard 

Reporting Operating Expenditures. When operating expenditures to the same person 

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

• amount; 

• date when the expenditures were made; and 

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

Facts and Analysis 

A. Facts 

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

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

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

majority of these omitted addresses were for disbursements made in 2010. 
B. Interim Audit Report & Audit Division Recommendation 

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

subsequently provided them with a schedule of disbursements with missing payee 

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

disclose the missing addresses. The Audit staff recommends that, within 30 days of 

service of this report, MDP amend its reports to correct these omissions. 

Finding 3. Disclosure of Occupation/Name of Employer 

Summary 

A review of all contributions from individuals requiring itemization indicated that 73 

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

Furthermore, "best efforts" to obtain, maintain and submit information had not been 

sufficiently documented for these contributions. 

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

efforts to obtain, maintain and submit the required contributor information or amend its 

reports to disclose the new occupation and/or name of employer information. 

Legal Standard 

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

other than an authorized committee must itemize any contribution from an individual 

if it exceeds $200 per calendar year, either by itself or when combined with other 

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

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

contribution from an individual, the committee must provide the following 

information: 

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

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

• the date of receipt (the date the committee received the contribution); 

• the amount of the contribution; and 

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

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

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

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

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

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

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

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

the following criteria. 

• All written solicitations for contributions included: 
o a clear request for the contributors full name, mailing address, occupation, 

and name of employer; and 

o the statement that such reporting is required by federal law. 

• Within 30 days of receipt of the contribution, the treasurer made at least one 

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

documented oral request. 

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

provided by the contributor, was obtained in a follow-up communication or 

was contained in the committees' records or in prior reports that the 

committee filed during the same two-year cycle. 11 CFR § 104.7(b). 

Facts and Analsrsis 

A. Facts 

A review of itemized contributions from individuals indicated that 73 contributions 

totaling $17,426, or 52 percent of the dollar value of individual contributions required to 

be itemized by MDP, lacked disclosure of occupation and/or name of employer. During 

audit fieldwork, MDP provided no evidence showing that it had utilized "best efforts" to 

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

with missing information were either disclosed with the notation "Best Effort" or left 

blank on the Schedules A (Itemized Receipts) filed with the Commission. 

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

representatives responded that no policy was in effect during the period covered by the 

audit. The Audit staff provided MDP with a list of contributors for whom occupation 

and/or name of employer information was missing. MDP returned this list to the Audit 

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

contributors to obtain this information. MDP explained that MDP representatives had 

obtained the information from personal knowledge of the individuals and research on the 

intemet after receiving the list from the Audit staff To date, MDP has not filed amended 

Schedules A containing this new information. 

A. Interim Audit Report & Audit Division Recommendation 

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

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

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

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

contributions are accepted. 

The Audit staff recommends that, within 30 calendar days of service of this report, MDP 

provide documentation that it exercised best efforts during the audit period to obtain, 

maintain and submit the required contributor information. In addition, MDP should file 

amended Schedules A to disclose the contributor information obtained subsequent to 

audit fieldwork. 
I Finding 4. Recordkeeping for Payroll 

Summary 

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

monthly payroll logs, as required, for the percentage of time each employee spent on 

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

required was $138,741. Absent provision of any monthly payroll logs, the Audit staff 

recommends that MDP implement a plan to maintain monthly payroll logs to track the 

percentage of time each employee spends on federal election activity. 

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 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 be allocated as administrative costs; 

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

month on federal election activities must be paid only from a federal account; 

and 

• employees who spend none of their compensated time in a given month on 

federal election activities may be paid entirely with fiinds that comply with state 

law. 11 CFR § 106.7(d)(1). 

Facts and Analysis 

A. Facts 

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

maintain any monthly logs or equivalent records to document the percentage of time each 

employee spent in connection with federal election activity. These logs are required to 

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

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

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

and non-federal fiinds during the audit period. MDP had no employees paid with 

exclusively non-federal funds. 

B. Interim Audit Report & Audit Division Recommendation 

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

MDP representatives. An MDP representative responded that MDP had not located any 

payroll logs or other payroll documentation. 

Absent provision of any monthly logs, the Audit staff recommends that, within 30 

calendar days of service of this report, MDP provide and implement a plan to maintain 

such monthly payroll logs to track the percentage of time each employee spends in 

connection with a federal election. 

Payroll is stated net of taxes and benefits.