Interim Audit Report of the Audit 

Division on the Nebraska 

Democratic 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 

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 Nebraska Democratic Party is a state party committee 

headquartered in Lincoln, Nebraska. For more information, see the 

chart on the Committee Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Political Committees 

o Transfers from Affiliates 

o Transfers from Non-federal Accounts 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Other Federal Expenditures 

o Federal Election Activity 

o Transfers to Affiliates 

o Coordinated Expenditures 

o Independent Expenditures 

o Other Disbursements 

Total Disbursements 

Findings and Recommendations (p. 3) 

• Recordkeeping for Employees (Finding 1) 

• Reporting of Debts and Obligations (Finding 2) 

• Excessive Coordinated Party Expenditures (Finding 3) 

$ 218,270 

24,202 

1,682,699 

344,901 

185,066 

S 2,455,138 

$ 540,126 

129,323 

1,490,477 

138,967 

114,788 

12,475 

35,174 

S 2,461,330 

2 U.S.C. §438(b). 
Interim Audit Report of 

the Audit Division on the 

Nebraska Democratic Party 

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

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit I 

Commission Guidance 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 I. Recordkeeping for Employees 4 

Finding 2. Reporting of Debts and Obligations S 

Findings. Excessive Coordinated Party Expenditures 6 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Nebraska Democratic Party^ (NOP), 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 Aa). 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 internal 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 disclosure of individual contributors' occupation and name of employer; 

2. the disclosure of disbursements, debts and obligations; 

3. the disclosure of expenses allocated between federal and non-federal accounts; 

4. the consistency between reported figures and bank records; 

5. the disclosure of independent and coordinated expenditures; 

6. the completeness of records; and 

7. other committee operations necessary to the review. 

Commission Guidance 

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," NDP requested early consideration of a question 

raised during the audit. NDP questioned whether the monthly time logs required under 

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

The Commission concluded, by a vote of S-l, that 11 CFR § 106.7(d)(1) 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 NDP Counsel of the Commission's decision on NDP's request. 

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

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

' The committee's name during the audit period was the Nebraska Democratic State Central Committee 

and was changed subsequently on April 4,2012. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration Decembers, 1975 

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

Headquarters Lincoln, Nebraska 

Bank Information 

• Bank Depositories One 

• Bank Accounts Five Federal and Two Non-federal 

Checking Accounts 

Treasurer 

• Treasurer When Audit Was Conducted Gerry Finnegan 

• Treasurer During Period Covered by Audit Gerry Finnegan 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and Recordkeeping 

Tasks 

Paid Staff 

Overview of Financial Activity 

Cash-on-hand ® January 1,2009 S 63,195 

Receipts 

o Contributions from Individuals 218.270 

o Contributions from Political Committees 24,202 

o Transfers from Affiliates 1,682.699 

o Transfers from Non-federal Accounts 344,901 

o Other Receipts 185,066 

Total Receipts S 2.455,138 

Disbursements 

o Operating Expenditures 540,126 

o Other Federal Expenditures 129,323 

o Federal Election Activity 1,490,477 

o Transfers to Affiliates 138,967 

o Coordinated Expenditures 114,788 

o Independent Expenditures 12.475 

o Other Disbursements 35,174 

Total Disbursements S 2,461,330 

Cash-on-hand @ December 31,2010 S 57,003 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Recordkeeping for Employees 

During audit fieldwork, the Audit staff noted that NDP 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 $293,439. This consisted of $282,882, for which payroll was allocated between 

federal and non-federal funds, and $10,SS7 that was paid exclusively with non-federal 

funds. For NDP employees paid with an allocation of federal and non-federal funds 

and/or non-federal funds, the Audit staff recommends that NDP 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. 4.) 

Finding 2. Reporting of Debts and Obligations 

During audit fieldwork, the Audit staff noted that NDP had failed to correctly disclose 

debts and obligations totaling $120,447. The Audit staff recommends that, absent 

documentation demonstrating that these expenditures did not require reporting on 

Schedule D (Debts and Obligations), NDP amend its disclosure reports to disclose these 

debts properly. 

(For more detail, see p. S.) 

Finding 3. Excessive Coordinated Party Expenditures 

During audit fieldwork, the Audit staff identified coordinated party expenditures made by 

NDP for a House candidate that appear to exceed the 2010 coordinated party expenditure 

limitation by $34,789. The Audit staff recommends that NDP provide evidence 

demonstrating it did not exceed the coordinated party expenditure limit. 

(For more detail, see p. 7.) 
Part IV 

Findings and Recommendations 

I Finding 1. Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff noted that NDP 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 $293,439. This consisted of $282,882, for which payroll was allocated between 

federal and non-federal funds, and $10,SS7 that was paid exclusively with non-federal 

funds. For NDP employees paid with an allocation of federal and non-federal funds 

and/or non-federal funds, the Audit staff recommends that NDP 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 are to be undertaken as follows: 

• Employees who spend 2S% 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% of their compensated time in a given 

month on federal election must be paid only from a federal account. 

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

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

law. 11 CFR§ 106.7(d)(1). 

Facts and Analysis 

A. Facts 

During fieldwork, the Audit staff reviewed disbursements NDP made to employees, 

totaling $293,439^ for which monthly logs were not provided to document the percentage 

of time the employee spent in connection with federal election activity.^ These logs are 

required to document proper allocation of federal and non-federal funds used to pay these 

workers. The total of $293,439 consisted of $282,882, for which payroll was allocated 

between federal and non-federal funds, and $10,557 that was paid exclusively with nonfederal'funds. 

' Payroll Is stated net of taxes. 

* Payments to NDP employees paid with 100 percent federal funds and reported as such are not included in 

this finding. (See Background Section - Request for Early Consideration of a Legal Question.) 
As part of fieldwork, the Audit staff provided NDP with a schedule of employees with an 

allocation of federal and non-federal funds for which a log was required. An NDP 

representative completed this schedule by inserting the percentage of time each employee 

spent in connection with federal election activity and provided a signed affidavit in which 

a NDP representative attested to the accuracy of the information provided. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed the recordkeeping issue with NDP 

representatives. They asked whether the schedule and the affidavit they had provided 

would resolve the recordkeeping finding. The Audit staff explained that because NDP 

did not create and maintain ^ese documents prior to the audit notification letter, but 

instead prepared them during fieldwork, the issue would be included in the interim audit 

report. 

For NDP employees that were paid exclusively with non-federal funds or with an 

allocation of federal and non-federal funds, the Audit staff recommends that, within 30 

calendar days of service of this report, NDP: 

• provide evidence that it maintained monthly time logs to document how much 

time the employee spent on federal election activity; or 

• implement a plan to maintain monthly payroll logs to track the percentage of time 

each employee spends on federal election activity. 

Finding 2. Reporting of Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff noted that NDP had failed to correctly disclose 

debts and obligations totaling $120,447. The Audit staff recommends that, absent 

documentation demonstrating that these expenditures did not require reporting on 

Schedule D (Debts and Obligations), NDP amend its disclosure reports to disclose these 

debts properly. 

Legal Standard 

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

and nature of outstanding debts and obligations until those debts are extinguished. 

2 U.S.C. §434(b)(8) and 11 CFR §§ 104.3(d) and 104.11(a). 

B. Separate Schedules. A political committee must file separate schedules for debts 

owed by and to the committee with a statement explaining the circumstances and 

conditions under which each debt and obligation was incurred or extinguished. 

11 CFR §104.11(a). 

C. Itemizing Debts and Obligations. 

• Once it has been outstanding 60 days from the date incurred, a debt of SSOO or 

less must be reported on the next regularly scheduled report. 

• A debt exceeding SSOO must be disclosed in the report that covers the date on 

which the debt was incurred, except reoccurring administrative expenses (such as 
rent) shall not be reported as a debt before the payment due date. 

11 CFR§ 104.11(b). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff used available disbursement records to reconcile 

the accounts^ of NDP's 11 largest vendors. These vendors provided NOP mainly with 

services such as office space, phone bank, printing, and compliance services. 

The Audit staff reviewed the vendors' invoiced amounts and identified unreported debts 

and obligations, totaling $105,447, owed to 10 of its vendors. Included in this balance 

were payments totaling $4,500 for office space that NDP made more than 30 days late 

throughout the audit period. Regularly reoccurring administrative expenses such as rent 

are reportable as debts if payment is not made by the due date. 

In addition to the unreported debts discussed above, NDP incorrectly reported debt 

amounts owed to one vendor. The under-reported debts total $19,500^ for the audit 

period. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff presented this matter to NDP representatives at the exit conference and 

provided schedules detailing the unreported and under-reported debts for each reporting 

period for the audited cycle. NDP representatives objected to the inclusion of rent, a 

regularly recurring obligation, appearing on the debt schedule. The Audit staff 

acknowledged that regularly occurring administrative expenses are not debt reportable as 

long as they are paid by the due date; however, NDP had consistently paid its rent more 

than 30 days after the payment was due. 

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

provide documentation demonstrating that these expenditures did not require reporting on 

Schedule D. Absent such documentation, the Audit staff recommends that NDP amend 

its reports to disclose the outstanding debts. 

Finding 3. Excessive Coordinated Party Expenditures 

Summary 

During audit fieldwork, the Audit staff identified coordinated party expenditures made by 

NDP for a House candidate that appear to exceed the 2010 coordinated party expenditure 

^ The reconciliation consisted of calculating invoiced and paid amounts for individual reporting periods in 

the 2009-2010 campaign cycle. The Audit staff then determined whether any outstanding debts were 

correctly disclosed on Schedule D. Each debt amount was counted once, even if it required disclosure over 

multiple reporting periods. 

* The total amount of reportable debt to this vendor was S34,S00. NDP reported only $ 15,000 on its 2009 

and 2010 disclosure reports. The underpayment was calculated as follows: S34.500 - S15,000 = S19,S00. 
limitation by $34,789. The Audit staff recommends that NDP provide evidence 

demonstrating it did not exceed the coordinated party expenditure limit. 

Legal Standard 

A. Coordinated Party Expenditures. National party committees and state party 

committees are permitted to purchase goods and services on behalf of candidates in the 

general election—over and above the contributions that are subject to contribution limits. 

Such purchases are referred to as "coordinated party expenditures." They are subject to 

the following rules: 

• The amount spent on "coordinated party expenditures" is limited by statutory 

formulas that are based on the Cost of Living Adjustment (COLA) and the voting 

age population; 

• Party committees are permitted to coordinate the spending with the candidate 

committees; 

• The parties may make these expenditures only in connection with the general 

election; 

• The party committees—not the candidates—are responsible for reporting these 

expenditures; and 

• If the party committee exceeds the limits on coordinated party expenditures, the 

excess amount is considered an in-kind contribution, subject to the contribution 

limits. 2 U.S.C. §441a(d) and 11 CFR §§109.30 and 109.32. 

B. Assignment of Coordinated Party Expenditure Limit. A political party may 

assign its authority to make coordinated party expenditures to another political party 

committee. Such an assignment must be made in writing, state the amount of the 

authority assigned, and be received by the assignee before any coordinated party 

expenditure is made pursuant to the assignment. The political party committee that is 

assigned authority to make coordinated party expenditures must maintain the written 

assignment for at least three years. 11 CFR §§104.14 and 109.33(a) and (c). 

C. Volunteer Activity. The payment by a state committee of a political party of the costs 

of campaign materials (such as pins, bumper stickers, handbills, brochures, posters, party 

tabloids or newsletters, and yard signs) used by such committee in connection with 

volunteer activities on behalf of any nominee(s) of such party is not a contribution, 

provided that the following conditions are met: 

1. Such payment is not for cost incurred in connection with any broadcasting, 

newspaper, magazine, bill board, direct mail, or similar type of general public 

communication or political advertising. The term direct mail means any 

mailing(s) by a commercial vendor or any mailing(s) made from commercial lists. 

2. The portion of the cost of such materials allocable to Federal candidates must be 

paid from contributions subject to the limitations and prohibitions of the Act. 

3. Such payment is not made from contributions designated by the donor to be spent 

on behalf of a particular candidate for Federal office. 

4. Such materials are distributed by volunteers and not by commercial or for-profit 

operations. 
5. If made by a political committee, such payments shall be reported by the political 

committee as a disbursement in accordance with 11 CFR §104.3 but need not be 

allocated to specific candidates in committee reports. 

6. The exemption is not applicable to campaign materials purchased by the national 

party committees. 11 CFR §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR 

§100.147 (a), (b). (c). (d). (e) and (g). 

D. Limits on Contributions Made by State and Local Party Committees. 

State and local party committees must comply with the contribution limits below: 

• $5,000 per election to a Federal campaign if the contributing committee has 

qualified as a multicandidate committee (see below); 

• $2,400 per election to a Federal campaign if the contributing committee has 

not qualified as a multicandidate committee; 

• $5,000 per year to a separate segregated fund (corporate or labor political 

action committee) or a non-connected committee; and 

• unlimited transfers to other party committees. 2 U.S.C. §441a(a). 

Facts and Analysis 

A. Facts 

The coordinated expenditure limit for the 2010 election cycle for a House candidate in 

the state of Nebraslu was $43,500 each for the state and national party committees. 

During audit fieldwork, the Audit staff reviewed the correspondence between NDP and 

the Democratic Congressional Campaign Committee (DCCC) that addressed the 

coordinated expenditures. On May 25,2010, NDP transferred its entire coordinated 

spending limit to DCCC. This permitted DCCC to make coordinated expenditures of 

$87,000 on behalf of Tom White, Democratic candidate for the United States House of 

Representatives from Nebraska's 2"^ Congressional District (the candidate). Additional 

documentation indicated that DCCC authorized NDP to spend no more than $80,000 of 

its coordinated party spending limit on behalf of the candidate. ^ 

The Audit staffs review of disbursements indicated that NDP appeared to make 

coordinated expenditures on behalf of the Candidate that totaled $114,789, as outlined 

below. 

• NDP reported three media-related expenditures totaling $85,174 as coordinated 

expenditures on behalf of the candidate. Specifically, NDP spent $80,000 on a 

media ad in opposition to the candidate's opponent, $4,596 on production of a 

candidate postcard, and $578 for campaign signage. 

• After the coordinated spending limit was established, NDP reported two 

additional disbursements, totaling $29,615, for "generic GOTV ("Get Out the 

Vote") calls" as federal election activity on its disclosure reports. The scripts 

provided by the vendor seem to indicate there was possible coordination with the 

candidate's committee since the scripts contained the message to vote for the 

^ DCCC filings disclosed additional candidate expenditure in the amount of S3S3, leaving DCCC with an 

unused coordinated limit of $6,647; ($87,000 - $80,000 - $353.) 
candidate and included a disclaimer that the message was paid for by NDP and 

authorized by the candidate. 

In addition to the expenditures discussed above, NDP spent $94,610 to produce a single 

mailer on behalf of ^e candidate. This amount consisted of the following components: 

layout and production ($92,610) and postage ($2,000). NDP considered the cost of the 

entire mailer to be an exempt activity under the volunteer materials exemption. To 

support its assertion, NDP provided vendor statements and invoices along with 

photographs of the volunteers participating in various duties such as reviewing, sorting, 

and packing the direct mail pieces. 

The Commission has addressed the applicability of the volunteer materials exemption in 

the Final Audit Reports of the Democratic Executive Committee of Florida and the 

Tennessee Republican Party. In these reports, the Commission recognized a lack of 

clarity regarding the application of the volunteer materials exemption. In recognizing the 

lack of clarity, the Commission has attempted to formulate a consensus policy regarding 

what constitutes substantial volunteer involvement for the purpose of applying the 

exemption.^ 

In view of the uncertainty regarding the amount of volunteer involvement needed to 

qualify for the volunteer materials exemption, as well as the amount of documentation 

required to support such an exemption, the expenditures for the mailer totaling $94,610 

have not been attributed to NDP*s coordinated expenditure limit. 

In conclusion, the Audit staff determined that NDP spent $I 14,789 on coordinated 

expenditures and exceeded its authorized coordinated party expenditure limit by 

$34,789.' As a result, these expenditures are considered an excessive in-kind 

contribution to the candidate. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter at the exit conference and provided schedules 

detailing the possible excessive in-kind contributions NDP made on behalf of the 

candidate. In response, NDP representatives stated their belief that some of the amounts 

reported on Schedule F (Itemized Coordinated Party Expenditures) might not actually 

have been coordinated expenditures. 

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

provide additional documentation demonstrating that it did not exceed the coordinated 

party expenditure limitation for the candidate. 

' Proposed Interim Enforcement Policy, Open Session Agenda document No. 10-16 dated March 10,2010, 

Drafts A through D. 

' The amount over the limit was calculated as follows: Total spent by NDP less amount authorized by 

DCCC: SI 14,789 - $80,000=S34,789. NDP made and reported the maximum allowable contribution to the 

candidate during the 2010 election cycle. 

The authorized committee of Tom White was approved for administrative termination on May 10,2011. 

Therefore, a recommendation to seek refond from the candidate committee is not warranted.