Final Audit Report on the Hawaii 

Democratic Party 

(January 1, 2011 - December 31, 2012) 

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. 3) 

The Hawaii Democratic Party^ is a state party committee 

headquartered in Honolulu, Hawaii. For more information, see 

the chart on the Committee organization, p. 3. 

Financial Activity^ (p. 4) 

• Receipts 

o Contributions from Individuals 

o Contributions from Party and 

Political Committees 

o Transfers from Affiliates 

o Loans Received 

o Transfers frqm Non-federal and 

Levin Funds 

o Other Receipts 

Total Receipts 

• . Disbursements 

o Operating Expenditures 

o Coordinated Party Expenditures 

o Loan Repayments Made 

o Refunds of Contributions 

o Other Disbursements 

o Federal Election Activity 

Total Disbursements 

• Levin Receipts 

• Levin Disbursements 

$ 190,885 

274,173 

116,387 

30,000 

122,196 

455,855 

SI,189,496 

$ 621,546 

129,725 

10,000 

20,052 

108,490 

272,159 

$1,161,972 

$23,564 

$23,564 

' 52 U.S.C. §30111(b). 

^ On October 4,2016, the Hawaii Democratic Party changed its name to the Democratic Party of Hawhii. 

^ The amounts shown on this page and on page four have been updated from the previous audit reports to reflect the 

removal of the Convention Account activity as reportable. (See Finding 1). 
Commission Findings (p. 5) 

• Misstatement of Financial Activity (Finding 1) 

• Receipt of Contributions that Exceed Limits (Finding 2) 

• Receipt of Apparent Impermissible Funds (Finding 3) 

• Reporting of Debts and Obligations (Finding 4) 

• Recordkeeping for Employees (Finding 5) 

• Failure to Properly Report Media Related Expenditures 

(Finding 6) 

• Allocation of Expenditures (Finding 7) 

Additional Issue (p. 39) 

Failure to Properly Report Media Related ExpendituresDissemination 
Final Audit Report of the 

Commission on the 

Hawaii Democratic Party 

(January 1, 2011 - December 31, 2012) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Commission Guidance 1 

Audit Hearing 2 

Part II. Overview of Committee 

Committee Organization 3 

Overviewof Financial Activity 4 

Part III. Summaries 

Coiiunission Findings 5 

Part IV. Commission Findings 

Finding I. Misstatement of Financial Activity 9 

Finding 2. Receipt of Contributions that Exceed Limits. 14 

Findings. Receipt of Apparent Impermissible Funds 16 

Finding 4. Reporting of Debts and Obligations 22 

Findings. Recordkeeping for Employees 25 

Finding 6. Failure to Properly Report Media Related Expenditures 27 

Finding?. Allocation of Expenditures 33 

Part V. Additional Issue 

Failure to Properly Report Media Related Expenditures- Dissemination 39 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Hawaii Democratic Party (HDP), 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 52 U.S.C. §30111(b), which permits the Commission to conduct audits and field 

investigations of any political committee that is required to file a report under 52 U.S.C. §30104. 

Prior to conducting any audit under this subsection, the Commission must perform an internal 

review of reports filed by selected committees to determine if the reports filed by a particular 

committee meet the threshold requirements for substantial compliance with the Act. 52 U.S.C. 

§30111(b). 

Scope of Audit 

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

as a result, this audit examined: 

1. the receipt of excessive contributions and loans; 

2. the receipt of contributions firom prohibited sources; 

3. the disclosure of contributions received; 

4. the disclosure of disbursements, debts and obligations; 

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

6. the consistency between reported figures and bank records; 

7. the completeness of records; 

8. the disclosure of independent expenditures; and 

9. other committee operations necessary to the review. 

Commission Guidance 

Request for Early Commission Consideration of a Legal Question 

Pursuant to the Commission's "Policy Statement Establishing a Program for Requesting 

Consideration of Legal Questions by the Commission," several state party committees 

unaffiliated with HDP requested early consideration of a legal question raised during audits 

covering the 2010 election cycle. Specifically, the Commission addressed whether monthly time 

logs under 11 CFR §106.7(d)(l) were required for employees paid with 100 percent federal 

funds. 

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

to keep a monthly log for employees paid exclusively with federal funds. 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. The Audit staff informed HDP 

representatives of the payroll requirement and the Commission's decision not to pursue 

recordkeeping violations for failure to keep payroll logs for salaries paid and correctly reported 
as 100 percent federal. This audit report does not include any findings or. recommendations with 

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

Audit Hearing 

HDP declined the opportunity for a hearing before the Commission on matters presented in this 

report. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration December 17,1986 

• Audit Coverage January 1,2011 - December 31,2012 

Headquarters Honolulu, Hawaii 

Bank Information 

e Bank Depositories One 

e Bank Accounts Four Federal and Three Non-Federal 

Treasurer 

• Treasurer When Audit Was Conducted Yuriko J. Sugimura (07/20/94 - 08/20/14); 

Florence Kong Kee (08/20/14 - 07/09/16); 

Tambry Young (07/09/16 - Present) 

• Treasurer During Period Covered by Audit Yuriko J. Sugimura 

Management Information 

• Attended Commission Campaign Finance Seminar Yes 

• Who Handled Accounting and Recordkeeping 

Tasks Paid Staff 
Overview of Financial Activity"^ 

(Audited Amounts) 

Cash-on-hand ® January 1,2011 S 8365 

Receipts 

o Contributions from Individuals 190,885 

o Contributions from Party and Political Committees 274,173 

o Transfers from Affiliates 116,387 

o Loans Received 30,000 

o Transfers from Non-federal and Levin Funds 122,196 

o Other Receipts 455,855 

Total Receipts $ 1,189,496 

Disbursements 

o Operating Expenditures 621,546 

o Coordinated Party Expenditures 129,725 

o Loan Repayments Made 10,000 

o Refrmds of Contributions' 20,052 

o Other Disbursements 108,490 

o Federal Election Activity 272,159 

Total Disbursements $ 1,161,972 

Cash-on-hand ® December 31,2012 $ 34,864 

Levin Cash-on-hand ® October 31,2012 S 0 

Total Levin Receipts 23,564 

Total Levin Disbursements 23,564 

Levin Cash-on-hand @ December 31,2012 $ 0 

* See footnote 3. 
Part III 

Summaries 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of HDP's bank activity with its most recent 

amended reports filed prior to the audit revealed material misstatements in both 2011 and 

2012. In response to the Interim Audit Report (lAR) recommendation, HDP filed 

amended disclosure reports for 2011 and 2012 which materially corrected the 

misstatements. Also, in response to the lAR recommendation, HDP Counsel (Counsel) 

stated that HDP did not believe the Convention Account (CA) should be included in the 

misstatement finding. 

After consideration of Counsel's response and consultation with the Commission's Office 

of General Counsel, the Audit staff determined in the Draft Final Audit Report (DEAR), 

based on available information, that the CA was not a federal account since its activity 

was non-federal. Consequently, the Audit staff excluded the CA and its activity from the 

misstatement finding calculation. However, since HDP originally disclosed the CA 

activity on its federal reports, the beginning cash for 2011^ and receipts and 

disbursements for 2012 were further misstated and needed to be corrected. In response to 

the DEAR recommendation, HDP amended its disclosure reports to correct the 

misstatements and reconcile its ending cash balance. 

In addition, a comparison of HDP's bank activity with its original reports filed for 2011 

and 2012 also revealed a material misstatement of disbursement activity. HDP made no 

comments in its response to the lAR. The removal of the CA and its activity in the 

DEAR resolved this portion of the finding. 

The Commission approved a finding that HDP misstated its financial activity for calendar 

years 2011 and 2012. The Commission further approved a finding that HDP did not 

materially misstate its original disclosure reports. (For more detail, see p. 9.) 

Finding 2. Receipt of Contributions that Ehcceed Limits 

During audit fieldwork, the Audit staff identified contributions from two political action 

committees that exceeded the limitation by $20,000. Both of the excessive contributions 

were untimely refunded. However, documentation was not provided to demonstrate that 

one refund totaling $5,000 had cleared the bank. In response to the lAR 

recommendation. Counsel provided documentation demonstrating the refimd for $5,000 

^ The beginning cash misstatement amount flows through to cause an additional misstatement in ending 

cash for 2011 and beginning cash for 2012. 
had cleared the bank. The Audit staff concluded that HDP untimely resolved excessive 

contributions totaling $20,000. 

The Commission approved a finding that HDP untimely resolved excessive contributions 

totaling $20,000. (For more detail, see p. 14.) 

Finding 3. Receipt of Apparent Impermissible Funds 

During audit fieldwork, the Audit staff identified 75 receipts, totaling $169,586, 

deposited into HDP's federal accounts during 2012 that appeared to be from 

impermissible sources. In response to the lAR recommendation, HDP Counsel stated 

that a majority of the impermissible contributions were received in connection with 

HDP's state convention; and therefore. Counsel believed that the CA should be removed 

from the impermissible funds analysis. Counsel stated that state convention activity 

should not be considered federal activity. Also, Counsel believed that amounts 

transferred from HDP's federal account*^ to its CA for non-federal purposes (convention 

fundraising) should mitigate other impermissible funds. In addition, HDP showed that 

$5,080 of receipts were permissible, $27,000 of receipts were untimely refunded, and 

filed amended reports for $115,000 of impermissible receipts from corporations on 

Schedule D (Debts and Obligations). 

After consideration of Counsel's response and consultation with the Commission's Office 

of General Counsel, the Audit staff determined in the DEAR, based on available 

information, that the CA was not a federal account since its activity was non-federal. 

Consequently, the Audit staff concluded that $22,006 in receipts deposited into the CA 

were not impermissible and excluded this amount from the finding. In addition, the 

calculated amount of impermissible contributions was reduced by $10,959 for transfers 

made within appropriate timeframes from one of the federal accounts to the CA, leaving 

an impermissible balance of $104,541. Based on available documentation, the Audit staff 

concluded that HDP accepted 15 impermissible receipts totaling $131,541, of which 

$27,000 was untimely reminded. In response to the DEAR, HDP filed amended reports 

disclosing the impermissible receipts totaling $104,541 on Schedule D. 

The Commission approved a finding that HDP accepted impermissible funds totaling 

$131,541, of which $27,000 was untimely refunded. (For more detail, see p. 16.) 

Finding 4. Reporting of Debts and Obligations 

During audit fieldwork, the Audit staff identified debts and obligations from 17 vendors 

totaling $115,967, which were not itemized or were under reported on Schedules D 

(Debts and Obligations). In response to the lAR recommendation, HDP filed amended 

disclosure reports for 2011 and 2012 correctly reporting and disclosing these debts and 

obligations on Schedule D. 

The Commission approved a finding that HDP failed to properly report debts and 

obligations totaling $115,967. (For more detail, see p. 22.) 

® There were two federal accounts that made transfers to the CA. 
Finding 5. Recordkeeping for Employees 

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

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

spent in connection with a federal election. For 2011 and 2012, the Audit staff identified 

payments to HDP employees totaling $60,923 for which HDP did not maintain monthly 

payroll logs. This consisted of $48,510 for which payroll was allocated between federal 

and non-federal funds, and $12,413 for which payroll was exclusively paid with non-

. federal funds. In response to the lAR recommendation. Counsel stated that the payroll 

logs could not be located but that HDP had implemented procedures to maintain the 

necessary documentation for payroll. 

The Commission approved a finding that HDP did not maintain monthly logs totaling 

$60,923. (For more detail, see p. 25.) 

Finding 6. Failure to Properly Report Media Related 

Expenditures 

During audit fieldwork, the Audit staff identified disbursements totaling $30,148, which 

appeared to be media related independent expenditures requiring disclosure on Schedule 

E (ltemi2ed Independent Expenditures), that HDP disclosed on Schedule B, Line 30b 

(Federal Election Activity) and Schedule F (Coordinated Party Expenditures). Of the 

$30,148, HDP did not file the required 24-hour reports for those items that should have 

been reported on Schedule E totaling $29,725. 

In response to the lAR recommendation. Counsel stated these expenditure were 

coordinated (and amended reports were filed showing these expenditure as coordinated 

on Schedule F) and not independent expenditures. Counsel added that, although the 

expenditures exceeded HDP's coordinated expenditure limit, this only occurred as a 

result Of an administrative oversight, a failure to contact the Democratic Senatorial 

Campaign Committee (DSCC) to obtain a higher spending authority. 

As a result of HDP's response to the lAR recommendation, the DFAR was revised to 

reflect that HDP made coordinated expenditures totaling $129,725, but only had 

coordinated spending authority for $102,600. Therefore, HDP exceeded its spending 

limit by $27,125. 

The Commission approved a finding that HDP had exceeded its coordinated spending 

limit by $15,203 but had not exceeded the overall spending limit, subject to the excision 

or relocation to the Additional Issue section of this report, an expenditure for the 

production and design costs associated with a television advertisement totaling $11,922. 

Accordingly, this portion of the finding is presented in the "Additional Issue" section of this 

report. (For more detail, see p. 27.) 

Finding 7. Allocation of Expenditures 

During audit fieldwork, the review of disbursements made from the federal and nonfederal accounts identified an apparent non-federal overfunding of activity in the amount 

of $82,722. In response to the lAR recommendation, HDP filed amended reports and 
submitted additional documentation for certain expenditures. Based on the new 

documentation, the Audit staff revised its calculation and concluded in the DFAR that the 

non-federal account did not overfund the federal account. 

The Commission approved a reconunendation that HDP did not materially overfund its 

federal accounts with funds from its non-federal accounts. (For more detail, see p. 33.) 

Additional Issue 

Failure to Properly Report Media Related ExpendituresDissemination 

During audit fieldwork, the Audit staff identified disbursements totaling $30,148, which 

appeared to be media related independent expenditures requiring disclosure on Schedule 

E (Itemized Independent Expenditures), that HDP disclosed on Schedule B, Line 30b 

(Federal Election Activity) and Schedule F (Coordinated Party Expenditures). Of the 

$30,148, HDP did not file the required 24-hour reports for those items that should have 

been reported on Schedule E totaling $29,725. 

In response to the lAR recommendation. Counsel stated these expenditure were 

coordinated (and amended reports were filed showing these expenditure as coordinated 

on Schedule F) and not independent expenditures. Counsel added that, although the 

expenditures exceeded HDP's coordinated expenditure limit, this only occurred as a 

result of an administrative oversight, a failure to contact the DSCC to obtain a higher 

spending authority. 

As a result of HDP's response to the lAR recommendation, the DFAR was revised to 

reflect that HDP made coordinated expenditures totaling $129,725, but only had 

coordinated spending authority for $102,600. Therefore, HDP exceeded its spending 

limit by $27,125. 

The Commission did not approve, by the required four votes, the excessive coordinated 

finding amount recommended by the Audit staff. After considering certain production 

and design costs related to a television advertisement totaling $11,922, the Commission 

directed the Audit Division to excise this amount from the finding or move it to an 

"Additional Issue" section of the report. This matter was moved to the Additional Issue's 

section of the report pursuant to Commission Directive 70.' (For more detail, see p. 39.) 

Available at http://classic.iec.gov/directives/CominissionDirectives.shtinl 
Part IV 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of HDP's bank activity with its most recent 

amended reports filed prior to the audit revealed material misstatements in both 2011 and 

2012. In response to the Interim Audit Report (lAR) recommendation, HDP filed 

amended disclosure reports for 2011 and 2012 which materially corrected the 

misstatements. Also, in response to the lAR recommendation, HDP Counsel (Coimsel) 

stated that HDP did not believe the Convention Account (CA) should be included in the 

misstatement finding. 

After consideration of Counsel's response and consultation with the Commission's Office 

of General Counsel, the Audit staff determined in the Draft Final Audit Report (DEAR), 

based on available information, that the CA was not a federal accoimt since its activity 

was non-federal. Consequently, the Audit staff excluded the CA and its activity from the 

misstatement finding calculation. However, since HDP originally disclosed the CA 

activity on its federal reports, the beginning cash for 2011' and receipts and 

disbursements for 2012 were further misstated and needed to be corrected. In response to 

the DEAR recommendation, HDP amended its disclosure reports to correct the 

misstatements and reconcile its ending cash balance. 

In addition, a comparison of HDP's bank activity with its original reports filed for 2011 

and 2012 also revealed a material misstatement of disbursement activity. HDP made no 

comments in its response to the lAR. The removal of the CA and its activity in the 

DEAR resolved this portion of the finding. 

The Commission approved a finding that HDP misstated its financial activity for calendar 

years 2011 and 2012. The Commission further approved a finding that HDP did not 

materially misstate its original disclosure reports. 

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). 52 U.S.C. §30104(b)(1), (2), (3), (4) and (5). 

The beginning cash misstatement amount flows through to cause an additional misstatement in ending 

cash for 2011 and beginning cash for 2012. 
10 

Facts and Analysis 

A. Misstatement of Financial Activity- Most Recent Reports Filed Prior to the 

Audit 

1. Facts 

The Audit staff reconciled HDP's reported financial activity with its bank records for 

calendar years 2011 and 2012. The following charts outline the discrepancies 

between HDP's disclosure reports and its bank records. The succeeding paragraphs 

explain why the discrepancies occurred. 

2011 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand @ 

January 1,2011 

$ 44,653 $ 8,365 $36,288 

Overstated 

Receipts $282,712 $295,136 $12,424 

Understated 

Disbursements $278,375 $290,981 $12,606 

Understated 

Ending Cash-on-Hand @ 

December 31,2011 

$ 48,990 $ 12,520 $36,470 

Overstated 

The beginning cash-on-hand was overstated by $36,288 and the discrepancy is 

unexplained, but likely resulted from prior period discrepancies. 

The understatement of receipts resulted from the following: 

• Unreported in-kind contributions^ $12,156 

• Return deposit items reported as disbursements 

instead of a negative entry on Schedule A (50) 

• Unexplained difference 318 

Net Understatement of Receipts $12.424 

The understatement of disbursements resulted from the following: 

"• Unreported in-kind contributions'" $12,156 

• Disbursements not reported 4,890 

• Disbursements reported but not in bank activity (4,269) 

• Disbursement amounts reported incorrectly 157 

' All unreported in-kind contribution discrepancies during calendar years 2011 and 2012 were for 

disbursements paid by the Democratic National Committee (DNC) on behalf of HDP for voter file 

updates and maintenance. The DNC reported these transactions as iri-kind contributions made to HDP. 

To help assure the correct cash balance is reported, these amounts should be disclosed as in-kind 

contributions on Schedules A and B. 

See footnote 7. 
11 

Return deposit items reported as disbursements 

instead of a negative entry on Schedule A 

Unexplained difference 

Net Understatement of Disbursements 

(50) 

j(2781 

mm 

The overstatement of $36,470 of the ending cash-on-hand was a result of the 

reporting discrepancies described above. 

2012 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand @ 

January 1,2012 

$ 48,990 $ 12,520 $ 36,470 

Overstated 

Receipts $875,660 $1,032,269 $156,609 

Understated 

Disbursements $895,253 $1,009,925 $114,672 

Understated 

Ending Cash-on-Hand @ 

December 31,2012 

$ 29,397 $ 34,864 $ 5,467 

Understated 

The overstatement of begiiming cash-on hand of $36,470 was a result of the reporting 

discrepancies noted for 2011 above. 

The understatement of receipts resulted frorh the following: 

• Unreported in-kind contributions $ 16,208 

• Receipts over-reported (25,937) 

• Receipts under-reported 179,118 

• Over-reported unitemized receipts (21,774) 

• Return deposit items reported as disbursements 

instead of a negative entry on Schedule A (1,665) 

• Unexplained difference 10,659 

Net Understatement of Receipts $156,609 

The understatement of disbursements resulted from the following: 

• Unreported in-kind contributions 

• Disbursements not reported 

• Disbursements reported but not in bank activity 

• Disbursement reported as memo entry clearing bank 

• Inter-account transfer reported 

• Disbursement amounts reported incorrectly 

• Return deposit items reported as disbursements 

instead of a negative entry on Schedule A 

Net Understatement of Disbursements 

$ 16,208 

101,152 

(2.497) 

5,000 

(4,205) 

679 

n.665^ 

$U4.672 

The $5,467 understatement of the ending cash-on-hand was a result of the 2012 

reporting discrepancies noted above. 
12 

2. Interim Audit Report & Audit Division Recommendation 

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

representatives a schedule of the misstated amounts. HDP representatives stated they 

would amend their reports in response to the lAR. 

The lAR recommended that HDP amend its disclosure reports to correct the . 

misstatements and reconcile the cash balance on its most recent report to identify any 

subsequent discrepancies that could affect the recommended adjustments. The lAR 

also recommended that HDP adjust the cash-on-hand balance, as necessary, on its 

most recent report, noting that Ae adjustment is the result of prior period audit 

adjustments. 

3. Committee Response to Interim Audit Report 

In response to the lAR recommendation, HDP filed amended disclosure reports for 

2011 and 2012 that corrected the misstatements. The amended 2012 disclosure 

reports also added Levin activity that was not previously reported. In addition. 

Counsel stated that the HDP did not believe the CA activity should have been 

included in this finding,'' but decided not to remove this account from its federal 

reports when it filed amendments; however, it acknowledged that it had inadvertently 

and incorrectly included some of the activity of this account in its federal reports. 

4. Draft Final Audit Report 

After consideration of Counsel's response to the lAR and consultation with our 

Office of General Counsel, the Audit staff determined, based on available 

information, that the CA was not a federal account since its activity was non-federal. 

Consequently, the Audit staff excluded the CA and its activity from the misstatement 

finding calculation which resulted in a revision of the misstated amounts as show 

below: 

• Beginning cash for 2011 was overstated by $37,313. 

• Ending cash for 201.1 and beginning cash for 2012 were overstated by 

$37,495. 

• Receipts for 2012 were understated by $ 18,700. 

• Disbursements for 2012 were overstated by $24,263. 

The Audit staff recommended that HDP amend its disclosure reports to correct the 

misstatements and reconcile the cash balance on its most recent report to identify any 

subsequent discrepancies that could affect the recommended adjustments. The Audit 

staff further recommended that HDP adjust the cash-on-hand as necessary on its most 

recent report, noting that the adjustment is the result of prior period audit adjustments. 

" Further explanation of Counsel's response is contained under the Committee's Response to the Interim 

Audit Report, Finding 3, Receipt of Apparent Impermissible Funds. 

" The amounts that need to be removed from the amended reports reflect the balances and activity of the 

CA. The CA beginning and ending cash balance for 2011 and the beginning cash balance for 2012 was 

$1,025 (the CA had a zero ending cash balance for 2012), the 2012 receipts activity was $221,074, and 

the disbursement activity was $222,098. 
13 

5. Committee Response to the Draft Final Audit Report 

In response to the DFAR, HDP filed amended disclosure reports for 2011 and 2012 

that removed the convention account (CA) activity. 

Commission Conclusion 

On December 14,2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission find that HDP misstated its financial activity for calendar years 2011 

and 2012. 

The Commission approved the Audit staffs recommendation. 

B. Misstatement of Financial Activity - Original Reports Filed 

1. Facts 

During audit fieldwork, in addition to examining HDP's most recent reports filed 

prior to the audit notification, the Audit staff compared HDP's originally filed reports 

with its bank records. The purpose of this additional reconciliation was to identify 

the degree to which HDP had misstated its original filings. 

The Audit staff calculated that HDP imderstated disbursements on the original reports 

filed by $358,942 over the two-year period (2011-2012). This figure includes the 

$12,606 and $114,672 understatement of disbursements from 2011 and 2012 

discussed in Section A. above (Misstatement of Financial Activity - Most Recent 

Reports Filed Prior to the Audit). 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the understatement of disbursements on its original reports 

during the exit conference and provided HDP representatives a copy of the relevant 

schedule. ^P representatives had no specific comments at the time. 

The lAR recommended that HDP provide any additional conunents it deemed 

necessary with respect to this matter. 

3. Committee Response to Interim Audit Report 

HDP did not provide any additional comments regarding the understatement of 

disbursements on its original report and no further action was required. 

4. Draft Final Audit Report 

The removal of the CA and its activity resolved this portion of the finding. See the 

CA discussion in part A above. 

5. Committee Response to the Draft Final Audit Report 

HDP provided no additional comment to this finding in its response to the DFAR. 
14 

Commission Conclusion 

On December 14,2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the. 

Commission find that HDP did not materially misstate its original disclosure reports. 

The Commission approved the Audit staffs recommendation. 

Finding 2. Receipt of Contributions that Exceed Limits 

Summaiy 

During audit fieldwork, the Audit staff identified contributions from two political action 

committees that exceeded the limitation by $20,000. Both of the excessive contributions 

were untimely refunded. However, documentation was not provided to demonstrate that 

one refund totaling $5,000 had cleared the bank. In response to the lAR 

recommendation. Counsel provided documentation demonstrating the refund for $5,000 

had cleared the bank. The Audit staff concluded that HDP untimely resolved excessive 

contributions totaling $20,000. 

The Commission approved a finding that HDP untimely resolved excessive contributions 

totaling $20,000. 

Legal Standard 

A. Party Committee Limits. A state, district or local committee of a political party may 

not receive more than a total of $5,000 per calendar year from a multicandidate 

political committee. 52 U.S.C. §30116(a)(2)(C) and 11 CFR §110.2(d). 

A state, district or local committee of a political party may not receive more than a 

total of $10,000 per calendar year from a non-multicandidate political committee. 52 

U.S.C. §30116(a)(1)(D) and 11 CFR §110.1(c)(5). 

B. Handling Contributions That Appear Excessive. If a committee receives a' 

contribution that appears to be excessive, the committee must either: 

• Return the questionable check to the donor; or 

• Deposit the check into its federal account and: 

o Keep enough money in the account to cover all potential refunds; 

o Keep a written record explaining why the contribution may be illegal; 

o Include this explanation on Schedule A if the contribution has to be itemized 

before its legality is established; 

o Seek a reattribution or redesignation of the excessive portion, following the 

instructions provided in the Commission regulations; and 

o If the committee does not receive a proper reattribution or redesignation 

within 60 days after receiving the excessive contribution, refund the excessive 

portion to the donor. 11 CFR § 103.3(b)(3), (4) and (5). 
15 

Facts and Analysis 

A. Facts 

HDP accepted contributions from two political action committees that exceeded the 

limitation by $20,000. One contribution from a non-multicandidate political action 

committee was received on March 15,2012 for $25,000, resulting in an excessive 

contribution of $15,000. HDP untimely refunded the excessive portion on September 28, 

2012 (197 days later). 

The second contribution from a multicandidate political action committee was received 

on October 19,2012 for $10,000, resulting in an excessive contribution of $5,000. HDP 

reported an untimely refund of the excessive portipn on June 19,2013 (243 days later); 

however, documentation was not provided that demonstrated the refund check had 

cleared the bank. 

B. Interim Audit Report & Audit Division Recommendation 

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

representatives a schedule of the apparent excessive contributions. HDP representatives 

had no specific comments at the time. 

The lAR recommended that HDP provide documentation demonstrating that the refund, 

totaling $5,000, reported on June 19,2013, had cleared the bank. Absent that 

documentation, it was recommended that HDP void the original refund check and issue 

another refund for the excessive portion, or if funds were not available to make the 

necessary refund, disclose the excessive portion on Schedule D until funds became 

available to satisfy the obligation. 

C. Committee Response to Interim Audit Report 

In response to the lAR recommendation, HDP provided documentation demonstrating 

that the refrind, totaling $5,000, had cleared the bank. 

D. Draft Final Audit Report 

The DFAR acknowledged that HDP provided a copy of the refund, totaling $5,000. The 

Audit staff concluded that HDP untimely resolved excessive contributions totaling 

$20,000. 

E. Committee Response to the Draft Final Audit Report 

HDP provided no additional comment to this finding in its response to the DFAR. 

Commission Conclusion 

On December 14,2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission find that HDP untimely resolved excessive contributions totaling $20,000. 

The Commission approved the Audit staffs recothmendation. 
15 

Facts and Analysis 

A. Facts 

HDP accepted contributions from two political action committees that exceeded the 

limitation by $20,000. One contribution from a non-multicandidate political action 

committee was received on March 15,2012 for $25,000, resulting in an excessive 

contribution of $15,000. HDP untimely refunded the excessive portion on September 28, 

2012 (197 days later). 

The second contribution from a multicandidate political action committee was received 

on October 19,2012 for $10,000, resulting in an excessive contribution of $5,000. HDP 

reported an untimely refund of the excessive portion on June 19,2013 (243 days later); 

however, documentation was not provided that demonstrated the refund check had 

cleared the bank. 

B. Interim Audit Report & Audit Division Recommendation 

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

representatives a schedule of the apparent excessive contributions. HDP representatives 

had no specific comments at the time. 

The lAR recommended that HDP provide documentation demonstrating that the refund, 

totaling $5,000, reported on June 19,2013, had cleared the bank. Absent that 

documentation, it was recommended that HDP void the original reflmd check and issue 

another refund for the excessive portion, or if funds were not available to make the 

necessary refund, disclose the excessive portion on Schedule D until funds became 

available to satisfy the obligation. 

C. Committee Response to Interim Audit Report 

In response to the IAR recommendation, HDP provided documentation demonstrating 

that the refund, totaling $5,000, had cleared the bank. 

D. Draft Final Audit Report 

The DFAR acknowledged that HDP provided a copy of the refund, totaling $5,000. The 

Audit staff concluded that HDP untimely resolved excessive contributions totaling 

$20,000. 

E. Committee Response to the Draft Final Audit Report 

HDP provided no additional comment to this finding in its response to the DFAR. 

Commission Conclusion 

On December 14,2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission find that HDP untimely resolved excessive contributions totaling $20,000. 

The Commission approved the Audit staffs recommendation. 
16 

Finding 3. Receipt of Apparent Impermissible Funds 

Summary 

During audit fieldwork, the Audit staff identified 75 receipts, totaling $169,586, 

deposited into HDP's federal accounts during 2012 that appeared to be from 

impermissible sources. In response to the lAR recommendation, HDP Counsel stated 

that a majority of the impermissible contributions were received in connection with 

HDP's state convention; and therefore. Counsel believed that the CA should be removed 

from the impermissible funds analysis. Counsel stated that state convention activity 

should not be considered federal activity. Also, Counsel believed that amounts 

transferred from HDP's federal account'^ to its CA for non-federal purposes (convention 

fiindraising) should mitigate other impermissible funds. In addition, HDP showed that 

$5,080 of receipts were permissible, $27,000 of receipts were untimely refunded, and 

filed amended reports for $115,000 of impermissible receipts from corporations on 

Schedule D (Debts and Obligations). 

After consideration of Counsel's response and consultation with the Comniission's Office 

of General Counsel, the Audit staff determined in the DFAR, based on available 

information, that the CA was not a federal account since its activity was non-federal. 

Consequently, the Audit staff concluded that $22,006 in receipts deposited into the CA 

were not impermissible and excluded this amount from the finding. In addition, the 

calculated amount of impermissible contributions was reduced by $10,959 for transfers 

made within appropriate timeframes from one of the federal accounts to the CA, leaving 

an impermissible balance of $104,541. Based on available documentation, the Audit staff 

concluded that HDP accepted 15 impermissible receipts totaling $131^541, of which 

$27,000 was untimely refrmded. In response to the DFAR, HDP filed amended reports 

disclosing the impermissible receipts totaling $104,541 on Schedule D. 

The Commission approved a finding that HDP accepted impermissible funds totaling 

$131,541, of which $27,000 was untimely reflmded. 

Legal Standard 

A. Receipt of Prohibited Contributions - General Prohibition. Candidates and 

committees may not accept contributions (in the form of money, in-kind contributions 

or loans) from the following prohibited sources: 

• Corporations organized by authority of any law of Congress; 

• Labor Organizations; 

• National Banks (except a loan made in accordance with the applicable 

banking laws and regulations and in the ordinary course of business); 

• Federal Government Contractors (including partnerships, individuals, and sole 

proprietors who have contracts with the federal govemment); 

" There were two federal accounts that made transfers to the CA. 
17 

• Foreign Nationals (including individuals who are not U.S. citizens and not 

lawfully admitted for permanent residence); foreign governments and foreign 

political parties; and groups organized under the laws of a foreign country or 

groups whose principal place of business is in a foreign coimtry, as defined in 

22 U.S.C. §611Cb);and 

• In the name of another. 52 U.S.C. §§30118, 30119, 30121, and 30122. 

B. Definition of Limited Liability Company. A limited liability company (LLC) is a 

business entity recognized as an LLC under the laws of the State in which it was 

established. 11 CFR §110.1(g)(1). 

C. Application of Limits and Prohibition to LLC Contributions. A contribution 

from an LLC is subject to contribution limits and prohibitions, depending on several 

factors, as explained below: 

1. LLC as Partnership. The contribution is considered a contribution from a 

partnership if the LLC chooses to be treated as a partnership under Internal 

Revenue Service (IRS) tax rules, or if it makes no choice at all about its tax status. 

A contribution by partnership is attributed to each partner by his or her share of 

the partnership profits. 11 CFR §110.1 (e)( 1) and (g)(2). 

2. LLC as Corporation. The contribution is considered a corporate contribution-and 

is barred under the Act-if the LLC chooses to be treated as a corporation under 

IRS rules, or if its shares are traded publicly. 11 CFR § 110.1(g)(3). 

3. LLC with Single Member. The contribution is considered a contribution from a 

single individual if the LLC is a single-member LLC that has not chosen to be 

treated as a corporation under IRS rules. 11 CFR §110.1 (g)(4). 

D. Limited Liability Company's Responsibility to Notify Recipient Committee. At 

the time it makes a contribution, an LLC must notify the recipient committee: 

• That it is eligible to make the contribution; and 

• In the case of an LLC that considers itself a partnership (for tax purposes), how 

the contribution should be attributed among the LLC's members. 11 CFR 

§110.1(g)(5). 

E. Questionable Contributions. If a committee receives a contribution that appears to 

be prohibited (a questionable contribution), it must follow the procedures below: 

1. Within 10 days after the treasurer receives the questionable contribution, the 

committee must either: 

• Return the contribution to the contributor without depositing it; or 

• Deposit the contribution (and follow the steps below). 11 CFR § 103.3(b)(1). 

2. If the coimnittee deposits the questionable contribution, it may not spend the 

funds and must be prepared to refund them. It must therefore maintain sufficient 

funds to make the reflmds or establish a separate account in a campaign 

depository for possibly illegal contributions. 11 CFR §103.3 (b)(4). 

3. The committee must keep a written record explaining why the contribution may 

be prohibited and must include this information when reporting the receipt of the 

contribution. 11 CFR §103.3(b)(5). 
18 

4. Within 30 days of the treasurer's receipt of the questionable contribution, the 

conunittee must make at least one written or oral request for evidence that the 

contribution is legal. Evidence of legality includes, for example, a vmtten 

statement from the contributor explaining why the contribution is legal or an oral 

explanation that is recorded by the committee in a memorandum. If the 

contribution cannot be determined to be legal, the treasurer shall, within thirty 

days of the treasurer's receipt of the contribution, refund the contribution to the 

contributor. 11 CFR §103.3(b)(l). 

F. Contributions to delegate and delegate committees. Funds received for the 

purpose of furthering the selection of a delegate to a national nominating convention 

are contributions for the purpose of influencing a federal election. 11 CFR 

§110.14(c). 

G. Federal v. Nonfederal. Account. The federal account may contain only those funds 

that are permissible under the federal election law; the nonfederal accouiit may 

contain funds that are not permitted under the federal law (but are legal under state 

law), such as contributions that exceed the limits of the federal law and contributions 

from prohibited sources, such as corporations and labor organizations. 11 CFR 

§102.5 (a)(l)(i) and (a)(3). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff identified 75 receipts totaling $169,586 deposited 

into HDP's federal, account during 2012 that appeared to be from impermissible sources. 

The sources of these receipts were as follows: 

Source 

Number of 

Transactions Total 

Labor Unions 8 $6,871 

Corporations 20 $141,005 

Limited Liability Companies 13 $10,455 

Unregistered Organizations'^ 34 $11,255 

Total 75 $169,586 

The purposes of these receipts were mostly for: 

• Contributions'® - 20 transactions totaling $96,421; 

• State party convention fees (i.e. registration fee, convention booth fee) - 49 

transactions totaling $ 15,085; and 

• Democratic National Convention Credentials - 4 transactions totaling $58,000. 

An unregistered organization is a political conunittee that has not registered with the Federal Election 

Commission. 

Three corporate contributions were erroneously disclosed as political action committees and two were 

erroneously disclosed as individuals. 
19 

Four of the receipts from corporations, totaling $27,000, were untimely refunded. 

However, documentation was not available demonstrating the refund checks had cleared 

the bank. The remaining 71 receipts totaling $142,586 remain unresolved. 

Hawaii state campaign finance statutes permit the acceptance of funds by a party from 

labor unions, domestic corporations,'^ and limited liability companies in an aggregate 

amount no greater than $25,000 in any two-year election period. However, federal 

regulations prohibit such contributions to be deposited into a federal account or used to 

influence federal elections. 

B. Interim Audit Report & Audit Division Reeommendation 

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

representatives a schedule of the apparent impermissible receipts. HDP representatives 

stated they would review the schedule. 

The IAR recommended that HDP submit documentation demonstrating that these receipts 

were refunded in a timely matter, were timely transferred to a non-federal account, or 

were not from prohibited sources. Absent this documentation, the lAR recommended 

that HDP refund the impermissible receipts or if funds were not available to make the 

necessary refunds, disclose the impermissible receipts on Schedule D until funds become 

available to satisfy the obligation. In addition, with respect to receipts received for the 

Hawaii state party convention, the lAR recommended that HDP submit documentation 

demonstrating that these receipts were not obtained in connection with a nominating 

convention that nominated candidates for federal office. 

C. Committee Response to Interim Audit Report 

In response to the lAR reconunendation. Counsel stated that a majority of the 

impermissible contributions were received in coimection with HDP's state convention, 

and that these contributions were merely pass-through contributions used to imderwrite 

the state convention.'^ Counsel explained that this account was established for the sole 

purpose of administering HDP's biennial convention and that Commission regulations 

specifically permit state parties to exclusively use non-federal funds to pay for 

convention expenses and all funds deposited into this account were used solely for that 

purpose. Accordingly, Counsel argued that no reimbursement to the non-federal account 

should be required because state convention expenses are payable with non-federal funds 

(11 C.F.R. § 100.24(c)(3)) and were paid immediately. Also, that a transfer of funds, 

$56,000," from its federal account to the CA had occurred to cover a convention 

fiindraising shortfall that should be considered a mitigating factor when considering the 

" Foreign corporations, including a domestic subsidiary of a foreign corporation, a domestic corporation 

that is owned by a foreign national, or a local subsidiary where administrative control is retained by the 

foreign corporation are prohibited under Hawaii state campaign finance statutes. 

" Counsel reiterated his response to Finding 1, Misstatement of Financial Activity, that stated the CA 

should not be considered a federal account, and that state convention expenses are payable with 

nonfederal funds. 

Transfers from other federal accounts into the CA totaled $78,164. 
20 

amount of "misdeposits." Counsel also stated, that subsequent to the 2012 convention, 

HDP had properly paid for convention expenses directly from non-federal accounts, and 

had done so previously. Finally, Counsel pointed out that state convention contributions 

included contributions from unregistered candidates for local office and that HDP 

believed these committees had sufficient permissible funds to make contributions under 

llC.F.R.§102.5(b)(l)." 

Other items addressed in Counsel's response were as follows: that $80 in receipts were 

for two vendor refunds; documentation demonstrating that one receipt for $5,000 was 

from an LLC having non corporate tax status; and documentation demonstrating that four 

receipts from corporations, totaling $27,000, were untimely refunded and that the refunds 

had been deposited by the contributor. 

D. Draft Final Audit Report 

The Audit staff disagreed with Counsel that a majority of the impermissible contributions 

were received in connection wiA HDP's state convention. Of the $169,586 in 

impermissible receipts identified in the lAR, only $22,006 (or 13%) were deposited into 

the CA.^° The remaining $147,580 (or 87%) were not identified as state party convention 

related and were deposited into other federal accounts. 

The Audit staff agreed with Counsel that the CA receipts and expenditures were used for 

administering HDP's biennial convention: However, the Audit staff noted that as part of 

the initial audit process, bank account information was gathered, and this information 

included confirmation from HDP's Executive Director that the CA was a federal account. 

As such, during the 2011 and 2012 audit period, the CA was treated as a federal account 

by HDP. All receipts, expenses and account balances of this account were reported as 

federal activity on its disclosure reports and none of this activity was disclosed on its 

state reports filed with the State of Hawaii Campaign Spending Commission.^' Because 

HDP reported activity for the CA as a federal account and confirmed to the Audit staff it 

was a federal accoimt, the Audit staff treated it as such. As a federal account, these 

receipts were subject to the prohibitions of the Act. 

In response to Counsel's statement that HDP properly paid convention expenses prior to 

and subsequent to the 2012 election cycle, the Audit staff did not audit HDP for ^ese 

coverage periods and could not speak to whether HDP properly paid for these state 

convention expenses. However, the Audit staff noted that for the previous four state 

conventions, beginning in 2004, that state party convention fees were reported as receipts 

and the state party convention expenses reported as disbursements on its federal reports. 

" The Audit staff was not provided documentation to support this contention; the unresolved amount is 

SSOO. 

^ These deposits consisted of $19,021 (or 11%) reported as state party convention fees and S2,98S (or 2%) 

not reported as state party convention related. 

HDP did not report transiisrs from other federal accounts, which corresponds to the account being treated 

as Federal. Also, as mentioned in the Misstatement Finding (Finding 1), the Committee had an 

opportunity, in response to the lAR, to file amended reports to exclude the CA, but did not. 
21 

but none of this activity was disclosed on HDP's state reports filed with the State of 

Hawaii Campaign Spending Commission.^^ 

The selection of HDP delegates to the Democratic National Committee Convention 

occurs, per its constitution and bylaws, at its state convention.^^ The JAR 

recommendation requested documentation that would show HDP did not receive 

impermissible funds that were used for a nominating convention that nominated 

candidates for federal office. No additional documentation about the usage of 

impermissible receipts was provided. Lacking this information, and with the information 

available to date, the Audit staff could not determine if and to what extent impermissible 

receipts were in coimection with a federal election. After consideration of Counsel's 

response and consultation with the Commission's Office of General Counsel, the Audit 

staff determined, based on available information, that the CA was not a federal account 

and its activity was not federal. Consequently, the Audit staff concluded that $22,006 in 

receipts deposited into the CA were not impermissible and excluded this amount from the 

finding. 

Also, in response to the lAR recommendation, HDP filed amended reports disclosing ten 

impermissible receipts from corporations, totaling $115,000, on Schedule D. Counsel 

stated that the impermissible funds would be refunded to the donors, if and when funds 

became available. Counsel reiterated his statement thiat HDP should be allowed to reduce 

the impermissible amount based upon transfers of federal funds to its CA (as mentioned 

earlier in this section). However, most of the transfers ($67,205 of the $78,164) were not 

related to the impermissible receipts as the transfers were made prior to the receipt of the 

impermissible contributions. Accordingly, the Audit staff reduced the finding amount by 

$10,959 for transfers made within the permissible timeframes.^^ 

The Audit staff reviewed Counsel's response and the documentation provided and 

determined that the $80 in receipts were vendor refunds and the contribution of $5,000 

from the LLC was a permissible receipt, both for which the finding amount was reduced. 

Also, that $27,000 was untimely refunded to four corporate entities. 

The chart below shows the description and amount of impermissible receipts after 

adjustments for information provided in HDP's response to the lAR. 

^ Some other convention expenses, such as county convention expenses, were reported on HDP's state 

reports. 

" 2012 By-Laws of the Democratic Party of Hawaii and the 2012 Constitution of the Democratic Party of 

Hawaii. 

^ 11 C.F.R. §103.3(b) allows 30 days for refunds of impermissible receipts. 
Number of 

Transactions Total 

75 $169,586 

(57) ($22,006) 

(0)2' ($10,959) 

(2) ($80) 

(1) ($5,000) 

15 $131,541 

(4) ($27,000) 

11 $104,541 

22 

, Description 

lAR Impermissible Receipts 

Impermissible Receipts deposited into the Convention Account 

Coiporate contribution disclosed on Schedule D reduced by 

Federal transfers occurring within permissible timeframes. 

Vendor refunds 

LLC taxed as a partnership 

Amount of Impermissible Receipts before Refunds 

Less: Amount Untimely Refunded 

Remaining Impermissible Funds (Schedule D) 

The Audit staff concluded that HDP accepted 15 impermissible receipts totaling 

$131,541. However, HDP untimely refunded $27,0.00, so that $104,541 needed to be 

reported on Schedule D. The Audit staff recommended that HDP file an amended report 

to reduce its disclosure of impermissible receipts on Schedule D to $ 104,541. Also, the 

Audit staff recommended that HDP provide documentation that would allow the Audit 

staff to determine if and to what extent impermissible receipts were in connection with a 

federal election. 

E. Committee Response to the Draft Final Audit Report 

In response to the DEAR, HDP filed amended reports to reduce its disclosure of 

impermissible receipts on Schedule D to $104,541. Documentation was not provided 

with regard to impermissible receipts that were in connection to a federal election. 

Commission Conclusion 

On December 14,2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission find that HDP accepted impermissible funds totaling $131,541, of which 

$27,000 was untimely refunded. 

The Commission approved the Audit staffs recommendation. 

Finding 4. Reporting of Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff identified debts and obligations from 17 vendors, 

totaling $115,967, which were not itemized or were under reported on Schedules D 

(Debts and Obligations). In response to the lAR recommendation, HDP filed amended 

" The amount of an impermissible corporate contributions to which the transfer of SI 0,939 was applied 

only partially reduced the impermissible contribution amount, as such, the number count of 

impermissible contributions did not change. 
23 

disclosure reports for 2011 and 2012 correctly reporting and disclosing these debts and 

obligations on Schedule D. 

The Commission approved a finding that HDP failed to properly report debts and 

obligations totaling $115,967. 

Legal Standard 

Reporting of Debts and Obligations. 

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

and nature of outstahding debts and obligations until those debts are extinguished. 52 

U.S.C. §30104(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 the committee and debts owed to the coimnittee, together 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. 

• A debt of $500 or less must be reported once it has been outstanding 60 days from 

the date incurred (the date of the transaction): the committee reports it on the next 

regularly scheduled report. 

• A debt exceeding $500 must be disclosed in the report that covers the date on 

which the debt was incurred. 11 CFR § 104.11 (b). 

D. Advances by Committee Staff and Other Individuals. 

1. Scope. This section applies to individuals who are not acting as commercial 

vendors. Individuals who are acting as commercial vendors shall follow the 

requirements of 11 CFR §§116.3 and 116.4. 

2. The treatment as contributions. The payment by an individual from his or her 

personal frmds, including a personal credit card, for the costs incurred in 

providing goods or services to, or obtaining goods or services that are used by or 

on behalf of, a candidate or political committee is a contribution unless the 

payment is exempted under 11 CFR 100.79, it shall be considered a contribution 

by the individual unlessa) The payment is for the individual's transportation expenses incurred while 

traveling on behalf of a candidate or political committee of a political party or 

for usual and normal subsistence expenses incurred by an individual, other 

than a volunteer, while traveling on behalf of a candidate or political 

committee of a political party; and 

b) The individual is reimbursed within sixty days after the closing date of the 

billing statement on which the charges first appear if the payment was made 

using a personal credit card, or within thirty ^ys after the date on which the 

expenses were incurred if a personal credit card was not used. For purposes 

of this section, the closing date shall be the date indicated on the billing 

statement which serves as the cutoff date for determine which charges are 

included on that billing statement. In addition, "subsistence expense" includes 
24 

only expenditures for personal living expenses related to a particular 

individual traveling on committee business, such as food or lodging. 11 CFR 

§116.5(b). 

3. Treatment as debts. A political committee shall treat the obligation arising from 

a payment described in paragraph (b) of this section as an outstanding debt until 

reimbursed. 11 CFR §116.5(c). 

Facts and Anal3rsis 

A. Facts 

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

the accoimts^^ of 17 HDP vendors. This review identified debts and obligations from 

these vendors, totaling $115,967 that were not itemized or were underreported on 

Schedule D for 2011 and 2012. Of this amount, $68,744 were debts not reported, and 

$47,223 were debts that were under reported. These vendors provided HDP with services 

such as office space, polling, accounting, database accounting software, website hosting, 

printing, insurance, telephone, copier lease, and staff reimbursements.^^ 

B. Interim Audit Report & Audit Division Recommendation 

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

representatives a schedule of the debts and obligations that were not itemized or were 

under reported. HDP representatives stated they would review the schedule of debts and 

obligations. 

The lAR recommended that HDP provide additional documentation demonstrating that 

these transactions were not obligations which required reporting on Schedule D. Absent 

such documentation, the Audit staff recommended that HDP amend its reports to 

correctly report and disclose these debts and obligations on Schedule D. 

C. Committee Response to Interim Audit Report 

In response to the lAR recommendation, HDP filed amended disclosure reports for 2011 

and 2012 that correctly reported and disclosed these debts and obligations on Schedule D. 

D. Draft Final Audit Report 

The DFAR acknowledged that HDP filed amended disclosure reports for 2011 and 2012 

that correctly reported and disclosed these debts and obligations on Schedule D. 

E. Committee Response to the Draft Final Audit Report 

HDP provided no. additional comment to this finding in its response to the DFAR. 

^ The reconciliation consisted of calculating invoiced and paid amounts for each reporting period in the 

2011-2012 election 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. 

" Staff reimbursements consisted of three individuals with debts not reported totaling $10,768 and debts 

under reported totaling $1,998. 
25 

Commission Conclusion 

On December 14,2017, the Commission considered the Audit Division 

Recommendation Memorandum in v^hich the Audit staff recommended that the 

Commission find that HDP failed to properly report debts and obligations totaling 

$115,967. 

The Commission approved the Audit staffs recommendation. 

Finding 5. Recordkeeping for Employees 

Summary 

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

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

spent in connection with a federal election. For 2011 and 2012, the Audit staff identified 

payments to HDP employees totaling $60,923 for which HDP did not maintain monthly 

payroll logs. This consisted of $48,510 for which payroll was allocated between federal 

and non-federal funds, and $12,413 for which payroll was exclusively paid with nonfederal funds. In response to the JAR recommendation. Counsel stated that the payroll 

logs could not be located but that HDP had implemented procedures to maintain the 

necessary documentation for payroll. 

The Commission approved a Hnding that HDP did not maintain monthly logs totaling 

$60,923. 

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, wajges, 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 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 funds that comply with state 

law. 11 CFR§ 106.7(d)(1). 

Facts and Analysis 

A. Facts 

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

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

time each employee spent in connection with a federal election. These logs are required 

to document the proper allocation of federal and non-federal funds used to pay employee 
26 

salaries and wages. For 2011 and 2012, HDP did not maintain monthly logs for $60,923 

in payroll.^' This amount includes payroll paid as follows to HDP employees: 

1. Employees reported on Schedule H4 (Disbursements for Allocated 

Federal/Nonfederal Activity) and paid with federal and non-federal funds 

during the same month (totaling $48,510); and 

2. Employees paid exclusively with non-federal funds in a given month and not 

reported by HDP (totaling $12,413). 

B. Interim Audit Report & Audit Division Recommendation 

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

representatives a schedule of the disbursements for payroll lacking monthly payroll logs. 

HDP representatives had no specific comments at the time. 

The lAR recommended that HDP provide evidence that it maintained monthly time logs 

to document the percentage of time an employee spent in connection with a federal 

election; or implement a plan to maintain monthly payroll logs in the future. 

C. Committee Response to Interim Audit Report 

In response to the IAR recommendation, HDP stated that it could not locate the time logs 

requested in the lAR, but had implemented procedures that will maintain the necessary 

documentation in connection with payroll and fringe benefit expenses in the future. 

D. Draft Final Audit Report 

The DFAR acknowledged that HDP implemented a plan to maintain monthly payroll 

logs. The Audit staff concluded that HDP did not maintain monthly logs for payroll 

totaling $60,923. 

E. Committee Response to the Draft Final Audit Report 

HDP provided no additional comment to this finding in its response to the DFAR. 

Commission Conclusion 

On December 14,2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission find that HDP did not maintain monthly logs totaling $60,923. 

The Corrunission approved the Audit staffs recommendation. 

^ This total does not include payroll for employees paid with 100 percent federal funds and r^orted as 

such (see Part 1, Background, Commission Guidance, Request for Early Commission Consideration of a 

Legal Question, Page 1). Payroll amounts do not include fringe benefits. 
27 

Finding 6. Failure to Properly Report Media Related 

Expenditures 

Summary 

During audit fieidwork, the Audit staff identified disbursements totaling $30,148, which 

appeared to be media related independent expenditures requiring disclosure on Schedule 

E (Itemized Independent Expenditures), that HDP disclosed on Schedule B, Line 30b 

(Federal Election Activity) and Schedule F (Coordinated Party Expenditures). Of the 

$30,148, HDP did not file the required 24-hour reports for those items that should have 

been reported on Schedule E totaling $29,725. 

In response to the IAR recommendation. Counsel stated these expenditure were 

coordinated (and amended reports were filed showing these expenditure as coordinated 

on Schedule F) arid not independent expenditures. Counsel added that, although the 

expenditures exceeded HDP's coordinated expenditure limit, this only occurred as a 

result of an administrative oversight, a failure to contact the Democratic Senatorial 

Campaign Committee (DSCC) to obtain a higher spending authority. 

As a result of HDP's response to the lAR recommendation, the DFAR was revised to 

reflect that HDP made coordinated expenditures totaling $129,725, but only had 

coordinated spending authority for $102,600. Therefore, HDP exceeded its spending 

limit by $27,125. 

The Commission approved a finding that HDP had exceeded its coordinated spending 

limit by $15,203 but had not exceeded the overall spending limit, subject to the excision 

or relocation to the Additional Issue section of this report, an expenditure for the 

production and design costs associated with a television advertisement totaling $11,922. 

Accordingly, this portion of the finding is presented in the "Additional Issue" section of 

this report. 

Legal Standard 

A. Definition of Independent Expenditures. An independent expenditure is an 

expenditure made for a communication expressly advocating the election or defeat of 

a clearly identified candidate that is not made in cooperation, consultation, or concert 

with, or at the request or suggestion of, a candidate, a candidate's authorized 

committee, or their agents, or a political party or its agents. 

A clearly identified candidate is one whose name, nickname, photograph or drawing 

appears, or whose identity is apparent through unambiguous reference, such as "your 

Congressman," or through an unambiguous reference to his or her status as a 

candidate, such as "the Democratic presidential nominee" or "Republican candidate 

for Senate in this state." 

Expressly advocating means any communication that: 

• Uses phrases such as "vote for the President" or "re-elect your Congressman" or 

communications of campaign slogan(s) or individual word(s), which in context 
28 

can have no other reasonable meaning than to urge election or defeat of one or 

more clearly identified candidates; or 

• When taken as a whole and with limited references to external events, such as 

proximity to the election, could be interpreted by a reasonable person only as 

advocating the election or defeat of one or more clearly identified candidates. 11 

CFR §§ 100.16(a), 100.17 and 100.22. 

B. Disclosure Requirements - General Guidelines. An independent expenditure shall 

be reported on Schedule E if, when added to other independent expenditures made to 

the same payee during the same calendar year, it exceeds $200. Independent 

expenditures made (i.e., publicly disseminated) prior to payment should be disclosed 

as memo entries on Schedule E and as a debt on Schedule D. Independent 

expenditures of $200 or less need not be itemized, though the committee must report 

the total of those expenditures on line (b) on Schedule E. 11 CFR §§104.3(b)(3)(vii), 

104.4(a) and 104.11. . 

C. Last-Minute Independent Expenditure Reports (24-Hour Reports). Any 

independent expenditures aggregating $1,000 or more, with respect to any given 

election, and made after the 20*** day but more than 24 hours before the day of an 

election, must be reported and the report must be received by the Commission within 

24 hours after the expenditure is made. A 24-hour report is required each time 

additional independent expenditures aggregate $1,000 or more. The 24-hour report 

must be filed on a Schedule E. The date that a communication is publicly 

disseminated serves as the date that the committee must use to determine whether the 

total amount of independent expenditures has, in the aggregate, reached or exceeded 

the threshold reporting amount of $1,000. 11 CFR §§104.4(f) and 104.S(g)(2). 

D. Independent Expenditure Reports (48-Hour Reports). Any independent 

expenditures aggregating $10,000 or more with respect to any given election, at any 

time during a calendar year, up to and including the 20th day before an election, must 

be disclosed within 48 hours each time the expenditures aggregate $10,000 or more. 

The reports must be filed with the Commission within 48 hours after the expenditure 

is made. 11 CFR §§104.4(f) and 104.5(g)(1). 

E. Requirements for Maintaining Records. Reporting committees are required to 

maintain records which provide, in sufficient detail, the information from which the 

filed reports may be verified. 11 CFR §104.14(b)(1). 

F. 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 termed "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 votingage population. 
29 

• 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. 

• 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. 52 U.S.C. §30116(d) and 11 CFR §§109.30 and 109.32. 

G. 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 piu-suant 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). 

Facts and Analysis 

A. Reporting of Independent Expenditures 

1. Facts 

During audit fieldwork, the Audit staff reviewed disbursements to ensure the 

reporting completeness and accuracy of independent expenditures. The Audit staff 

noted that HDP made media-related expenditures totaling $30,148 and disclosed them •' 

as Federal Election Activity or Coordinated Party Expenditures that may be 

considered independent expenditures. A breakdown of the analysis for these 

expenditures is as follows: 

Apparent Independent Expenditures Reported as Coordinated Party 

Expenditures and Federal Election Activity (Copy of Communication Made 

Available) 

HDP made 18 apparent independent expenditures totaling $30,M8 for which it 

provided supporting documentation such as invoices, scripts, ads, etc. 

i) For apparent independent expenditures totaling $ 18,226, the 

communications contained language expressly advocating the election or 

defeat of a clearly identified candidate as defined under 11 CFR 

§ 100.22(a). This amount consisted of costs associated with 16 radio 

advertisements and one newspaper advertisement containing express 

advocacyThe radio advertisements included the statement: "And on 

November 6th, let's furlough Linda Lingle!", and included the disclaimer, 

" The newspaper advertisement was not itemized on the FEC report (cost, $423). 
30 

"Paid for by the Democratic Party of Hawaii, which is responsible for the 

content of this advertising". 

The 16 radio advertisements were disclosed on Schedule F as Coordinated 

Party Expenditures. Aside from being reported as Coordinated Party 

Expenditures, no documentation was available demonstrating 

coordination. Also, Counsel for HDP believed these expenditures were 

not coordinated. Giventhesereasons, the Audit staff believes the 

communications should have been reported as Independent Expenditures. 

However, should HDP continue to maintain that these radio 

advertisements were not coordinated, the committee would have exceeded 

its spending limit by $ 15,203. 

The newspaper advertisement included the statenient: "Vote Democrat in 

the General Election" with pictures below of Barack Obama, Joe Biden, 

Mazie Hirono, and Tulsi Gabbard. The advertisement included the 

disclaimer "Paid for by Vote Hawaii 2012,^° Not authorized by any 

candidate or candidate committee". Given the content and the disclaimer, 

the Audit staff believes the communication should have been reported as 

an Independent Expenditure. 

ii) For an apparent independent expenditure totaling $I 1,922, the production 

and design costs associated with a television advertisement were paid by 

HDP. The television advertisement depicted the Hawaii Senatorial 

candidate, Linda Lingle, making a speech at the 2008 Republican National 

convention. While this depiction continued, the narrator stated the 

Candidate, "Linda Lingle, was wrong then, about a lot of things, and she's 

wrong for Hawaii now." The Audit staff believes the phrase, "she's 

wrong for Hawaii" was express advocacy because it had the same 

meaning as "defeat" and therefore could have no other meaning than to 

urge the defeat of the Candidate. The television advertisement was 

disclosed on Schedule B, Line 30(b) as Federal Election Activity and 

included the disclaimer, "Paid for by Vote Hawaii 2012, not authorized by 

any candidate or candidate's committee". Given the content and the 

disclaimer, the Audit staff believes the cost associated with the 

communication should be reported as an Independent Expenditure. 

2. Interim Audit Report & Audit Division Recommendation 

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

representatives a schedule of disclosure errors for independent expenditures. HDP 

representatives stated they would review the schedule. 

The IAR recommended that HDP provide documentation and evidence that apparent 

independent expenditures totaling $30,148 did not require reporting as independent 

This newspaper advertisement was paid for by the Democratic Party of Hawaii. 
31 

expenditures. Absent such evidence, the lAR recommended that HDP amend its 

reports to disclose these disbursements as independent expenditures on Schedule E 

and submit revised procedures for reporting independent expenditures. 

3. Committee Response to Interim Audit Report 

In response to the lAR recommendation, Counsel stated that these apparent 

independent expenditures were coordinated (and amended reports were filed showing 

these expenditure as coordinated on Schedule F) and not independent expenditures. 

Counsel also noted that, although the total coordinated expenditures exceeded HDP's 

coordinated limit, it was only because of an administrative oversight (i.e., a failure to 

contact DSCC to obtain a higher spending authority).^' The response also included a 

letter from the DSCC Counsel stating that $5,000 in coordinated spending authority 

was transferred to HDP on November 1,2012; and had HDP requested additional 

spending authority, he knew of no reason why spending authority would have been 

withheld. Also, the letter provides additional coordinated spending authority to 

DSCC in the amount of $92,097. 

4. Draft Final Audit Report 

The Audit staff accepted HDP's characterization of these communications as 

coordinated expenditures and not as independent expenditures. However, the Audit 

staff noted that the 16 radio advertisements, totaling $17,803, included disclaimer 

wording for a communication not authorized by a candidate ("Paid for by the 

Democratic Party of Hawaii, which is responsible for the content of this advertising"). 

Similarly, the television advertisement, totaling $11,922, included disclaimer wording 

for a communication not authorized by a candidate ("Paid for by Vote Hawaii 2012, 

not authorized by any candidate or candidate's committee"). 

After further review, the newspaper advertisement classified by the Audit staff as an 

apparent independent expenditure, totaling $423, was determined to he federal 

election activity correctly reported on Schedule B, Line 30(b). 

Amended reports, filed in response to the JAR, disclosed the 16 radio advertisements 

and the television advertisement on Schedule F as coordinated expenditures. This 

was in addition to a television advertisement, totaling $100,000, previously reported 

as a coordinated expenditure on Schedule F. One television advertisement supported 

the democratic senatorial candidate for general election. The radio advertisements 

and second television advertisement opposed the republican senatorial candidate for 

general election. Coordinated expenditures reported on Schedule F totaled $129,725. 

The Audit staff disagreed with HDP's application of the DSCC's coordinated 

expenditure authority after HDP made coordinated party expenditures. Neither HDP 

nor the DSCC could locate a record authorizing additional spending authority. 11 

CFR §109.33(a) requires that an assignment must be made in writing, state the 

As part of its response, HDP requested that the Final Audit Report reflect that the HDP's spending limit 

did not exceed the combined coordinated expenditure limit for the 2012 Hawaii Senate election. 
32 

amount of the authority assigned, and be received by the assignee before any 

coordinated party expenditure is made pursuant to the assignment. 

In similar cases, the Commission has rejected assignments of spending authority after 

the fact, but did acknowledge in one of the cases that the Committee had not 

exceeded its combined coordinated expenditure limit, which was the case for HDP. 

In response to Counsel, the Audit staff revised its schedule of coordinated 

expenditures to include $30,148 of media related expenses that were previously 

thought to be independent expenditures. The revised schedule of coordinated 

expenditures totaled $129,725 but HDP had coordinated spending authority of only 

$102,600. The Audit staff determined HDP exceeded its coordinated spending limit 

by $27,125. 

S. Committee Response to the Draft Final Audit Report 

In response to the DFAR, Counsel stated, that in a similar situation, the Commission 

found that the coordinated spending authority had been exceeded but the combined 

spending authority of the state party and national party had not been exceeded, 

irrespective of the lack of prior written authorizations.^^ Also, Counsel stated that in 

the aforementioned situation, refunds from the benefitting campaign conunittee were 

not required and that the Commission should explain its inconsistent treatment if 

refunds are now required.^^ 

Commission Conclusion 

On December 14,2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission find that HDP exceeded its coordinated spending limit by $27,125. 

The Conunission did not approve, by the required four votes, the Audit Division 

Recommendation Memorandum, which included the recommendation to find that 

HDP had exceeded its coordinated spending limit by $27,125. However, a revised 

Commission proposal was approved addressing the concern that the Audit staff could 

not confirm the airing of a television advertisement, but only its production and 

design costs of $11,922. Accordingly, the Commission directed the Audit staff to 

either excise the television advertisement and its cost from the finding or move the 

advertisement to the "Additional Issue" section and also reduce the finding amount. 

The Commission approved a finding that HDP exceeded its coordinated spending 

limit by $15,203 but that the overall spending limit was not exceeded. The television 

advertisement is discussed under the "Additional Issue" part of this report. 

" See the Final Audit Report of the Commission for the Democratic Executive Committee of Florida for 

the 2008 election cycle and the related ADRM Vote Certification dated June 7,2012. 

" The DFAR recommended that HDP obtain a refund from the candidate committee. The recommendation 

has been excluded from this report. 
33 

B. Failure to File 24/48-Hour Reports for Independent Expenditures 

1. Facts 

The Audit staff reviewed the apparent independent expenditures noted above to 

determine whether additional reporting of a 24/48-hour report was required.^^ The 

Audit staff determined that HDP did not file 24-hour reports, as required for 

independent expenditures, totaling $29,725. 

2. Interim Audit Report & Audit Division Recommendation 

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

representatives a schedule of 24-hour reports that were not filed. HDP 

representatives stated they would review the schedule. 

Absent documentation and evidence that apparent independent expenditures totaling 

$30,148 did not require reporting as independent expenditures (per Part A. above), 

the lAR recommended that HDP provide any comments it deems necessary with 

respect to the 24-hour reports that were not filed. 

3. Committee Response to Interim Audit Report 

In response to the lAR recommendation. Counsel provided no additional comments 

regarding 24-hour reports. 

4. Draft Final Audit Report 

The Audit staff accepted HDP's characterization of the communications noted above 

in Part A. as coordinated expenditures. As such, no 24-hour reports were required. 

5. Committee Response to the Draft Final Audit Report 

HDP provided no additional comment regarding 24-hour reports in its response to the 

DFAR. 

Commission Conclusion 

See the Commission concluded in Part A of this finding that these expenditures were 

coordinated and not independent. There is no 24 hour reporting requirement for 

coordinated expenditures. 

I Finding 7. Allocation of Expenditures 

Summary 

During audit fieldwork, the review of disbursements made from the federal and nonfederal accounts identified an apparent non-federal overfunding of activity in the amount 

of $82,722. In response to the lAR recommendation, HDP filed amended reports and 

" The date the expenditure is publicly distributed serves as the date that the independent expenditure is 

made for purposes of the additional 24/48-hour report filing requirement. In the absence of a known date 

for public dissemination, the Audit staff used the invoice date or date of incurrence to determine if a 

24/48-hour report was required. 
34 

submitted additional documentation for certain expenditures. Based on the new 

documentation, the Audit staff revised its calculation and concluded in the DFAR that the 

non-federal account did not overflind the federal account. 

The Commission approved a recommendation that HDP did not materially overfund its 

federal accounts with funds from its non-federal accounts. 

Legal Standard 

A. Paying for Allocable Expenses. The Commission regulations offer party conunittees 

two ways to pay for allocable, shared federal/non-federal expenses. 

• they may pay the entire amount of the shared expense from the federal account 

and transfer funds from the non-federal account to the federal account to cover the 

non-federal share of that expenses; or 

• They may establish a separate, federal allocation account into which the 

committee deposits funds from both its federal and non-federal accounts solely 

for the purpose of paying the allocable expenses. 11 CFR § 106.7(b). 

B. Transfers. Generally, a political conunittee may not transfer funds from its nonfederal account to its federal account, except when the committee follows specific 

rules for paying for shared federal/non-federal election activity. 11 CFR 

§§102.5(a)(l)(i) and 106.7(f). 

C. Reporting Allocable Expenses. A political committee that allocates 

federal/nonfederal expenses must report each disbursement it makes from its federal 

account (or separate allocation account) to pay for a shared federal/non-federal 

expense. Committees report these kinds of disbursements on Schedule H4 (Joint 

Federal/Non-federal Activity Schedule). 11 CFR §104.17(b)(3). 

D. Allocation Ratio for Administrative & Generic Voter Drive Costs. State and local 

party committees must allocate their administrative expenses and generic voter drive 

costs dependent upon which federal offices appear on the ballot for the election year. 

The minimum percentage of federal funds would be at least: 

• 36 percent if both a Presidential candidate and a Senate candidate appear on the 

ballot; 

• 28 percent if a Presidential candidate but not a Senate candidate appears on the 

ballot; 

• 21 percent if a Senate candidate, but not a Presidential candidate, appears on the 

ballot; and, 

• 1S percent if neither a Presidential nor a Senate candidate appears on the ballot. 

11 CFR § 106.7(d)(2) and (.3). 

E. Salaries and Wages. Committees must keep a monthly log of the percentage of time 

each employee spends in connection with a Federal election. Employees who spend 

25 percent or less of their compensated time in a given month on Federal election 

activity or on activities in connection with a Federal election must either be paid only 
35 

from the Federal account or have their salaries allocated as an administrative cost. 11 

CFR §106.7(d)(l). 

F. Definition of Federal Election Activity. Federal election activity (FEA) is a 

specifically defined term of art for activity by state, district or local party committees 

that triggers special payment and reporting requirements. As a general rule, FEA 

must be paid for with federal funds. No non-federal funds may be used for FEA. 

There are four types of FEA: 

• Voter registration activity during the period 120 days before a regularly scheduled 

federal election including the election day itself; 

• Voter identification, get-out-the-vote and generic campaign activity conducted in 

connection with an election in which a candidate for federal office appears on the 

ballot; 

• A public communication that refers to a clearly identified candidate for federal 

office and that promotes, attacks, supports or opposes (PASOs) a candidate for 

that office. The communication need not expressly advocate the election or 

defeat of the federal candidate to qualify as FEA; and 

• Services provided during any given calendar month by an employee of a state, 

district or local party committee who spends more than 25 percent of his or her 

compensated time during that month in activities in connection with a federal 

election, including FEA mentioned above. 11 CFR § 100.24(b). 

G. Required accounts for Federal Election Activity. Each State, district, and local 

party organization or committee that has receipts or makes disbursements for Federal 

election activity can establish two separate accounts in depositories as follows: One 

or more Federal accounts, and an account that must function as both a Non-Federal 

account and a Levin account. If such an account is used, the State, district, and local 

party must demonstrate through a reasonable accounting method approved by the 

Commission that whenever such organization makes a disbursement for activities 

undertaken pursuant to 11 CFR 300.32(b), that organization had received sufficient 

contributions or Levin funds to make such disbursement. 11 CFR §300.30(c)(3). 

H. Receipt of Levin Funds. Levin funds expended or disbursed by any state committee 

must be raised solely by the committee that expends or disburses them. Each 

donation must be lawful under the laws of the state in which the committee is 

organized and the funds solicited must not aggregate more than $10,000 in a calendar 

year. Consequently, funds from national party committees, other state, district and 

local committees, and from federal candidates or officeholders, may not be accepted 

as Levin funds. 11 CFR §300.31. 

I. Disbursements of Levin Funds. A State, district, or local committee of a political 

party may spend Levin funds on the following types of activity: 

• Voter registration activity during the period that begins on the date that is 120 

days before the date a regularly scheduled Federal election is held and ends on the 

date of the election; 
36 

• Voter identification, get-out-the-vote activity, or generic campaign activity 

. conducted in connection with an election in which a candidate for Federal office 

appears on the ballot (regardless of whether a candidate for State or local office 

also appears on the ballot); 

• The Federal election activity for which the disbursement is made must not refer to 

a clearly identified candidate for Federal office; and 

• The disbursement must not pay for any part of the costs of any broadcasting, 

cable, or satellite communication, other than a communication that refers solely to 

a clearly identified candidate for State or local office. 11 CFR §300.32(b)(l) and 

(c). 

J. Reporting Federal Election Activity. If a state, district or local party committee's 

combined annual receipts and disbursements for federal election activity (FEA) total 

$5,000 or more during the calendar year, the committee must disclose receipts and 

disbursements of federal funds and Levin funds used for FEA. 11 CFR §300.36 

(b)(2). 

K. Contents of Levin Reports. Each report must disclose: 

• the amount of cash-on-hand for Levin funds at the beginning and end of the 

reporting period; 

• the total amount of Levin fund receipts for the reporting period and the calendar 

year; 

• the total amount of Levin fund disbursements for the reporting period and the 

calendar year; and 

• certain transactions that require itemization on Schedule L-A (Itemized Receipts 

of Levin Funds) or Schedule L-B (Itemized Disbursements of Levin Funds). 11 

CFR §300.36 (b)(2). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the review of disbursements made from the federal and nonfederal accounts identified an apparent non-federal overfiinding of activity in the 

amount of $82,722. 

1. Expenses reported as allocated on Schedules H4. The Audit staff calculated 

the non-federal share of expenditures required to be disclosed on Schedules H4 

and compared that to the amount transferred from the non-federal account for the 

period between 2011 and 2012. The non-federal portion of shared activity for this 

period was $110,092. However, the non-federal account transferred a net amount 

of $160,083, resulting in an overfiinding of allocable expenses totaling $49,991. 

a) Below is a breakdown of the Audit staffs calculation of overfimding of 

allocable expenses totaling $49,991. The following expenses were disclosed 

on Schedule H4 but, based on available documentation, were not allocable 

and should have been paid with 100 percent federal funds: 
37 

i) Payroll and Associated Costs: HDP paid expenses from a federal account 

but disclosed these as allocable administrative expenses on Schedule H4. 

HDP did not provide monthly logs, timesheets, or affidavits demonstrating 

that these costs were solely non-federal or allocable expenses (see Finding 

5). 

ii) Generic Voter Drive (GVD) Expenses. HDP paid expenses from a federal 

account that appeared to be GOTV activity during the PEA time period, 

but disclosed these as allocable expenses on Schedule H4. A portion of 

these expenses were disclosed as allocable Generic Voter Drive expenses 

on Schedule H4. The remaining were disclosed as shared administrative 

expenses on Schedule H4. Based upon the dates and purpose of the 

disbursements and the limited documentation provided, it appears these 

disbursements should have been paid with 100 percent federal funds and 

not disclosed as shared expenses on Schedules H4.^^ 

iii) Miscellaneous Expenses. HDP disclosed expenses on Schedule H4 that 

were not sufficiently documented to allow the Audit staff to determine 

whether they could be shared. Included in this total were disbursements 

for rent and utilities. The documentation to support these disbursements 

was insufficient to determine if these expenses were made to support the 

headquarters' office or temporary campaign office locations. 

2. Expens.es paid from the non-federal account. HDP paid certain expenses 

directly from the non-federal account that appeared to represent 100 percent 

federal activity or allocable activity that should have been disclosed on Schedules 

H4, resulting in an overfunding of expenses totaling $32,731. 

a) Below is a breakdown of the Audit staffs calculation of overfunding of 

expenses paid from the non-federal account totaling $32,731. Based on 

available documentation, these expenses should have been paid with 100 

percent federal funds or allocated on Schedules H4: 

i) Federal Election Activity Expenses. HDP paid expenses totaling $30,576 

from its non-federal account that appeared to be FEA Type II (GOTV) 

activity that should have been paid with 100% federal funds. Based on 

available documentation, it appeared these expenses pertained to various. 

GOTV rallies. These costs included consulting services, facility and 

equipment rentals, food and beverages, entertainment and transportation 

expenses. 

" For the 2012 election cycle, a candidate for federal office appeared on the ballot in the state of Hawaii. 

For HDP, the FEA Voter ID, Generic Campaign Activity and GOTV period was June S, 2012 throu^ 

November 6,2012. Further, the FEA voter registration period was November 8,2011 through March 13, 

2012 and April 13,2012 through November 6,2012. 
38 

ii) Miscellaneous Administrative Expenses: HDP paid expenses from its 

non-federal account that, based on available documentation, appeared to 

be expenses that should have been allocated between the federed and nonfederd accounts. The federal share of these expenses totaled $2,155. 

These expenses pertained to office rent, bank fees, office vehicle repairs 

and accounting services. 

B. Interim Audit Report & Audit Division Recommendation 

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

representatives schedules identifying the transactions causing the non-federal 

overfiinding. HDP representatives stated they were working on getting three former staff 

to sign payroll affidavits for disbursements disclosed as allocable administrative expenses 

on Schedule H4. 

The lAR recommended that HDP provide documentation demonstrating that the 

expenditures above did not cause an over-funding from the non-federal account of 

$82,722 ($49,991 + $32,731). Absent such evidence, the lAR recommended that HDP 

reimburse the non-federal account $82,722 or disclose the non-federal overfunding on 

Schedule D as a debt until funds become available to satisfy the obligation. 

C. Committee Response to Interim Audit Report 

In response to the IAR recommendation, HDP provided a declaration that stated several 

staff payroll payments were made to individuals who worked less than 25% percent of 

time in a given month on activities in connection with federal elections and federal 

election activity. 

HDP also provided a declaration that asserted that several expenses disallowed by the 

lAR were in fact ordinary operating costs. 

In addition, HDP filed amended disclosure reports in response to the lAR 

recommendation that moved $38,251 in federal election activity expenses disclosed on 

Schedule H4 to Schedule H6 (allocated Levin & federal expenses). HDP provided 

Schedules L for Levin activity and have moved the necessary portion of allocation 

transfers to Schedule H5 (Transfers of Levin Funds Received for Allocated Federal 

Election Activity) so that these activities are properly disclosed as allocable federal 

election activity. Finally, HDP objected to the inclusion of non-federal bank charges as 

allocable expenses. 

D. Draft Final Audit Report 

The Audit staff acknowledged that payroll declarations provided in response to the lAR 

recommendation were allocable on Schedule H4, and adjusted the calculation for 

overfunding accordingly. In addition, the Audit staff acknowledged that declarations 

provided for expenses identified as ordinary operating costs were allocable on Schedule 

H4, and adjusted the calculation for overfunding accordingly. Also, the Audit staff 

acknowledged that the expenditures moved from Schedule H4 were expenditures for 
39 

federal election activity allocable on Schedule H6, and adjusted the calculation for 

overfunding accordingly. Finally, the Audit staff agreed that the non-federal bank 

charges were not an allocable administrative expense, and adjusted the calculation for 

overfunding accordingly. Based on the documentation provided in response to the lAR 

recommendation, the Audit revised its ilmding analysis and concluded the non-federal 

account did not overfund the federal account. 

E. Committee Response to the Draft Final Audit Report 

HDP provided no additional comment to this finding in its response to the DEAR. 

Commission Conclusion 

On December 14,2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Conunission find that HDP did not materially overfund it federal accounts with funds 

from its non-federal accounts. 

The Commission approved the Audit staffs recommendation. 

Part V 

Additional Issue 

Failure to Properly Report Media Related Expenditures -

Dissemination 

Summary 

During audit fieldwork, the Audit staff identified disbursements totaling $30,148, which 

appeared to be media related independent expenditures requiring disclosure on Schedule 

E (Itemized Independent Expenditures), that HDP disclos^ on Schedule B, Line 30b 

(Federal Election Activity) and Schedule F (Coordinated Party Expenditures). Of the 

$30,148, HDP did not file the required 24-hour reports for those items that should have 

been reported on Schedule E totaling $29,725. 

In response to the lAR recommendation. Counsel stated these expenditure were 

coordinated (and amended reports were filed showing these expenditure as coordinated 

on Schedule F) and not independent expenditures. Counsel added that, although the 

expenditures exceeded HDP's coordinated expenditure limit, this only occurred as a 

result of an administrative oversight, a failure to contact the DSCC to obtain a higher 

spending authority. 

As a result of HDP's response to the lAR recommendation, the DEAR was revised to 

reflect that HDP made coordinated expenditures totaling $129,725, but only had 

coordinated spending authority for $102,600. Therefore, HDP exceeded its spending 

limit by $27,125. 
40 

The Commission did not approve, by the required four votes, the excessive coordinated 

finding amount recommended by the Audit staff. After considering certain production 

and design costs related to a television advertisement totaling $11,922, the Commission 

directed the Audit Division to excise this amount from the finding or move it to an 

"Additional Issue" section of the report. This matter was moved to the Additional Issue's 

section of the report pursuant to Commission Directive 70.^^ 

Legal Standard 

The legal standard in the Finding 6 is incorporated herein. 

Facts and Analysis 

A. Reporting of Independent Expenditures 

1. Facts 

During audit fieldwork, the Audit staff reviewed disbursements to ensure the 

reporting completeness and accuracy of independent expenditures. The Audit staff 

noted that HDP made media-related expenditures totaling $30,148 and disclosed them 

as Federal Election Activity or Coordinated Party Expenditures that may be 

considered independent expenditures. A breakdown of the analysis for these 

expenditures is as follows: 

Apparent Independent Expenditures Reported as Coordinated Party 

Expenditures and Federal Election Activity (Copy of Communication Made 

Available) 

HDP made 18 apparent independent expenditures totaling $30,148 for which it 

provided supporting documentation such as invoices, scripts, ads, etc. 

i) For apparent independent expenditures totaling $ 18,226, the communications 

contained language expressly advocating the election or defeat of a clearly 

identified candidate as defined under 11 CFR § 100.22(a). This amount 

consisted of costs associated with 16 radio advertisements and one newspaper 

advertisement containing express advocacy.^' The radio advertisements 

included the statement: "And on November 6th, let's furlough Linda Lingle!", 

and included the disclaimer, "Paid for by the Democratic Party of Hawaii, 

which is responsible for the content of this advertising". 

The 16 radio advertisements were disclosed on Schedule F as Coordinated 

Party Expenditures. Aside from being reported as Coordinated Party 

Expenditures, no documentation was available demonstrating coordination. 

Also, Counsel for HDP believed these expenditures were not coordinated. 

Given these reasons, the Audit staff believes the communications should have 

been reported as Independent Expenditures. However, should HDP continue 

^ Available at http://classic.fec.gov/directives/CoinmissionDirectives.shtni] 

" The newspaper advertisement was not itemized on the FEC report (cost, $423). 
41 

to maintain that these radio advertisements were not coordinated, the 

committee would have exceeded its spending limit by $15,203. 

The newspaper advertisement included the statement; "Vote Democrat in the 

General Election" with pictures below of Barack Obama, Joe Biden, Mazie 

Hirono, and Tulsi Gabbard. The advertisement included the disclaimer "Paid 

for by Vote Hawaii 2012,^' Not authorized by any candidate or candidate 

committee". Given the content and the disclaimer, the Audit staff believes the 

communication should have been reported as an Independent Expenditure. 

ii) For an apparent independent expenditure totaling $11,922, the production and 

design costs associated with a television advertisement were paid by HDP. 

The television advertisement depicted the Hawaii Senatorial candidate, Linda 

Lingle, making a speech at the 2008 Republican National convention. While 

this depiction continued, the narrator stated the Candidate, "Linda Lingle, was 

wrong then, about a lot of things, and she's wrong for Hawaii now." The 

Audit staff believes the phrase, "she's wrong for Hawaii" was express 

advocacy because it had the same meaning as "defeat" and therefore could 

have no other meaning than to urge the defeat of the Candidate. The 

television advertisement was disclosed on Schedule B, Line 30(b) as Federal 

Election Activity and included the disclaimer, "Paid for by Vote Hawaii 2012, 

not authorized by any candidate or candidate's committee". Given the content 

and the disclaimer, the Audit staff believes the cost associated with the 

communication should be reported as an Independent Expenditure. 

2. Interim Audit Report & Audit Division Recommendation 

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

representatives a schedule of disclosure errors for independent expenditures. HDP 

representatives stated they would review the schedule. 

The lAR recommended that HDP provide documentation and evidence that apparent 

independent expenditures totaling $30,148 did not require reporting as independent 

expenditures. Absent such evidence, the lAR recommended that HDP amend its 

reports to disclose these disbursements as independent expenditures on Schedule E 

and submit revised procedures for reporting independent expenditures. 

3. Committee Response to Interim Audit Report 

In response to the lAR recommendation. Counsel stated that these apparent 

independent expenditures were coordinated (and amended reports were filed showing 

these expenditure as coordinated on Schedule F) and not independent expenditures. 

Counsel also noted that, although the total coordinated expenditures exceeded HDP's 

coordinated limit, it was only because of an administrative oversight (i.e., a failure to 

This newspaper advertisement was paid for by the Democratic Party of Hawaii. 
42 

contact DSCC to obtain a higher spending authority).^^ The response also included a 

letter from the DSCC Counsel stating that $5,000 in coordinated spending authority 

was transferred to HDP on November 1,2012; and had HDP requested additional 

spending authority, he knew of no reason why spending authority would have been 

withheld. Also, the letter provides additional coordinated spending authority to 

DSCC in the amount of $92,097. 

4. Draft Final Audit Report 

The Audit staff accepted HDP's characterization of these communications as 

coordinated expenditures and not as independent expenditures. However, the Audit 

staff noted that the 16 radio advertisements, totaling $17,803, included disclaimer 

wording for a communication not authorized by a candidate ("Paid for by the 

Democratic Party of Hawaii, which is responsible for the content of this advertising"). 

Similarly, the television advertisement, totaling $11,922, included disclaimer wording 

for a communication not authorized by a candidate ("Paid for by Vote Hawaii 2012, 

not authorized by any candidate or candidate's committee"). 

After further review, the newspaper advertisement classifled by the Audit staff as an 

apparent independent expenditure, totaling $423, was determined to be federal 

election activity correctly reported on Schedule B, Line 30(b). 

Amended reports, filed in response to the lAR, disclosed the 16 radio advertisements 

and the television advertisement on Schedule F as coordinated expenditures. This 

was in addition to a television advertisement, totaling $100,000, previously reported 

as a coordinated expenditure on Schedule P. One television advertisement supported 

the democratic senatorial candidate for general election. The radio advertisements 

and second television advertisement opposed the republican senatorial candidate for 

general election. Coordinated expenditures reported on Schedule F totaled $129,725. 

The Audit staff disagreed with HDP's application of the DSCC's coordinated 

expenditure authority after HDP made coordinated party expenditures. Neither HDP 

nor the DSCC could locate a record authorizing additional spending authority. 11 

CFR § 109.33(a) requires that 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. 

In similar cases, the Commission has rejected assignments of spending authority after 

the fact, but did acknowledge in one of the cases that the Committee had not 

exceeded its combined coordinated expenditure limit, which was the case for HDP. 

In response to Counsel, the Audit staff revised its schedule of coordinated 

expenditures to include $30,148 of media related expenses that were previously 

thought to be independent expenditures. The revised schedule of coordinated 

expenditures totaled $129,725 but HDP had coordinated spending authority of only 

As part of its response, HDP requested that the Final Audit Report reflect that the HDP's spending limit 

did not exceed the combined coordinated expenditure limit for the 2012 Hawaii Senate election. 
43 

$102,600. The Audit staff determined HDP exceeded its coordinated spending limit 

by $27,125. 

5. Committee Response to the Draft Final Audit Report 

In response to the DEAR, Counsel stated, that in a similar situation, the Commission 

foimd that the coordinated spending authority had been exceeded but the combined 

spending authority of the state party and national party had not been exceeded, 

irrespective of the lack of prior written authorizations.^^ Also, Counsel stated that in 

the aforementioned situation, refunds from the benefitting campaign committee were 

not required and that the Commission should explain its inconsistent treatment if 

refunds are now required.^' 

Commission Conclusion 

On December .14,2017, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission find that HDP exceeded its coordinated spending limit by $27,125. 

The Commission did not approve, by the required four votes, the Audit staffs 

recommendation to find that HDP had exceeded its coordinated spending limit by 

$27,125. However, a revised Commission proposal was approved addressing the 

concern that the Audit staff could not confirm the airing of a television 

advertisement, but only its production and design costs of $11,922. Accordingly, the 

Audit staff was asked to excise the television advertisement and its cost from the 

finding or move the advertisement to an "Additional Issue" and to reduce the finding 

amount. The Commission approved a finding that HDP exceeded its coordinated 

spending limit by $15,203 but that the overall spending limit was not exceeded. 

Pursuant to Commission Directive 70,^^ this matter is presented as an "Additional 

Issue." 

^ See the Final Audit Report of the Commission for the Democratic Executive Committee of Florida for 

the 2008 election cycle and the related ADRM Vote Certification dated June 7,2012. 

" The DFAR recommended that HDP obtain a reiiind from the candidate committee. The recommendation 

has been excluded from this report. 

Available at http;//classic.fec.gov/directives/CommissionDirectives.shtml