FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

A99-50

March 12,2001

MEMORANDUM

TO:

FROM:

SUBJECT:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE tr--

ROBERT 1. COSTA

ASSISTANT STAFF DIRECTO

AUDIT DIVISION

PUBLIC ISSUANCE OF THE REPORT OF THE AUDIT DIVISION

ON THE DEMOCRATIC STATE CENTRAL COMMITTEE OF

CALIFORNIA - FEDERAL

Attached please find a copy ofthe final audit report and related documents on the

Democratic State Central Committee ofCalifomia - Federal which was approved by the

Commission on February 26, 2001.

Informational copies ofthe report have been received by all parties involved and

the report may be released to the public.

Attachment as stated

cc: Office ofGeneral Counsel

Office ofPublic Disclosure

Reports Analysis Division

FECLibrary
REPORT OF THE AUDIT DIVISION

ON THE

DEMOCRATICSTATE CENTRAL

COMMITTEE OF CALIFORNIA - FEDERAL

Approved February 26, 2001

FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

WASHINGTON, D.C.
TABLE OF CONTENTS

DEMOCRATIC STATE CENTRAL COMMJTTEE

OFCALWORNlA-FEDERAL

A99-50

PAGE

Executive Summary

Final Audit Report

Transmittal to Committee

Chronology

3

7

9
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Washington, DC 20463

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DEMOCRATIC STATE CENTRAL COMMITTEE

OF CALIFORNIA - FEDERAL

EXECUTfVES~Y

The Democratic State Central Committee ofCalifomia - Federal (the Committee)

registered with the Comptroller General ofthe United States on September 15, 1975 and

filed subsequent amended Statements ofOrganization to change its name. In December

1991, the Committee amended its registration to change its name to the Democratic State

Central Committee ofCalifomia - Federal.

The audit was conducted pursuant to 2 U.S.C. §438(b), which states that the

Commission may conduct audits of any political committee whose reports fail to meet

the threshold level ofcompliance set by the Commission.

No audit findings are included in the audit report. However, a matter noted

during the audit is pending before the Commission in another context. When the

Commission concludes its consideration ofthis matter, information will be made public

in accordance with Commission procedures.

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A99-50

FEDERAL ELECTION COMMISSION

WASHINGTON. DC 20463

REPORT OF THE AUDITDIVISION

ON THE

DEMOCRATICSTATE CENTRAL COMMITTEE

OFCALIFORNIA - FEDERAL

I. BACKGROUND

A. AUDIT AUTHORITY

This report is based on an audit ofthe Democratic State Central

Committee ofCalifornia - Federal (the Committee), undertaken by the Audit Division of

the Federal Election Commission (the Commission) in accordance with the provisions of I

the Federal Election Campaign Act of 1971, as amended (the Act). The audit was

conducted pursuant to Section 438(b) ofTitle 2 ofthe United States Code which states,

in part, that the Commission may conduct audits and field investigations of any political

committee required to file a report under section 434 ofthis title. Prior to conducting any

audit under this subsection, the Commission shall perform an internal review ofreports

filed by selected committees to determine ifthe reports filed by a particular committee

meet the threshold requirements for substantial compliance with the Act.

B. AUDIT COVERAGE

The audit covered the period from January I, 1997 through December 31,

1998. During this period, the Committee reported a beginning cash balance of $282,121;

total receipts of$17,570,452; total disbursements of $17,418,260; and a closing cash

balance of $434,313'. To manage its financial activity, the Committee used nine federal 2

and nine non-federal bank accounts.

All figures in this report have been rounded to the nearest dollar.

2 Includes three federal custodialoank accounts maintained by Gordon and Schwenkmeyer, Inc. (GSI) on

behalf ofthe Committee. GSI is a fundraising and telemarketing firm located in EI Segundo, California.

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2

C. COMMITTEE ORGANIZATION

The Democratic State Central Committee (of California) Federal

Candidates Fund registered with the Comptroller General of the United States on

September 16, 1975 and filed subsequent amended Statements ofOrganization to change

its name. In December 1991, the Committee filed an amended Statement of

Organization changing its name to the Democratic State Central Committee ofCaJifornia

- Federal. The Committee maintains its headquarters in Sacramento, California. The

Treasurer at the beginning ofthe audit period was Gary Paul. He was succeeded on July

27, 1997 by Katherine Moret, who continues in this position.

D. AUDIT SCOPE AND PROCEDURES

Although the Committee appears to have met the minimum recordkeeping

requirements of II CFR § 102.9, the scope ofour testing of contributions received from

individuals was limited. The Committee maintained copies of contributor checks and

deposit batches for all individual contributions. In most cases, the Committee did not

include contributions ofless than $50 in the individuals' contribution histories. Also, for

$2,515,213 in contributions solicited and deposited by Gordon and Schwenkmeyer, Inc.,

records maintained by the Committee in support ofthese contributions were limited to

bank statements and computer files which contained information such as contributor

name and address, and contribution date and amount; no contributor-generated

documentation was made available.

The audit included testing ofthe following general categories:

1. The receipt of contributions or loans in excess ofthe statutory limitations;

2. the receipt of contributions from prohibited sources, such as those from

corporations or labor organizations;

3. proper disclosure of contributions from individuals, political committees

and other entities, to include the itemization of contributions when

required, as well as, the completeness and accuracy ofthe information

disclosed;

4. proper disclosure of disbursements including the itemization of

disbursements when required, as well as, the completeness and accuracy

ofthe information disclosed;

5. review of expenditures made on behalf offederal candidates;

6. proper disclosure of debts and obligations;

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3

7. the accuracy oftotal reported receipts, disbursements and cash balances as

compared to bank records;

8. adequate recordkeeping for transactions;

9. proper disclosure ofthe allocation ofcosts associated with administrative

expenses and activities conducted jointly on behalf offederal and nonfederal elections and candidates; and

10. other audit procedures that were deemed necessary in the situation.

Unless specifically discussed below, no material non-compliance with

statutory or regulatory requirements was detected. It should be noted that the

Commission may pursue further any ofthe matters discussed in this report in an

enforcement action.

A matter noted during the audit is pending before the Commission in

another context. When the Commission concludes its consideration ofthis matter,

information will be made public in accordance with Commission procedures.

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WASHINGTON, DC. 20463

A99-50

March 5, 2001

Ms. Katherine Moret, Treasurer

Democratic State Central Committee ofCalifornia - Federal

tl,ij 911 20th Street

;t Sacramento, CA 95814

Dear Ms. Moret:

Attached please find the Report ofthe Audit Division on the Democratic State

Central Committee ofCalifornia- Federal. The Commission approved the report on

February 26,2001.

The Commission approved Final Audit Report will be placed on the public record

on March 12, 2001. Should you have any questions regarding the public release ofthe

report, please contact the Commission's Press Office at (202) 694-1220. Any questions

you have related to matters covered during the audit or in the report should be directed to

Gary Hache or Marty Favin ofthe Audit Division at (202) 694-1200 or toll free at (800)

424-9530.

Assistant Staff Director

Audit Division

cc: Mr. Lance H. Olson, Counsel

Attachment as stated

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CHRONOLOGY

DEMOCRATIC STATE CENTRAL COMMITTEE

OF CALIFORNIA - FEDERAL

A99-50

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Audit Fieldwork

Interim Audit Report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

10/25/99--2/11/00

8/25/00

9/28/00

2/06/01

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