Final Audit Report of the 

Commission on the 

Democratic Party of Arkansas 

January 1, 2007 - December 31, 2008 

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 

witii the Act.* The audit 

determines whether the 

committee complied 

with the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

About the Committee (p. 2) 

The Democratic Party of Arkansas is a state party committee 

headquartered in Little Rock, Arkansas. For more information, see 

the chart on the Committee Organization, p. 2. 

Financial Activity (p. 2) 

Receipts 

o Contributions from Individuals $ 620,492 

o Contributions from Other Political 

Committees 326,600 

o Transfers from Affiliated Party 

Committees 113,217 

o Transfers from Non-Federal Accoimts 1,507,775 

o Other Receipts 119,305 

Total Receipts $2,687,389 

Disbursements 

o Operatmg Disbursements $ 2,213,994 

o Loan Repayments Made 31,319 

o Federal Election Activity 107,908 

o Transfers to Non-Federal 

Accoimt 224,349 

o Other Disbursements 117,600 

Total Disbursements $2,695,170 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to the 

matter discussed in this 

report. 

Commission Finding (p. 3) 

• Misstatement of Financial Activity 

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

Commission on the 

Democratic Party of Arkansas 

January 1, 2007 - December 31, 2008 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Audit Hearing 1 

Part II. Overview of Conunittee 

Conunittee Organization 2 

Overview of Fmancial Activity 2 

Part III. Summary 

Commission Finding 3 

Part rv. Conunission Finding 

Misstatement of Financial Activity 4 
Part I 

Backgroimd 

Authority for Audit 

This report is based on an audit of the Democratic Party of Arkansas (DPA), undertaken 

by the Audit Division of the Federal Election Commission (the Conunission) m 

accordance with the Federal Election Campaign Act of 1971, as amended (the Act). The 

Audit Division conducted the audit pursuant to 2 U.S.C. §438(b), which permits die 

Commission to conduct audits and field investigations of any political committee tiiat is 

required to file a report under 2 U.S.C. §434. Prior to conducting any audit under this 

subsection, the Commission must perform an intemal review of reports filed by selected 

committees to determine if the reports filed by a particular committee meet the threshold 

requirements for substantial compliance with the Act. 2 U.S.C. §438(b). 

Scope of Audit 

Following Commission approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit exammed: 

1. The disclosure of disbursements, debts and obligations. 

2. The disclosure of expenses allocated between federal and non-federal accoimts. 

3. The disclosure of individual contributors' occupation and name of employer. 

4. The consistency between reported figures and bank records. 

5. The completeness of records. 

6. Other committee operations necessary to the review. 

Audit Hearing 

DPA declined an opportunity for a hearing before the Commission on the matter 

presented in this report. 
Part II 

Overview of Committee 

Coinmittee Organization 

Important Dates 

• Date of Registration March 8,1976 

• Audit Coverage January 1,2007 - December 31,2008 

Headquarters Little Rock, Arkansas 

Bank Information 

• Bank Depositories Four 

• Bank Accounts Seven Federal, Five Non-federal, One 

Levin (unused) 

Treasurer 

• Treasurer When Audit Was Conducted Karen Garcia 

• Treasurer During Period Covered by Audit Karen Garcia 

Management Information 

• Attended FEC Campaign Finance Seminar Yes 

• Who Handled Accountuig and Recordkeeping 

Tasks 

Paid staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand @ January 1,2007 $ 68,560 

o Contributions from Individuals 620,492 

o Contributions from Other Political Committees 326,600 

o Transfers from Affiliated Party Committees 113,217 

o Transfers from Non-Federal Accounts 1,507,775 

o Other Receipts 119,305 

Total Receipts $ 2,687,389 

o Operating Disbursements 2,213,994 

o Loan Repayments Made 31,319 

o Federal Election Activity 107,908 

o Transfers to Non-Federal Account 224,349 

o Other Disbursements 117,600 

Total Disbursements $ 2,695,170 

Cash-on-hand @ December 31,2008 $ 60,779 
Part III 

Summary 

Commission Finding 

Misstatement of Financial Activity 

During audit fieldwork, a comparison of DPA's reported activity with bank records 

revealed a misstatement of receipts and disbursements m 2007. DPA understated receipts 

and disbursements by $148,974 and $146,561, respectively. 

In response to the Interim Audit Report, DPA amended its reports to materially correct 

the misstatements. The Commission approved this finding. (For more detail, see p. 4) 
Part IV 

Commission Finding 

Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of DPA's reported activity with bank records 

revealed a misstatement of receipts and disbursements m 2007. DPA understated receipts 

and disbursements by $148,974 and $146,561, respectively. 

In response to the Interim Audit Report, DPA amended its reports to materially correct 

the misstatements. The Commission approved this findmg. 

Legal standard 

Contents of Reports. Each report must disclose: 

• the amount of cash on hand at the begmning 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, 

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

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

Facts and Analjrsis 

A. Facts 

As part of fieldwork, the Audit staff reconciled DPA's reported activity to its bank 

records for 2007. The following chart outlines the discrepancies for the beginning cash 

balance, receipts, disbursements and the ending cash balance. Succeeding paragraphs 

address the reasons for the misstatements, if known. 

2007 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2007 

$67,443 $68,560 $1,117 

Understated 

Receipts $1,410,249 $1,559,223 $148,974 

Understated 

Disbursements $1,400,534 $1,547,095 $146,561 

Understated 

Ending Cash Balance 

©December 31,2007 

$77,158 $80,688 $3,530 

Understated 

The beginning cash balance was understated by $1,117 and is unexplained, but likely 

resulted from prior period discrepancies. 
The understatement of receipts resulted from the following: 

• Unreported fimdraising proceeds $ 87,496 

• Unreported reimbursement from non-federal account 66,000 

• Unexplained difference (4,522) 

Net understatement of receipts $ 148,974 

The understatement of disbursements resulted from the following: 

• Unreported transfer of fundraismg proceeds to non-federal $ 87,496 

account 

• Umeported payment of non-federal activity 66,000 

• Unexplained difference (6,935) 

Net understatement of disbursements $ 146,561 

The $87,496 adjustment uicluded in botii the understatement of receipts and 

disbursements represents net non-federal proceeds from fundraising events in which DPA 

received both federal and non-federal contributions. The contributions were received in 

the form of the ticket price paid to attend the events and were collected by a commercial 

ticket processing company. The company subsequently submitted a check to DPA for the 

proceeds, less its service fee. DPA deposited the check into its federal account, then 

calculated the non-federal share and transferred that amount to the non-federal account 

but failed to report the receipt of the non-federal portion of the proceeds and the transfer 

to the non-federal accoimt ($87,496). The federal portion along with the service fees 

were reported by DPA. 

The $66,000 adjustment included in both the understatement of receipts and 

disbursements represents non-federal activity that was mistakenly paid for out of a 

federal account, tiien reimbursed using non-federal fimds. The reimbursement occurred 

approximately three weeks after the expense was paid, but neither transaction was 

reported by DPA. 

The $3,530 understatement of the endmg cash balance was the result of the misstatements 

described above. 

B. Interim Audit Report & Audit Division's Recommendation 

The Audit staff discussed the misstatements for 2007 with DPA representatives at the exit 

conference and provided relevant work papers detailing the reportmg errors. Regarding 

tiie reportuig of the non-federal proceeds and subsequent transfer, DPA representatives 

explauied they excluded from the report both the receipt and the transfer because they 

only deposited the proceeds in the federal account after receiving a single, co-mingled 

check, which included both federal and non-federal fimds. They further added that they 

would amend the appropriate schedules as necessary to correct the misstatements. 

Regarding the non-federal activity that was paid for mistakenly out of a federal accoimt 

and subsequently reimbursed using non-federal funds, DPA representatives contend that 

since both transactions occurred during the same reporting period, they were justified in 

excluding them from the report. 
In the Interim Audit Report, the Audit staff recommended that DPA amend its 2007 

reports to correct the misstatements noted above. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report, DPA filed amended reports that materially 

corrected the misstatements. 

In addition, DPA provided evidence demonstrating that some adjustments suggested in 

the Interim Audit Report were not necessary. The amounts shown in the table above 

have been revised to reflect these changes. 

D. Draft Final Audit Report 

In the Draft Final Audit Report, the Audit staffed acknowledged that DPA had amended 

its reports to disclose these transactions. 

Commission Conclusion 

On June 10,2011, tiie Conunission considered the Audit Division Recommendation 

Memorandum in which the Audit Division recommended that the Commission adopt a 

finding that DPA misstated its financial activity for 2007. 

The Commission approved the Audit staff recommendation.