FEDERAL ELECTION COMMISSION

WASHINGTON, O.C 2046}

Jillle 7, 1999

MEMORANDUM

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

Mississippi Democratic Party Political Action Committee, which was approved by the

Commission on May 28,1999.

i:'

TO:

FROM:

SUBJECT:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERT J. COSTA

ASSISTANT STAFF DIRECTOR

AUDIT DNISION

PUBLIC ISSUANCE OF THE AUDIT REPORT ON MISSISSIPPI

DEMOCRATIC PARTY POLITICAL ACTION COMMITTEE

Infonnational 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 COilllsel

Office ofPublic Disclosure

Reports Analysis Division

FEC Library
,

REPORT OF THE AUDIT DIVISION .

ON THE

fJ MISSISSIPPIIDEMOCRATIC PARTY

1'1 POLITICAlLACTION COMMITTEE

Approved May 28, 1999

FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

WASHINGTON, D.C.
TABLE OF CONTENTS

MISSISSIPPI DEMOCRATIC PARTY POLITICAL ACTION COMMITTEE

ru Page

f;.:o~ Executive Summary

•

~! Final Audit Report 3

fil

!d Backgrmmd 3

t--",

F~~ Findings 5 =<

•

IiJ Transmittal to Committee 17 ~,

i~

Chronology 19
•

REPORT OF THE AUDIT DIVISION

ONTBE

MISSISSIPPI DEMOCRATIC PARTY POLITICAL ACTION COMMITTEE

EXECUTIVE SUMMARY

The Mississippi Democratic Party Political Action Committee (MDP) registered with

the Federal Election Commission on February 8, 1982.

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 of compliance set by the Commission.

The findings ofthe audit were presented to the:MOP at the completion offieldwork on

July 24, 1998 and later in the interim audit report. MDP's response to those findings are

contained in the audit report.

The following is an overview ofthe findings contained in the audit report.

RECEIPT OF AN EXCESSIVE CONTRIBUTION FROM ANON-REGISTERED

COMMlTIEE -2 U.S.C. §441a(a)(1)(C). MDP received a $10,000 contribution from a nonregistered committee, the excessive portion ofwhich totaled $5,300. In addition, the

permissibility ofthe entire $10,000 was questioned, as Mississippi state campaign finance law

allows corporate contributions for use in non-federal elections. In response, :MOP explained

that the contribution was supposed to have been deposited into the "State Non-Federal

Account".

RECEIPT OF PROHIBITED CONTRIBUTIONS - 2 U.S.C. §441b(a). :MOP received47

contributions from 40 prohibited sources, totaling $23,775. In addition, this report questions a

$33,000 transfer offunds to the non-federal accountand its subsequent reversal, which

appeared to have been an attempt to resolve deposited prohibited contributions. In response to

the interim audit report, MDP filed amended Schedules D to disclose the refunds due as debts.

:MOP and supplied copies ofsome refund checks ($4,225) issued on 4/1199, which had not yet

been negotiated. The current Treasurer was unable to provide any new information as to why

the transfers had been made between the federal and non-federal account.

ITEMIZATION OF RECEIPTS FROM POLmCAL ORGANIZATIONS - 2 U.S.C.

§434(b)(3)(B). MOP failed to itemize 28 contributionstotaling $3,246 received from party

committees and other political committees. In response to the interim audit report, MDP filed

amended Schedules A disclosing these contributions.
DISCLOSURE OF OCCUPATIONINAME OF EMl'LOYER - 2 U.S.C. §434(b)(3)(A) and

11 CFR §104.7(b). The occupation and/or the name of employer was not disclosed as required

for contributions totaling $ 24,940 received from 39 contributors. In response to the interim

audit report, the MDP provided documentation ofits efforts to obtain the missing information

and filed amended Schedules A to disclose the information obtained.

DISCLOSURE OF DISBURSEMENTS- 2 U.S.C. §434(b)(5). Payments totaling

approximately $112,000 to a payroll processing firm were disclosed on Schedules H-4. Correct

disclosure ofthese payments requires that'each individual who received a paycheck be

disclosed, as wen as payments to taxing authorities. Additionally, for payments totaling

$13,199, there was either no disclosure of the address and/or an inadequate disclosure ofthe

purpose as "GOTV". Finally, four reimbursements, totaling $6,278, were not adequately

disclosed as to purpose or payee. In response to the interim audit report, the MDP filed

amendments to its reports to correct these omissions.

REpORTING OF DEBTS AND OBLIGATIONS - 2 U.S.c. §434(b)(8) and 11 CFR

§104.11(a). MOP did not disclose outstanding debts and obligations to 30 vendors, totaling

about $35,000, on Schedule D as required. In addition, a debt to an individual ($2,226) and a

contingent liability were not disclosed. In response to the interim audit report, the MDP filed

amendments to its disclosure reports to correct the public record.

MISSTATEMENT OF FINANCIALACTMTY-2 V.S.c. §434(b)(I), (2) and (4).

Reported totals for receipts, disbursements and cash on hand for calendar years 1995 and 1996

were misstated. In response to the interim audit report, the MDP filed amended disclosure

reports which corrected these misstatements.

2
This report is based on an audit ofthe Mississippi Democratic Party

Political Action Committee (MDP), undertaken by the Audit Division ofthe Federal

Election Commissi.on in accordance with the provisions ofthe 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 perfonn 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.

BACKGROUND

REPORT OF THE AUDITDIVISION ON THE

MISSISSIPPI DEMOCRATICPARTYPOLITICAL ACTION

COMMITTEE

A. AUDIT AUTHORITY

I.

B. AUDIT COVERAGE

The audit covered the period from January 1, 1995 through December 31,

1996. During this period, MDP reported a beginning cash balance of $3,668; total

receipts of $415,537; total disbursements of$365,697; and a closing cash balance of

$53,508.1

MDP ceased reporting beginning and ending cash figures on the Summary Pages ofdisclosure reports

filed during 1996. This figure was derived by using the reported ending cash balance at December 31,

1995 and reported receipts and disbursements for 1996. Figures in this report are rounded to the

nearest dollar.

3
C. COMMITTEE ORGANIZATION

MDP registered with the Commission on February 8, 1982, and maintains

its headquarters in Jackson, Mississippi. MDP had two Treasurers during the period

covered by the audit. Mr. Stephen Hale was Treasurer from June, 19942 through

September 15, 1995. On September 16, 1995, Ms. Peggy Peterson was elected Treasurer

and remained in that position until January 25,1997. The current Treasurer is Ms. Jodie

Robinson.

To manage its federal financial activity, MDP maintained two bank

accounts. From these accounts, MDP made approximately 400 disbursements. Receipts

were composed of contributions from individuals (approximately $156,300),

contributions from other political committees and organizations (approximately

$29,000), fees received from candidates for ballot access payments ($9,545), a loan

received from a state candidate committee in the amount of$10,000 (see Finding ITA),

offsets to operating expenditures ($250) and transfers from the MDP non-federal

accounts of approximately $200,400 J.

D. AUDIT SCOPE AND PROCEDURES

The audit included testing ofthe following general categories:

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

(see Finding II.A.);

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

corporations or labor organizations (see Finding II.B.)

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 (see Findings II.C. and 1I.D.);

4. proper disclosure ofdisbursements including the itemization of

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

ofthe information disclosed (see Finding n.E.);

5. proper disclosure of debts and obligations (see Finding 1I.F.);

2 MDP never filed an amended Statement ofOrganization indicating that Mr. Hale was the Treasurer.

However, MDP's Executive Director notified the Commission in June of 1995 that Mr. Hale was the

new Treasurer and had taken office in June of 1994.

These categories of receipts total $405,495 Dr about $10,000 less than reported receipts ($415,537).

See Finding LI.G..

4
6. the accuracy oftotal reported receipts, disbursements and cash balances as

compared to bank records (see Finding II.G.);

7. adequate recordkeeping for transactions;

8. proper disclosure ofthe allocation of costs associated with administrative

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

9. review ofexpenditures made on behalf offederal candidates; and,

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

Unless specifically discussed below, no material non-eompliance was

detected. MOP did not maintain externally generated documentation, such as invoices,

bills or receipts, for about 30% of its disbursements, limiting our testing ofthe reporting

of debts and obligations (See Finding IT.F.) and the disclosure ofinformation such as

payee address and purpose ofthe disbursement for all items (see Finding II.E.). It should

be noted that the Commission may pursue any ofthe matters discussed inthis report in

an enforcement action.

n. AUDIT FINDINGS AND RECOMMENDATIONS

A. RECEIPT OF AN EXCESSIVE CONTRIBUTION FROM

A NON- REGISTERED COMMlTfEE

Section 44la(a)(1)(C) ofTitle 2 offue United States Code states no

person shall make contributions to any other political committee in any calendar year

which, in the aggregate, exceed $5,000. Section 100.10 of Title II ofthe Code of

Federal Regulations defines "person" as an individual, partnership, committee,

association, corporation, labor organization, and any other organization, or group of

persons.

Section 100.7(a)(l) ofTitle 11 ofthe Code ofFederal Regulations defines

the term "contribution" to include any loan (except for a loan made in accordance with

11 CFR 100.7(b)(11)) received by the committee. The aggregate amount loaned to a

committee by a contributor, when added to other contributions from that person, shall not

exceed the contribution limitations set forth at 11 CFR part 110. The section further

states that a loan which exceeds the contribution limitations in 11 CFR part 110 shall be

unlawful whether or not it is repaid.

Section 103.3(b) ofTitle 11 ofthe Code ofFederal Regulations states if

contributions which on their face exceed the contribution limitations set forth in 11 CFR

part 110 are deposited into a campaign depository, the treasurer has sixty days to resolve

5
the excessive portion ofthe contribution by either requesting a redesignation or

reattribution from the contributor in accordance with 11 CFR 110.1(b), 110.l(k), or

110.2(b), as appropriate, or by refunding the contribution to the contributor.

Section 102.5(b) ofTitle 11 ofthe Code ofFederal Regulations states that

any organization that makes contributions but does not qualitY as a political committee

under 11 CFR 100.5 shall either establish a separate account to which only funds subject

to the limitations and prohibitions ofthe Act shall be deposited and from which

contributions shall be made, or, demonstrate through a reasonable accounting method

that whenever such organization makes a contribution, that organization has received

sufficient funds subject to the limitations and prohibitions ofthe Act to make such

contribution.

A $10,000 check made payable to "Mississippi Democratic Party" was

received from "The Dick Molpus Campaign" and deposited into the MDP federal

account on April 12, 1995. On the memo line ofthe check was written "Loan". Mr.

Molpus was the Mississippi democratic gubernatorial candidate in the 1995 general

election. MDP had previously received a $300 check from the Dick Molpus Campaign

dated March 6, 1995. Mississippi state campaign finance law allows political

committees to receive contributions which do not comply with the limitations and

prohibitions of the Act.

On October 16, 1995, nearly six months after the check had been

deposited, MDP issued a check from its federal account to "Molpus for Governor" in the

amount of$5,000. The memo line on this check read "repayment ofloan". On

November 22, 1995, another check was issued to the "Dick Molpus Campaign", in the

amount of$IO,OOO, also from the federal account. There was no entry on the memo line

ofthis check.

MDP reported the receipt ofthe loan on its Mid-Year 1995 Schedules H-3,

Transfers From Non-Federal Accounts, as a $10,000 transfer from the "The Dick Molpus

Campaign" for administrative and voter drive expenses. Schedule H-3 is for reporting

transfers from MDP's non-federal account to reimburse its federal account for allocable

expenses. The $5,000 repayment in October was partially disclosed on Schedule H-4,

Joint Federal/Non-Federal Activity Schedule, ofthe MDP 1995 Year End disclosure

report. The entry identified the payee as the Dick Molpus Campaign., and the date as

October 16, 1995. No amount or other information was provided. The payment appears

to have been included in MDP's reported activity. The MDP disclosed the $10,000

payment on its Year End 1995 report, again on Schedules H-4, as a "refund of

contribution". Neither ofthese transactions was properly disclosed on Schedules A, B, or

C; nor was documentation available to establish the terms, conditions, or purpose ofthe

loan.

Therefore, for the period April 12, 1995 through October 16, 1995, MDP

appears to have received a contribution ($10,000), the excessive portion of which totaled

6
Fa

=

$5,300 ($300 + $10,000 - $5,000). Further, the permissibility ofthese funds remains as a

concern.

MOP representatives, who were advised ofthese matters at the exit

conference, had no official response at that time.

The interim audit report recommended that MDP demonstrate the

$10,000 received from the Dick Molpus Campaign in 1995 was not an excessive

contribution and, in addition, provide evidence that the non-excessive portion ofthe

contribution met the requirements of 11 CFR §102.5(b). The interim audit report further

recommended that corrective Schedules A, B and C be filed, as needed.

In response to the interim audit report, MOP amended its reports to reflect

the $10,000 receipt as a loan from the Dick Molpus Campaign and disclosed its

subsequent repayment. The Treasurer states in her response that the contribution was

supposed to have been deposited into the "State Non-Federal Account" and used to pay

for temporary help for state elections. Upon fmding out that that the funds had been

deposited in the wrong account, the past Treasurer returned $5,000 thinking this would

make a permissible contribution. Several months later, this former Treasurer found out

that the remaining portion was still not permissible and refunded $10,000 to the Dick

Molpus Campaign, a $5,000 overpayment. MDP has entered discussions with the Dick

Molpus Campaign to resolve this $5,000 overpayment.

B. RECEIPT OF PROHIBITED CONTRlBUTIONS

Section 441b(a) ofTitle 2 ofthe United States Code states, in relevant

part, that it is unlawful for any corporation organized by authority of any law ofCongress

to make a contribution in connection with any election to any political office, or for any

corporation or labor organization, to make a contribution in connection with any election

to federal office and that iUs unlawful for any candidate, political committee or any

person knowingly to accept or receive any contribution prohibited by this section.

Sections 103.3(b)(2) and (4) ofTitle II ofthe Code ofFederal

Regulations state, in part, that the treasurer shall refund any contribution determined to

be illegal to the contributor within thirty days ofthe date on which the illegality is

discovered. Further, any contribution which appears to be illegal and which is deposited

into a campaign depository shall not be used for any disbursements by the political

committee until the contribution has been determined to be legal. The political

committee must either establish a separate account in a campaign depository for such

contributions or maintain sufficient funds to make all such refunds.

Section I02.5(a)(I)(i) ofTitle 11 ofthe Code ofFederal Regulations

states, in part, that each organization, including a party committee, which finances

7
political activity in connection with both federal and non-federal elections and which

qualifies as a political committee under 11 CFR 100.5 shall establish a separate federal

account in a depository in accordance with 11 CFR part 103. Such account shall be

treated as a separate federal political committee which shall comply with the

requirements ofthe Act. Only funds subject to the prohibitions and limitations ofthe Act

shall be deposited in such separate federal account All disbursements, contributions,

expenditures and transfers by the committee in connection with any federal election shall

be made from its federal account. No transfers may be made to such federal account

from any other account(s) maintained by such organization for the purpose offinancing

activity in connection with non"federal elections, except as provided in 11 CFR 106.5(g).

Section 106.5(g)(l) ofTitle 11 ofthe Code ofFederal Regulations states,

in part, committees that have established separate federal and non-federal accounts under

11 CFR 102.5(a)(l)(i) shall pay the expenses ofjoint federal and non-federal activities as

follows: (i) pay the entire amount of an allocable expense from its federal account and

transfer funds from its non-federal account to its federal account solely to cover the nonfederal share ofthat allocable expense; or (ii) establish a separate allocation account into

which funds from its federal and non-federal accounts shall be deposited solely for the

purpose of paying allocable expenses. Once a committee has established a separate

allocation account for this purpose, all allocable expenses shall be paid from that account

for as long as the account is maintained.

During our review of all MDP receipts, the Audit staffidentified 47

contributions from 40 prohibited sources. These contributions totaled $23,775. Fortyfive ofthe contributions were received from incorporated entities, to include five

contributions from incorporated casinos. The other two contributions were from banks.

The MDP did not maintain sufficient funds in its bank accounts with which to refund

these prohibited contributions as required by 11 CFR §103.3(b)(4).

Since MDP itemized all but one ofthe above contributions on Schedules

A fI1ed with the Commission, infonnational notices questioning the possible prohibited

nature ofthese contributions were sent on three occasions requesting MDP to provide

more information. On May 11, 1996, the MOP issued a check, payable to its non-federal

account, in the amount of$33,000; the memo line ofthis check was annotated "Transfer

Per FEC". Based on discussions with former MOP personnel, this was an effort to

comply with the Commission's request. No workpapers or correspondence with

contributors was available for the Audit staffto review. Therefore, it is unknown how

the $33,000 figure was determined and whether the contributors were given the option to

receive a refund oftheir original contribution(s).

By check dated May 12, 1996, MDP transferred $56,000 to its federal

account from the non-federal account. The purpose ofthis transfer was reported on

Schedule H-3 as "administrative/voter drive expenses". The following information was

disclosed on the check stub: "$33,000 - FEC", "15,000 - FEC - fine 1991 [illegible]",

and "8,000 - Bills".

8
MDP never informed the Commission ofthe $33,000 transfer and never

included it in its reported activity (see Finding II.G.2.). However, as noted above, the

non-federal account appears to have returned the $33,000 sent to it by MDP the day

before, effectively offsetting the initial transfer. MDP has received an impermissible

transfer of$33,000 from its non-federal account.

At the exit conference, workpapers detailing these prohibited

contributions were provided to representatives ofMDP, who agreed to make refunds as

soon as the funds became available. In addition, MDP representatives were informed of

the above noted transfers and had no official response at that time. It should be noted that

this issue was also addressed in a previous audit report.

The interim audit report recommended that MDP demonstrate that the

above contributions were not from prohibited sources. Absent such a demonstration, it

was recommended that MDP refund the contributions, report the refunds on Schedules B,

and provide evidence (i.e., copies ofthe front and back ofthe negotiated check) of such

refunds. Iffunds were not available to make the refunds, the amounts were to be

reported on Schedules D (amending MDP's most recently filed disclosure report) as debt

and refunds made as funds became available. The interim audit report further

recommended that lv1DP provide an explanation ofthe two transfers between the federal

and non-federal accounts noted above.

In response to the interim audit report, MDP filed amended Schedules D

for its 1998 Year-end report disclosing these prohibited contributions as debts owed by

MDP and supplied copies (front only) of22 refund checks ($4,225) issued during April,

1999, which had not yet been negotiated.

The current Treasurer was unable to provide any new information as to

why the transfers had been made between the federal and non-federal account4

•

C. lTENUZATIONOFRECE~SFROMPOLnnCALORGANaATIONS

Section 434(b)(3)(B) ofTit1e 2 ofthe United States Code states that each

report under this section shall disclose the identification of each political committee

which makes a contribution to the reporting committee during the reporting period,

together with the date and amount of any such contribution.

Section 431(13) ofTitle 2 ofthe United States Code states that the term

"identification" means: in the case of any individual, the name, the mailing address, and

The current Treasurer was unable to speak with the fanner Executive DirCGtor, due to a pending

lawsuit involving the former MOP Executive Director lUld SO could only speculate on possible

reasons for the transfers bctween the fedcral and non-federal accounts.

9
the occupation ofsuch individual, as well as the name ofhis or her employer; and in the

case of any other person, the full name and address ofsuch person.

All 52 contributions received from party committees and other political

committees were reviewed. Ofthese, 28 contributions totaling $3,246 were not disclosed

on Schedule A as required.

At the exit conference, representatives for MDP were provided a schedule

detailing these items. They agreed to file amended Schedules A. Itshould be noted that

this issue was also addressed in a previous audit report

The interim audit report recommended that MDP file amended Schedules

A (by reporting period) disclosing the above noted contributions.

In response to the interim audit report, MDP filed amended Schedules A

as recommended.

D. DISCLOSURE OF OCCUPATIONINAME OF EMPLOYER

ii; Section 434(b)(3)(A) ofTitle 2 ofthe United States Code requires, in part,

a political committee to report the identification of each person who makes a

contribution to the committee in an aggregate amount or value in excess of $200 per

calendar year together with the date and amount of any such contribution.

Section 431{13)(A) ofTitle 2 ofthe United States Code definesthe term

"identification" to be, in the case of any individual, the name, the mailing address, and

the occupation ofsuch individual, as well as the name ofhis or her employer.

Section 432(i) ofTitle 2 ofthe United States Code states, in part, that

when the treasurer ofa political committee shows that best efforts have been used to

obtain, maintain, and submit the information required by this act, any records ofsuch

committee shall be considered in compliance with this Act.

Section 104.7(b) ofTitle 11 ofthe Code ofFederal Regulations states, in

relevant part, that the treasurer will only be deemed to have exercised best efforts to

obtain, maintain and report the required information iffor each contribution received

aggregating in excess of $200 per calendar year which lacks required contributor

information, the treasurer makes at least one effort after the receipt ofthe contribution to

obtain the missing information. Such effort shall consist ofeither a written request sent

to the contributor or an oral request to the contributor documented in writing. The

written or oral request IIlUst be made no laterthan thirty (30) days after receipt ofthe

contribution. The written or oral request shall not include material on any other subject

or any additional solicitation, except that it may include language solely thanking the

contributor for the contribution.

10
All 180 contributions from individuals required to be disclosed on

Schedules A filed as part of MOP's disclosure reports, were reviewed The occupation

and/or the name of employer was not disclosed as required for contributions from 39

contributors ($ 24,940), representing 22% ofthe number of contributions requiring

disclosure ofsuch information.

The MDP Executive Director during 1995 and 1996 stated that when

contributions were received that lacked the required information, subsequent attempts to

obtain it were made either by letter or a phone call. No phone log was kept to document

these cans and the Audit staff was unable to obtain any follow-up letters sent to

contributors.

These issues were discussed with representatives ofthe MDP at an exit

conference. The representatives agreed to contact contributors to request the information

and to amend MDP disclosure reports as needed.

The interim audit report recommended that MDP submit documentation

to demonstrate that best efforts were utilized to obtain the required occupation/name of

employer information related to contributions from individuals. Absent such a

demonstration, it was recommended that the MDP make an effort to obtain the missing

occupation/name of employer information and file amended Schedules A (by reporting

period) to disclose any occupation/name of employer information obtained from those

contacts.

In response to the interim audit report, MDP sent copies ofphone logs

detailing its efforts to obtain the missing occupation/name of employer information,

annotated with any information obtained. In addition, MDP filed amended Schedules A

disclosing the information obtained. Although MDP has demonstrated best efforts to

obtain the required occupation/name of employer information, it was not accomplished

in a timely manner.

E. DISCLOSURE OF DISBURSEMENTS

Section 434(b)(S) ofTitle 2 ofthe United States requires each report

under this section to disclose the name and address ofeach person to whom an

expenditure in an aggregate amount or value in excess of $200 within the calendar year is

made by the reporting committee to meet a candidate or committee operating expense,

together with the date, amount and purpose ofsuch operating expenditure.

Section 102.9(b)(2) ofTitle 11 ofthe Code ofFederal Regulations states,

in part, payee means the person who provides the goods or services to the committee or

agent thereof in return for payment, except for an advance of $500 or less for travel and

subsistence to an individual who will be the recipient ofthe goods or services.

11
•

During our review ofdisbursements, the Audit staff identified payments

totaling approximately $112,000 to a payroll processing fum. These payments, which

represented the semi-monthly gross pay for all employees, were disclosed on Schedules

H-4 as payments to the payroll fum, Employer Plus, Inc. Correct disclosure ofthese

payments requires that each individual who received a paycheck be disclosed, as well as

payments to taxing authorities.

Additionally, for 17 payments made from MDP's Victory '96 bank

account, totaling $13,199, there was either no disclosure ofthe address and/or an

inadequate disclosure ofthe purpose as "GOTV" .

Also reviewed were all reimbursements received by Executive Director,

Alice Skelton. Four ofthese items, totaling $6,278, were inadequately disclosed. Three

items were disclosed simply as reimbursement expense, while the fourth item disclosed

the payee incorrectly.

The Audit staffdiscussed these issues with MDP representatives, who

indicated a willingness to amend disclosure reports as needed.

The interim audit report recommended that MDP file amended Schedules

H-4 (by reporting period) to correct the disclosure ofthe above noted disbursements.

In response to the interim audit report, MDP amended its reports as

recommended.

F. REpORTING OF DEBTS AND OBLIGATIONS

Section 434(b)(8) ofTitle 2 ofthe United States Code states that each

report shall disclose the amount and nature of outstanding debts and obligations owed by

a political committee.

Section 104.11 ofTitle 11 ofthe Code ofFederal Regulations states, in

part, that debts and obligations owed by a political committee which remain outstanding

shall be continuously reported until extinguished. In addition, a debt, obligation, or

written promise to make an expenditure, the amount of which is $500 or less, shall be

reported as ofthe time the payment is made or no later than 60 days after such obligation

is incurred, whichever comes first. Any debt or obligation, the amount of which is over

$500, shall be reported as ofthe date on which the debt or obligation is incurred.

The Audit staffs review of disbursements detennined that MDP did not

disclose any ofits debts and obligations on Schedules D. Based on available invoices

and related payments, it was determined that outstanding debts and obligations to 30

vendors, totaling about $35,000, were not disclosed on Schedule D as required.

12
Subsequent to the completion offieldwork, the MDP provided

documentation relative to reimbursements paid to Alice Skelton (Executive Director for

the party). A review ofthis documentation indicated that the MDP failed to disclose a

debt of $2,226. In addition, Alice M. Skelton has filed Civil Action # 97-42, against the

Democratic Party ofthe State ofMississippi, and its former Chairman, Johnnie E. Walls,

Jr., individually and as Chairman, for money she claims is owed her for non-reimbursed

expenses approximating $12,176, salary totaling $12,500 and bonuses amounting to

$30,000. This Civil Action also names as defendants, members ofthe MOP Executive

Committee, roughly 100 individuals.

MDP's representatives were informed ofthe unreported debt to 30

vendors ($35,000) at the exit conference and agreed to amend its reports, as necessary.

Subsequent to the exit conference, MDP representatives were informed ofthose matters

pertaining to Alice Skelton. At that time, a MDP representative stated that an attorney

had advised them to list the contingent liability until such time as the issue could be

settled in court.

The interim audit report recommended that MDP file Schedules D (by

reporting period) to disclose the debts and obligations addressed above. It was further

recommended that MDP provide a written description ofsystem changes it has

implemented to enable it to identify and report debts and obligations.

As part ofits response to the interim audit report, MOP filed amended

Schedules D as recommended. However, its response did not provide a written

description of any system changes implemented to enable it to identify and report debts

and obligations.

G. M!SSTATEMENT OF FINANCIAL ACTIVITY

Sections 434(b)(1), (2) and (4) ofTitle 2 ofthe United States Code state,

in part, that each report shall disclose the amount ofcash on hand at the beginning ofthe

reporting period and the total amount of all receipts and all disbursements for the

reporting period and calendar year.

The Audit staff's reconciliation of bank activity to reports filed by the

MOP, indicated that receipts, disbursements and cash-on-hand balances had been

misstated. The:MDP did not provide workpapers detailing how its reported amounts

were calculated. Beginning in 1996, the MOP ceased reporting beginning and ending

cash figures on Summary Pages filed as part ofits disclosure reports. Its April Quarterly

1996 Summary Page notes that "[t)his figure is unknown, pending completion of current

FEC audit. Amended [sic] report will be filed". The statement refers to a Commission

\3
t--"

=

61

•

audit ofthe MDP's 1993-1994 activity conducted during 1996. 5 No amended reports

have been filed. Therefore, ending cash on hand as of 12/31/96 was derived by using the

reported ending cash balance at December 31,1995 and reported receipts and

disbursements for 1996.

1. January 1, 1995 through December 31, 1995

The MDP reported a beginning cash on hand balance atJanuary 1,

19950f$3,668. The correct amount was determined to be $2,875. Thus, reported

beginning cash was overstated by $793. The overstatement resulted from the failure to

account for three outstanding checks issued in 1994.

The MDP reported total disbursements of$125,183. The correct

figure was determined to be $130,171; therefore, disbursements had been understated by

$4,988. The net understatement was due to: $5,182 in unreported disbursements; reported

disbursements of $629 not supported by either a check or debit memo; an $872 math

error; and, an unexplained difference of $437.

The MDP reported a cash-on-hand balance on December 31, 1995

of$11,293. The correct cash balance was $4,651. Therefore, the ending-cash-on-hand

balance was overstated by $6,642. This overstatement resulted from the misstatements

detailed above and from an. $861 overstatement ofreported receipts by the MDP.

2. January 1, 1996 through December 31,1996

The MDP reported receipts of $282,729 in 1996. The correct

amount was determined to be $273,574, resulting in an overstatement of$9,155.

Although the amounts by which receipts were overstated or understated could be

calculated by reporting period, absent MDP workpapers detailing the source of its

reported figures, the Audit staff is unable to explain this overstatement.

The MDP reported total disbursements of$240,515 for 1996. The

correct figure was determined to be $277,141, resulting in an understatement of $36,626.

The net understatement was due to: an unreported transfer of$33,000 to the non-federal

account (see Finding rr.c. ); $4,057 in unreported disbursements; $466 in disbursements

that were reported but not supported by a canceled check or debit memo; and, an

unexplained difference of $35.

As noted above, MDP did not report a cash-on-hand amount for

December 31, 1996. Based on the reported cash-on-hand balance at December 31,1995,

and reported receipts and disbursements in 1996, the MDP's cash-on-hand balance at

December 31, 1996 was calculated to be $53,508. The correct cash balance was $1,084.

5 The Report ofthe Audit Division relative to this audit Was placed on the public record, January 24,1997.

14
Therefore, the ending-cash-on-hand balance was overstated by $52,424. This

overstatement resulted from the misstatement of ending cash on hand at 12-31-95, as

well as the misstatement of receipts and disbursementsfor 1996, as detailed above.

The Audit staff discussed these matters with MDP representatives at the

exit conference. These representatives indicated a willingness to amend disclosure

reports as required. It should be noted that this issue was also addressed in a previous

audit report.

The interim audit report recommended that MDP file comprehensive

amended Summary and Detailed Summary Pages for calendar years 1995 and 1996, to

correct the misstatements noted above. It was further recommended that MDP file

amended Schedules S, H-3, and H-4, as appropriate, by reporting period, to disclose

those disbursements not reported (See also Recommendations #3, #4, #5 and #6).

In response to the interim audit report, MDP amended its reports as

recommended.

15
•

16
FEDERAL ELECTION COMMISSION

WASHINGTON. 0 C 204&l

June 1,1999

Ms. Jodie Robinson, Treasurer

Mississippi Democratic Party

Political Action Committee

P.O. Box 1583

Jackson, MS 39215

Dear Ms. Robinson:

Attached please find the Report oflhe Audit Division on the Mississippi

Democratic Party Political Action Committee. The Commission approved the report on

May 28, 1999. As noted on page 2, the Commission may pursue any of the matters

discussed in an enforcement action.

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

June 7, 1999. Should you have any questions regarding the public release ofthis report,

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

Any questions you may have related to matters covered during the audit or in the

audit report should be directed to Rhonda Simmons or Alex Boniewicz ofthe Audit

Division at (202) 694-1200 or toll free at (800) 424·9530.

Sincerely,

Assistant StaffDireetor

Audit Division

Attaclunent as stated

17
18
CHRONOLOGY

MISSISSIPPI DEMOCRATIC PARTY POLITICAL ACTION COMMITTEE

c.}

•

ru

nl.

Audit Fieldwork

Interim Audit Report

to the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

19

6/22/98 -7/24/98

215/99

4/26/99

5/28/99
Ii I .