Interim Audit Report of the 

Audit Division on the 

Democratic Party of Wisconsin 

(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. 2) 

The Democratic Party of Wisconsin is a state party committee 

headquartered in Madison, Wisconsin. For more information, see 

the chart on the Committee Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Political 

Committees 

o Transfers from Affiliated and 

Other Political Committees 

o Transfers from Non-federal 

Accounts 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Contributions to Other Political 

Committees 

o Transfers to Affiliated and Other 

Political Committees 

o Federal Election Activity 

o Other Disbursements 

Total Disbursements 

$ 6,744,785 

2,692,509 

8,676,624 

1,400,151 

484,290 

S 19,998,359 

$ 11,536,529 

25,500 

. 51,261 

7,991,072 

159,088 

$ 19,763,450 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Recordkeeping for Employees (Finding 2) 

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

Audit Division on the 

Democratic Party of Wisconsin 

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

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Commission Guidance 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Findings and Recommendations 3 

Part IV. Findings and Recommendations 

Finding!. Misstatement of Financial Activity 4 

Finding 2. Recordkeeping for Employees 7 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Democratic Party of Wisconsin (DPW), 

undert^en 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 2 U.S.C. §438(b), which permits the 

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

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

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

committees to determine whether the reports filed by a particular committee meet the 

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

Scope of Audit 

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

factors and as a result, this audit examined: 

1. the disclosure of individual contributors* occupation and name of employer; 

2. the disclosure of disbursements, debts and obligations; 

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

4. the consistency between reported figures and bank records; 

5. the completeness of records; and 

6. 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 DPW 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)(1) were required for employees paid with 100 

percent federal funds. 

The Commission concluded, by a vote of S-1, that 11 CFR §106.7(d)(l) 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 DPW representatives of the payroll log requirement and 

of 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 DPW employees 

paid with 100 percent federal funds and reported as such. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

e Date of Registration April 21,1975 

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

Headquarters Madison, Wisconsin 

Bank Information 

• Bank Depositories Two 

• Bank Accounts Twelve Federal, Two Non-federal 

Treasurer 

• Treasurer When Audit Was Conducted Michael F. Childers 

• Treasurer During Period Covered by Audit Michael F. Childers 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

Cash-on-hand @ January 1,2011 S 53,631 

Receipts 

o Contributions from Individuals 6,744,785 

o Contributions from Political Committees 2,692,509 

o Transfers from Affiliated and Other Political 

Committees 8,676,624 

o Transfers from Non-federal Accounts 1,400,151 

o Other Receipts 484,290 

Total Receipts S 19,998359 

Disbursements 

o Operating Expenditures 11,536,529 

o Contributions to Other Political Committees 25,500 

o Transfers to Affiliated and Other Political 

Committees 51,261 

o Federal Election Activity 7,991,072 

o Other Disbursements 159,088 

Total Disbursements S 19,763,450 

Cash-on-hand @ December 31,2012 S 288,540 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fleldwork, a comparison of DPW'.s reported financial activity with bank 

records revealed a misstatement of receipts and disbursements for 2011 and 2012. For 

2011, DPW understated its receipts by $169,196 and its disbursements by $184,702. In 

2012, DPW overstated its receipts by $402,707 and its disbursements by $381,326. The 

Audit staff recommends that DPW amend its disclosure reports to correct the 

misstatements. (For more detail, see p. 4.) 

Finding 2. Recordkeeping for Employees 

During audit fieldwork, the Audit staff determined that DPW 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 DPW employees totaling $3,627,262, for which DPW did not maintain 

monthly payroll logs. This consisted of $2,192,554, for which payroll was allocated with 

federal and non-federal funds, and $1,434,708, for which payroll was exclusively nonfederal. For DPW employees paid with an allocation of federal and non-federal funds or 

exclusively non-federal funds, the Audit staff recommends that DPW provide monthly 

payroll logs that indicate the time spent in connection with a federal election. Absent the 

provision of monthly time logs, the Audit staff recommends that DPW implement a plan 

to maintain such monthly payroll logs in the future. 

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

Findings and Recommendations 

Finding 1, Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of DPW's reported financial activity with bank 

records revealed a misstatement of receipts and disbursements for 2011 and 2012. For 

2011, DPW understated its receipts by $169,196 and its disbursements by $184,702. In 

2012, DPW overstated its receipts by $402,707 and its disbursements by $381,326. The 

Audit staff recommends that DPW amend its disclosure reports to correct the 

misstatements. 

4 

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

Facts and Analysis 

A. Facts 

As part of audit fieldwork, the Audit staff reconciled DPW's reported financial activity 

with its bank records for 2011 and 2012. The reconciliation determined that DPW 

misstated receipts and disbursements for 2011 and 2012. The following charts outline the 

discrepancies between DPW's disclosure reports and its bank records, and the succeeding 

paragraphs explain why the discrepancies occurred. 

2011 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance @ 

January 1,2011 

$56,862 $53,631 $3,231 

Overstated 

Receipts $3,758,853 $3,928,049 $169,196 

Understated 

Disbursements $3,497,621 $3,682,323 $184,702 

Understated 

Ending Cash Balance @ 

December 31,2011 

$316,089^ $299,357 $16,732 

Overstated 

^ DPW miscalculated its ending cash balance. ItshouldbeS318,094(adiflerenceofS2,00S). Using the 

correct ending cash balance (S318,094), the discrepancy is SI8,737. 
The beginning cash balance was overstated by $3,231 and is unexplained, but likely 

resulted from prior-period discrepancies. 

The understatement of receipts resulted from the following: 

• Transfers from non-federal accounts, not reported -1- $35,130 

• In-kind contributions, not reported as receipts + 2,565 

• Vendor refund, not reported + 9,198 

• Vendor refunds reported as negatives -1- 57,545 

• Interest, not reported H- 145 

• Political committee and individual contributions. 

not reported + 73,851 

• Reported refunds and contributions not supported by a credit • or deposit - 9,260 

Unexplained differences -1- 22 

Net Understatement of Receipts + 

The • understatement of disbursements resulted from the following: 

In-kind contributions, not reported as disbursements -1- $2,565 

• Vendor refunds reported as negatives^ -1- 57,545 

• Transfers to non-federal accounts, not reported -1- 15,119 

• Disbursements and fees, not reported -1- 111,793 

• Reported disbursements not supported by a check or debit - 7,317 

• Vendor fees, not reported -I- 4,451 

• Unexplained differences -1- 546 

Net Understatement of Disbursements -1-

The $16,732 overstatement of the ending cash balance resulted from the misstatements 

described above, as well as from a $2,005 mathematical discrepancy in calculating the 

ending cash balance. 

2012 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2012 

$316,089 $299,357 $16,732 

Overstated 

Receipts $16,473,017 $16,070,310 $402,707 

Overstated 

Disbursements $16,462,453 $16,081,127 $381,326 

Overstated 

Ending Cash Balance @ 

December 31,2012 

$290,921'^ $288,540 $2,381 

Overstated 

^ DPW reported vendor refunds as negative entries on Schedule B (Itemized Disbursements). Unless the 

refund is for allocable federal and non-federal expenditures or allocable federal and Levin expenditures, 

the refund should be reported as an of&et to operating expenditures on Schedule A (Itemized Receipts). 

* DPW miscalculated its ending cash balance. It should be S326,6S4 (a difference of S3S,733). Using the 

correct ending cash balance (S326,6S4), the discrepancy is $38,114. 
The overstatement of receipts resulted from the following: 

• Vendor refunds reported as negatives 

• In-kind contributions, not reported as receipts 

• Contribution from a political conunittee, not reported 

• Transfers from non-federal accounts, not reported 

• Transfers from the National Party, not reported 

• Incorrectly disclosed transfers from non-federal accounts 

• Contributions from joint fundraisers reported twice 

• Unexplained differences 

Net Overstatement of Receipts 

+ $15,312 

+ 9,186 

+ 1,000 

+ 22,310 

+ 31,270 

- 43,160 

- 457,814 

+ 19.189 

- $402,707 

Regarding the $457,814 in contributions from joint fundraisers reported twice, the Audit 

staff notes the following. In its October monthly reports, DPW correctly reported 

transfers from two joint fundraiser representatives on Schedule A (Itemized Receipts). 

DPW also reported the contributions from the individuals received at these joint 

fimdraising events. However, DPW should only have reported the contributions from the 

individuals as memo entries. As a result of reporting both the transfer of total 

contributions received from the joint fundraisers and each of the contributions from the 

individuals, DPW overstated the receipts it received from these joint fundraising events. 

The overstatement of disbursements resulted from the following: 

• Vendor refunds reported as negatives -i- $15,312 

• Transfers to non-federal accounts, not reported + 27,179 

• In-kind contributions, not reported as disbursements + 9,186 

• Duplicate reported payments to vendor - 514,424 

• Unexplained differences + 81.421 

Net Overstatement of Disbursements - $381^26 

Regarding the $514,424 in duplicate reported payments, the Audit staff notes the 

reporting errors related to a single vendor that produced mailers for DPW. Also, all three 

duplicate reported disbursements were reported in the Pre-General report. 

The $2,381 overstatement of the ending cash balance resulted from the misstatements 

described above, as well as from a $35,733 mathematical discrepancy in calculating the 

ending cash balance. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the misstatement of disbursements with DPW representatives at 

the exit conference. DPW representatives asked questions for clarification and said they 

would respond after having time to thoughtfully review each issue. The Audit staff 

provided work papers detailing the misstatement of receipts to DPW representatives after 

the exit conference. DPW did .not provide a response to either the disbursements or 

receipts misstatements. 

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

amend its disclosure reports to correct the misstatements noted above and reconcile the 
cash balance on its most recent report to identify any subsequent discrepancies that could 

affect the recommended adjustments. The Audit staff recommends furAer that DPW 

adjust the cash balance as necessary on its most recent report, noting that the adjustment 

is the result of prior-period audit adjustments. 

•Finding 2. Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff determined that DPW 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 DPW employees totaling $3,627,262, for which DPW did not maintain 

monthly payroll logs. This consisted of $2,192,554, for which payroll was allocated with 

federal and non-federal funds, and $1,434,708, for which payroll was exclusively nonfederal. For DPW employees paid with an allocation of federal and non-federal funds or 

exclusively non-federal funds, the Audit staff recommends that DPW provide monthly 

payroll logs that indicate the time spent in connection with a federal election. Absent the 

provision of monthly time logs, the Audit staff recommends that DPW implement a plan 

to maintain such monthly payroll logs in the future. 

Legal Standard 

Maintenance of Monthly Logs. Party committees must keep a monthly log of the 

percentage of time each employee spends in connection with a federal election. 

Allocations of salaries, wages, and fringe benefits are to be undertaken as follows: 

• employees who spend 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)(l). 

Facts and Analysis 

A. Facts 

During fieldwork, the Audit staff reviewed disbursements for payroll. DPW 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 

salaries and wages. For 2011 and 2012, DPW did not maintain monthly logs for 

$3,627,262 in payroll.® This amount includes payroll paid as follows to DPW employees. 

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

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

Legal Question, Page 1). Payroll amounts are stated net of taxes and fringe benefits. 
A. Employees reported on Schedule H4 and paid with a mixture of federal and 

non-federal fUnds during the same month (totaling $2,192,554). 

B. Employees reported on Schedule H4 and/or Schedule B and also paid with 

both a mixture of federal and non-federal funds and exclusively non-federal 

funds during the same month (totaling $28,972); and 

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

reported by DPW (totaling $1,405,736). 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the recordkeeping requirement with DPW representatives 

during the audit fieldwork and at the exit conference. DPW representatives asked 

questions for clarification and said they would respond after having time to thoughtfully 

review each issue. Subsequently, DPW representatives stated that payroll logs had not 

been identified nor other evidence that they were maintained. However, DPW provided a 

statement contending that other information confirmed the basis on which employees 

were paid. DPW representatives supported this statement by providing exhibits with a 

basic job description for the employees and a narrative that stated, in part, 

"Beginning in February, 2011 and continuing through the summer of 2012, 

Wisconsin held multiple elections in connection with various recalls of state-level 

elected officials. Recall elections for nine Wisconsin state senators were held during 

the summer of 2011. Recall elections for the Govemor, Lieutenant Govemor and 

four additional state senators were held during the spring and summer of 2012. 

Throughout 2011 and through the sununer of 2012, the Committee and its staff were 

engrossed in these nonfederal elections. Employees directly involved in supporting 

nonfederal candidates performed no work in connection with federal elections, while 

other employees were paid entirely with federal funds." 

In addition, DPW submitted documentation identifying non-federal and federal election 

dates and events for both years 2011 and 2012, stating, "...as a result of these events, the 

Committee hired staff to work exclusively in connection with various nonfederal recall 

elections." 

The statement and exhibits provided by DPW is not sufficient evidence and does not 

resolve the recordkeeping finding because it does not document the time an employee 

spent in connection with a federal election and the documents were provided after 

notification of the audit. In addition, some of the employees DPW stated performed no 

work in connection with federal elections were actually paid with federal funds at some 

point during the audit cycle.® 

As such, the Audit staff recommends that, within 30 calendar days of service of this 

report, DPW: 

' Of the $ 1,434,708 for employees paid with 1 GO percent non-iederal iiinds (categories B and C above), 7S 

employees totaling S669,027 were also paid with federal funds at some point during the audit cycle. The 

remaining 100 employees totaling $763,681 were paid with only 100 percent non-federal funds during 

the audit cycle. This amount is already included in the category C total above. 
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.