Draft Final Audit Report of the 

Audit Division on the 

State Democratic Executive 

Committee of Alabama 

(January 1, 2009 - December 31, 2010) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political conunittee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(die Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have me|, 

the direshold 

requirements for 

substantial compliance 

with the AcjtfJiiPg^audit 

com^^^ complied wit[r|s 

the rmiitations, 

prohibitioh's;Ji^cl 

disclosure requirements 

of tiie Act. vfc:- ; 

Future Actioii^ 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to die matter 

discussed in this report. 

About the Committe^^ij 

The State Democratic Executiye.Conunittee of Alabama is a state 

party committee headqua^|red in^ontgomery, Alabama. For 

more information, see the^^hart o^k^Committee Organization, 

p. 2. % K 

Financial Actiivit3p^2) 

• Receipts 

o ^Contributions fromilndividuals 

o wansfers from Affiliated 

o ContribulioM^i Irom Odacr 

Poiacali^bnimi^'' 

o Transfers from Non-federal 

^\ 

Accounts 

o All Other Receipts 

Tolai Receipl.s 

Disbursements 

VJ ©perating Disbursements 

o/ Federal Election Activity 

All Other Disbursements 

Total Disbursements 

$ 342,232 

413,892 

225,377 

316,171 

173,243 

$ 1,470,915 

$ 950,626 

456,345 

72,274 

$ 1,479,245 

Finding and Recommendation (p. 3) 

• Recordkeeping for Employees 

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

Audit Division on the 

State Democratic Executive 

Committee of Alabama 

(January 1, 2009 - Decep^r 31, 2010) 

•••SI 

45" 

—v,?S^ 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 

Scope of Audit 

Commission Guidance 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summary 

Finding and Recommendation 

Part IV. Finding and Recomiheifda^ioi^^, 

Recordkeeping for Employees "^^M^ 

£^ • • 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the State Democratic Executive Committee of 

Alabama (SDA), undertaken by the Audit Division of the Federal Election Conunission 

(the Commission) in accordance with the Federal Election Campaign Act of 1971, as 

amended (die Act). The Audit Division conducted die audit pursuant to 2 U.S.C. 

§438(b), which permits the Commission to conduct audits and fiep^P^^stigations of any 

political committee that is required to file a report under 2 U.S^#' §43^. Prior to 

conducting any audit under this subsection, die Commission^|is.t perform an intemal 

review of reports filed by selected committees to deterrninier whStner.the reports filed by a 

particular committee meet the threshold requirements,'for^^\ibstantiiil|^mpliance with the 

Act. 2 U.S.C. §438(b). 

Scope of Audit 4^ ^ 

Following Commission-approved procedures, the M^^^pff evaluated various risk 

factors and as a result, diis audit examined: 

1. die disclosure of individual contri^i;i|prs' occupation and'^name of employer; 

2. the disclosure of disbursements, de6t-sl|^d^^bligations; , ^ 

3. the disclosure of expenses allocated^ctv^^^^eral and r^n-iederal accounts; 

4. the consistency between reported figui^es ai^fbaitl^jS^rds; 

5. the disclosure of indepeiEtdent expenditiftesif "1^^ 

6. the completeness.QFrecords^and \4 

7. other committeet(yp]Brations"necessary to ttitKireyiew. 

Commission. GvddMxtteF-^^i^pfd^^ 

Request for Early^i^^mnii§^^^ of a Legal Question 

PursuMtl-tp the Commi^l^n's "Pdl^Statement Establishing a Program for Requesting 

ConsideffiBn^of Legal Qde^tions by die Commission," SDA requested early 

consideratidn^pf^ legal que^ion raised during the audit. SDA questioned whedier the 

mondily time ldg4yrequirecl|jinder 11 C.F.R. § 106.7(d)(1) applied to employees paid widi 

ICQ percent federalrj^unidsF (See Finding, page 4.) 

The Conunission concluded, by a vote of 5-1, that 11 C.F.R. §106.7(d)(l) does require 

committees 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 SDA Coimsel of the Commission's decision on SDA's 

request. The finding presented in this audit report. Recordkeeping for Employees, does 

not include SDA employees paid with 100 percent federal funds and reported as such. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration July 10,1976 

• Audit Coverage January 1,2009 - December 31,2010 

Headquarters Montgomery, Alaban^.^ 

Bank Information 

• Bank Depositories Two ^ 1, 

• Bank Accoimts Three FederffTwo'']®!!-federal. One Levin 

Treasurer 

• Treasurer When Audit Was Conducted Mr. Edfar CT Gentle, III WX^ l - 7/18/12) 

M |. James B.^l^vidson (7/1^1^152/5/12) 

llr. J^es D.;pmer (12/6/12 -^9/13) 

Mr. Edlfe^^entfe, III (6/20/f 3 - Present) 

• Treasurer During Period Covered by^, ^ 

Audit ^T^ii::,^ 

Mr. Brannoit^^yalden (5/22/08 - 1/30/11) 

Management Information 

• Attended Commission Campaign Finance^: 

Seminar ^ 

Ye^i|='- ^ ^r' 

• Who Handled Accounjti^^l^^ 

Recordkeeping Task's^ 

f|id Staff ^ 

.«^«iv . *^|A.uditei3 

nadbcial Activity 

[Amounts) 

Cash-on^fiaii4 @ January1f55Q09 W $ 13,139 

Receipts '^^fey, '"^ 

o Contributioni^frpjm Individu|ls 342,232 

o Transfers from^ffl!|iliated ^onunittees 413,892 

o Contributions frofi^jdielrPolitical 

Committees w 225,377 

o Transfers from Non-^federal Accounts 316,171 

o All Other Receipts 173,243 

Total Receipts $ 1,470,915 

Disbursements 

o Operating Disbursements $ 950,626 

o Federal Election Activity 456,345 

o All Odier Disbursements 72,274 

Total Disbursements $ 1,479,245 

Cash-on-hand @ December 31,2010 $ 4,809 
Part in 

Summary 

Finding and Recommendation 

Recordkeeping for Employees 

During audit fieldwork, the Audit staff determined diat SDA did not maintain any 

monthly payroll logs, as required, to document the percentage o^l^^ach employee 

spent on federal election activity. For 2009 and 2010, the Audit staff identified payments 

to SDA employees totaling $279,429^, for whom SDA di4|>^^aintain monthly payroll 

logs. This consisted of $248,930, for which payroll was i^TocatM^^ween federal and 

non-federal funds, and $30,499, for which payroll was|t;xclusively iipWederal. Prior and 

subsequent to die exit conference, SDA representatives provided the /^&it staff with 

affidavits for most of the employees attesting to, Jie percentage of time $i|^n^:federal 

election activity. ^^"^ 

In response to the Interim Audit Report recommendatip^^DA stated it will implement 

procedures to make sure all employe^p^id all or in part<^^^ federal and/or non-federal 

funds, are documented by the use of mo^ihly^time sheets. WeJ^^dit staff considers diis 

matter resolved. (For more detail, see p^..) ^ 

% 

0-

V 

^ 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). 
Part IV 

Finding and Recommendation 

Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff determined diat SDA did not maintain any 

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

spent on federal election activity. For 2009 and 2010, die Aud^^HEtkientified payments 

to SDA employees totaling $279,429^, for whom SDA did nctfgnaintain mondily payroll 

logs. This consisted of $248,930, for which payroll was allpcat^jbetween federal and 

non-federal funds, and $30,499, for which payroll was exclusively non-federal. Prior and 

subsequent to die exit conference, SDA representatiy<|s^provided tik* ^dit staff with 

affidavits for most of die employees attesting lo ihe^rceiitage of tim^^ent on federal 

election activity. 

In response to the Interim Audit Report recommen^idii. SDA^stated it will'implement 

procedures to make sure all employees, paid all or in with federal and/or non-federal 

funds, are documented by the use of i&itibly time sheets^Thc Audit staff considers this 

matter resolved. 

Legal Standard jf ^ 

Maintenance of Monthly|i|ojgi^ Party coiTu|^ittees mus|9Steep a monthly log of the 

percentage of time eacti emplbybe spends in ejqirmection with a federal election. 

Allocations of salaribtiv^ages, fringe benefits are to be undertaken as follows: 

• employees who 'Spend 2^1giercent or less'Sf their compensated time in a given 

month;;On.fe.deral election adtiA^itiel^nius^ be paid either from the federal account 

OF^ble Mr6icatea:ias adniihistrative costs; 

•^employees who^^i^^jpd mor^ian 25 percent of their compensated time in a given 

' ^SfjiQnth on federal'^Jgction ai^tivities must be paid only from a federal account; and 

• ern^if:^3gpes who sp6n|l non^ of their compensated time in a given month on federal 

election|activities nia^ be paid entirely with fimds that comply with State law. 

llC.FJRl|^6.7(d|l). 

Facts and Analj^i^ 

A. Facts 

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

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

time its employees spent in connection with federal election activity. These logs are 

required to document the proper allocation of federal and non-federal fimds used to pay 

^ 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). 
employees. For 2009 and 2010, logs were not maintained for $279,429 in payroll.'* All of 

tiiese individuals were disclosed as having been paid witii an allocation of federal and 

non-federal funds ($248,930) or exclusively non-federal funds ($30,499). ^ 

The Audit staff requested that SDA provide documentation to verify the time employees 

spent on federal election activity. In response, SDA provided signed affidavits for five of 

die 11 employees noted above. The affidavits stated die employee name, job title and 

responsibilities, die time period covered by the affidavit and die funding used. They also 

included a brief statement concerning the time spent on federal election activity. 

B. Interim Audit Report & Audit Division Recommendation, \ 

The Audit staff discussed this matter again with SDA represeffitives at the exit 

conference. SDA did not provide the requested monthly^kne l^^during the response 

period; SDA did, however, submit additional affidavits f^ n dir^&iployees and another 

after the response period. Each of these affidavits st^^:^e employe^^ne, job title and 

responsibilities, the time period covered by the affidavit and die funding^sied, and 

included a brief statement regarding die time s^^pn federal election SLci^^^^The 

affidavits provided by SDA, prior to and subseq^^|p thig^xit^conference,^id not 

preclude this matter from the audit report because sl^^^d not create and rhaintain these 

documents prior to die audit notification letter. Instead^the, affidavits were prepared 

during fieldwork after requests from theii^udit staff for veriifieation documentation. 

"T".':is;^-vw!.. ^ ^^^^ 

The Interim Audit Report recommended tihat SD0pr0vide evidence diat it maintained 

mondily time logs to document how much |imi^eacfrem{|l^ spent on federal election 

activity or a plan to majntain|^nthly payrojl^lbgs to track the percentage of time each 

employee spends on^geral ete|lipn activity 

C. CommitteeRespoin^^Qln|L-riin .\uditReport 

In response to^thokiterim l^i t Rcpori recommendation, SDA stated it will implement 

procedu^^^tb mlK^urc all emplo\ces, paid entirely or in part with federal and/or nonfederal funds, are documented by die use of monthly time sheets. Such action is 

consistent with Commissmn guidiiiice witii respect to payroll logs. As such, the Audit 

staff considcF&.this matter rcNolvedr 

^ Payroll is stated net of taxes and benefits. 

^ Payments to SDA employees paid with 100 percent federal funds and reported as such are not included in 

this fmding (see Part I, Background, Commission Guidance, Request for Early Commission 

Consideration of a Legal Question, Page 1).