Draft Final Audit Report of the 

Audit Division on the 

Kentucky State Democratic 

Central Executive Committee 

(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 complifn 

with the Act,^ The audit 

determines.w-fi^3^!efethe 

commij^^ompli 

the linwarions. 

prombiiil^.and 

disclosuren^irements 

of the Act. 

Future Actio! 

The Commission ma 

initiate an enforcement 

action, at a later time, 

with respect to the matter 

discussed in this report. 

About the Committee 

The Kentucky State Democrat!^ 

a state party committee head 

For more information, i 

p. 2. 

Finau 

1 Executive Committee is 

red in Frankfort, Kentucky. 

Committee Organization, 

Receipts 

o Contribution^ 

oSaCpntributions 

Individuals 

litical 

jursement 

ig Expenditures 

Transfers to Affiliates 

Fransfers to Non-federal 

'Accounts 

Coordinated Expenditures 

o Contribution Refunds 

o Federal Election Activity 

o All Other Disbursements 

Total Disbursements 

r 

$ 3,284,010 

233,585 

1,337,724 

160,055 

261,284 

S 5,276,658 

$2,517,459 

404,050 

1,507,682 

9,953 

6,150 

700,805 

87,212 

$5,233,311 

Finding and Recommendation (p. 3) 

• Recordkeeping for Employees 

' On September 1,2014, the Federal Election Campaign Act of 1971, as amended ("the Act"), was 

transferred from Title 2 of the United States Code to new Title 52 of the United States Code. 

^ 52 U.S.C. §30111(b) (formerly 2 U.S.C. §438(b)). 
Draft Final Audit Report of the 

Audit Division on the 

Kentucky State Democratic 

Central Executive Committee 

(January 1, 2011 - Decer^fe^ 31, 2012) 
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 Recom: 

Recordkeeping for Employees 
Parti 

Background 

Authority for Audit 

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

Corrimittee (KDC), undertaken 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 52 

U.S.C. §30111(b) (formerly 2 U.S.C. §438(b)), which permits the Commission to 

conduct audits and field investigations of any political committee^at is required to file a 

report under S2 U.S.C. §30104 (formerly 2 U.S.C. §434). Prio&^^nducting any audit 

under this subsection, the Commission must perform an intemjarreview of reports filed 

by selected committees to determine whether the reports fijm^^articular committee 

meet the threshold requirements for substantial compliarffTwith^^Act. S2 U.S.C. 

§30111 (b) (formerly 2 U.S.C. §438(b)). 

Scope of Audit 

Following Commission-approved procedures^ th< 

factors and as a result, this audit examined: 

1. the disclosure of individual contrib^rs' occupatidi 

the disclosure of disbursements, dli^an^d obligation^ 

the disclosure of expenses allocated^^l^.tfederal ani 

the consistency between reported fig^s MiSj^l^recordsl' 

the completeness of records; and 

other committee operalf^^Qecessary towe review 

2. 

3. 

•4. 

5. 

6. 

ederal accounts; 

Commissioi 

Requesi 

Pursu 

Cor^l 

unaffili 

audits 

monthly time 

percent federal 

. Co 

the Co^^sron's 

of Legal^^tioi 

ited 

deration of a Legal Question 

icy Statement Establishing a Program for Requesting 

Commission," several state party committees 

fy consideration of a legal question raised during 

ion cycle. Specifically, the Commission addressed whether 

'FR § 106.7(d)(1) were required for employees paid with 100 

The Commission cofjlfluded, by a vote of S-1, that 11 CFR § 106.7(d)(1) 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 KDC 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 KDC employees 

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

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration July 12, 1975 

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

Headquarters Frankfort, Kentucky . 

Bank Information 

• Bank Depositories One 

• Bank Accounts Three Federai^K^^pn-federal 

Treasurer „ ^ 

• Treasurer When Audit Was Conducted Fredem^^fe^ligdon f57»011 - 4/11 /2013) 

M. Nl^nda A. Kams (4/l^p!J3 - Present) 

• Treasurer During Audit Period D^^andy Wpum -S/fimK) 

FreJ^kA. l^on (5/12/201F4/11/2013) 

Management Information 

• Attended Commission Campaign Finance 

Seminar J" . 

• Who Handled Accounting and 

Recordkeeping Tasks 

of Fimncisn Activity 

idited ^nfiunts) 

Cash-on-hand j^idauii!ir\ iSr S 144,014 

Receipts 

o Contritions from Indg^uals 3.284,010 

o Confriti^ns from PolitH^bkComrf^l^es 233,585 

o Transfersl^ra Affiliates ^ ^ 1,337,724 

o Transfers fron^pn-federa^ccounts 160,055 

o All Other Recei]^?^ W 261,284 

Total Receipts $ 5,276,658 

Disbursements 

o Operating Expenditures 2,517,459 

o Transfers to Affiliates 404,050 

o Transfers to Non-federal Accounts 1,507,682 

o Coordinated Expenditures 9,953 

o Contribution Refunds 6,150 

o Federal Election Activity 700,805 

o All Other Disbursements 87,212 

Total Disbursements $5,233,311 

Cash-on-hand @ December 31,2012 S 187,361 
Part III 

Summary 

Finding and Recommendation 

Recordkeeping for Employees 

During audit fieldwork, the Audit staff determined that KDC did not maintain any 

monthly payroll logs, as required, to document the percentage o^me each employee 

spent in connection with a federal election. For 2011 and 20]^[he Audit staff identified 

payments to K.DC employees totaling $833,262, for which 

monthly payroll logs. This consisted of $820,979, for' 

federal and non-federal funds, and $12,283, for whic 

federal. Subsequent to the exit conference, KDCjmenc 

$503,149 of the employee salaries, previously ^gj^rted asii 

percent federal expenses. The amended repottsl^feiot pr 

audit report because the amendments were filed af 

not maintain 

t)vas allocated with 

isively nonits reportsl^isclose 

jllocated expeS^g; js»l 00 

ide this matter1^?n the 

^a^n of the t 

The Audit staff verified the accuracy! 

Commission's guidance with respect tc 

percent federal funds and reported as suS 

action was necessary with respect to recor 

salaries. 

:^'s amended'^lgrts, and in light of the 

)ing for e^lw6es paid with 100 

iff cor^^ed that no further 

33,149 in employee 

Audit 

nin£ 

In response to the J 

recordkeeping for the 

track and document, to thl 

employefsifHaFw^^S. pe 

and fed^l election a^aties. 

port recomnKndation, KDC addressed the 

1^30,113 by swing it has implemented procedures to 

'all or in part with non-federal funds, 

r less^^fiiir time in connection with federal elections 

^ detail, see p. 4.) 
Part IV 

Finding and Recommendation 

Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff determined that KDC 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 2012jJ^^dit staff identified 

payments to KDC employees totaling $833,262, for which Kggaid not maintain 

monthly payroll logs. This consisted of $820,979, for whkPp^ll was allocated with 

federal and non-federal funds, and $12,283, for which pd^ll w^^clusively nonfederal. Subsequent to the exit conference, KDC am^epits repon^^isclose 

$503,149 of the employee salaries, previously rqg^rtM as allocated expfbigs. as 100 

percent federal expenses. The amended reppr^^not prelude this matf^Fjim the 

audit report because the amendments were fifM^reMiotifi^on of the auc 

The Audit staff verified the accuracy^f KDC's amend^^raorts, and in light of the 

Commission's guidance with respect c^ecprdkeeping fo^^loyees paid with 100 

percent federal funds and reported as s^n^fejtAudit staff co^ud^d that no further 

action was necessary with respect to reco^^k^t^for the $5^g^49 in employee 

salaries. 

In response to the In 

recordkeeping foritn^mainint 

track and document, to 

employees 25 

and federaliiel^aira^iviti 

sport recof^endation, KDC addressed the 

130,113 by stating it has implemented procedures to 

;^re paid Wor in part with non-federal funds, 

^ime in connection with federal elections 

LegiSi^undard 

Mainten^^of Monthl^^gs. F^rty committees must keep a monthly log of the 

percentage ol^^ each en^oyee spends in connection with a federal election. 

Allocations ofs^^s, wa^s, and fringe benefits are to be undertaken as follows: 

• employeelwQ,swnd 25 percent or less of their compensated time in a given 

month on fedrepfl election activities must be paid either from the federal account 

or be allocate 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)(1). 
Facts and Analysis 

A. Facts 

During fieldwork, the Audit staff reviewed disbursements for payroll. KDC 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, KDC did not maintain logs for $833,262 in 

payroll.^ This amount includes payroll paid as follows to KDC employees. 

A. Employees reported on Schedule H4 (Payments for AUqcable Expenses) and 

paid with a mixture of federal and non-federal funds^iiring the same month 

(totaling $820,979); and 

B. Employees paid exclusively with non-federal fUrasim;;a.given month and not 

reported by KDC (totaling $12,283). . ' -Mi '•'v! i;. 

The Audit staff requested that KDC provide docurhentatibn to verify th^rtime employees 

spent on federal election activity. In response^(;^C provided signed affiSav^/for seven 

employees who worked in 2012. The affidavits ls||d^th^qiTi[pJ^oyee name, jjlb title and 

responsibilities, the time period covered by the aifi(i^t.^M the funding used. They also 

included a brief statement concemin^the time spent ofi^deral election activity. KDC 

provided no affidavits for employees v$>]^^^rked in 20f 

The affidavits provided by KDC did not i^ol^g^jK^kegping finding because they 

were prepared after notification of the auc 

B. Interim Audit I^^ort &i^|^it Divisioif^ecommendation 

The Audit staff discUiifs(^^,the relSOrdkeeping req^jpments with KDC representatives 

during audit fieldwork anfid.^t the;exit;Confere^^ KDC's counsel stated that, even 

though pa3^roH.y/||S reported^^V^ah on Schedule H4, KDC did not make 

the necessary trahsfenl^fnon-fei^era funds to cover its portion of the expense. Thus, 

counsel intended thiftltime log^b^not required since the payroll had been paid with 

100 percent federal funds:;,) At the e)tit conference, counsel asked whether amending the 

disclosure-^pprts by movin^^the payroll disclosed on Schedule H4 to Schedule B, Line 

30b (Federal El^ction Acti^;^ Paid Entirely with Federal Funds) would negate the 

finding. The Audjt.staff responded that the finding would remain in the audit report 

regardless of any s^c)r.amendments, since KDC, at the time of the audit, disclosed these 

transactions as allocable expenses on Schedule H4. Subsequent to the exit conference, 

KDC filed amended reports to disclose $503,149 in payroll on Schedule B, Line 30b; 

thus, leaving $317,830 still on Schedule H4. The Audit staff verified that KDC had not 

made the transfers from its non-federal account to cover the $503,149 now reported as 

100 percent federal election activity. As such, no further action was necessary with 

^ This total includes payroll for employees paid with 100 percent federal iiinds and reported as such. 

Subsequent to the exit conference, KDC filed amended reports which disclosed payroll transactions, 

previously disclosed as allocable expenses on Schedule H4, as 100 percent federal expenses on Schedule 

B, Line 30b. Payroll amounts are stated net of taxes and benefits. 
respect to the recordkeeping for payroll totaling $503,149 and paid with 100 percent 

federal funds. 

The Interim Audit Report recommended that, for the remaining payroll reported on 

Schedule H4 ($317,830) and payroll paid exclusively with non-federal funds ($12,283), 

KDC provide evidence that It maintained monthly time logs to document the percentage 

of time each employee spent In connection with a federal election or Implement a plan to 

maintain monthly payroll logs In the future. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, Kl 

KOC does not have any specific documents to supplement i 

already been provided to the Commission. Counsel fur 

Implemented procedures to track and document, to th^ 

with non-federal funds, employees that work 25 

connection with federal elections and federal ele^^ activities. 

ii}.sel stated that 

irmatlon that has 

at KDC has 

Id all or In part 

e In