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 

(tiie Act). The 

Commission generally 

conducts such audits 

when a committer 

appears not to ha\olnet 

the threshold 

requirements for 

substan^^jggpliancc 

witii^t^^^^ffiliudit 

detej^lnes whether 

comi^^^ complied wi^: 

the lin^^iqns, 

prohibiti^ ^ 

disclosure requitements 

of the Act. ^t^J^ 

Draft Final Audit Report of the 

Audit Division on the 

Los Angeles County Democratic 

Central Committee 

January 1, 2007 - December 31, 2008 

About the Cominittee (p. 2) 

Los Angeles County democratic Central Committee is a local 

party committee hciidciiiaricrcd in Burbank, Califomia. For more 

information, see the chart on ihc Committee Organization, p.2. 

Financiir^tivityup. 2) 

• Receipts 

ContributwS%^'^^^ 

fpfeJLoans Receive,^,. ^ 

^I^CcSiefc^Receipts '^'^dik. 

d«YanSf6i;s^fom NoiiT^^eral Funds 

o ^^nsfer^tSSm^viiiMfeds 

Tiilal RcceiiM^ 

Disburse^nts 

r: Operat4iii! I Expenditures 

Luiiii R('|iii}mients 

c ()ih^^|sbursements 

TotSl^bursements 

L e ^ Receipts 

Levin Disbursements 

$ 297,749 

7.700 

10,025 

503,595 

38,845 

$ 857,914 

$ 787,495 

7,700 

79,573 

$ 874,768 

$153,473 

$156,930 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Misstatement of Levin Financial Activity (Finding 2) 

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

the Audit Division 

on the 

Los Angeles County Democratic 

CentralfCommittee 

.4 Mr 

January 1, 2007#6eij|^ber 31, 2008 
Table of Contents 

Part I. Background 

Authority for Audit 

Scope of Audit 

Page 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings an#Recommeii^||iti^ 

Finding 1. Misstatement of Fiiitanci|i,k^^^ "^fe^i 

Finding 2. Misstatement of LeV^inJ^i^^^ 

-H':-Si.\ 

J 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Los Angeles County Democratic Central 

Committee (LACDCC), undertaken by the Audit Division of tiie Federal Election 

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

1971, as amended (tiie Act). The Audit Division conducted tiie audit pursuant to 2 

U.S.C. §438(b), which permits the Commission to conduci uiulits and field investigations 

of any political committee tiiat is required to file a rep^ iiiulcr 2 U.S.C. §434. Prior to 

conducting any audit under this subsection, the Con^^^^must perform an intemal 

review of reports filed by selected committees to d^^mi^^^^e reports filed by a 

particular committee meet the threshold require#eiM for sub'stuiuiiil compliance with tiie 

Act. 2 U.S.C. §438(b). . f ' 

Scope of Audit 

Following Commission approved procedures, t^ .-\udii ^Ul^f^ evaluated l^lbl lowing 

areas in this audit: ^ ' ... 

1. the consistency between reponed rfiiiiirc^ and bank records; 

2. the disclosure of individual ccmi^iiUM >' iiccupatioii uiM name of employer; 

3. the disclosure of disbursements,^^.^ ^iid tihligations; 

4. the disclosure of cxpciiNCN allocat^U)eiwe^^fetnl. Leviiu^d non-federal accounts; 

5. the complete:r»;ci)i d*: imd 

6. other commi:k'c cipcratioii^ necessary lo ih»: w\ iew. ^ 

Scope Limitation 

The J^lpierlof LAC'DCC^^^ I I'Ccl^uI^^^erl^ an accounting firm that handles 

Li^pg^C's accountingsrecbrdkccping^^^^rting. The firm also acts as LACDCC's 

crecii^ard processoi^pie same credit card merchant account is used to process 

contributions for LACD€.^.and a number of otiier clients. The Audit staff did not have 

access to complete records'for this accgunt and therefore was limited in its ability to 

verify the pri^plbr accounting of transactions relating to the account. 
Part II 

Overview of Conunittee 

Coinmittee Organization 

Important Dates LACDCC 

• Date of Registration September 6,1994 

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

Headquarters Burbank, CA::^^^.:. 

Bank Information 

• Bank Depositories 

• Bank Accounts 4 'l^rdcral /i^^unt, 1 Levin Account and 2 

^Noii-Federal A^^unt?) 

Treasurer ^'^^^s 

• Treasurer When Audit Was Conducted Kinde Durkgg 

• Treasurer During Period Covered by Audit »deDui ^ 

^ ''' ^ 

Management Information ^j^^^ ^ 

• Attended FEC Campaign Finance Se®tiar^^>^ Yes ^ . ^. 

• Used Commonly Available Campaign "^^^^ 

Management Software I^apkage "^Si;, 

• Who Handled AccoudtiRf^ahd^Recordkeepih^-^ 

Tasks ."S ^ '^^y.. yV:^. 

PaiB JsMf and voiunteer 

•^-?4-^s 

O^^efljQf Fiii 

Federal^eSish^on-handf#Januai^^^^^^ 

ancial Activity 

Mjqiunts) 

u"^^'' $ 18,888 

o CdhWutions " 297.749 

o Loari^^eeived ""^ ^ 7,700 

0 Otiier Re?§fets '^^^ 10,025 

o Transfers ffo@I^on-Federal Fuiu!^ ^ 503.595 

o Transfers from^iSyin Funds 38,845 

Total Federal Receipts 

o Operating Expenditure^ ^ 

$ 857.914 

787,495 

o Loan Repayments 7,700 

o Other Disbursements ^ 79.573 

Total Federal Disbursements $ 874,768 

Federal Cash-on-hand @ December 31,2008 $ 2,034 

Levin Cash-on-Hand @ January 1,2007 $381 

Total Levin Receipts $ 153.473 

Total Levin Disbursements $ 156,930 

Levin Cash-on-hand @ December 31,2008 -$ 3,076 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

A comparison of LACDCC's reported federal activity with hank records revealed a 

misstatement of cash-on-hand, receipts and disburscincnis in 2007 and 2008. In 2007, 

LACDCC overstated beginning cash-on-hand by $5,228. iiiulcrstated receipts by $8,920, 

understated disbursements by $9,311 and overstated cndiiitz-cash-on-hand by $5,619. In 

2008, LACDCC understated receipts by $34,278, disbursements by $33,411 and ending 

cash-on-hand by $25,661. In response to tiie In^im Audit fiftc^ij, LACDCC amended 

its reports to correct the misstatements present!^ in that report. 

The Audit staff also identified an apparent prpfiibited or excessive contribution contained 

in the 2008 misstated receipts. In response to flie Merii^^ Report, tsAfepCC 

provided evidence showing tiiat^tfi^f eceipts should^not^^e'considered contributions. 

(For more detail, see p. 4.) "^^I^ r • - H^""'*:. 

Finding 2. Misstatemeiff of D^^^nan^^ Activity 

A comparison of L.\CD('C"> reported Lo^in aciiviix wiih barik^cords revealed a 

misstatement of ca^h-on-hand, le^eipts aiul tii^iMiiseiiieni^ in 2008. Specifically. 

LACDCC under^uuod receipt h> $16,32s .u.il ilixbursemenis by $101,669 and overstated 

ending cash-on-haiid ^^85,3^ I. In respcHiNC lo the Interim Audit Report, LACDCC 

amend^it^reports to i.'tirrec; ti:e missuitemeni of i^vin financial activity. 

(For ^n^^^^^^ee p. 9.; 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

A comparison of LACDCC's reported federal activity with bank records revealed a 

misstatement of cash-on-hand, receipts and disbursements jrL>2007 and 2008. In 2007. 

LACDCC overstated beginning cash-on-hand by $5.22J^Miderstated receipts by $8,920, 

understated disbursements by $9.311 and overstated.:^^d[iiig,<cash-on-hand by $5,619. In 

2008. LACDCC understated receipts by $34,278. d^^^^^^s by $33,411 and ending 

cash-on-hand by $25,661. In response to the IntlrimAudit E^^pi)n. i .ACDCC amended 

its reports to correct the misstatements presented that report. -

The Audit staff also identified an apparent Shibited or excessive coiiilibution contained 

in the 2008 misstated receipts. In response to^^^teriiii #\i^dit Report. l^^^C C 

provided evidence showing that^^eceipts should noi be considered contri%tions. 

Legal Standard '^| ^ 

A. Contents of Reports. Each repo^rnust^Sii^^e: 

• The amount of ca^h^on^and at tii^eginnihg'|^%^nd of il^^eporting period; 

• The total amouni^'pSTS^ifes for the rei^ortingi-blH^dlknd th^alendar year; and 

• The total amdf^ntof disbursements for-t|ti)e;;fj^porting peridd and the calendar year; 

and; 

• Certain transactions that re'quireitpmization on Schedule A (Itemized Receipts) or 

Scheduj(|B (ItemizedrD^^^^^ U^S,C. §434(b)(l). (2) and (4). 

B. Receipt of Prohibited Contributions - General Prohibition. 

Candidates and conmiitti^s^may hiajga^ept contributions (in the form of money, in-kind 

contributidns or loans) froEitthe treai^iji:^' funds of the following prohibited sources: 

. CorporS^ (i.e. any ii^orated organization, including a non-stock corporation, 

an incorpoM^d^emberli^ organization or an incorporated cooperative); 

• Labor Organiza^as: or f 

• National Banks/^tej.-S.C. §441b. 

C. Extension of Credit by Commercial Vendor. 

A commercial vendor, whether or not it is a corporation, may extend credit to a candidate 

or political committee provided tiiat: 

• The credit is extended in the vendor's ordinary course of business (see below); and 

• The terms of the credit are similar to the terms the vendor observes when extending a 

similar amount of credit to a nonpolitical client of similar risk. 11 CFR §116.3(a) and 

(b). 
D. Definition of Ordinary Course ofBusiness. 

In determining whetiier credit was extended in the ordinary course of business, the 

Commission will consider whether: 

• The commercial vendor followed its established procedures and its past practice in 

approving the extension of credit; 

• The commercial vendor received prompt, full payment if it previously extended credit 

to the same candidate or political committee and 

• The extension of credit conformed to the usual and normal practice in the coinmercial 

vendor's industry or trade. 11 CFR § 116.3(c) 

£. Party Committee Limits. 

A party conunittee may not receive more than $5,0()|^ei' year from any one contributor. 

2 U.S.C. §441a(a)(l)(C). (2)(C) and (f); 11 CFR §§S|. Kd) and 110.9. 

F. Contributions by Limited Liability Companies (LLCs). 

A limited liability company is a business ^^i^that is recognized ^^^^ under the 

laws of tiie state in which it is established.^^^iiLLC that elects to be^^^ted as a 

corporation by the Intemal Revenue Service uni^r 26 C^^pi.7701-3 sh4ilj)e 

considered a corporation pursuant/jo 11 CFR Paj^Jl^^^Ml^LC that makS!iJ> 

contribution to a candidate or comnGiiiUi^^ s providl^formation as to how the 

contribution is to be attributed an$;^^rM|that it is eliglBIe to make the contribution 

CFR§110.1(g) '%.'^%^:.. ^'"^ 

11 

Facts and Anal^sis^t^^'^^, 

A. Facts ^^y^ 

The Audit staff recohejed ihe leported finairciiil activity with the bank records for 2007 

and 2008. Ti ik-i.-i mined ih^ii L.-XC'DCC misstaiedxash-on-hand, receipts and 

disbur'^i'ii.^Mii^ In: both veiir>. The tolto^ing charts outline the discrepancies and provide 

explanations for ilie dii ierenicies. 

2007#ctivity 

Reported Bank Records Discrepancy 

Opening Cl|h Balance $24,116 $18,888 $5,228 

Overstated 

Receipts $312,959 $321,879 "" $8,920" 

Understated 

Disbursements $299,683 $308,994 $9,311 

Understated 

Ending Cash Balance $37,392 $31,773 $5,619 

Overstated 
The net understatement of receipts resulted from the following: 

• Offset to operating expenditures not reported 

• Unexplained differences 

Net Understatement of Receipts 

The net understatement of disbursements resulted from the following: 

• Disbursements not reported 

• Disbursements reported with incorrect amounts 

• Reported disbursements that did not clear bank 

• Reported voided disbursements 

Net Understatement of Disbursements .f^^*^ 

+ $9,245 

325 

$8,920 

+ 

+ 

$847 

9,389 

98 

827 

$9,311 

2008 Activity 

Reportediig Bank Relctiiirds Discrepancy 

Opening Cash Balance $37,392^ $31.773 $5,619 

Overstated 

Receipts $501.75^^^;^ S536.035 $34,277 

^Understated 

Disbursements 

Ending Cash Balance 

S532..164 

$6?786" ~ 

$565,774 

k •S2.034 " 

, 

'"$33,410 

Understated 

$4,752 

Overstated 

The net understatment oi receipts re.sulied iVoni ihe fol 

• Unreportei^l^ancefrb^credil card processor (see below) 

• Unreported traiisl^s from non-federal account (see below) 

• ^ep]gtte(|^ans]^^ Levin fund thai was never made 

•^V V":'Net Under^tatement\i(^Receipts 

The net urifestatement of d?i§j3|ursem^nts resulted from the following: 

Unreported repaymenj^of advance from credit card processor 

Unreporte4^4|?burse'm^iits to credit card processor (see below) 

Unreported di^^^^ents 

Reported disbi^^^nts with incorrect amounts 

Reported disbursements that did not clear bank 

Reported voided disbursements 

Reported disbursement paid from Levin account 

Net Understatement of Disbursements 

+ $7,700 

+ 42,596 

16,272 

+ 253 

$34,277 

+ 

+ 

+ 

+ 

$7,700 

15.000 

7.877 

26.873 

1,374 

66 

22.600 

$33,410 

LACDCC misstated tiie cash balances throughout 2007 and 2008 due to tiie errors 

outiined above and unknown adjustments from prior reporting periods. LACDCC 

overstated the cash balance on December 31.2008 by $4,752. 
Advance from and Repayment to Credit Card Processor-$7,700 

LACDCC's federal account received advances from its accounting firm and credit card 

processor. Durkee & Associates.^ on credit card proceeds that were being delayed. The 

advances totaled $7,700 and occurred between December 22 and December 26,2008. 

The committee prepared and dated checks to repay the advances on the days it received 

them, but tiie checks did not clear the bank until Febmary 17,2009. LACDCC did not 

report the advances of $7,700 and the repayments of the same amount, as noted above. 

In addition to the reporting issues relating to these transactions, the Audit staff considers 

the $7,700 received from Durkee & Associates an advancejir^ extension of credit 

outside tiie ordinary course of business. See 2 U.S.C. § -i? I' S^(A)(i) or see 11 C.F.R. §§ 

100.55.116.1(e). 116.3. As such, tiie $7,700 received h\ l..\CDCC is a contribution and 

either an excessive contribution of $2,700 ($7,700 i;-*^ lhc;ar.iiwable contribution limit of 

$5,000) or a prohibited contribution of $7,700. ue|viicl!ng CMI u hcther Durkee & 

Associates, as a limited liability company, elected to be treated a^^a pai tnership or a 

corporation for tax purposes. 

Disbursed to Credit Card Processor-$l 5,000 ^ 

On December 31,2008. tiiree checks totaling $H.0(M) were drawn from ilic^^eral 

account. Each check was payable lo l^kee & AsN()ciaieN. LACDCC did not report the 

checks on its disclosure reports. 1 ..-\C'I^('C-'s counsel explained that the Treasurer 

withdrew the fiinds from the federal i|^ouni a||part of tiie r^nciliation process to 

identify possible errors involving theWpositof^^[it card c^^butions. LACDCC 

retumed tiie funds t^^g^^^al accoun^nce it^^^^Mined that^tiiere were no problems 

with credit card p6iitriSutidn® As was tii&ase>witii m6iml'eposit of the $45,000 to the 

Levin account (seW^Einding 2)^n6wever. LAiSDDC redeposited tiie $15,000 in tiie federal 

account montiis laterv^^urkee &:Associates rptumed the money in four increments 

between May:'and December ol 20P.9[A:*^, 

Th^^^urer provM^ii .•. li^iiiig^ creditl^^ontributions totaling $61,491 tiiat were 

depo^^into the sh..ie{l ciedi^ird merchant account and identified as contributions to 

LACD^,^*- These credii card coniributions apparentiy represent the funds Durkee & 

Associatesi^^drew from I..\(."DCC^ank accounts (Levin account ($45,000) and the 

federal acc^^»15.000)) uliile reconciling the credit card merchant account. Based on 

available recoraTti: I )urkce tV: .Associates, the Audit staff could not determine whether 

LACDCC funds w^-ie used hy IDurkee & Associates during the period it held them. 

^ Durkee & Associates is operated by LACDCC's Treasurer, Kinde Durkee. Durkee & Associates is an 

accounting and business management firm with clients including political and non-proHt organizations, as 

well as small businesses. 
Transfer from Non-federal Account-$15,000 

LACDCC failed to report a transfer received from its non-federal account in the amount 

of $15,000. According to LACDCC's counsel, the $15,000 was erroneously transferred 

from LACDCC's non-federal account to its federal account on December 31,2008, the 

same day t it wrote the checks to the credit card processor. Without receipt of this 

transfer, LACDCC's federal bank account would have had a negative balance of $7,044 

on December 31,2008. 

LACDCC transferred $15,000 on November 9,2009 to retum tiie fimds to tiie nonfederal account. LACDCC's counsel stated the purpose foy^e original transfer was 

unclear, and that no one from LACDCC's management was^iformed of, or consulted 

about, the erroneous $15,000 transfer or the retum of those mnds. Rather, LACDCC 

management became aware of these transactions soljely as «>^f^ult of this audit. The 

Audit staff could not determine the reason for the ^^sfcr fi dm^the non-federal account 

based on available records. The Audit staff ve;rj|i^d that the funcls^ere retumed to the 

LACDCC's non-federal account. y^W' 

The non-federal account transferred less than< its; .share of allocated federig(i/npn-federai 

costs during the audit period. As such, tiie federal ;acc9tint;bould have accepted the nonfederal transfer without resulting^-iriibverfunding. 

B. Interim Audit Report & AudiiNDiviliion^Recommi^iid'ation 

The Audit staff presented tiie missta^^nts ndt^d above t^^representatives for 

LACDCC during the e.xii c(Mircrence.^^represeMiaii^s di^^t provide any 

information to explain ihe inisstatement^^'.ii ii'.ilieaied'^tliai ihey would file amended 

reports to correcMiesc errors. , -

•L ^ 

The Audit siaff reconnn^^d thaf LACDCC file amended reports to correct the 

misstatement.N. 1 ..ACDC^^DUUI amend ihei cash balance of its most recent report witii 

an^expfiaination tfillihe aine^^ienis are du^^^udit adjustments from a prior reporting 

pertol^.^ 

LACDCG(^^.uld also pro^:^informSon conceming the $7,700 advance from its credit 

card processior.tQ establish thaiit was made in tiie ordinary course of busmess. The 

information shoiild include:.^ 

• The specifiCterms^J^^^^ & Associates apply to such extensions of credit; 

• Whether simiMitilmi's are offered to nonpolitical customers of similar size and 

risk of obligation;^ 

• Rationale for why Durkee & Associates chose the time it did to negotiate 

LACDCC's checks representing repayment; 

• Information about Durkee & Associates' tax status; and 

• Any other information LACDCC believes might clarify the transactions. 
C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation. LACDCC amended its reports, 

correcting the misreporting. Also. LACDCC amended its cash balance on its May 2011 

monthly report and noted that the adjustment was pursuant to the Audit staff's direction. 

To establish that the advance of $7,700 from its credit card processor was made in the 

ordinary course of business. LACDCC's response explained that Durkee & Associates 

considered short-term advances to its clients as benefits encompassed in its 3 percent 

credit card transaction fee. It provided a listing of 45 short-term advances that Durkee & 

Associates made to both its political and non-political clients dating back to 2001. 

LACDCC sufficientiy demonstrated tiiat tiie $7,700 frjs^purkee & Associates had a 

business purpose and was not for the purpose of inl1iiei^m|^a federal election. As a 

result, the transaction is not considered a contribuiion. ^ 

Finding 2. Misstatement of Levin Financial Activity 

Summary ^ v 

A comparison of LACDCC's re^^ d Levin aclivii> \K iili bank records reve^d a 

misstatement of cash-on-hand, r^^^^md disbur-«"niei:iN in 2008. For 2008, LACDCC 

understated receipts by $16,328 a^^mirsements by SIO! .669 and overstated ending 

cash-on-hand by $85,341. In resporoie to the jfegmi Audii Report, LACDCC amended 

its reports to correct ilie missiatemeni of|Levin rinaiieial .leiiv ilk. 

Legal Standard ""^^ 

A. Reporting. ' "^^^ 

If a state, district or l&mlvparty?c<bmmittee's combined annual receipts and disbursements 

for federatetection activit5t;(ig^!l^t0tai^.OOO'^^^^^ during the calendar year, tiie 

conuiiii^teb mMt^llfs^lose reG^ints and^is^ursenii^nts of Federal funds and Levin funds 

use| » FEA. 11 emS300!3^l?)(2). 

B. Contents of Levin Reports. Elshlreport must disclose: 

• The airionni of cash-on^hand for &vin funds at the beginning and end of tiie 

reportini! [leriod; 

• The total amouni of Le\ in fund receipts for the reporting period and the calendar 

year; 

• The total amouni of l.e\ ni tund disbursements for the reporting period and the 

calendar year; and 

• Certain transactions that require itemization on Schedule L-A (Itemized Receipts of 

Levin Funds) or Schedule L-B (Itemized Disbursements of Levin Funds). 11 CFR 

§300.36 (b)(2). 
10 

Facts and Analysis 

A. Facts 

The Audit staff reconciled the reported Levin financial activity with tiie bank records for 

2007 and 2008. Staff determined that LACDCC misstated cash-on-hand, receipts and 

disbursements for 2008. The following chart outiines the discrepancies for 2008 and 

provides explanations for the misstated Levin activity. 

2008 Levin Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance 

Receipts 

$960 

$135.^990 

$960 

••"si.52.318 

$0 

$16,328 

Understated 

Disbursements $54,685 ' .S.I 56.354 

A. 1 ...lk 

$101,669 

Understated 

Ending Cash Balance $82,265, $(3^/))' • $85,341 

•'^ Overstated 

£i*l 

The understatement of receipts re^sulted from th'e ifpjlpwmgj^^ 

• Unreported transfer from.federal account 

• Unreported contribution .>.; - \ 

• Refund of contribution reported as a;ii^gative receij^tjnstead 

of a disbursement ' 

Understateih^htiiiif^Receipts 

$6,328 

5.000 

5.000 

The understatement-M disbursWents result@l#om the following: 

• Unreported dKl"»iir^cniei'.iN to Durkee Associates (see below) 

• .Utfffejpiprted tran^ler lo non-nariv commiliee (see below) 

»'OtiiibruiareiuM i ^-d disbursements 

^isbursementiidcorreeiK reported as transfer to federal account 

'Refund of coniribiiiicm reported as a negative receipt instead 

b^disbursemeni K. ^ fei 

+ 

+ 

+ 

$16,328 

$45,000 

35.000 

32,941 

16,272 

5.000 

Nei^t^derstatemenibf Disbv^ements $101,669 

LACDCC misstat^^ts Le^imdnding cash balances for 2008 due to the errors outlined 

above. On DecemSe?|3.L|20'O§, tiie committee overstated the Levin cash by $85,341. 

^ The negative ending cash balance was due to an outstanding check that was not negotiated until February 

2009. During the period that it was outstanding, the Levin bank statements showed a positive cash balance. 

LACDCC disbursed $22,600 from its Levin account to a vendor, but it reported this transaction as a 

$16,272 transfer to the federal account, which is the amount that could have been transferred from the 

Levin account if the disbursement had been paid properly from the federal account. The $22,600 is 

included in the $32,941 amount of disbursements that were not reported. LACDCC also did not report the 

transfer of $6,328 - the federal share of the $22,600 expenditure - from its federal account to the Levin 

account. 
11 

Amount Disbursed from Levin Fund-$45,000 

Between December 5 and December 22.2008. four checks made out to Durkee & 

Associates totaling $45,000 were drawn on the Levin account. LACDDC did not report 

the checks on its Schedules L. According to LACDCC's counsel, Durkee & Associates 

closely examined its credit card merchant account^ at the end of 2008 and determined that 

a number of clients had received duplicate transfers relating to credit card contributions. 

Durkee & Associates concluded that reversing all credit card transfers made to its clients 

was the best way to avoid potential reporting issues. Durkee & Associates would then retransfer the correct amount of credit card contributions based upon a reconciliation of its 

merchant account. 

However, credit card contributions were not deposite^im|^1he Levin account during tiie 

audit period. As such, tiiere seemed to be no reason^fbr>bufkee & Associates to 

withdraw funds from this account. LACDCC deposited credit'Oard contributions in the 

federal account. However, between Decemb^er'S- ahd Decemb'eft22,2008. LACDCC did 

not have $45,000 in its federal bank accou^pieS Finding 1. abov^^ e $45,000 

withdrawn from the Levin account was not-'^deposited until Marcff 23^^2010. 

The committee made an earlier a^^ipt to redeposii ir.e money in March 2Q^^ 

LACDCC's counsel provided a eheclfcin the amoinv. ol S45,()00 made out to flie Levin 

Fund, along with a deposit ticket dated Nlarch 13. 2009. I lnwever. this check never 

cleared and was not posted to the a^^^ . 

LACDCC's couii-*'] xi.ii that LACDd^ianaiienieni was not jtiformed of, or consulted 

about, tiie $45,0(U) mi=jinall^^thdrawii^in*tl!e I.e\ i:: !"fed account, tiie merchant 

account check issue^o LACDm^, in Marc^p09 or the merchant account check issued 

to LACDCC in MarishpOlO. I^CDCC maffiement became aware of tiiese transactions 

only as a result of the attait-^Thk%e£ts.urer coni^nds tiiat Durkee & Associates has since 

improved ils internal controls avoid^thisltype q&situation in the fiiture. LACDCC 

fo^arded a descrijtiJijBypf the;jpt|^mal coritrCij-improvement to the Audit staff. These 

intemsil:,controls inclui'^|eneral cKianges to accounting and recordkeeping procedures, 

but do nSot;Specifically detlll^procedifiies that would minimize the risk of commingling 

LACDCd^^iqceeds with tiildsje of othiSS^ommittees and Durkee & Associates. 

Amount Transferred from%evin Account-$35,000 

On November 25.'2diG|8, hl^^pCQ made a transfer of $35,000 from tiie Levin account to 

a non-party commit^^^Sena Area United Democratic Headquarters (Pasadena 

United), which is anotlSTDurkee & Associates client. The conunittee did not report the 

transfer on its Schedules L. LACDCC's counsel explained tiiat the transfer was supposed 

to be made from Durkee & Associates' credit card merchant account to Pasadena United, 

but the fimds were taken from the Levin account in error. 

^ This merchant account was a shared account that received credit card contributions for LACDCC and 

Durkee & Associates' other political committee clients, many of which had the same treasurer as 

LACDCC. 
12 

The Treasurer refunded the $35,000 to tiie Levin Fund account from the Durkee & 

Associates merchant account in tiiree increments between December 17,2009 and 

January 28,2010. The Treasurer explained tiiat this was more efficient than transferring 

$35,000 from Pasadena United to tiie Levin account and tiien transferring $35,000 to 

Pasadena United from tiie Durkee & Associates merchant account. The Treasurer 

believed this was an appropriate resolution because the merchant account was the 

intended source of tiie funds. 

LACDCC's counsel states that no one from LACDCC management was informed of, or 

consulted about, the error, tiie metiiod of reversmg tiie erroneous transaction, tiie timing 

or reporting of tiie error, the retum of funds or any otiierj|i^lt of tiie corrective effort 

undertaken by tiie Treasurer. 

B. Interim Audit Report & Audit Division Recomlnendatibn 

The Audit staff presented the misstatements^^^^in activity lu^^epresentatives for 

LACDCC during the exit conference. The^^iisentatives did n^^rovide any 

information to explain the misistatements, bui indicated that they wouHiltfile amended 

reports to correct the errors. 

The Audit staff reconunended that?L^CDCC file amended reports to correct^e 

misstatements of Levin activity. The^1\i^t|Sjaff also fi^gmended that LACDCC 

reconcile the cash balance on its mb^t^receht^teport to idWiM^ any subsequent 

discrepancies tiiat could affect the rebbmmehded^ldjustme^^Kcash. 

In response to the^terim Audit^Report recommendation. LACDCC amended its reports 

correcting the misreporting.