SANDLER, REIFF, YOUNG & LAMB, F.C. 

•September 28,2012 

Shawn Woodhead Worth 

Secretary 

Federal Election Coinmission 

999 E Street, NW 

Washington, DC 20463 

Dear Ms. Worth: 

The undersigned serves as counsel to the following Democratic State.Party Committees; 

Mississippi Democratic Paity PAC 

Massachusetts Democratic State Committee - Fed. Fund 

This letter serves as. a request for consideration of a legal question raised during each of 

the Audits of the above referenced committees for the 2010 election cycle. This request is being 

made in accordance with the FEC's recent Policy Statement, Notice 2011 -1K Policy Statement 

Regardinii a Program For Requesting Consideration of Legal Questions bv the Commisision. 76 

Fed. Reg.4579H (August 1,2011). Our office received notification of this prq.poged fmding, via 

conference call, on September 10,2012. 

Specifically, during this call, our office was notified by the Audit Division that it 

intended to include, as a finding in the Interim Audit Repoit for each Audit that the committee 

failed to comply with Commission recordkeeping requirements by failing to maintain employee 

time logs for those employees who were paid exclusively with federal funds. It is my 

understanding that all of Iiie above referenced committees would be affected by tl^is proposed 

finding. Our clients disagree with this proposed fmding as a "novel" approach to :this issue" and 

"inconsistent with prior Commission matters dealing with .the same issue" 76 Fed, Reg. ai 45799. 

During the fieldwork and the Exit Conference for each of these committees, the Audit 

Division raised the issue of time logs and suggested that, according to 11 C.F.R. § lb6.7((d)(l). 

1025 VERMON-I- AVENUE, N.W., SUITE .300 • WASHINGTON, DC 20005 • TEL: (202) 479-1111 • FAX: (202) 479-1115 
logs must be kept for all employees percentage of time spent on federal activity regardless of 

whether they were paid all, in part, or with no federal funds. During the fieldwbrkj each 

committee conceded that the ifailure tq keep logs, for employees who were paid either in part or 

with no federal funds would support a recordkeeping finding. However, each ciommittee 

objected to any finding that employees who were paid exclusively with federal funds required 

any entry in a time log.' 

DISCUSSION 

Commission regulations at 11 C.F.R. § 106.7(d)(1) require that party committees "keep a 

monthly log of the percentage of time each employee spends in connection with a Federal 

election." Contrary to the proposed regulation that preceded the final , regulation, the final 

regulation does not appear to spepify that such a log be kept for all employees. 

The proposed regulation at propoised 11 C.F.R. § 300.33(b)(1) stated: "Committees must 

keep time records for aH employees for purposes of determining the percentage of time spent on 

activities in connection with a Federal Election." Notice of Proposed Rulemaking, Prohibited 

and Excessive Contributions: Non-Federal Funds or Soft Money, 97 Fed. Reg. 35654, 35684 

(May 20,2002) (emphasis added). 

Although the Commission left provisions regarding the allocation of salary in the final 

section 300.33, it also created a new section ofthe regulations^ 11 C.F.R. § 106.7, to address all 

issues relating to the allocation of expenses between federal and non-federal activities by state 

and local party committees. In doing so, it moved the recordkeeping requirement, in its entiriety 

from proposed section 300.33 to section 106.7. The shift of this language from section 300.33 

which relates to Federal Election Activities, to section 106.7, which deals exclusively with the 

allocation of expenses is significant. In our view, this shift signifies that the Commission, 

believed that the recordkeeping requirement related solely to issues relating to the use of nonfederal funds and did not intend to create a universal,: burdensome recordkeeping requirement for 

all employees. 

More significantly, the Commission changed the language of the proposed regulation and 

specifically deleted the word "all" from the proposed, version ofthe regulation. This clearly 

shows the intent of the Commission to not require time recordis for aU employees but only for 

those covered by 11 CF.R. § 106.7, which would include only those employees that the party 

was claiming to pay either entirely non-federal funds or with a combination of federal and nonfederal funds. 

' Notwithstanding this concession, it should be noted that prior tothe 2010 election cycle, it is my understanding 

that the committees were permitted to demonstrate during the audit process that employees didinot exceed the 25% 

threshold by providing affidavits where inadequate records were, maintained. Provision of these affidavits would 

negate a potential finding that the committee potentially over-funded its federal account from its ndn-federal 

account. Once these affidavits were adequately provided, and the over-funding issue resolved, the.Cornmission did 

not pursue any separate recordkeeping finding for employee time log recordkeeping. Although thC'Audit Division 

continues to allow affidavits to be provided to resolve over-funding issues,, to the extent that providing for a separate 

recordkeeping finding under aiiy circumstances where the committee, provides, subsequent, acceptable 

documentation during the audit process.appears to be inconsistent with past practice in Commission audits. 
To be sure, there is no reason, as a matter of policy, to make a finding that state party 

committees have violated Commission recordkeeping requirements by requiring titne sheets that 

serve no purpose. When queried by our office during the teleconference call as to the reason 

such documentation should be kept, the Audit Division replied that such time sheets would help 

track state psirty allocation transfers for payroll, by employee. However, the Comrnission 

already has access to sufficient information from committee payroll and other finaiicial records, 

as well as the actual reports filed by the committee which show whether that the employee's 

payroll was intended to be paid for exclusively with federal funds. Adding a time log 

requirement for such employees, serves absolutely no additional purpose other thai) to increase 

the recordkeeping requirements of state parties. In fact, it is my understanding that several state 

parties have chosen to not allocate their payroll costs because they find the time recordation 

requirements to be too burdensome. 

We also find it troubling that the Audit Division has chosen to include this finding in an 

Audit Report with respect to a regulation that the Commission has addressed in the Audit context 

on several occasions in prior cycles without once making a separate recordkeeping violation 

finding. The 2010 election cycle was the fourth election cycle under this regulation and the 

Audit Division's decision to include this as a finding now after three prior cycles under this 

regulation is clearly inconsistent with the Commission's approach in prior audits Where no time 

logs were maintained. For example, in the 2006 Final Audit Report for the Georgia Federal 

Elections Committee, the Commission determined that the failure to maintain proper 

documentation would result in the requirement that employees must be disclosed on Line 30(b): 

The Audit staffs review of payroll expenses reported on Schedules H4 reveded that 

GFEC failed to maintain supporting documentation detailing the time spent on federal 

activities ifor employees whose salaries and related expenses totaled $231,366; Absent the 

supporting documentation. GFEC should have disclosed these salarv and related 

expenses as non-allocable FEA on Schedules B. Line 30b. (Fiederal Election Activity 

Paid Entirely with Federal Funds). 

The Audit steiff discussed this matter with GFEC's representatives during the audit and 

requested monthly logs, timesheets and affidavits. GFEC representatives were unable to 

locate any of the items requested 

... .The Commission considered the Audit Division's Recommendation Memorandum in 

which the Audit Division recommended that the Commission adopt a finding that GFEC 

had not maintained adequate documentation detailing the time spent on federal activities 

for employees whose earnings and related, pavroll expenses, were allocated on Schedules 

H4. 

Final Audit Report of the Georgia Federal Elections Committee for the 200.6 Election 

Cycle, p. 10 (emphasis added). 

Similarly, the Commission treated the same issue for the Tennessee Republican Party 

Federal Election Account as purely an over-funding and reporting issue in its 2006 Audit. The 

Audit Repoit did not discuss any specific recordkeeping violation. 
According to these prior audits, the recordkeeping requirement exists ,fqr tl|e. sqle'purpqse 

of determining the appropriateness of allocation by the committee under sectipri l d6.7(d) and the 

Commission did not create a separate recordkeeping finding in these prior audits. The 

recordkeeping requiremeht merely supports the heed to further document the use of non-federal 

funds for these activities. Therefore, the separate recordkeeping finding is clearly Uuplicatiye 

and unnecessary. 

Thus, this recordkeeping provision is not mandated by the Federal Election Campaign 

Act and it was the Commission who created this regulation for the apparent and sojle purpose of 

assisting the Commission.in monitoringxompliance with the 25% provision found: in 2 U:S.C. § 

431(20)(A)(iv). The payment by a state party of an employee's salary and benefits with 100% 

federal dollars^ and the disclosure of such payhients on Lihe 30(b). of the comhiitti^e's report is a 

clear concession that it is subject tq the mandate found in this statute and the need jto comply 

with the FEC's recordkeeping requirement is completely moot with respect to that, employee. 

.1 can assure yoii that.stat.e parties have, as a general matter,, proceeded V/ith.this 

assumption, and .I would expect that, due to the burden of the recordkeeping re<quirement,.that 

few, if any,, maintain time logs for 100% federal employees.. Ifthe Commissipn vs^ishes to create 

a new standard for this recordkeeping .requirement, it should do so by providing thjs regulated 

cominunity with advanced notice and not penalize state parties by creating a new and novel 

finding of a violation of Commission regulations during the Audit process. 

Based upon the above, it is clear that the Audit Division's recohimehdatioh to include a 

separate finding of a violation of Commission regulations if a state party comniittee does not 

maintain time logs for employees who are paid exclusively with federal funds is iii^onsistent 

with Commission regulations. Therefore, the Commission should direct the Audit Division to 

omit such a finding in the Interim Audit Report. 

If you have any additional questions regarding this matter, I can be reached at (202) 479-

1111. 

SinG^rely