• FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 204&3

A8l-68

REPORT OF THE AUDIT DIVISION

ON THE

KANSAS DEMOCRATIC STATE COMMITTEE

I. Background

A. Overview

This report is based on an audit of the Kansas

Democratic State Committee ("the Committee"), undertaken by the

Audit Division of the Federal Election Commission in accordance

with the Commission's audit policy to deterDine whether there has

been compliance with the provisions of the Federal Election

Campaign Act of 1971, as amended ("the Act"). The audit was

conducted pursuant to Section 438(b) of Title 2 of the United

States Code which states, in part, that the Corrmission may conduct audits and field investigations of any political committee required to file a report under Section 434 qf this

title. Prior to conducting any audit under this section, the

Commission shall perform an internal review of reports filed by selected committees to determine if the reports filed by a

particular committee meet the threshold requirements for

substantial compliance with the Act.

The Committee registered with the General Accounting Office on July 24, 1974 and maintains its headquarters in Topeka, Kansas.

The audit covered the period January 1, 1980, through

December 31, 1980. The audit also included a review of activity from June 6, 1979, through December 31, 1979 that had not been

reported to the Federal Election Commission. The Committee

reported a beginning cash balance at January 1, 1980 of

$1,133.78; total receipts for the period of $31,560.03; total

expenditures for the period of $29,734.12; and an ending cash

balance at December 31,1980 of $2,959.69.

This report is based on documents and working papers supporting each of its factual statements. They form part of the

record upon which the Commission based its decisions on the

matters in this report and were available to Co~issioners and

appropriate staff for review.
B. Key Personnel

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The Treasurer of the Committee during the period covered by the audit was W. E.Clarkson. The current Treasurer

is Larry D. Tittel. Jim Ploger is the current Assistant

Treasurer and held that post during the period covered by the

audit.

C. Scope

The audit included such tests as verification of total

reported receipts and expenditures and individual transactions1

review of required supporting documentation1 analysis of

Committee debts and obligations1 and such other audit procedures

as deemed necessary under the circumstances.

II. Audit Findings and Recommendations

A. Disclosure of Financial Activity

Sections 434{b) (2) and (4) of Title 2, United States

Code require that a committee report the total sum of all

receipts and expenditures (including loan repayments) made during

a reporting period and the calendar year. Sections 434{b) (3) and

(S) of Title 2, United States Code provide for disclosure of each

person who receives a loan repayment from the committee, and the

disclosure of receipts and expenditures with aggregate values in

excess of $200.00. Section 434{b) (8) of Title 2, United States

Code requires that a committee report the nature and amount of

outstanding debts owed by such committee.

The Kansas Democratic State Committee maintains a bank

account to fund Federal activity and a separate account for state

and local activity. Prior to 1980 Committee reports disclosed

activity for both accounts. However, Committee officials stated

that during the latter part of 1979 a decision was made to report only the activity of the Federal account pursuant to 11 C.F.R.

102.5. .

The Committee's second quarter report for 1979

(covering through June 30, 1979) contained a schedule indicating debts totaling $46,793.04. The Committee filed no further

reports for calendar year 1979. The Committee's report covering

January 1, 1980 through March 31, 1980 showed no outstanding

debts at the beginning of the period and provided no explanation

as to the disposition of the debts outstanding at June 30, 1979.
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The Committee's Assistant Treasurer explained that

although most of these debts were incurred prior to his taking office it was his understanding that the debts were primarily related to non-federal activity. The Committee initiated a

fundraising campaign in 1979 to retire the debts.

The debts outstanding at June 30, 1979 consisted of

$32,500 in bank loansi $12,271.08 owed to a printing firmi and

$2,021.96 owed for office rent.

A special bank account ha~ been opened to retire the

debts and was titled the "capital account". A contribution of

$1,343.02 from an FEC registered committee called Association of

State Democratic Chairpersons (ASDC - also known as Dollars for

Democrats) was used to open this account on June 6, 1979. (See

Finding D.) A review of the records from the capital account

showed deposits totaling $43,382.02 between June 6, 1979 and

December 31, 1979 including 40 contributions requiring

itemization. During the same period disbursements totaling $42,791.11 were made from the capital account. These

expenditures consisted of payments to settle all but one of the

previously reported debts and one contribution refund. All 12

disbursements required itemization. The Committee's state

account paid the balance ($8,771.08) on the one remaining debt.

In addition, the Committee's federal account expended $490 for

operating expenses during the second half of 1979. The capital

account was closed in February of 1980 with the remaining funds

transferred to the federal account.

No reports had been filed disclosing the receipts and

disbursements described above. The Committee's Assistant

Treasurer agreed to file appropriate reports for 1979 and submit

documentation for the debt payments made by the state account.

The Audit staff recommended that the Committee file

reports disclosing the activity in the capital account and the

previously undisclosed disbursements made from the federal

account, including the disposition of the Committee debts. In

addition, the Audit staff recommended that the Comrr.ittee provide

documentation to verify that the portion of the debts paid by the

state account related to state or local activity or reimburse the

state account for amounts paid.

On April 7, 1982 the Committee filed amended reports for 1979 substantially disclosing the activity in the capital

account, the disposition of Committee debts, and previously

undisclosed disbursements made from the federal account. In

addition, the Committee submitted copies of checks showing that a

portion of the debts were paid by the state account and asserted

that these were debts related to state and local activity.
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Recommendation

The Audit staff recommends no further action in this matter.

B. Disclosure of Transfers to Other Political Committees

Section 434(b) (4) (H) (i) of Title 2, united States Code

requires that committees other than authorized committees

disclose all contributions made to other political committees.

A review was conducted of all 1980 Committee

expenditures. One check dated October 27 and payable to Phil

Martin for Congress, was not listed on the Committee's reports.

In addition, during the pre-audit review it was noted that the

Kennedy For President Committee reported receiving 2

contributions totaling $1,600.00 from the Committee in February,

1980. The contributions had not been reported by the Kansas

Democratic State Committee to the Commission because they were

made from the state account. The Committee's Assistant Treasurer

acknowledged the contributions should have been made from the

federal account and said he would file an amendment.

The Audit staff recommended that the Committee file

comprehensive amendments for 1980 disclosing the contributions

made to Martin For Congress and Kennedy For President. Further,

the Audit staff recommended that the Committee reimburse the

-state account $1,600.00 for the contributions made. to Kennedy For

President.

On April 7, 1982 the Committee filed amendments

disclosing the previously unreported transfers to federal

candidates. The Committee also submitted a copy of the check

reimbursing the state account $1,600 for the federal candidate

transfer •

Recommendation

The Audit staff recommends no further action in this matter.

C. Allocation of Administrative Expenses

Section 106.1(e) of Title 11, Code of Federal

RegUlations requires that party committees which have established

separate Federal campaign committees pursuant to 11 C.F.R. 102.5

allocate administrative expenses between their federal and nonfederal accounts on some reasonable basis.
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The Committee has created separate federal and nonfederal committees in accordance with 11 C.F.R. 102.5 but no

administrative expenses have been reported to the Commission.

Through a review of state account records it was

determined that in 1980, $59,055.75 in administrative expenses had been incurred by the non-federal account. Applying the

criteria of 11 C.F.R. 106.l(e) and related Commission Advisory Opinions, several allocation percentages were calculated. The

Committee agreed that the ratio (14.63%) of total funds raised by the federal account compared to the total funds raised by the

combined non-federal and federal accounts was the most reasonable

method to determine the Committee's share of administrative

expenses. Therefore the Committee's share of administrative

expenses for 1980 was $8,639.86 ($59,055.75 times 14.63%).

The Audit staff'recommended that the Committee

reimburse the state account $8,639.86 for its fair share of

administrative costs for 1980 and file an anendment disclosing this amount as administrative expenses.

On April 7, 1982 the Committee said they would

reimburse the state account and on April 19, 1982 submitted a

copy of the check reimQursing the state account $8,639.86 for

administrative expenses.

Recommendation

The Audit staff recommends no further action in this matter.

D. Receipt of Funds From State Account

Section 44lb of Title 2, United States Code prohibits

any corporation or labor organization from Daking a contribution

in connection with any federal election and prohibits any person from accepting such a contribution. In addition, Section

102.5(a) (1) (i) of Title 11 of the Code of Federal Regulations provides if a committee which finances political activity in

connection with activity in both federal and non-federal

elections establishes a separate federal account, all

disbursements in connection with federal activity shall be made

from this account and no transfers may be made to such federal

account from an account maintained for the purpose of financing activity in connection with non-federal elections.