Part II
Overview of Committee

Committee Organization

Important Dates

Democratic Executive Committee of
Florida

e Date of Registration

April, 19, 1972

e Audit Coverage

January 1, 2001 — December 31, 2002

Headquarters

Tallahassee, FL

Bank Information

e Bank Depositories

2

e Bank Accounts

5 Federal and 5 Non-federal Accounts

Treasurer

e Treasurer When Audit Was Conducted Earl Scales

e Treasurers During Period Covered by Audit _| George Platt (until 7/5/2001)
Earl Scales

Management Information

e Attended FEC Campaign Finance Seminar

Yes (February 2004)

e Used Commonly Available Campaign Yes
Management Software Package
e¢ Who Handled Accounting and Paid Staff

Recordkeeping Tasks

Overview of Financial Activity
(Audited Amounts)

Cash on hand @ January 1, 2001 $ 467,895
o From Contributors 872,724
o. Transfers From Affiliates 999,060
o Transfers From Non-federal for Shared 6,346,671
Activity
o Other Receipts 310,764
Total Receipts $ 8,529,219
o Operating Disbursements $ 9,025,368
o Other Disbursements 76
Total Disbursements $ 9,025,444
Cash on hand @ December 31, 2002 ($ 28,330)



During the exit conference the Audit staff provided the DECF representatives with
workpapers detailing the misstatements of financial activity.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended the DECF file amended reports for the applicable reporting
periods in calendar years 2001 and 2002 to correct the misstatement of financial activity.
The DECF complied with the Audit staff's recommendation by submitting amended
reports.

| Finding 2. Disclosure of Refunds of Allocable Expenses

Summary

The DECF did not disclose correctly refunds from vendors in the amount of $34,962.
The DECF complied with the Audit staff's recommendation by filing amended reports to
correct the disclosure errors.

Legal Standard

Disclosing Refunds of Allocable Expenses. Advisory Opinion 1995-22 describes two
methods of reporting refunds. Method 1 discloses the refund and the federal and non-
federal shares as negative entries on the Schedules H4 (Joint Federal/Non-federal
Activity). Method 2 discloses the receipt of the refund as an offset to operating
expenditures on the Schedules A and the federal account transfer to the non-federal
account for the non-federal share is disclosed on Schedules H4.

Facts and Analysis

A review of all vendor refunds received by the DECF identified 33 disclosure errors
totaling $34,962. The DECF reported the vendor refunds on Schedules A as offsets to
operating expenditures but did not transfer the non-federal share of the refunds to the
non-federal account or report the non-federal share on Schedules H4. Refunds for
allocable expenses must be deposited in the federal or allocation account and then
allocated between the federal and non-federal accounts according to the same allocation
ratio used to allocate the original disbursement. The non-federal share of the refunds was
$29,718.

Normally the Audit staff would recommend that the DECF transfer $29,718 to the non-
federal account. However, in this case a transfer is not warranted because during the
audit period, the DECF paid $63,502 more than its share for allocable expenditures and
this amount exceeds the amount of refunds that would be due to the non-federal account.
This issue was presented to the DECF representatives at the exit conference along with
workpapers to demonstrate how to report the vendor refunds.


Part IV
Findings and Recommendations

| Finding 1. Misstatement of Financial Activity

Summary

A comparison of the DECF’s reported financial activity to its bank records revealed a
misstatement of beginning cash on hand, receipts, and disbursements in calendar year
2001 and a misstatement of receipts and disbursements in 2002. The DECF complied
with the Audit staff's recommendation by filing amended reports to correct the
misstatement of financial activity.

Legal Standard

Contents of Reports. Each report must disclose:

¢ The amount of cash on hand at the beginning and end of the reporting period;

¢ The total amount of receipts for the reporting period and for the calendar year; and

¢ The total amount of disbursements for the reporting period and for the calendar year.
e

Certain transactions that require itemization on Schedule A or Schedule B.
2 U.S.C. §434(b)(1), (2), (3), (4), and (5).

Facts and Analysis

The Audit staff reconciled the DECF’s reported activity to its bank records and
determined there was a misstatement of beginning cash on hand, receipts, and
disbursements in calendar year 2001 and a misstatement of receipts and disbursements in
2002. The following charts detail the discrepancies between the DECF’s reported
activity and its bank records.

2001 Activity
Reported Bank Records Discrepancy
Beginning Cash Balance $182,169 $467,895 $285,726
Understated
Receipts $2,770,265 $3,137,571 $367,306
Understated
Disbursements $2,627,238 $3,222,358 $595,120
Understated
Ending Cash Balance $325,196 $383,109 $57,913
Understated

Explanation of Discrepancies

Beginning Cash Balance — 2001
The understatement of beginning cash on hand in the amount of $285,726 likely occurred
because the DECF did not report the salary and payroll related expenses for some of the



Part III
Summaries

Findings and Recommendations

Finding 1. Misstatement of Financial Activity

A comparison of the DECF’s reported financial activity to its bank records revealed a
misstatement of beginning cash on hand, receipts, and disbursements in calendar year
2001 and a misstatement of receipts and disbursements in 2002. The DECF complied
with the Audit staff’s recommendation by filing amended reports to correct the
misstatement of financial activity. (For more detail, see p. 4)

Finding 2. Disclosure of Refunds of Allocable Expenses
The DECF did not disclose correctly refunds from vendors in the amount of $34,962.
The DECF complied with the Audit staff’s recommendation by filing amended reports to
correct the disclosure errors. (For more detail, see p. 7)

Finding 3. Recordkeeping for Disbursements

The DECF failed to maintain adequate records for disbursements for 18 refunds of
contributions to individuals in the amount of $34,500 as well as for two disbursements to
media vendors in the amount of $183,500. The DECF complied with the Audit staff’s
recommendation by providing the missing records. (For more detail, see p. 8)


2002 Activity
Reported Bank Records Discrepancy
Opening Cash Balance $325,196 $383,109 $57,913
Understated
Receipts $5,138,812 $5,391,648 $252,836
Understated
Disbursements $5,424,830 $5,803,087 $378,257
Understated
Ending Cash Balance $24,209 ($28,330) ($52,539)
Overstated
Explanation of Discrepancies
Receipts — 2002
The understatement of receipts was the result of the following:
e Transfers Not Reported— The DECF did not report on + $242,613
Schedules H3 (Transfers from the Non-federal Account)
transfers from the non-federal account for salary and payroll
related expenses for employees whose duties were considered
to be 100% non-federal by the DECF. These expenses were
paid from the allocation account.
e Receipts Not Reported—- The DECF did not report a transfer + 10,000
from an affiliated committee.
e Unexplained difference + 222
Understatement of Receipts “$252,836
Disbursements — 2002
The understatement of disbursements was the net result of the following:
e Payroll Not Reported — The DECF did not report salary and + $424,195
payroll related expenses for employees whose duties they
considered to be 100% non-federal. Even though the DECF
incorrectly treated these expenses as 100% non-federal for
reporting purposes, the expenses were correctly paid on an
allocated basis using the administrative expense ratio. The
expenses should have been reported on Schedules H4.
e Miscellaneous Reporting Errors - - 45,444
- 494

e Unexplained difference

Net Understatement of Disbursements

$378,257


FEDERAL ELECTION COMMISSION
WASHINGTON. DC 20463

September 27, 2004

MEMORANDUM

TO: ROBERT W. BIERSACK
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ { i J
ASSISTANT STAI CTOR
AUDIT DIVISION u

SUBJECT: | PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON
THE DEMOCRATIC EXECUTIVE COMMITTEE OF FLORIDA

Attached please find a copy of the final audit report and related documents on the
Democratic Executive Committee of Florida, which was approved by the Commission on
September 9, 2004.

Informational copies of the report have been received by all parties involved and
the report may be released to the public on September 27, 2004.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library
Web Manager


for which the only documentation made available was the debit entry on the bank
statement and the entry on the DECF’s database. It appears that one of the wires in the
amount of $163,500 was a second payment to a vendor. The vendor received two
payments for the same amount on the same day. The DECF disclosed both payments on
Schedules H4, but there was only one invoice for this vendor.

The DECF is required to keep invoice copies and/or customer receipt documentation for
three years. Both of these issues were Presented to the DECF representatives at the exit
conference along with workpapers.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended the DECF obtain and provide the missing documentation
for disbursements stated above. In Tesponse to the interim audit report, the DECF
submitted credit card refund documentation and invoices for the media expenditures
totaling $211,370. Disbursements totaling $6,630 remain undocumented.


Interim Audit Report Recommendation and Committee Response
The Audit staff recommended the DECF file amended reports that include memo
Schedules H4 to disclose correctly the non-federal share of the refunds. The DECF
complied with the Audit staff's recommendation by submitting amended reports.

| Finding 3. Recordkeeping for Disbursements

Summary

The DECF failed to maintain adequate records for disbursements for 18 refunds of
contributions to individuals in the amount of $34,500 as well as for two disbursements to
media vendors in the amount of $183,500. The DECF complied with the Audit staff’s
recommendation by providing the missing records.

Legal Standard

Required Records for Disbursements. For each disbursement, the treasurer of a

political committee must keep records on the:

Amount of the disbursement;

Date when the disbursement was made;

Name and address of the payee”;

Purpose (a brief description of why the disbursement was made); and

If the disbursement was made on behalf of a candidate, the candidate’s name and

the office sought by the candidate.

¢ Ifthe disbursement was in excess of $200, the records must include a receipt or
invoice from the payee, or a cancelled check or share draft to the payee. If the
disbursement was by credit card, the record must include the monthly statement
or customer receipt and the cancelled check used to pay the credit card bill. 2
U.S.C. §432(c) and 11 CFR §§102.9(b) and 104.3(b)(3)(i).

Preserving Records and Copies of Reports. The treasurer of a political committee must
preserve all records and copies of reports for 3 years after the report is filed. 2 U.S.C.
§432(d).

Facts and Analysis

The Audit staff reviewed all refunds of contributions and identified 18 refunds in the
amount of $34,500 that lacked adequate documentation. These refunds were for
contributions made by credit card. The refunds were handled through the credit card
merchant account. There were no credit card refund forms available for review during
audit fieldwork. The only documentation provided was the bank statement showing a
debit to the credit card merchant account and the entry on the DECF’s database.

A review of all media expenditures identified two disbursements in the amount of
$183,500 that lacked adequate documentation. Both disbursements were wire transfers

? The payee is usually the person providing the goods or services to the committee. In the case of travel
advances, however, the payee is the person receiving the advance. 11 CFR §102.9(b)(2).


employees that were paid from the federal payroll account in the prior cycle in the same
manner as described below.

Receipts — 2001
The understatement of receipts was the result of the following:

e

Transfers Not Reported - The DECF did not report on
Schedules H3 (Transfers from the Non-federal Account)
transfers from the non-federal account for salary and payroll
related expenses for employees whose duties were considered
to be 100% non-federal by the DECF. These expenses were
paid from the allocation account.

In-Kind Contributions Not Reported— The DECF did not
report in-kind contributions from individuals on Schedules A
(Itemized Receipts).

Unexplained difference

Understatement of Receipts

Disbursements — 2001

The understatement of disbursements was the net result of the following:

Payroll Not Reported —- The DECF did not report salary and
payroll related expenses for employees whose duties they
considered to be 100% non-federal. Even though the DECF
incorrectly treated these expenses as 100% non-federal for
reporting purposes, the expenses were correctly paid on an
allocated basis using the administrative expense ratio. The
expenses should have been reported on Schedules H4.

Non-Payroll Disbursements Not Reported

In-Kind Contributions Not Reported— The DECF did not
teport in-kind contributions on Schedules B (Itemized
Disbursements).

Reported Disbursements Not Traced to Bank- There were
no checks or debits in the DECF’s bank accounts to support
reported contribution refunds and a contribution to a
candidate.

Unexplained difference

Net Understatement of Disbursements

+

+

$347,610

3,000

16,696

$367,306

$503,279

92,189

3,000

3,447

99

$595,120


Part I
Background

Authority for Audit

This report is based on an audit of the Democratic Executive Committee of Florida
(DECF), 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 2 U.S.C.
§438(b), which permits the Commission to conduct audits and field investigations of any
political committee that is required to file a report under 2 U.S.C. §434. Prior to
conducting any audit under this subsection, the Commission must 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. 2 U.S.C. §438(b).

Scope of Audit

Following Commission approved procedures, the Audit staff evaluated various factors
and as a result, this audit examined:

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

The disclosure of contributions received.

The disclosure of disbursements, debts and obligations.

The disclosure of expenses allocated between federal and non-federal accounts.
The consistency between reported figures and bank records.

The completeness of records.

Other committee operations necessary to the review.

PAIAMRYWND

Limitations

Although the DECF’s records for contributions from individuals technically met the
recordkeeping requirements of Section 432(c) of the Act, the Audit staff’s testing of
contributions received was limited. For calendar year 2001, copies of contribution
checks, response devices, or other documentation generated by the contributor which
contained the contributor’s name, date and amount of contribution, or occupation and
name of employer were not available. Therefore, no verification of the reported
information was possible beyond the information recorded by the DECF in its electronic
files. The DECF made several attempts to locate the missing records.

Changes to the Law

On March 27, 2002, President Bush signed into law the Bipartisan Campaign Reform Act
of 2002 (BCRA). The BCRA contains many substantial and technical changes to the
federal campaign finance law. Most of the changes became effective November 6, 2002.
Except for the period November 7, 2002, through December 31, 2002, the period covered
by this audit pre-dates these changes. Therefore, the statutory and regulatory
requirements cited in this report are primarily those that were in effect prior to November
7, 2002.


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Limitations
Changes to the Law

Part II. Overview of the Committee
Committee Organization
Overview of Financial Activity

Part III. Summaries

Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Misstatement of Financial Activity
Finding 2. Disclosure of Refunds of Allocable Expenses
Finding 3. Recordkeeping for Disbursements

Page

NN

x


Report of the Audit Division on
the Democratic Executive

Committee of Florida

January 1, 2001 - December 31, 2002

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 compliance
with the Act.' The audit
determines whether the
committee complied with
the limitations,
prohibitions and
disclosure requirements
of the Act.

Future Action
The Commission may
initiate an enforcement
action, at a later time,
with respect to any of the
matters discussed in this
report.

' 2 U.S.C. §438(b).

About the Committee (p. 2)

The Democratic Executive Committee of Florida is a state party
committee headquartered in Tallahassee, Florida. For more
information, see chart on the Committee Organization, p. 2.

Financial Activity (p. 2)

Receipts
o From Contributors
o Transfers From Affiliates

o Transfers From Non-Federal
Account for Shared Activity

o Other Receipts

o Total Receipts
Disbursements

o Operating Disbursements
o Other Disbursements

o Total Disbursements

$ 872,724
999,060
6,346,671

310,764
$ 8,529,219

$ 9,025,368
716
$ 9,025,444

Findings and Recommendations (p. 3)
Misstatement of Financial Activity (Finding 1)
Disclosure of Refunds of Allocable Expenses (Finding 2)

Recordkeeping for Disbursements (Finding 3)