THE FEDERAL ELECTION COMMISSION 

U Washington, DC 20463 

December 12, 2013 

MEMORANDUM 

To: The Commission 

Through: 

From: 

By: 

Subject: 

Alec Palmer 

StaffDirector ' 

Patricia C. Orrock 

Chief Compliance OfiRcer 

Thomas E. HintermistS'"^^ 

Assistant StaffDirector 

Audit Division 

Doug Kodish ^ 

Audit Manager 

Nicole Burgess SA/ ^ 

Lead Auditor 

Audit Division Recommendation Memorandum on the Vermont 

Democratic Party ((VDP) Al 1-12) 

Pursuant to Commission Duective No. 70 (FEC Directive on Processing Audit Reports), 

the Audit staff presents its recommendation below and discusses the finding in the 

attached Draft Final Audit Report (DFAR). The Office of General Counsel has reviewed 

this memorandum and concurs with the recommendations. 

Recordkeeping for Employees 

For the period covered by the audit, VDP did not maintain any monthly payroll 

logs, as required, to document the percentage of time each employee spent on 

fed^ election activity. For 2009 and 2010, the Audit staff identified payments to 

VDP employees totaling $203,472 for which monthly payroll logs were not 

maintained. All of the VDP employees were originally disclosed as having been 

paid with an allocation of federal aiid non-federal funds. After the exit conference, 

VDP amended its reports to disclose payments to employees as federal election 

activity. 
In response to the Interim Audit Report recommendation, VDP submitted a plan to 

pay all employees with 100 percent federal funds. Further, VDP said it would 

maintain monthly timesheets for all employees paid with federal/non-federal 

allocated fiinds, in order to track the percentage of time each employee spends on 

federal election activity. 

The Audit staff recommends that thie Commission find that the VDP failed to 

maintain logs to doounent the time employees spent on federal election activity 

totaling $203,472. 

VDP did not request an audit hearing. 

If this memorandum is approved, a Proposed Final Audit Report will be prepared within 

30 days ofthe Commission's vote. 

In case of an objection. Directive No. 70 states that the Audit Division Recommendation 

Memorandum will be placed on the next regularly scheduled open session agenda. 

Documents related to this audit report can be viewed in the Voting Ballot Matters folder. 

Should you have any questions, please contact Nicole Burgess or Doug Kodish at 694-

1200. 

Attachment; Draft Final Audit Report of the Audit Division on the Vermont Democratic 

Party 

cc: Office of General Counsel 
Draft Final Audit Report ofthe 

Audit Division on the Vermont 

Democratic Party 

(January 1, 2009 - December 31, 2010) 

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 Campsugn Act 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements foi 

substantial co^uance 

with the A^Va t audit 

determ^^whether the 

conysffflHhffiplied with 

the limitatic 

prohibitions 

disclosure requii 

ofthe Act. 

Future Actioi 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any matter 

discussed in this report. 

About the Committee 

The Vermont Democratic^ 

headquartered in Montoffl^ 

see the chart on the CoAnhtee' 

Financial Acti' 

arty committee 

For more information, 

p. 2. 

Receipts 

• Contribi 

• Transfi^ fro 

Co 

Its 

; Expenditures 

Fedbral Election Activity 

All Other Disbursements 

^Total Disbursements 

$ 544,077 

332,494 

219,000 

89,791 

$ 1,185,362 

$ 762,858 

238,300 

175,576 

$ 1,176,734 

Finding and Recommendation (p. 3) 

Recordkeeping for Employees 

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

Audit Division on the 

Vermont Democratic Party 

(January 1, 2009 - December 31, 2010) 
Table of Contents 

Part L Background 

Authority for Audit 

Scope of Audit 

Commission Guidance 

Page 

Part n. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part in. Summary 

Finding and Recommendation 

Part IV. Finding and Recommendation 

Recordkeeping for Employees 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Vermont Democratic Party (VDP), undertaken by the 

Audit Division of the Federal Election Conunission (the Conunission) 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 imder this subsection, the CcMmtissioiunust perform an 

intemal review of reports filed by selected committees to d^^H H wBlitiiffthe reports filed by 

a particular committee meet the threshold requirements forpubstantiaW^iliance with the Act. 

2 U.S.C. §438(b). 

Scope of Audit 

Following Commission-approved procedures, the Audit 

as a result, this audit examined: 

1. the disclosure of individual contributors' occui 

2. the disclosure of disbursements, debts and ol 

3. the disclosure of expenses allocated b 

4. the consistency between reported fi 

5. the completeness of records; 

6. the disclosure of independent expi 

7. other committee operations m 

various risk factors and 

Commissio] 

RequestJn^Sarly Comm: 

PursuaiyM|Bmnmission's *Toli 

Consideration^lHimd Questions b; 

legal question railHrauing the 

eral accounts; 

Consideration of a Legal Question 

katement Establishing a Program for Requesting 

le Commission," VDP requested early consideration of a 

VDP questioned whether the monthly time logs required 

under 11 C.F.R §1( '1) maaed to employees paid with 100 percent federal funds. 

The Commission conclu^fby a vote of 5-1, that 11 C.F.R. §106.7(dXl) does require 

committees to keep a momhiy log for employees paid exclusively with federal fonds. Exercising 

its prosecutorial discretion, however, the Conunission 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 fonds and reported as such. The Audit staff informed VDP 

Counsel of the Conunission's decision on VDP's request. The finding presented in this audit 

report. Recordkeeping for Employees, does not include VDP employees paid with 100 percent 

federal fonds and reported as such, excluding amended filings. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

Date of Registration October 20,1976 

Audit Coverage 

Headquarters 

January 1,200S - December 31, 2010 

Montpi 

Bank Information 

Bank Depositories Two 

Bank Accounts 

Treasurer 

Treasurer When Audit Was Conducted 

Treasurer During Period Covered by Audit 

Management Information 

• Attended Commission Campaign 

Seminar 

• Who Handled Accountii 

Tasks 

Lindi 

Overvie 

Michael Innei 

d Frey 

luchette 

i5 

4/2009) 

6/2009) 

009-8/2009) 

-2/2011) 

Paidstafif and volunteers 

^f Financial Activity 

Edited Amounts) 

Cash-on-hand @ JUMkss 1. S 37,901 

Receipts ^^H|^' ^ 

o Contributions fiom IiffilTduals 544,077 

o Affiliated Committee^ 332,494 

0 Other Political Committees 219,000 

o All Other Receipts 89.791 

Total Receipts S 1,185362 

Disbursements 

0 Operating Expenditures 762,858 

o Federal Election Activity 238,300 

0 All Other Disbursements 175.576 

Total Disbursements $ 1,176,734 

Cash-on-hand @ December 31,2010 $ 46,529 
Part III 

Summary 

Finding and Recommendation 

Recordheeping for Employees 

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

monthly logs, as required, to document the percentage of time each employee spent on 

federal election activity. For 2009 and 2010, the Audit staff identified payments to VDP 

employees totaling $203,472,^ for which monthly DavrolUiff^y^jM|imiaintained. All 

of the VDP employees were originally disclosed as havmg been pfflH^tii an allocation 

of federal and non-federal fonds. After the exit conferdpe. VD^InS^^^ts reports to 

disclose payments to employees as federal election actn 

In response to the Interim Audit Report recommendatio^rvHwbmitted a plan to pay 

all employees with 100% federal fimds. Further, VDP stated iF^nmaintain monthly 

timesheets to track the percentage of time each ^B/^M ^ spends^n^ l election 

activity for all employees paid with federal/nQtfWIBkillocated folR^ The Audit staff 

considera this matter resolved. (For more d«ls, sc 

^ This total does not include p^roll for emjdqyees paid with 100 pocent federal funds and rqported as such 

(see Part I. Background. Commission Guidanoe, Request for Eaiiy Commission (Consideration of a Legal 

(Question, Page 1). 
Part rv 

Finding and Recommendation 

I Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff determined that VDP did not nnaintain any 

monthly logs, as required, to document the percentage of time each employee spent on 

federal election activity. For 2009 and 2010, the Audit staff identified payments to VDP 

employees totaling $203,472^, for which monthly payroll loesjwaje notmaintained. All 

of the VDP employees were originally disclosed as haviiMHi pHtl^h an allocation 

of federal and non-federal fonds. After the exit confe 

disclose payments to employees as federal election 

VDP its reports to 

In response to the Interim Audit Report recommendationTMltejgubmitted a^l^peo pay 

all employees with 100% federal fimds. Further, VDP meoHwl maintain montMy 

timesheets to track the percentage of time each employee spencHkfed^|| election 

activity for all employees paid with federal/non^dhul allocated nBbn . he Audit staff 

considers this matter resolved. 

Legal Standard 

Maintenance of Monthly Logs. P 

percentage of time each employee^ 

Allocations of salaries, wages, 

• employees 

month 

or b^Rbcated as 

loyees who spend 

on federal dectioi 

5S who spend n 

elec!!B|t|||ivities may 

CFR§I1H^(1 ) 

Facts and Anali 

ittefiBmust JoepB. monthly log of the 

in conaamammi a federal election, 

benefits aMobe determined as follows: 

less of their compensated time in a given 

e paid either fi'om the federal account 

^percent of their compensated time in a given 

ivities nmst be paid only from a federal account; and 

of their con^ensated time in a given month on federal 

aid entirely with fonds that comply with state law. 11 

A. Facts 

During fieldwork, the Audit staff reviewed disbursements for payroll. VDP did not 

maintain any monthly logs or equivalent records to document the percentage of time each 

employee spent in connection with federal election activity. For 2009 and 2010, the 

Audit staff identified payments to VDP employees totaling $203,472^^ for which payroll 

^ This total does not include payroll for employees paid with 100 percent federal funds and xepoited as 

such (see Part I, Background. (Conunission Guidance, Request for Eariy Coimnissi^ Consideration ofa 

Legal (^estion. Page 1). 

* Payments to VDP eaoqployees paid widi 100 percent federal funds and rqxirted as sudi are not included in 

this finding (see Fart I, Badcground, Commission Guidance. Request for Earty Commission Consideration 

of a Legal (Question, I^ge 1). 
logs were not maintained. All of these individuals were originally disclosed as having 

been paid with an allocation of federal and non-federal fonds. VDP had no employees 

paid with exclusively non-federal fonds. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the payroll recordkeeping matter with VDP representatives 

during audit fieldwork and at the exit conference. VDP representatives stated that they 

were unable to locate the dociunentation requested and explained that these payroll 

expenditures were reported erroneously as shared federal/non-federal activity, instead of 

solely federal. Further, they stated plans to correct this error by comprehensively 

amending then* reports and disclosing these expenditures as strictly federal activity. The 

Audit staff verified that the VDP had sufficient federal fiind^^ c^^^ hafh the federal 

and non-federal share of payroll costs. After the exit cofl^nllie, HnFnled amended 

reports to disclose the payroll as federal election activitff paid entuHlbith federal fimds. 

The Interim Audit Report recommended that VDP pro 

maintain monthly payroll logs to track the percentage 

federal election activity. 

C. Committee Response to Interim Audit 

In response to the Interim Audit Report, VD! 

with 100 percent federal fonds and to report^ 

Schedule B, line 30b (Itemized Disbun 

with Federal Funds). The plan h 

employees with an allocation of i 

fonds. VDP provided a sample 

to occur. TheconlH 

logs are kept, 

that VDP ^mSsel be consul 

action isjfl&istent with Coi 

Staff odBters this matter resoh 

ngUK 

ds on 

Ian to pay all its employees 

aries and benefits on 

Activity Paid Entirely 

e event VDP ever had to pay 

or solely with non-federal 

payment to employees were 

s the Executive Director to ensure payroll 

file is maintained for continuity, and 

ent with the appropriate fonds. Such 

ice with respect to payroll logs. The Audit 

Payroll is stated net of taxes and benefits.