FEDERAL ELECTION COMMISSION mSHINCim ac 204C3 

October 27,2014 

MEMORANDUM 

To: The Commission 

Thioiigh: Alec Palmer 

Staff Dixector 

Fxom: PatxiciaC.Onock 

Chief Compliance OiBm 

ThmwiiMi R "tHiiliBHnSalei 

Assistant Staff Director 

Audh Division 

Doui^A.Kodlshv{2g^ 

Audit Aiidit IbfflfiaoMP Manager 

By: Jeffrey V. SpUinewdd 

Lead Auditor 

i 

Sulject: Preliminaiy Audit Report on the ConnnitteefixrChailotlB/CharlotteDNC 

Host Committee (CFG) 

Attached for your oonsideratioa is tfae sulject audit iqxnt, along with the legal 

analysis (LRA96S)i»epaied by the OfSce of Qenend Counsel. As recommended in 

LRA 96S, the Audit Division is providing a brief discussion of possible isopennissible 

CFG expenditures that were not included u a finding in the audit iqiorL These 

expenditures nuy not relate to promoting die host chy or defiaying convention expenses 

inaccoidanGe wxdi 11 C.F.R. § 9008.52^). 

CFG, on behalf of the 2012 Democmtic Nadonal Convention Committee, Inc., 

contracted vM RKCP to provide production services and anange fiv and oversee tfae 

provision of certain goods and services related to production elements as weU as certain 

construction dements of die convention. 
Tlib oondxact faichided a production budget totaling SI 1,700,OCX)^ wMi p^ymeols 

made according to a negotiatod Cadi Flow schedule.' ExpenditurBipaidflbrbyCFCin 

this contract were conautent with the type of diabunemcnta deemed pennisaible in pricHDemoctatic host committee audits. 

In addition to the production contasct, RKCP billed and CFG paid seven 

additioDal invoices totaling $619^33. As with die expendituiea noted diove, toe Audit 

staffconsidered S372.762 of the $619,533 as pennissible host committee eitoenditures 

since simihff expenditures from past host conunhtee audits were deenaed pcnniadble. 

For the two remaining invoices, totaling $246,771/the Audit staff could not find 

documentation demonsttating vdietoer these expenditures had been deemed ehher 

pennissible or inqiennisBible by the Audit Division in past cycles. However, the Audit 

ataflfdid not include the matter in the Audit Report since the final reconciliation of RKCP 

production expenses resulted in a refimd to CFG of $579,929. This reflmded amount 

mere than ofihet toe amount of the possible impennissible CFG expenditures.' 

This report is being drcolatedfiir a tally vole. Shouldano1dectionbereoeived.it 

is recommended that the rqxirt be considered at the next regularly scheduled Executive 

Session. 

Attachments; Pxeliminaxy Audit Rqxnt on the Gommittee fin Chsrlotte/Chailotte DNC 

Host Cnittifiiiftnf 

Legal Analysis (LRA 965) dated October 16.2014 

* A copy oftheRXCPcoiitiiethpravldodwttiotevotiiig billot mstias. 

' OMinvolcotalalliig$167,121 vnipaidteieiinbunosiodiiBUuncriw'iah,pwdiem mdhwha. Hill 

crew Included departmcnta eovarlag bead m^hig bainly, vaphici, pyratedmlGa, emciSlvB prodiietiei^ 

announcer, taleiit, md tedmlcaL The aaeond tavoiee tctaling S79,6M was Ifar a pyretodmicB and conftOi 

eflbdapaAaga 

' TheLRA,page4,dlicuaiaapartpiictlcaaadprovldaactlatlQn8ftr8anadoMlnvililehrBftindicrodNr 

Ibndi have ahnflady baan applied. 
Preliminary Audit Report of the 

Audit Division on the Committee 

for Charlotte/Charlotte DNC 

Host Committee 

(April 1, 2011 - December 31, 2012) 

Why tho Audit 

WM Done 

The Commission audits 

each host committee or 

municipal fund that 

fepresents a city where a 

publicly imaiiced 

nnminaring etimiwirimi 

was held. The audit 

seeks to detennixie 

whether the committee 

has materially complied 

with the prohibitions and 

disclosure requirements 

ofthe election law.' 

Future Action 

The Commission mi^ 

initiate an enfincemeot 

action, at a later time, 

with respect to any of the 

matters discussed in this 

icport 

About the Committee (p. 2) 

The Committee for Charlotte/Charlotte DNC Host Committee (CFC), 

headquartered in Charlotte, North Carolina, is a committee reqxmsite 

for hosting the 2012 Demooatic National Conventian. Formore 

information, see the chart on the Conunitlee Organization, p. 2. 

Financial Activity (p.2) 

• Receipts 

o Contributions to Defhiy Convention 

Expenses 

o Loans Received 

o Refimds, Ridiates, Returns of Deposits 

o Odier Income^ 

Total Recdpts 

• IMsiinnciiients 

o Convention Expenditures 

o Transfeis to Affliated Committees 

o Loan RqMtyments Made 

o Other Disbursements 

Total Dbbnrsaments 

$24,428,337 

13,000,000 

31 

(2.709) 

$37^425,689 

$32,532,958 

8,783 

4,000,000 

93,592 

$36,635,333 

Findinca and Recommendations (p. 3) 

• Recordkeqiing fin In-Kind Contributions (Finding 1) 

• Disclosure of Didnnsements (Finding 2) 

' IICFRfi9008.S4. 

' Thii emount WM t remit from tow on in wiliiiuiSi 
Preliminary Audit Report of the 

Audit Division on the 

Committee for Charlotte/ 

Charlotte DNC Host Committee 

(April 1, 2011 - December 31, 2012) 
Table of Contents 

Page 

Parti. Baekgnmnd 

Aulliority fi)r Audit 1 

Scope of Audit 1 

Inventory of Cominittec Records 1 

PRrtn. Overvtew of Committee 

Committee Oiganization 2 

Overview of Finandal Activity 2 

Put m. Summaries 

Findings and Recommendations 3 

Part IV. Findinga and Recommendatioiis 

Finding I. Recoidkeqnng fixr In-Kind Contributions 4 

Finding 2. Disclosure of Disbursements 5 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Committee for Charlotte/Charlotte DNC Host 

Committee (CFC), undertaken by the Audit Division of the Federal Election Commission 

(the Conunission) as mandated by Section 9008.54 of Title 11 offlw Code of Federal 

Regulations. That section states the Commission dudl conduct an examination and audit 

of each host committee registered under 11 CFR §9008.51. 

Scope of Audit 

This Audit examined; 

1. the receipt of contributions firom prohibited sources; 

2. the disclosure of contributions and other rece^; 

3. the disclosure and nature of disbursement^ 

4. the disdosure of debts and obligations; 

5. the completeness of records; 

6. the consistency between rqiorted figures and bank records; and 

7. other committee operations necessary to the review. 

lavontoiy of Committee Reoorde 

The Audit staff routinely conducts an inventory of committee records befine it begins die 

audit fieldwoik. CFC records were materially and the fieldwoik began 

immediately. 
Part II 

Overview of Committee 

Committee Organisation 

Important Data 

• Date of Rmdstntion February 16,2011 

• Audit Coverage April 1,2011 - December 31.2012 

Hcadamutan Charlotte, North Carolina 

Bank Infonnatfon 

e Bank Depositories Two 

• Bank Accounts Three Accounts 

Treasurer 

• Treasurer When Audit Was Conducted Harvey Qantt 

# Treaspv*«r niirififf Period Covered by Audit Harvey Gantt 

Manatement Infbrmatlon 

e Attemjed Commission Campaign Finance 

Seminar 

No 

• Who Handled Accounting and Recordkeqdng 

Tasks 

Paid Staff 

Overview of Financial Activity 

(Andlted Amoimts) 

Cash-on-hand (81 Anril 1.2011 S 0 

Receipts 

o Contributions to Defiay Convention Ezpensea 24.428J37 

o Loans Received 13.000,000 

o Refunds. Rebates, Returns of Deposits 31 

o Other Income (2.709) 

Total Receipts S37y425^ 

Disbnnementi 

p f^ntivifcwl DyiipiMUfiiiwe tp C17 oca 

o iiansiersio Axniuneai a,/a J 

o Loan Repayments Made 4,000,000 

o Other Disbursements 93,592 

Total Disbnrscmcats $36,635,333 

Caah-on-hand @ Dceember 31,2012 S 790,326 
Part III 

Summaries 

Findings and Recommendations 

Flndl^ 1. Reeordkeeplng Ibr In-Kind Contributions 

The Audit staff identified 23 iDrkind contributions provided by corporations, conuneicial 

vendors, and individual contributors totaling $2,878,882 that lacked the required 

supporting documentatioiL The Audit staff recommends that CFC obtain and provide die 

required in-ldnd records. (For more detail, see p. 4.) 

Finding 2. Disclosure of Disbursements 

The Audit staff identified 43 disbursements totaling $12,580,995 that were either 

or did not adequately provide required disclosure infimiwtion. The Audit staff 

recommends that CFC amend its reports to correctly disclose these transactions on 

Schedule B (Itemized Dirimrsements). (Formore detail, see p. 5.) 
Part IV 

Findings and Recommendations 

I Finding 1. Recordheepliis tor In-Kind Contributtong 

Bmnmsiy 

The Audit staff identified 23 in-kind contributions provided by ooiporatioiis, commercial 

vendors, and individual contributors totaling $2,878,882 that lacked the required 

supporting documentatioiL The Audit staff recommends that CFC obtain md provide the 

required in-kind records. 

Legal Standard 

A. Receipts and disbaiBcmcntB of mnnlcipalftiiids. Municipal funds may accept 

goods or services from commercial vendors fin convention uses under the same 

terms and conditions (including rqxnting requirements) set forth at 11 CFR 

9008.9 for convention committees. Busiiiesses (includ^ banks), labor 

organizations, and other organizations and individuals nuqr donate funds or make 

in^ldnd donations to a municipal fund to pay fin expenses listed in 11 CFR 

9008.S2(b). 11 CFR §9008.53. 

B. Reeordkceping for goods and sendees flhrmeommereial vendors for 

prDmotlonal eonslderation. Omunercial vendors mi^ sell, lease, rent or provide 

their goods or services to the national conunittee with respect to a presidential 

nominating canvention at reduced or discounted rates, or at'nochnge. The 

convention committee riiall maintain documentation showing; 

• the goods or services provided; 

• the date(s) on iiriiichllie goods or services were provided; 

• the terms and conditions of the arrangement; and 

• what promotional considention was provided. 11 CFR§9008.9(bX4). 

C. Valuation of in-Kind Contribntlons. The amount of an inrldnd conbibution 

shall be equal to the usual and normal value on the date received. 11 CFR 

§104.13(aXl). 

D. FonnalRcqnlremcnts Regarding Reports and Statements. Eadi political 

committee aihall maintain records with respect to the matters required to be 

reported which shall provide in sufficient detail the necessary infisimation and 

data fiom uhich the filed reports may be verified, explained, clarified, and 

checked fi)r accuracy and completeness. 11 CFR§104.14(bXl)-

E. Recordkeeping Requirements for Receipts. The treasurer of a political 

conunittee riiall keqi an account of: 

• All conlributions received by or on bdudf of the committer 
• The name and address of any person makes a camribution in excess of 

$50, togedier with fhe date and amount of the contiibutuni; and 

• The occiqwdon and name of enqiloyer of any individual v^iose contributions 

aggregate more than $200 during a calendar year, together with the date and 

amount ofanysudi contributions. 11 CFR§ 102.9(a). 

F. Preserving DoenmcBts. Committees must preserve these records for 3 yean 

after a rqxnt is filed. 11 CFR§ 102.9(c). 

Fnotn and Aaalysla 

A. Facts 

The Audit staff identified 23 in-kind contributions totaling $2,878,882 that lacked the 

lequiied supporting documentation. In-ldnd contributions consisted of goods and 

services provided by commercial vendors, corporations, and individuals. Approximately 

half of the in-ldnd contributions totaling $1,557,053 originated fiom one corporation. 

The only documentatiQn available for these in-kind contributians was the receipt and 

dislnirsement databases from which the disclosure rqxnts were produced. Recordswere 

not available showing the dates the goods or services were provided, terms and 

conditions oftfaeanangements and the promotional consideratiQn provided. TheAudit 

staff asked CFC representatives fin additional documentation. CFG stated it was 

available and would be provided, but no additional documentation was sent. 

B. Prellminaiy Andtt Report A Audit Division Recommendation 

At the exit conforence, the Audit staff discussed and provided a list of in-kind 

contributions for which CFG had not provided supporting documentation. CFG 

representatives acknowledged the missing siqiport for in-ldnd oontributioiu and stated 

th^ would locate and provide the required documentatian. 

The Audit staff reconunends that, within 60 calendar days of the service of this rqxxrt, 

the GFG obtain and provide documentation to support the in-kiiKl contributions. 

|FtiMUiig2. Dteclorore of DlBlmi»ement» 

Snmniaxy 

The Audit staff identified 43 disbursements totaling $12,580,995 that were either missing 

or did not adequately provide requited disclosure information. The Audit staff 

recommends tte GFG amend its reports to correctly disclose these transactions on 

Schedule B (Itemized Disbursements). 

Legnl tttaodnrd 

A, Reporting Expenditures. When expenditures to the same person exceed $200 in 

a calendar year, the commitlee must report the: 

• Amount; 
• Date when the expenditures were made; 

• Name and address oftfae payee; and 

• Pupose (a brief description of why the disbursement was made- see below). 

2 U.S.C. §434(bXSXA) and 11 CFR §104.3(bX3Xi)-

B. Reporting Credit Card Tnuisactioiis. A committee must itemize a pi^ent to 

a credit card company if the payment exceeds the $200 aggregate ifarnthold for 

itemization. Thecommitteemustalsoitemize, as a memo entry, any specific 

transaction chaigad on a credit card if the payment to the actual vendor exceeds 

the $200 threshold. The memo entry must include the name and address of the 

vendor, the purpose ofthe disbursement, and the amount of die disbursement 11 

CFR §102.9(bX2) and 104.9. 

C. Reporting ReimbarscmcDts to Indivldaals. When an individual vdio is not 

ac^ as a vendor advances his or her personal funds (or uses a personal credit 

card) to pay fiir goods or services on bbhalf of a politi^ committee, the 

reimbursement must be reported as follows: 

• Nontravel Advances. Report die individual as payee, and rqxirt the payments 

aggregating over $200 to any one vendor as memo entries on Schedule B; and 

• Travel and Subsistence Advances. If the total amount reimbuised is $500 or 

less, the committee should report the individual as payee. If the total amount 

exceeds $500 and pr^ments to any one vendor used fo the expenses total 

over $200 for the calendar year, report the individual as payee, and report the 

payments aggregating over $200 to any one vendor as memo entries on 

Schedule B. Each memo entry must include the name and address of the 

vendor, as well as the date, amount and purpose of the payment 11 CFR 

104.3(bX3Xi) and 104.9. 

Facto and AnalfBls 

A. Facts 

The Audit staff identified 43 disbursenmnts totaling $12,580,995 that were missing or did 

not adequately provide required disclosure infbrmatiorL The minority of disclosure 

enors, totaling $12,319,532, involved inadequate purposes disclosed for pigments to a 

sin^ vendor. Additic^ information is provided in the table below. 

Descripttoa Number of 

Transactions DoDar Value 

P^meiits to corporations or other entitieB wHh inadequate or with no 

staled punioM discloied. 38 $12/190,987 

Payment with an incomplete address disdoied. 1 $48,365 

Credit card p^ment with no memo entries diffciosing psyments made to 

the vendor. 1 $28,487 

Staff reimbursements with inadequate purposes and no memo entries 

disdoaina payments made to the uhimate vendor. 3 $13,156 

Total $12,580,99$ 
B. Preliniiiaiy Audit Report A Audit DIviiion Rmmmcndatlon 

At the exit Gonference, the Audit staff discussed the missing or inndcypiBte disclosure 

items with CFCxquesentatives and provided a schedule detailing there items. CFC 

represciitatives stated they would amend theiritports in reyonse to the Preliminaiy 

Audit Report 

The Audit staff recommends that, within 60 caleiidBr days of the service of this iqxnt, 

the CFC amend its rqxnls to correctly disclose these transactions on Schedule B 

(Itemized Disbursements).