Interim Audit Report of the 

Audit Division on the 

Democratic Party of South 

Carolina 

(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 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. 

About the Committee (p. 2) 

The Democratic Party of South Carolina is a state party 

committee headquartered in Columbia, South Carolina. For more 

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

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Transfers from Non-federal 

Account 

o Transfers from Affiliated 

Committees 

o Transfers from Other Political 

Committees 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Federal Election Activity 

o Coordinated Expenditures 

o Other Disbursements 

Total Disbursements 

• Levin Receipts 

• Levin Disbursements 

$ 501,313 

736,973 

753.574 

670,971 

301,155 

$ 2,963,986 

$ 1,597,632 

1,307,227 

50,366 

83,850 

$ 3,039,075 

51,000 

51,000 

Findings and Recommendations (p. 3) 

• Recordkeeping for Employees (Finding 1) 

• Coordinated Party Expenditures (Finding 2) 

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

Division on the 

Democratic Party of South 

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

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Commission Guidance 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 3 

Part III. Summaries 

Findings and Recommendations 4 

Part IV. Findings and Recommendations 

Finding 1. Recordkeeping for Employees 5 

Finding 2. Coordinated Party Expenditure 6 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Democratic Party of South Carolina (DPSC), 

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 risk 

factors and as a result, this audit examined: 

1. the disclosure of individual contributors' occupation and name of employer; 

2. the disclosure of disbursements, debts and obligations; 

3. the disclosure of expenses allocated between federal and non-federal accounts; 

4. the consistency between reported figures and bank records; 

5. the completeness of records; and 

6. other committee operations necessary to the review. 

Commission Guidance 

Request for E^rly Commission Consideration of a Legal Question 

Pursuant to the "Policy Statement Establishing a Program for Requesting Consideration 

of Legal Questions by the Commission," DPSC requested early consideration of a legal 

question raised during the audit. DPSC questioned whether the monthly time logs 

required under 11 CFR § 106.7(d)(1) applied to employees paid with 100 percent federal 

funds. 

The Commission concluded, by a vote of 5-1, that 11 CFR § 106.7(d)(1) does require 

committees to keep a monthly log for employees paid exclusively with federal fimds. 

Exercising its prosecutorial discretion, however, the Commission 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 funds and reported as 

such. The Audit staff informed DPSC Counsel of the Commission's decision. This audit 

report does not include any finding or recommendation with respect to DPSC employees 

paid with 100 percent federal funds and reported as such, excluding amended filings. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration July 10,1976 

• Audit Coverage January 1,2009 - December 31,2010 

Headquarters Columbia, South Carolina 

Bank Information 

• Bank Depositories Two 

• Bank Accounts Four federal and five non-federal 

Treasurer 

• Treasurer When Audit Was Conducted Dan D'Alberto 

• Treasurer During Period Covered by Audit Marc Posner, May 29, 2009 - December 31, 

2010 

Kathryn Hensley, January 1,2009 - May 28, 

2009 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

No 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid staff 
Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand January 1,2009 $ 125,742 

Receipts 

o Contributions firom Individuals 501,313 

o Transfers from Non-federal Account 736,973 

o Transfers from Affiliated Committees 753,574 

o Transfers from Other Political Committees 670,971 

o Other Receipts 301,155 

Total Receipts $ 2,963,986 

Disbursements 

o Operating Expenditures 1,597,632 

o Federal Election Activity 1,307,227 

o Coordinated Expenditures 50,366 

o Other Disbursements 83,850 

Total Disbursements $ 3,039,075 

Cash-on-hand December 31,2010 $ 50,653 

Levin Cash-on-hand @ January 1,2009 $ 0 

Total Levin Receipts $ 51,000 

Total Levin Disbursements $ 51,000 

Levin Cash-on-hand December 31,2010 $ 0 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Recordkeeping for Employees 

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

monthly payroll 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 DPSC employees totaling $481,956 for whom DPSC was required to maintain 

monthly payroll logs. For DPSC employees paid with an allocation of federal and nonfederal fiinds, the Audit staff recommends that DPSC implement a plan to maintain 

monthly payroll logs to track the percentage of time each employee spends on federal 

election activity. (For more detail, see p. 5.) 

Finding 2. Coordinated Party Expenditure 

The Audit staff determined that DPSC appeared to have exceeded the 2010 coordinated 

party expenditures limit on behalf of a House candidate by $5,117. In response to the 

audit fieldwork, DPSC provided additional documentation and filed an amended report 

reclassifying one of the coordinated expenditures to Line 30(b) (Federal Election Activity 

Paid Entirely with Federal Funds), thus resolving the overage. The Audit staff 

recommends that DPSC provide any additional information or written comments that it 

considers relevant to this matter. (For more detail, see p. 6.) 
Part IV 

Findings and Recommendations 

Finding 1. Recordkeeping for Employees 

Summary 

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

monthly payroll 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 DPSC employees totaling $481,956 for whom DPSC was required to maintain 

monthly payroll logs. For DPSC employees paid with an allocation of federal and nonfederal fUnds, the Audit staff recommends that DPSC implement a plan to maintain 

monthly payroll logs to track the percentage of time each employee spends on federal 

election activity. 

Legal Standard 

Maintenance of Monthly Logs. Party committees must keep a monthly log of the 

percentage of time each employee spends in connection with a federal election. 

Allocations of salaries, wages, and fringe benefits are to be undertaken as follows: 

• employees who spend 25% or less of their compensated time in a given month on 

federal election activities must be paid either from the federal account or have 

their pay allocated as administrative costs; 

• employees who spend more than 25% of their compensated time in a given month 

on federal election activities must be paid only from a federal account; and, 

• employees who spend none of their compensated time in a given month on federal 

election activities may be paid entirely with funds that comply with State law. 11 

CFR§106.7(d)(l). 

Facts and Analysis 

A. Facts 

During fieldwork, the Audit staff reviewed disbursements for payroll. DPSC 

did not maintain any monthly logs or equivalent records to document the percentage of 

time each employee spent in connection with federal election activity. These logs are 

required to document the proper allocation of federal and non-federal funds used to pay 

employees. For 2009 and 2010, the amount of payroll for which logs were required was 

$481,956.^'"* This amoimt represents the total payroll for employees paid with an 

allocation of federal and non-federal funds during the audit period. DPSC had no 

employees paid with exclusively non-federal funds. 

^ Payroll is stated net of taxes and benefits. 

^ Payments to DPSC employees paid with 100 percent federal fiinds and reported as such are not included 

in this finding. (See Background Section- Request for Early Consideration of Legal Question.) 
B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the payroll recordkeeping matter with DPSC representatives 

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

did not maintain payroll log documentation and no further information was provided. 

For DPSC employees paid with an allocation of federal and non-federal funds, the Audit 

staff recommends that, within 30 calendar days of service of this report, DPSC provide 

and implement a plan to maintain monthly payroll logs to track the percentage of time 

each employee spends on federal election activity. 

Finding 2. Coordinated Party Expenditure 

Summary 

The Audit staff determined that DPSC appeared to have exceeded the 2010 coordinated 

party expenditures limit on behalf of a House candidate by $5,117. In response to the 

audit fieldwork, DPSC provided additional documentation and filed an amended report 

reclassifying one of the coordinated expenditures to Line 30(b) (Federal Election Activity 

Paid Entirely with Federal Funds), thus resolving the overage. The Audit staff 

recommends that DPSC provide any additional information or written comments that it 

considers relevant to this matter. 

Legal Standard 

A. Coordinated Party Expenditures. National party committees and state party 

committees are permitted to purchase goods and services on behalf of candidates in the 

general election, over and above the contributions that are subject to contribution limits. 

Such purchases are termed "coordinated party expenditures." They are subject to the 

following rules: 

• the amount spent on "coordinated party expenditures" is limited by statutory 

formulas that are based on the Cost of Living Adjustment (COLA) and the voting 

age population; 

• party committees are permitted to coordinate the spending with the candidate 

committees; 

• the parties may make these expenditures only in connection wiih the general 

election; 

• the party committees—^not the candidates—are responsible for reporting these 

expenditures; and 

• if the party committee exceeds the limits on coordinated party expenditures, the 

excess amount is considered an in-kind contribution, subject to the contribution 

limits. 2 U.S.C. §441a(d) and 11 CFR §§109.30 and 109.32. 

B. Assignment of Coordinated Party Expenditure Limit. A political party may 

assign its authority to make coordinated party expenditures to another political party 

committee. Such an assignment must be made in writing, state the amount of the 

authority assigned, and be received by the assignee before any coordinated party 
expenditure is made pursuant to the assignment. The political party conunittee that is 

assigned authority to make coordinated party expenditures must maintain the written 

assignment for at least three years. 11 CFR §§104.14 and 109.33(a) and (c). 

Facts and Analysis 

A. Facts 

The combined coordinated party expenditure limit for a House of Representative's 

Candidate in South Carolina for the 2010 election cycle was $87,000, with a $43,500 

limit for both the state party (DPSC) and the National Party ((Democratic National 

Committee (DNC)). DPSC reported coordinated expenditures of $48,617on Schedule F 

(Itemized Coordinated Party Expenditures) for Robert Miller, a candidate for the House 

of Representatives (the Candidate). The reported coordinated expenditures exceeded the 

state party limit by $5,117. 

Of the $48,617 reported on Schedule F, DPSC disclosed that the DNC^ designated it to 

make $20,250 on their behalf for the Candidate. The Audit staff requested, during 

fieldwork, that DPSC provide DNC^ assignment letters to document the assignment of 

spending authority to DPSC. DPSC representatives did not provide any letters or other 

documentation to support the assignment of DNC s spending authority. Therefore, the 

Audit staff concluded that the DPSC's expenditures for the Candidate exceeded the state 

party coordinated expenditure limit. 

B. Interim Audit Report & Audit Division Recommendation 

After the exit conference, in response to the Audit staffs request for documentation to 

show that the coordinated expenditure limit was not exceeded, DPSC representatives 

stated that a $10,250 disbursement for door hangers was mistakenly reported as a 

coordinated expenditure and should have been reported as Federal Election Activity on 

Schedule B, Line 30(b). DPSC's counsel stated that this disbursement was an "exempt 

slate card activity" and DPSC filed an amended report, reclassifying the $10,250 

expenditure to Line 30(b) as "exempt canvassing material." Based upon a review of the 

content of the door hanger and the timing of the invoice relative to the election (it appears 

to fall within the established FEA timelines), the Audit staff agreed with the 

reclassification and concluded that DPSC did not make excessive coordinated 

expenditures. 

The Audit staff recommends that, within 30 calendar days of receipt of this report, DPSC 

provide any additional information or written comments that it considers relevant to this 

finding. 

* DNC did not report any coordinated expenditures on behalf of the Candidate; but the Democratic 

Congressional Campaign Committee (DCCC) filings disclosed additional coordinated expenditures of 

$ 15,118 for the Candidate which is below the spending limit of $43,500. 

^ The Audit staff requested that DPSC officials provide letters from both the DNC and the DCCC to 

document the assigning of its coordinated spending authority.