Final Audit Report of the 

Commission on the Democratic 

Party of Wisconsin 

(January 1, 2011 - December 31, 2012) 

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 conunittee 

appears not to have met 

the threshold 

requirements for 

substantial compliance 

with the Act.^ l^e audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Conunission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Conunittee (p. 3) 

The Democratic Party of Wisconsin is a state party committee 

headquartered in Madison, Wisconsin. For more information, see 

the chart on the Committee Organization, p. 2. 

Financial Activity (p. 3) 

• Receipts 

o Contributions from Individuals 

o Contributions from Political 

Committees 

o Transfers from Affiliated and 

Other Political Conunittees 

o Transfers from Non-federal 

Accounts 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Contributions to Other Political 

Committees 

o Transfers to Affiliated and Other 

Political Committees 

o Federal Election Activity 

o Other Disbursements 

Total Disbursements 

$ 6,744,785 

2,692,509 

8,676,624 

1,400,151 

484,290 

$ 19,998,359 

$ 11,536,529 

25,500 

51,261 

7,991,072 

159,088 

$ 19,763,450 

Commission Findings (p. 4) 

• Misstatement of Financial Activity (Finding 1) 

• Recordkeeping for Employees (Finding 2) 

Additional Issue (p.4) 

• Recordkeeping for Employees 

On September 1,2014, the Federal Election Campaign Act of 1971, as amended ("the Act"), was 

transferred from Title 2 of the United States Code to the new Title 52 of the United States Code. 

52 U.S.C. §3011 Kb) (formerly 2 U.S.C. §438(b)). 
Final Audit Report of the 

Commission on the Democratic 

Party of Wisconsin 

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

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Commission Guidance 1 

Audit Hearing 2 

Part II. Overview of Committee 

Committee Organization 3 

Overview of Financial Activity 3 

Part III. Summaries 

Commission Findings 4 

Additional Issue 4 

Part IV. Commission Findings 

Finding 1. Misstatement of Financial Activity 6 

Finding 2. Recordkeeping for Employees 10 

PartV. Additional Issue 

Recordkeeping for Employees 13 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Democratic Party of Wisconsin (DPW), 

undertt^en by the Audit Division of the Federal Election Commission (the Conunission) 

in accordance with the Federal Election Campaign Act of 1971, as amended (the Act). 

The Audit Division conducted the audit pursuant to 52 U.S.C. §30111(b) (formerly 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 52 U.S.C. 

§30104 (formerly 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 whether the reports filed by a particular committee meet the threshold 

requirements for substantial compliance with the Act. 52 U.S.C. §30111(b) (formerly 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 Early Commission Consideration of a Legal Question 

Pursuant to the Commission's "Policy Statement Establishing a Program for Requesting 

Consideration of Legal Questions by the Commission," several state party committees 

unaffiliated with DPW requested early consideration of a legal question raised during 

audits covering the 2010 election cycle. Specifically, the Commission addressed whether 

monthly time logs under 11 CFR §106.7(d)(l) were required for employees paid with 100 

percent federal funds. 

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

committees to keep a monthly log for employees paid exclusively widi federal funds. 

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 DPW representatives of the payroll log requirement and 

of the Commission's decision not to pursue recordkeeping violations for failure to keep 

payroll logs for salaries paid and correctly reported as 100 percent federal. This audit 

report does not include any findings or recommendations with respect to DPW employees 

paid with 100 percent federal funds and reported as such. 
Audit Hearing 

DPW declined the opportunity for a hearing before the Commission on the matters 

presented in this report. 
Part II 

Overview of Committee 

Cominittee Organization 

Important Dates 

• Date of Registration April 21.1975 

• Audit Coverage January 1,2011 - December 31,2012 

Headquarters Madison, Wisconsin 

Bank Information 

• Bank Depositories Two 

• Bank Accounts Twelve Federal, Two Non-federal 

Treasurer 

• Treasurer When Audit Was Conducted Michael F. Childers 

• Treasurer During Period Covered by Audit Michael F. Childers 

Management Information 

• Attended Conunission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand @ January 1,2011 $ 53,631 

Receipts 

o Contributions from Individuals 6,744,785 

o Contributions from Political Committees 2,692,509 

o Transfers from Affiliated and Other Political 

Committees 8,676,624 

o Transfers from Non-federal Accounts 1,400,151 

o Other Receipts 484,290 

Total Receipts $ 19.998359 

Disbursements 

o Operating Expenditures 11,536,529 

o Contributions to Other Political Committees 25,500 

o Transfers to Affiliated and Other Political 

Committees 51,261 

o Federal Election Activity 7,991,072 

o Other Disbursements 159,088 

Total Disbursements $ 19,763,450 

Cash-on-hand @ December 31,2012 $ 288340 
Part ni 

Summaries 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of DPW's reported financial activity with bank 

records revealed a misstatement of receipts and disbursements for 2011 and 2012. For 

2011, DPW understated its receipts by $169,196 and its disbursements by $184,702. In 

2012, DPW overstated its receipts by $402,707 and its disbursements by $381,326. In 

response to the Interim Audit Report recommendation, DPW amended its disclosure 

reports to materially correct the misstatements. 

The Commission approved a finding that DPW misstated its financial activity for 

calendar years 2011 and 2012. (For more detail, see p. 6) 

Finding 2. Recordkeeping for Employees 

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

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

spent in connection with a federal election. For 2011 and 2012, the Audit staff identified 

payments to DPW employees totaling $3,627,262, for which DPW did not maintain 

monthly payroll logs. This consisted of $2,192,554, for which payroll was allocated with 

federal and non-federal funds, and $1,434,708, for which payroll was exclusively nonfederal. In response to the Interim Audit Report recommendation, DPW acknowledged 

the need to improve its system of maintaining monthly time logs. As a result, DPW 

developed a web-based system for employees to track time associated with federal 

election activity. 

The Commission approved a finding that DPW failed to keep monthly payroll logs for 

the $2,192,554 that DPW disclosed as having been paid with an allocation of federal and 

non-federal funds and $28,972 that was paid from an exclusively non-federal account 

during periods in which the employee was also paid with federal fiinds. The Commission 

did not approve the portion of the recommended finding related to $1,405,736 in payroll 

paid exclusively with non-federal funds and, as such, these expenses are presented as an 

"Additional Issue". (For more detail, see p. 10) 

Additional Issue 

Recordkeeping for Employees 

As detailed in Finding 2 above, DPW did not maintain any monthly payroll logs, as 

required, to document the percentage of time each employee spent in connection with a 

federal election. For 2011 and 2012, the Audit staff identified payments to DPW 

employees totaling $3,627,262, for which DPW did not maintain monthly payroll logs. 

This consisted of $2,192,554, for which payroll was allocated with federal and non-
federal funds, and $1,434,708, for which payroll was exclusively non-federal. In 

response to the Interim Audit Report reconunendation, DPW acknowledged the need to 

improve its system of maintaining monthly time logs. As a result, DPW developed a 

web-based system for employees to track time associated with federal election activity. 

The Commission did not approve by the required four votes the portion of the Audit 

staffs recommended finding that DPW failed to maintain monthly payroll logs for the 

$1,405,736 in payroll paid from an exclusively non-federal account during certain 

months. Pursuant to Commission Directive 70^, these expenses are discussed in the 

"Additional Issue" section, and the payroll expenditures of $1,405,736 are not included in 

Finding 2. (For more detail, see p. 13) 

' Available at http://www.fec.gov/dlrectlves/dlrectlve_70.pdf 
Part IV 

Commission Findings 

Finding 1, Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of DPW's reported financial activity with bank 

records revealed a misstatement of receipts and disbursements for 2011 and 2012. For 

2011, DPW understated its receipts by $169,196 and its disbursements by $184,702. In 

2012, DPW overstated its receipts by $402,707 and its disbursements by $381,326. In 

response to the Interim Audit Report recommendation, DPW amended its disclosure 

reports to materially correct the misstatements. 

The Commission approved a finding that DPW misstated its financial activity for 

calendar years 2011 and 2012. 

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; 

• the total amount of disbursements for the reporting period and for the calendar year; 

and 

• certain transactions that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 52 U.S.C. §30104(b)(l), (2), (3), (4) and (5) 

(formerly 2 U.S.C. §434(b)(l), (2), (3), (4) and (5)). 

Facts and Analysis 

A. Facts 

As part of audit fieldwork, the Audit staff reconciled DPW's reported financial activity 

with its bank records for 2011 and 2012. The reconciliation determined that DPW 

misstated receipts and disbursements for 2011 and 2012. The following charts outline the 

discrepancies between DPW's disclosure reports and its bank records, and the succeeding 

paragraphs explain why the discrepancies occurred. 

2011 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance @ 

January 1,2011 

$56,862 $53,631 $3,231 

Overstated 

Receipts $3,758,853 $3,928,049 $169,196 

Understated 

Disbursements $3,497,621 $3,682,323 $184,702 

Understated 

Ending Cash Balance @ 

December 31,2011 

$316,089" $299,357 $16,732 

Overstated 

* DPW miscalculated its ending cash balance. It should have been $318,094 (a difference of $2,005). 

Using the correct ending cash balance ($318,094), the discrepancy is $18,737. 
The beginning cash balance was overstated by $3,231 and is unexplained, but likely 

resulted from prior-period discrepancies. 

The understatement of receipts resulted from the following: 

• Transfers from non-federal accounts, not reported + $35,130 

• In-kind contributions, not reported as receipts -I- 2,565 

• Vendor refund, not reported + 9,198 

• Vendor refunds reported as negatives -1- 57,545 

• Interest, not reported + . 145 

• Political committee and individual contributions. 

not reported + 73,851 

• Reported refunds and contributions not supported by a credit 

or deposit - 9,260 

• Unexplained differences + 22 

Net Understatement of Receipts + $169.196 

The understatement of disbursements resulted from the following: 

• In-kind contributions, not reported as disbursements + $2,565 

• Vendor refunds reported as negatives^ + 57,545 

• Transfers to non-federal accounts, not reported + 15,119 

• Disbursements and fees, not reported -1- 111,793 

• Reported disbursements not supported by a check or debit - 7,317 

• Vendor fees, not reported + 4,451 

• Unexplained differences + 546 

Net Understatement of Disbursements + $184.702 

The $16,732 overstatement of the ending cash balance resulted from the misstatements 

described above, as well as from a $2,005 mathematical discrepancy in calculating the 

ending cash balance. 

2012 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2012 

$316,089 $299,357 $16,732 

Overstated 

Receipts $16,473,017 $16,070,310 $402,707 

Overstated 

Disbursements $16,462,453 $16,081,127 $381,326 

Overstated 

Ending Cash Balance @ 

December 31,2012 

$290,921" $288,540 $2,381 

Overstated 

^ DPW reported vendor refunds as negative entries on Schedule B (Itemized Disbursements). Unless the 

refund is for allocable federal and non-federal expenditures or allocable federal and Levin expenditures, 

the refund should be reported as an offset to operating expenditures on Schedule A (Itemized Receipts). 

' DPW miscalculated its ending cash balance. It should have been $326,654 (a difference of $35,733). 

Using the correct ending cash balance ($326,654), the discrepancy is $38,114. 
+ $15,312 

+ 9,186 

+ 1,000 

+ 22,310 

+ 31,270 

- 43,160 

- 457,814 

+ 19.189 

- $402.707 

8 

The overstatement of receipts resulted from the following: 

• Vendor refunds reported as negatives 

• In-kind contributions, not reported as receipts 

• Contribution from a political committee, not reported 

• Transfers from non-federal accounts, not reported 

• Transfers from the National Party, not reported 

• Incorrectly disclosed transfers from non-federal accounts 

• Contributions from joint fundraisers reported twice 

• Unexplained differences 

Net Overstatement of Receipts 

Regarding the $457,814 in contributions from joint fundraisers reported twice, the Audit 

stafr noted the following. In its October 2012 monthly reports, DPW correctly reported 

transfers from two joint fundraiser representatives on Schedule A (Itemized Receipts). 

DPW also reported the contributions from the individuals received at these joint 

fundraising events. However, DPW should only have reported the contributions from the 

individuals as memo entries. As a result of reporting both the transfer of total 

contributions received from the joint fundraisers and each of the contributions from the 

individuals, DPW overstated the receipts it received from these joint fundraising events. 

The overstatement of disbursements resulted from the following: 

• Vendor refunds reported as negatives + $15,312 

• Transfers to non-federal accounts, not reported + 27,179 

• In-kind contributions, not reported as disbursements + 9,186 

• Duplicate reported payments to vendor - 514,424 

• Unexplained differences + 81,421 

Net Overstatement of Disbursements - $381.326 

Regarding the $514,424 in duplicate reported payments, the Audit staff noted the 

reporting errors related to a single vendor that produced mailers for DPW. Also, all three 

duplicate reported disbursements were reported in the 2012 Pre-General report. 

The $2,381 overstatement of the ending cash balance resulted from the misstatements 

described above, as well as from a $35,733 mathematical discrepancy in calculating the 

ending cash balance. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the misstatement of disbursements with DPW representatives at 

the exit conference. DPW representatives asked questions for clarification and said they 

would respond after having time to thoughtfully review each issue. The Audit staff 

provided work papers detailing the misstatement of receipts to DPW representatives after 

the exit conference. DPW did not provide a response to either the disbursements or 

receipts misstatements. 

The Interim Audit Report recommended that DPW amend its disclosure reports to correct 

the misstatements noted above and reconcile the cash balance on its most recent report to 

identify any subsequent discrepancies that could affect the recommended adjustments. 
The Interim Audit Report further recommended that DPW adjust the cash balance as 

necessary on its most recent disclosure report, noting that the adjustment was the result of 

prior-period audit adjustments. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, DPW amended the disclosure 

reports to materially correct the misstatements. 

Counsel explained that while DPW does not contest the discrepanies identified by the 

auditors as part of the misstatement finding, the nature of these discrepancies in many 

cases involved the form of the disclosure provided, not its substance. Counsel 

specifically commented on the recommended reporting adjustments of the Audit staff 

concerning vendor refunds and joint fiindraising contributions. For example, DPW 

reported vendor refunds as negative entries on Schedule B (Itemized Disbursements) 

instead of as offsets to operating expenditures on Schedules A (Itemized Receipts) as 

recommended by the Audit staff. With respect to reporting adjustments for joint 

fundraising contributions. Counsel stated that the error in reporting occurred because the 

wrong box was selected in the campaign finance reporting software used to prepare its 

reports. Counsel further added that these contributions were reported to the Commission 

on a timely, individualized basis, even if its cash position was incorrect due to the 

reporting error. 

In response, the Audit staff would like to note that Counsel's arguments for the activity 

noted above are based on the assumption that mere disclosure of these financial 

transactions is sufficient, regardless of the overall accuracy of its reports. However, the 

Commission's regulations under 11 CFR §104.14(d) also require disclosure reports to be 

accurate. DPW's method of disclosure resulted in inaccuracies in total receipts, total 

disbursements, and cash balances. Under 52 U.S.C. §30104(b)(l), (2), (4)^ and 11 CFR 

§ 104.3(a)(1), (2), (b)(1), committees must report the amount of beginning cash-on-hand, 

the total amount of all receipts and all disbursements, as well as the total amount of 

receipts and disbursements in various enumerated catergories. Therefore, the overall 

totals and individual totals for specific types of receipts and disbursements are significant 

for disclosure purposes and accuracy. 

The Audit staff agreed that vendor refunds and the joint fundraiser receipts were included 

in DPW's original disclosure reports. However, because the transactions were either 

reported twice or reported as negative entries, DPW's receipt, disbursement and cash 

balances were misstated. To materially correct these misstatements, DPW filed amended 

disclosure reports for 2011 and 2012. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that DPW filed amended disclosure reports 

that materially corrected die misstatement of financial activity. 

E. Committee Response to the Draft Final Audit Report 

DPW's response to the Draft Final Audit Report provided no additional comments. 

Formerly 2 U.S.C. §434(b)(l), (2) and (4). 
10 

Commission Conciusion 

On February 12,2015, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended the Commission find that DPW 

misstated its financial activity for calendar years 2011 and 2012. 

The Commission approved the Audit staffs recommendation. 

Finding 2. Recordkeeping for Employees . 

Smnmaiy 

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

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

spent in connection with a federal election. For 2011 and 2012, the Audit staff identified 

payments to DPW employees totaling $3,627,262, for which DPW did not maintain 

monthly payroll logs. This consisted of $2,192,554, for which payroll was allocated with 

federal and non-federal funds, and $1,434,708, for which payroll was exclusively nonfederal. In response to the Interim Audit Report recommendation, DPW acknowledged 

the need to improve its system of maintaining monthly time logs. As a result, DPW 

developed a web-based system for employees to track time associated with federal 

election activity. 

The Commission approved a finding that DPW failed to keep monthly payroll logs for 

the $2,192,554 that DPW disclosed as having been paid with an allocation of federal and 

non-federal fiinds and $28,972 that was paid from an exclusively non-federal account 

during periods in which the employee was also paid with federal fiinds. The Commission 

did not approve the portion of the recommended finding related to $1,405,736 in payroll 

paid exclusively with non-federal fiinds and, as such, these expenses are presented as an 

"Additional Issue". 

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 percent or less of their compensated time in a given 

month on federal election activities must be paid either from the federal account 

or be allocated as administrative costs; 

• employees who spend more than 25 percent 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 fiinds that comply with state law. 11 

CFR § 106.7(d)(1). 
11 

Facts and Analysis 

A. Facts 

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

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

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

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

salaries and wages. For 2011 and 2012, DPW did not maintain monthly logs for 

$3,627,262 in payroll.^ This amount includes payroll paid as follows to DPW employees. 

i. Employees reported on Schedule H4 and paid with a mixture of federal and 

non-federal funds during the same month (totaling $2,192,554). 

ii. Employees reported on Schedule H4 and/or Schedule B and also paid with 

both a mixture of federal and non-federal funds and exclusively non-federal 

funds during the same month (totaling $28,972); and 

iii. Employees paid exclusively with non-federal funds in a given month and not 

reported by DPW (totaling $1,405,736).' 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the recordkeeping requirement with DPW representatives 

during the audit fieldwork and at the exit conference. DPW representatives asked 

questions for clarification and said they would respond after having time to thoughtfully 

review each issue. Subsequently, DPW representatives stated that payroll logs had not 

been identified nor other evidence indicating that they were maintain^. However, DPW 

provided a statement contending that other information confirmed the basis on which 

employees were paid. DPW representatives supported this statement by providing 

exhibits with a basic job description for the employees and a narrative that stated, in part, 

"Begiiming in February, 2011 and continuing through the summer of 2012, Wisconsin 

held multiple elections in coimection with various recalls of state-level elected officials. 

Recall elections for nine Wisconsin state senators were held during the sununer of 2011. 

Recall elections for the Governor, Lieutenant Govemor and four additional state senators 

were held during the spring and summer of 2012. Throughout 2011 and through the 

summer of 2012, the Committee and its staff were engrossed in these nonfederal 

elections. Employees directly involved in supporting nonfederal candidates performed 

no work in connection with federal elections, while other employees were paid entirely 

with federal funds." 

In addition, DPW submitted documentation identifying non-federal and federal election 

dates and events for both years 2011 and 2012, stating,".. .as a result of these events, the 

Committee hired staff to work exclusively in connection with various nonfederal [sic] 

recall elections." 

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

such (see Part I, Background, Commission Guidance, Request for Early Commission Consideration of a 

Legal Question, Page I). Payroll amounts are stated net of taxes and fringe benefits. 

' Some of these employees were paid from federal funds and reported as such in other months within the 

audit period. 
12 

The statement and exhibits provided by DPW are not sufficient evidence and do not 

resolve the recordkeeping finding because they do not document the time an employee 

spent in connection with a federal election and the documents were provided after 

notification of the audit. 

The Interim Audit Report recommended that DPW provide evidence that it maintained 

monthly time logs to document the percentage of time an employee spent in connection 

with a federal election; or implement a plan to maintain monthly payroll logs in the 

future. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, Counsel stated that the 

employee recordkeeping finding appears to be one of the most common findings in recent 

audits of state and local parties. Additionally, Counsel added that the scope of the 

Commission's jurisdiction in relation to payments to employees with non-federal funds 

for exclusively non-federal activity has been a subject of recent Commission debate. 

Counsel believes the maintenance of monthly time logs is particularly burdensome for 

committees, such as DPW, that are heavily involved in non-federal election activity. 

Counsel stated that DPW participated in an unprecedented 13 non-federal elections 

during the 2012 election cycle. Counsel added that the non-federal elections arose 

unexpectedly as a result of the filing of petitions that led to the recall of 13 state senators, 

the lieutenant governor, and the govemor. Counsel stated that the recall elections 

garnered nationwide attention. 

Despite these contentions. Counsel acknowledged the need to improve its system of 

maintaining monthly time logs. Counsel stated that a web-based system for employees to 

enter and track time spent on federal election activity was developed. A screen shot of 

the new time log was also submitted. Counsel stated that having the new system 

electronically helps to ensure the records will not be lost or misplaced. Fu^ermore, 

Counsel stated that the web-based system complies with the requirements of Commission 

regulations. 

Counsel raised the question as to whether the Conunission should apply the employee log 

requirement to a party committee heavily involved in non-federal elections. However, 

the log requirement of 11 CFR §106.7(d)(l) also applies to payroll paid exclusively out 

of non-federal funds. The language is broad in that it applies Ae term "each employee" 

and "each employee" necessarily includes all of a committee's employees, including 

those who spend no time in connection with federal elections because zero percent is also 

a percentage of time spent in connection with federal elections. Counsel's statement that 

employees directly involved in supporting non-federal candidates performed no work in 

connection with federal elections needs to be documented in order to ensure that, in light 

of potential concerns about funding federal election related activity with federally noncompliant funds, it can be verified for accuracy. 

The screen shot of the new time log shows employees are required to enter a name, 

description of work performed, pay period, hours spent in the pay period on non-federal 

activity, hours spent in the pay period on federal activity, and a certification that the 

information entered is accurate. If the web-based system tracks the time each employee 
13 

spends in connection with a federal election, as the screen shot suggests, then it is 

consistent with the Commission payroll log requirements for party committees at 11 CFR 

§ 106.7(d)(1). As such, DPW has complied wiA the Interim Audit Report 

recommendation by implementing a plan to maintain monthly payroll logs in the future. 

D. Draft Final Audit Report 

The Draft Final Audit Report mentioned that DPW acknowledged there was a need to 

improve its system of maintaining monthly time logs. DPW developed a web-based 

system for employees to track time associated with federal election activity. 

E. Committee Response to the Draft Final Audit Report 

DPW's response to the Draft Final Audit Report provided no additional comments. 

Commission Conclusion 

On February 12,2015, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff reconunended that the Commission find that DPW 

failed to maintain monthly payroll logs to document the percentage of time each 

employee spent in connection with a federal election totaling $3,627,262. 

The Commission approved a finding that DPW failed to keep monthly payroll logs for 

the $2,192,554 that DPW disclosed as having been paid with an allocation of federal and 

non-federal funds and $28,972 that was paid from an exclusively non-federal account 

during periods in which the employee was also paid with federal funds. The Commission 

did not approve the portion of the recommended finding related to the $1,405,736 in 

payroll paid exclusively with non-federal funds during a given month and, as such, the 

matter is presented in the "Additional Issue" section. 

Part V 

Additional Issue 

I Recordkeeping for Employees 

Siunmaiy 

As detailed in Finding 2 above, DPW did not maintain any monthly payroll logs, as 

required, to document the percentage of time each employee spent in connection with a 

federal election. For 2011 and 2012, the Audit staff identified payments to DPW 

employees totaling $3,627,262, for which DPW did not maintain monthly payroll logs. 

This consisted of $2,192,554, for which payroll was allocated with federal and nonfederal funds, and $1,434,708, for which payroll was exclusively non-federal. In 

response to the Interim Audit Report recommendation, DPW acknowledged the need to 

improve its system of maintaining monthly time logs. As a result, DPW developed a 

web-based system for employees to track time associated with federal election activity. 

The Commission did not approve by the required four votes the portion of the Audit 

staff's recommended finding that DPW failed to maintain monthly payroll logs for the 
14 

$1,405,736 in payroll paid from an exclusively non-federal account during certain 

months. Pursuant to Commission Directive 70'°, these expenses are discussed in the 

"Additional Issue" section, and the payroll expenditures of $1,405,736 are not included in 

Finding 2. 

Legal Standard 

The legal standard in Finding 2 is incorporated herein. 

Facts and Analysis 

A. Facts 

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

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

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

to document the proper allocation of federal and non-federal fimds used to pay employee 

salaries and wages. For 2011 and 2012, DPW did not maintain monthly logs for 

$3,627,262 in payroll." This amount includes payroll paid as follows to DPW 

employees. 

i. Employees reported on Schedule H4 and paid with a mixture of federal and 

non-federal funds during the same month (totaling $2,192,554). 

ii. Employees reported on Schedule H4 and/or Schedule B and also paid with 

both a mixture of federal and non-federal funds and exclusively non-federal 

funds during the same month (totaling $28,972); and 

iii. Employees paid exclusively with non-federal funds in a given month and not 

reported by DPW (totaling $1,405,736).'^ 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the recordkeeping requirement with DPW representatives 

during the audit fieldwork and at the exit conference. DPW representatives asked 

questions for clarification and said they would respond after having time to thoughtfully 

review each issue. Subsequently, DPW representatives stated that payroll logs had not 

been identified nor other evidence indicating that they were maintained. However, DPW 

provided a statement contending that other information confirmed the basis on which 

employees were paid. DPW representatives supported this statement by providing 

exhibits with a basic job description for the employees and a narrative that stated, in part, 

"Beginning in February, 2011 and continuing through the summer of 2012, Wisconsin 

held multiple elections in connection with various recalls of state-level elected officials. 

Recall elections for nine Wisconsin state senators were held during the summer of 2011. 

Recall elections for the Governor, Lieutenant Governor and four additional state senators 

were held during the spring and summer of 2012. Throughout 2011 and through the 

summer of 2012, the Committee and its staff were engrossed in these nonfederal 

Available at http://www.fec.gov/directives/directive_70.pdf 

" This total does not include payroll for employees paid with ICQ percent federal funds and reported as 

such (see Part I, Background, Commission Guidance, Request for Early Commission Consideration of a 

Legal Question, Page I). Payroll amounts are stated net of taxes and fringe benefits. 

Some of these employees were paid from federal funds and reported as such in other months within the 

audit period. 

12 
15 

elections. Employees directly involved in supporting nonfederal candidates performed 

no work in connection with federal elections, while other employees were paid entirely 

with federal funds." 

In addition, DPW submitted documentation identifying non-federal and federal election 

dates and events for both years 2011 and 2012, stating,".. .as a result of these events, the 

Committee hired staff to work exclusively in connection with various nonfederal [sic] 

recall elections." 

The statement and exhibits provided by DPW are not sufficient evidence and do not 

resolve the recordkeeping finding because they do not document the time an employee 

spent in connection with a federal election and the documents were provided after 

notification of the audit. 

The Interim Audit Report recommended that DPW provide evidence that it maintained 

monthly time logs to document the percentage of time an employee spent in coimection 

with a federal election; or implement a plan to maintain monthly payroll logs in the 

future. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report reconunendation. Counsel stated that the 

employee recordkeeping finding appears to be one of the most common findings in recent 

audits of state and local parties. Additionally, Counsel added that the scope of the 

Commission's jurisdiction in relation to payments to employees with non-federal funds 

for exclusively non-federal activity has been a subject of recent Commission debate. 

Counsel believes the maintenance of monthly time logs is particularly burdensome for 

committees, such as DPW, that are heavily involved in non-federal election activity. 

Counsel stated that DPW participated in an unprecedented 13 non-federal elections 

during the 2012 election cycle. Counsel added that the non-federal elections arose 

unexpectedly as a result of the filing of petitions that led to the recall of 13 state senators, 

the lieutenant governor, and the governor. Counsel stated that the recall elections 

gamered nationwide attention. 

Despite these contentions. Counsel acknowledged the need to improve its system of 

maintaining monthly time logs. Counsel stated that a web-based system for employees to 

enter and track time spent on federal election activity was developed. A screen shot of 

the new time log was also submitted. Counsel stated that having the new system 

electronically helps to ensure the records will not be lost or misplaced. Fu^ermore, 

Counsel stated that the web-based system complies with the requirements of Commission 

regulations. 

Counsel raised the question as to whether the Commission should apply the employee log 

requirement to a party committee heavily involved in non-federal elections. However, 

the log requirement of 11 CFR § 106.7(d)(1) also applies to payroll paid exclusively out 

of non-federal funds. The language is broad in that it applies the term "each employee" 

and "each employee" necessarily includes all of a committee's employees, including 

those who spend no time in connection with federal elections because zero percent is also 

a percentage of time spent in connection with federal elections. Counsel's statement that 
16 

employees directly involved in supporting non-federal candidates performed no work, in 

connection with federal elections needs to be documented in order to ensure that, in light 

of potential concems about funding federal election related activity with federally noncompliant funds, it can be verified for accuracy. 

The screen shot of the new time log shows employees are required to enter a name, 

description of work performed, pay period, hours spent in the pay period on non-federal 

activity, hours spent in the pay period on federal activity, and a certification that the 

information entered is accurate. If the web-based system tracks the time each employee 

spends in connection with a federal election, as the screen shot suggests, then it is 

consistent with the Commission payroll log requirements for party committees at 11 CFR 

§ 106.7(d)(1). As such, DPW has complied with the Interim Audit Report 

recommendation by implementing a plan to maintain monthly payroll logs in the future. 

D. Draft Final Audit Report 

The Draft Final Audit Report mentioned that DPW acknowledged there was a need to 

improve its system of maintaining monthly time logs. DPW developed a web-based 

system for employees to track time associated with federal election activity. 

E. Committee Response to the Draft Finai Audit Report 

DPW's response to the Draft Final Audit Report provided no additional conunents. 

Commission Conciusion 

On February 12,2015, the Conmiission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission find that DPW 

failed to maintain monthly payroll logs to document the percentage of time each 

employee spent in connection with a federal election totaling $3,627,262. 

The Commission did not approve, by the required four votes, the portion of the Audit 

staffs recommended finding that DPW failed to maintain monthly payroll logs for the 

$1,405,736 in payroll paid exclusively from a non-federal account during certain months. 

Some Commissioners voted to approve the Audit staff's recommendation. Others did 

not, citing the position of three Commissioners in the Final Audit Report of the 

Commission on the Georgia Federal Elections Committee, in support of the proposition 

that the Commission lacks jurisdiction to impose recordkeeping and documentation 

requirements on exclusively non-federal activity. 

These expenses are discuseed in the "Additional Issue" section pursuant to Commission 

Directive 70.'^ 

" Available at http://www.fec.gov/directives/directive_70.pdf.