Interim Audit Report of the 

Audit Division on the 

Republican Party of Orange 

County (Federal) 

(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 

F^eral 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 Republican Party of Orange County (Federal) is a local party 

committee headquartered in Tustin. California. For more 

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

Financial Activity (p. 2) 

• Receipts 

o Individual Contributions $ 299,234 

o Political Committee Contributions 81.OCX) 

o Transfers firom Affiliates 76,923 

o Transfers from Non-federal Accounts 230,078 

o Transfers from Levin Account 73,466 

o Loans Received 6,205 

o Offsets to Operating Expenditures 3,661 

Total Receipts $770,567 

• Disbursements 

o Operating Expenditures $ 613,029 

o F^eral Election Activity 149,571 

o Contribution Refunds g,gso 

o Loans Repaid 6,205 

Total Disbursements $ 777,655 

• Levin Receipts $ 74,132 

• Levin Disbursements $ 73,466 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Reporting of Debts and Obligations (Finding 2) 

• Recordkeeping for Employees (Finding 3) 

• Use of Levin Fund Transfers (Finding 4) 

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

Audit Division on the 

Republican Party of Orange 

County (Federal) 

(Januaiy 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 2 

Part III. Summaries 

Findings and Recommendations 4 

Part IV. Findings and Recommendations 

Finding 1. Misstatement of Financial Activity S 

Finding 2. Reporting of Debts and Obligations 7 

Finding 3. Recordkeeping for Employees 8 

Finding 4. Use of Levin Fund Transfers 9 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Republican Party of Orange County (Federal) 

(RPOC), undertaken by the Audit Division of the Fede^ 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 intenud 

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; 

6. the disclosure of independent expenditures; and 

7. 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 

imaffiliated with RPOC requested early consideration of a legal question raised during an 

audit. Specifically, the Commission addressed whether monthly time logs under 11 CFR 

§106.7(d)(l) were required for employees paid with 1(X) percent federal funds. 

The Commission concluded, by a vote of S-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, die 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. Finding 3, Recordkeeping for Employees, of this audit report does not include 

RPOC employees paid with 100 percent federal fiinds and reported as such. 
Partn 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration July 6.1982 

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

Headquarters Tustin, Califomia 

Bank Information 

• Bank Depositories Two 

• Bank Accounts Four Federal. Two Levin and Eight 

Non-federal 

Treasurer 

• Treasurer When Audit Was Conducted Mark W. Bucher 

• Treasurer During Period Covered by Audit Mark W. Bucher 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

No 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Company 
Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand @ January 1,2009 $6,092 

Receipts 

o Individual Contributions 299,234 

o Political Committee Contributions 81,000 

o Transfers from Affiliates 76,923 

o Transfers from Non-federal Accounts 230,078 

o Transfers from Levin Account 73,466 

o Loans Received 6,205 

o Offsets to Operating Expenditures 3,661 

Total Receipts $770,567 

Disbursements 

o Operating Expenditures 613,029 

o Federal Election Activity 149,571 

o Contribution Refunds 8,850 

o Loans Repaid 6,205 

Total Disbursements $ 777,655 

Cash-on-hand @ December 31,2010 ($996)' 

Levin Cash-on-hand @ January 1,2009 $10 

Total Levin Receipts $74,132 

Totai Levin Disbursements $73,466 

Levin Cash-on-hand @ December 31,2010 $676 

' RPOC overdrew its bank accounts in the amount of $996. On January 12,2011, RPOC's balance was no 

longer overdrawn. 
Part in 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

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

records revealed a misstatement of receipts and disbursements for calendar year 2009. 

RPOC understated its receipts by $17,420 and disbursements by $17,420. The 

misstatements were due mainly to unreported transfers to and from non-federal accounts 

and unreported in-kind contributions. The Audit staff recommends that RPOC amend its 

disclosure reports to correct the misstatements of its receipts and disbursements for 2009. 

(For more detail, see p. S.) 

Finding 2. Reporting of Debts and Obligations 

Audit fieldwork indicated that RPOC failed to report debts and obligations for 12 vendors 

totaling $60,296 on Schedule D (Debts and Obligations). The Audit staff recommends 

that RPOC amend its disclosure reports to correctly include debts and obligations of 

$60,296 on Schedule D. (For more detail, see p. 7.) 

Finding 3. Recordkeeping for Employees 

During audit fieldwork, the Audit staff determined that RPOC did not maintain monthly 

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

federal election activity. For 2009 and 2010, the amount of payroll for which logs were 

required was $187,281^. This entire payroll amount was allocated between federal and 

non-federal funds. 

After audit fieldwork, RPOC provided an affidavit that listed the time spent, on federal 

election activities for each of its employees. The Audit staff recommends that RPOC 

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. 8.) 

Finding 4. Use of Levin Fund Transfers 

During audit fieldwork, a review of Levin fund activity determined that RPOC received 

$74,132 from the California Republican Party's Levin account for reimbursement of 

voter registration expenses. RTOC then transferred $73,463 from its Levin account to its 

federal accounts as reimbursement for voter registration expenses. In accordance with 11 

CFR §300.31(a), Levin funds expended must be raised solely by the committee that 

expends them. The Audit sta^ recommends that RPOC demonstrate that it solely raised 

the expended Levin funds. Absent such demonstration, RPOC's federal account should 

refund $73,463 to its Levin account and provide evidence of such refund. (For more 

detail, see p. 9.) 

' This total does not include payroll for employees paid with 100 percent federal funds (see Part I, 

Background, Conunission Guidance, Request for Early Commission Consideration of a Legal Question, 

page 1). 
Part IV 

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity 

Summary 

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

records revealed a misstatement of receipts and disbursements for calendar year 2009. 

RPOC understated its receipts by $17,420 and disbursements by $17,420. The 

misstatements were due mainly to unreported transfers to and from non-federal accounts 

and unreported in-kind contributions. The Audit staff recommends that RPOC amend its 

disclosure reports to correct the misstatements of its receipts and disbursements for 2009. 

Legal Standard 

A. Contents of Reports. Each report must disclose: 

• the amount of cash on band at the begirming 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). 2 U.S.C. §434(b)(l). (2), (3), (4) and (5) 

B. Definition of Contribution. Gift, subscription, loan, advance or deposit of money. 

• a gift, subscription, loan, advance or deposit of money or anything of value made 

by any person for the purpose of influencing any election for Federal office is a 

contribution. 

• the term anything of value includes all in-kind contributions. 

• the provision of any goods or services without charge or at a charge that is less 

than the usual and normal charge for such goods or services is a contribution. 11 

CFR §100.52(a) & (d)(1) 

Facts and Analysis 

A. Facts 

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

records revealed a misstatement of receipts and disbursements for calendar year 2009. 

The following chart details the discrepancies between RPOC's disclosure reports and its 

bank records. Succeeding pu^agraphs explain why the discrepancies occurred. 
2009 Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand 

@ January 1,2009 $6,092 $6,092 $0 

Receipts $311,572 $328,992 ($17,420) 

Understated 

Disbursements $303,419 $320,839 ($17,420) 

Understated 

Ending Cash-on-Hand 

@ December 31,2009 $14,245 $14,245 . $0 

The understatement of receipts resulted from the following. 

• Under reporting of receipts $10,631 

• In-kind contribution, not reported as a receipt 10,000^ 

• In-kind rent for December, not reported as a receipt 3,904 

• Duplicate reported receipt (in-kind contribution) (5,000)^ 

• Unexplained difference (2.115) 

Net Understatement of Receipts $ 17.420 

The understatement of disbursements resulted from the following. 

• Ih-kind contribution, not reported as a disbursement $ 10,000 

• Disbursements not reported 9,382 

• In-kind rent for December, not reported as a disbursement 3,904 

• Disbursements over-reported (866) 

• Duplicate reported disbursement (in-kind contribution) (5.000) 

Net Understatement of Disbursements $ 17.420 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, Audit staff provided RPOC's treasurer with workpapers detailing 

the misstatements. The treasurer asked general questions regarding the reporting 

requirements. 

The Audit staff recommends that, within 30 calendar days of service of this report, RPOC 

amend its disclosure reports to correct the misstatement of its receipts and disbursements 

for 2009, as noted above. 

* This was a partial payment for a fondraising event. 

^ RPOC originally reported this as a loan and repayment. It was later reported as an in-kind contribution. 
Finding 2. Reporting of Debts and Obligations 

Summary 

Audit fieldwork indicated that RPOC failed to report debts and obligations for 12 vendors 

totaling $60,296 on Schedule D (Debts and Obligations). The Audit staff recommends 

that RPOC amend its disclosure reports to correctly include debts and obligations of 

$60,296 on Schedule D. 

Legal Standard 

A. Continuous Reporting Required. A political committee must disclose the amount 

and nature of outstanding debts and obligations until those debts are extinguished. 

2 U.S.C. §434(b)(8) and 11 CFR §§ 104.3(d) and 104.11(a). 

B. Separate Schedules. A political committee must file separate schedules for debts 

owed by and to the committee with a statement explaining the circumstances and 

conditions under which each debt and obligation was incurred or extinguished. 

11 CFR §104.11(a). 

C. Itemizing Debts and Obligations. 

• Once it has been outstanding 60 days from the date incurred, a debt of $500 or less 

must be reported on the next regularly scheduled report. 

• A debt excUding $500 must be disclosed in the report that covers the date on which 

the debt was incurred. 11 CFR §104.11(b). 

Facts and Aaaljwis 

A. Facts 

During audit fieldwork, the Audit staff reviewed disbursement records and disclosure 

reports for proper reporting of debts and obligations. This review identified debts owed 

to 12 vendors totaling $60,296 that RPOC failed to report on Schedule D. Of these debts, 

$48,636 was incurred during the audit period and $11,660 was incurred prior to the audit 

period and remained outstanding as of the beginning of the audit period. It should be 

noted that RPOC did disclose debts owed to some of these vendors during the audit 

period. However, the debt amounts identified by the Audit staff above were not included 

in the debt amounts rqiorted. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the reporting of debts and obligations with RPOC's treasurer 

and provided schedules detailing the transactions requiring disclosure. The treasurer had 

no comments on this matter. 

The Audit staff recommends that, within 30 calendar days of service of this report, RPOC 

amend its disclosure reports to correctly include debts and obligations of $60,296 on 

Schedule D. 
Finding 3. Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff determined that RPOC did not maintain monthly 

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

federal election activity. For 2009 and 2010, the amount of payroll for which logs were 

required was $187,281^. This entire payroll amount was allocated between federal and 

non-federal funds. 

After audit fieldwork, RPOC provided an affidavit that listed the time spent on federal 

election activities for each of its employees. The Audit staff recommends that RPOC 

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 

percenuge 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 be 

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 

fednal election activities may be paid entirely with funds that comply with State 

law. 11 CFR 1106.7(d)(1). 

Facts and Analysis 

A. Facts 

During fieldwork, the Audit staff reviewed payroll disbursements totaling $187,281. 

RPOC did not maintain any monthly payroll 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 employee salaries and wages. The entire total of $187,281 represents 

payroll for employees paid with an allocation of federal and non-federal funds during the 

audit period. RPOC had no employees paid with exclusively non-federal funds.^ 

RPOC's staffing consisted of eight individuals all of whom were hired via an 

employment company. In its reports, RPOC disclosed the purpose of the payroll 

expenditures as "Leased Employees." In addition, RPOC included a statement in its 

This total does not include payroll for employees paid with 100 percent federal fends (see Part I, 

Background, Commission Guidance, Request for Early Commission Consideration of a Legal Question, 

pagel). 

As such, this finding only includes payments to RPOC employees consisting of an allocation of federal 

and non-federal fends. Employees paid with 100 peicent fednal fends are not included in this finding 

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

Question, page 1). 
reports noting that the time spent on federal election activity and federal campaigns was 

tracked on a monthly basis a^ no employee spent 25% or more of their compensated 

time on federal election activity. RPOC did not maintain a monthly time log to support 

its statement above and as required by 11 CFR §106.7(d)(l). 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference and during audit fieldwork, the Audit staff discussed the payroll 

recordkeeping matter with RPOC's treasurer. At the exit conference, the treasurer 

provided an affidavit &om RPOC's chairman that listed the time spent on federal election 

activities for its employees. This document, however, does not resolve the recordkeeping 

finding because RPOC provided the affidavit only after being notified of the 

recordkeeping requirement during the audit. 

For all future payroll, the Audit staff recommends that, within 30 calendar days of service 

of this report, RTOC implement a plan to maintain monthly payroll logs to track the 

percentage of time each employee spends on federal election activity. 

I Finding 4. Use of Levin Fund Transfers 

Summary 

During audit fieldwork, a review of Levin fund activity determined that RPOC received 

$74,132 from the California Republican Party's Levin account for reimbursement of 

voter registration expenses. RPOC then transferred $73,465 from its Levin account to its 

federal accounts as reimbursement for voter registration expenses. In accordance with 11 

CFR §300.31(a), Levin funds expended must be raised solely by the committee that 

expends them. The Audit staff recommends that RPOC demonstrate that it solely raised 

the expended Levin funds. Absent such demonstration, RPOC's federal account should 

refund $73,465 to its Levin account and provide evidence of such refund. 

Legal Standard 

A. Expending of Levin Funds. Levin funds expended or disbursed by any State, 

district or local committee must be raised solely by the committee that expends or 

disburses them. Consequently, funds from national party conunittees, other State, district 

and local committees and Federal candidates or officeholders, may not be accepted as 

Levin funds. 11 CFR §§3(X).31 and 300.34. This includes any entity directly or 

indirectly established, financed, maintained or controlled by any national. State, district 

or local committee of a political party. 2 U.S.C. §441i(b)(2)(B)(iv). 

B. Levin Fund Transfers. A State, district, or local committee of a political party must 

not use any Federal funds transferred to it &om or otherwise accepted by it fn)m any 

other State, district, or local committee as the Federal component of an expenditure or 

disbursement for Federal election activity under 11 CFR §300.32. A State, district, or 

local committee of a political party must itself raise the Federal component of an 

expenditure or disbursement allocated between federal funds and Levin funds under 11 

CFR §§300.32 and 300.33. 11 CFR §300.34(a). 

Levin Ainds must be raised solely by the State, district, or local committee of a political 

party that expends or disburses the funds. A State, district, or local conunittee of a 
10 

political party must not use as Levin funds any funds transferred or otherwise provided to 

the committee by any State, district, or local committee of a political party of the national 

committee of any political party. 11 CFR §300.34(b). 

Facts and Analysis 

A. Facts 

During the audit period, RPOC made twenty-three transfers, totaling $73,465, from its 

Levin account to its federal accounts and reported these transfers on Schedule H5 

(Transfers of Levin Funds for Shared Federal Election Activity). All of the Levin funds 

expended by RPOC' ($73,465) were received ftom the California Republican Party's 

Levin account, which transferred $74,132 to RPOC's Levin account. 

While there is no prohibition on the California Republican Party transferring Levin funds 

to local party committees under 11 CFR §102.6, there is a prohibition on the local 

committees using funds transferred by a state party committee for either the federal or 

Levin shares of disbursements allocated between federal and Levin funds.^ As such, 

RPOC did not meet the requirement that the Levin funds must be raised solely by the 

committee that expends or disburses the funds. 

B. Interim Audit Report & Audit Division Recommendation 

At the entrance and exit conferences, the Audit staff discussed this matter with RPOC's 

treasurer. The treasurer had no comments regarding this matter. 

The Audit staff recommends that, within 30 calendar days of service of this report, RPOC 

demonstrate that it solely raised the expended Levin funds. Absent such demonstration, 

RPOC should refund its Levin account $73,465 from its federal account and provide 

evidence of such refund. 

' RPOC had a beginning cash baiance of $10 in its Levin account that was not transfeiied fiom the 

California Republican Party. 

' This matter was noted in a Directive 69, approved by the Commission on May 11,2011.