Final Audit Report of the 

Commission on the Democratic 

Party of Illinois 

(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 Democratic Party of Illinois (DPIL) is a state party committee 

with headquarters in Springfield, Illinois. For more information, see 

the chart on the Committee Organization, p. 2. 

Financial Activity (p. if 

• Receipts 

o Individual Contributions $ 597,542 

o Political Committee Contributions 1,337,075 

o Transfers from Affiliates 844,950 

o Transfers from Non-federal 1,504,443 

Accounts 

Total Receipts $ 4,284,010 

• Disbursements 

o Operating Expenditures $1,922,328 

o Federal Election Activity 705,871 

o Coordinated Expenditures 1,257,848 

o Transfers to Affiliated Committees 292,178 

o Other Disbursements 62,545 

Total Disbursements $ 4,240,770 

Commission Findings (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Recordkeeping for Employees (Finding 2) 

• Unreported Levin Fund Activity (Finding 3) 

Additional Issues (p.4) 

• Recordkeeping for Employees (Issue 1) 

• Fundraising Receipts (Issue 2) 

' 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 new Title S2 of the United States Code. 

* 52 U.S.C. §3011 Kb) (formerly 2 U.S.C. §438(b)). 

^ DPIL did not maintain a Levin bank account, but during the period covered by the audit DPIL raised $254,774 of 

Levin receipts that it deposited into its non-federal bank account. DPEL transferred $100,000 of Levin funds to its 

federal account for federal election activity during this same period. See Finding 3 for Levin reporting issues. 
Final Audit Report of the 

Commission on the 

Democratic Party of Illinois 

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

Page 

Parti. Background 

Authority for Audit 1 

Scope of Audit 1 

Commission Guidance 1 

Audit Hearing 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Commission Findings 3 

Additional Issues 4 

Part IV. Commission Findings 

Finding 1. Misstatement of Financial Activity 6 

Finding 2. Recordkeeping for Employees 8 

Findings. Unreported Levin Fund Activity 11 

» 

PartV. Additional Issues 

Issue 1. Recordkeeping for Employees 13 

Issue 2. Fundraising Receipts 16 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Democratic Party of Illinois (DPIL), 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 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 intemal 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 "Policy Statement Establishing a Program for Requesting Consideration 

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

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

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

funds. (See Finding 2 and Additional Issue 1.) 

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 with federal fiinds. 

Exercising its prosecutorial discretion, the Commission will not, however, 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 DPIL counsel (Counsel) of the Commission's decision on 

DPIL's request. This audit report does not include any finding or recommendation with 

respect to DPIL's employees paid with 100 percent federal funds and reported as such. 

Audit Hearing 

DPIL requested a hearing before the Commission. The request was granted and the 

hearing was held on April 23,2014. At the hearing, DPIL addressed one issue related to 

whether DPIL could deposit fundraising receipts received from non-federal events into its 

federal account. (See Additional Issue 2, page 16.) 
Part II 

Overview of Committee 

Cominittee Organization 

Important Dates 

• Date of Registration May 4.1983 

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

Headquarters Springfield, Illinois 

Bank Information 

• Bank Depositories Two 

• Bank Accounts 3 Federal, 4 Non-federal Accounts 

Treasurer . 

• Treasurer When Audit Was Conducted Michael Kasper 

• Treasurer During Period Covered by Audit Michael Kasper, January 1,2009 -

December 31,2010 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand @ January 1,2009 $ 298,984 

Receipts 

o Individual Contributions 597,542 

o Political Committee Contributions 1,337,075 

o Transfers from Affiliates 844,950 

o Transfers from Non-federal Accounts 1,504,443 

Total Receipts $4,284,010 

Disbursements 

o Operating Expenditures 1,922,328 

o Federal Election Activity 705,871 

o Coordinated Expenditures 1,257,848 

o Transfers to Affiliated Committees 292,178 

o Other Disbursements 62,545 

Total Disbursements $4,240,770 

Cash-on-hand @ December 31,2010 $ 342,224 
Partm 

Summaries 

Commlraion Findings 

Finding 1. Misstatement of Financial Activity 

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

records revealed a misstatement of receipts and disbursements in calendar year 2010. 

DPIL understated receipts by $203,666 and disbursements by $215,677. The 

misstatements were mainly the result of unreported transfers from the non-federal 

accounts and affiliated committees, as well as unreported operating expenditures and 

transfers to affiliated committees. In response to the Interim Audit Report 

recommendation, DPIL amended its reports to materially correct the misstatements noted 

above. 

The Commission approved a finding that DPIL misstated its receipts and disbursements 

for calendar year 2010. (For more detail, see p. 6.) 

Finding 2. Recordkeeping for Employees 

During audit fieldwork, the Audit staff found that DPIL did not maintain monthly logs, as 

required, to document the percentage of time each employee spent on federal election 

activity. DPIL maintained payroll logs for the month of September 2010; the information 

contained in these logs, however, did not include the percentage of time each employee 

spent on federal election activity. For 2009 and 2010, logs were required for DPIL 

payroll totaling $729,125.^ In response to the Interim Audit Report recommendation, 

DPIL acknowledged that it needed to improve its system for maintaining monthly payroll 

logs, and it provided a sample payroll log that it intended to use as part of its general 

compliance procedures. 

The Commission approved a finding that DPIL failed to keep monthly time logs for the 

$412,809 that DPIL disclosed as having been paid with an allocation of federal and nonfederal funds and $1,269 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 $315,047 in payroll paid 

exclusively with non-federal funds and, as such, these expenses are presented in the 

"Additional Issues" section (Issue I). (For more detail, see p. 8.) 

Finding 3. Unreported Levin Fund Activity 

During audit fieldwork, an analysis of DPIL's Levin fund activity indicated that DPIL 

raised Levin funds during the period covered by the audit that totaled $254,774. Of this 

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

such. (See Part I, Background, Commission Guidance, Request for Early Consideration of a Legal 

Question on Page 1.) 
amount, DPIL did not report Levin funds totaling $115,274 on its Levin Schedules L 

(Aggregation Page: Levin Funds) or on its Schedules L-A (Itemized Receipts of Levin 

Funds). In addition, DPIL incorrectly disclosed a shared f^eral election activity 

expenditure in the amount of $144,375 as a shared operating expenditure. In response to 

the Interim Audit Report recommendation, DPIL filed amended reports that materially 

corrected the reporting of Levin activity. 

The Commission approved a finding that DPIL did not report Levin funds totaling 

$115,274 on its Levin Schedules and incorrectly disclosed a shared federal election 

activity expenditure in the amount of $144,375 as a shared operating expenditure. (For 

more detail, see p. 11.) 

Additional Issues 

Issue 1. Recordkeeping for Employees 

As detailed in Finding 2 above, DPIL did not maintain monthly payroll logs, as required, 

to track the percentage of time each employee spent on federal election activity. For 

2009 and 2010, the Audit staff identified payments to DPIL employees totaling $729,125 

for which payroll logs were not maintain^. This consisted of $412,809, for which 

payroll was allocated between federal and non-federal funds, $1,269 that was paid from 

an exclusively non-federal account during periods in which the employee was also paid 

with federal ^nds, and $315,047 for which payroll was paid from an exclusively nonfederal account during certain months. 

In response to the Interim Audit Report recommendation, DPIL acknowledged that it 

needed to improve its system for maintaining monthly payroll logs, and it provided a 

sample payroll log that it intended to use as part of its general compliance procedures. 

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

staffs recommended finding that DPIL failed to keep monthly time logs for the $315,047 

in payroll paid from an exclusively non-federal account during certain months. Pursuant 

to Commission Directive 70,^ these expenses are discussed in the "Additional Issues" 

section and the payroll expenditures of $315,047 are not included in Finding 2. (For 

more detail, see p. 13.) 

Issue 2. Fundraising Receipts 

During audit fieldwork, the Audit staff identified 10 fundraising events from which 

DPIL's federal and non-federal accounts received funds. The federal account received 

$75,800 from these events. Although the federal account was the recipient of these 

funds, it did not appear that DPIL shared any of the costs incurred in raising these funds. 

Four of the events were held to benefit a non-federal campaign and therefore appear to be 

prohibited contributions. For the remaining six events, the Audit staff lacked sufficient 

information to conclude whether the events were joint fundraising events with other 

' Available at http://www.iec.gov/directives/diFective_70.p(if. 
political committees or DPIL fiindraising events solely benefiting DPIL's federal and 

non-federal accounts. 

In response to the Interim Audit Report recommendation, DPIL transferred $75,800 to its 

non-federal account; DPIL's response also stated that the Interim Audit Report presented 

neither evidence of any failure on DPIL's part to allocate the event costs, nor any 

indication that the events in question were somehow joint fundraisers under 11 CFR 

§102.17. The response further stated that all of the events were non-federal fundraising 

events, and that the amounts identified by the auditors were insubstantial, when compared 

with the total amounts raised through these events. DPIL requested a hearing before the 

Commission to discuss this matter. (See Audit Hearing section, page I.) 

The Commission did not approve by the required four votes the Audit staffs 

recommended finding that DPIL did not maintain sufficient records to support that these 

contributions totaling $68,300^ may be deposited into its federal account under the 

notification requirements of 11 CFR §102.5. Pursuant to Commission Directive 70, this 

matter is discussed in the "Additional Issues" section. (For more detail, see p. 16.) 

' In the DFAR, the amount in question totaled $75,800, but at the audit hearing held April 23,2014, DPIL 

counsel noted that one contribution in the amount of $5,000 included in that total was designated for the 

federal account. Upon closer examination, the Audit staff found that this check, along with one other in the 

amount of $2,500, did have accompanying letters from the contributors that designated these funds to the 

federal account. As a result, the Audit staff has revised this figure to $68,300 in the Proposed Final Audit 

Report ($75,800 - $5,000 - $2,500). 
Part IV 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

Summary 

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

records revealed a misstatement of receipts and disbursements in calendar year 2010. 

DPn. understated receipts by $203,666 and disbursements by $215,677. The 

misstatements were mainly Ae result of umeported transfers from the non-federal 

accounts and affiliated committees, as well as unreported operating expenditures and 

transfers to affiliated committees. In response to the Interim Audit Report 

recommendation, DPIL amended its reports to materially correct the misstatements noted 

above. 

The Commission approved a finding that DPIL misstated its receipts and disbursements 

for calendar year 2010. 

Legal Standard 

Contents of Reports. Each report must disclose:. 

• the amount of casb-on-band 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 Analsrsis 

A. Facts 

As part of audit fieldwork, the Audit staff reconciled DPIL's reported activity with its 

bank records and identified misstatements of receipts and disbursements for calendar year 

2010. The chart below details the discrepancies and succeeding paragraphs explain the 

reasons for the misstatements. 

2010 Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2010 

$324,676 $324,676 $0 

Receipts $3,727,446 $3,931,112 $203,666 

Understated 

Disbursements $3,697,887 $3,913,564 $215,677 

Understated 

Ending Cash Balance 

@ December 31,2010 

$354,235 $342,224 $12,011 

Overstated 
The understatement of receipts was the result of the following; 

• Contributions from individuals not reported $1,525 

• Transfers from non-federal accounts not reported 79,316 

• Transfers from an affiliated committee not reported 138,089 

• Contributions received via ACTBLUE reported net of 296 

processing fees 

• Reported receipts not supported by deposit or credit (15.560) 

Net Understatement of Receipts $ 203.666 

The understatement of disbursements was the result of the following: 

• Operating expenditures not reported $155,347 

• Transfer to an affiliated committee not reported 137,089 

• Disbursements not supported by check or debit (77,607) 

• Unreported in-kind contributions 150 

• Disbursements incorrectly reported 7 

• ACTBLUE processing fees not reported 691 

Net Understatement of Disbursements $ 215.677 

The $12,011 overstatement of the ending cash balance resulted from the reporting 

discrepancies noted above. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided DPIL representatives with work papers 

detailing the misstatements of financial activity and discussed the reporting errors that 

caused the misstatement. A DPIL representative stated that DPIL made the unreported 

transfer to the affiliated committee in error, and received the unreported transfers fixim 

the same affiliated committee in order to correct the original transfer. DPIL was prepared 

to amend its reports to correct the misstatement. 

The Interim Audit Report recommended that DPIL: 

• amend its reports to correct the misstatements for 2010 as noted above; 

• amend its most recent report to correct the cash-on-hand balance with an 

explanation that the change resulted from a prior period audit adjustment; and 

• reconcile the cash balance of its most recent report to identify any subsequent 

discrepancies that may affect the adjustment recommended by the Audit staff. 

C. Committee Response to Interim Audit Report Recommendation 

In response to the Interim Audit Report recommendation, DPIL filed amended reports 

that materially corrected the misstatement of financial activity. The response also noted 

that DPIL is reviewing and revising its procedures for reconciling and verifying its 

reports to ensure that such misstatement errors do not recur in future reporting periods. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that DPIL filed amended reports that 

materially corrected the misstatement of financial activity. 
8 

E. Committee Response to the Draft Final Audit Report 

DPIL's response to the Draft Final Audit Report provid^ no additional comments 

relating to this matter. 

F. Audit Hearing 

This finding was not addressed at the Audit Hearing. 

Commission Conclusion 

On June 26,2014, the Conunission considered the Audit Division Recommendation 

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

misstated its receipts and disbursements for calendar year 2010. 

The Commission approved the Audit staffs recommendation. 

Finding 2. Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff found that DPIL did not maintain monthly logs, as 

required, to document the percentage of time each employee spent on federal election 

activity. DPIL maintained payroll logs for the month of September 2010; the information 

contained in these logs, however, did not include the percentage of time each employee 

spent on federal election activity. For 2009 and 2010, logs were required for DPIL 

payroll totaling $729,125.^ In response to the Interim Audit Report recommendation, 

DPIL acknowledged that it needed to improve its system for maintaining monthly payroll 

logs, and it provided a sample payroll log that it intended to use as part of its general 

compliance procedures. 

The Commission approved a finding that DPIL failed to keep monthly time logs for the 

$412,809 that DPIL disclosed as having been paid with an allocation of federal and nonfederal funds and $1,269 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 $315,047 in payroll 

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

"Additional Issues" section (Issue 1). 

Legal Standard 

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

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

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

^ 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 Consideration of a Legal 

Question on Page 1.) 
• 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 have their pay 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 funds that comply with state law. 11 

CFR § 106.7(d)(1). 

Facts and Anal]rsis 

A. Facts 

During audit fieldwork, the Audit staff reviewed all payroll disbursements made from 

DPIL's federal and non-federal accounts. The only payroll log DPIL maintained was for 

the month of September 2010. This log listed the number of hours worked by each 

employee and the activities performed each day. The information provided did not, 

however, include the percentage of time that the employees spent in connection with 

federal election activity. During audit fieldwork, DPIL representatives explained that 

DPIL did not realize that logs were required until September 1,2010, and that some staff 

left before the end of September without turning in their logs. Such logs were required to 

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

salaries and wages. 

In addition to the aforementioned logs for the month of September 2010, DPIL provided 

agreement-for-services contracts, campaign employment applications, and IRS W-4 

forms (Employee's Withholding Allowance Certificate) for most of its employees. For 

employees paid from the non-federal account, the campaign employment applications 

noted the non-federal candidates to which the employees were assigned, and for 

employees paid from the federal account, the applications noted that the employee was 

assigned to DPIL's headquarters. Further, DPIL provided copies of in-kind letters that 

were addressed to non-federal candidates. These letters listed salaries and expenses paid 

to employees from its non-federal accounts as in-kind contributions made on behalf of 

non-federal candidates. The documentation provided by DPIL supports its position that 

the employees it considered non-federal could be paid from its non-federal accounts. 

DPIL did not, however, maintain sufficient payroll logs to document the percentage of 

time each employee spent in connection with federal election activity. 

For 2009 and 2010, logs were required for $729,125 in payroll ($412,809 paid with an 

allocation of shared federal/non-federal funds and $316,316^ paid with non-federal 

funds).' 

* DPIL paid 59 employees from its non-federal account. Fifty-eight of these employees were paid 

$315,047 exclusively with non-federal funds during certain months, while one employee was paid $1,269 

from an exclusively non-federal account during periods in which the employee was also paid with federal 

funds. 

' Payroll is stated net of taxes and benefits. 
10 

B. Interim Audit Report & Audit Division Recommendation 

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

recordkeeping issue with DPIL representatives. The representatives provided notarized 

and sworn affidavits by DPIL's executive director and coordinated campaign director that 

identified DPIL's employees and discussed the amount of compensated time spent by 

each employee on activities in connection with federal elections. DPIL did not provide 

documentation of the actual percentage of time spent on federal activities. While the 

affidavits were useful for allocation purposes, they alone were not sufficient to fulfill the 

recordkeeping requirement because they were not created and maintained prior to the 

issuance of the audit notification letter. 

For DPIL employees paid with an allocation of federal and non-federal funds, and for 

those employees paid entirely with non-federal funds, the Interim Audit Report 

recommended that DPIL provide and implement a plan to maintain such monthly payroll 

logs to track the percentage of time each employee spends on federal election activity. 

C. Committee Response to Interim Audit Report Recommendation 

In response to the Interim Audit Report recommendation, DPIL acknowledged that it 

needed to improve its system for maintaining monthly payroll logs. It also provided a 

sample payroll log that it intended to use as part of its general compliance procedures in 

the ^ture. The sample payroll log contained columns for each employee to track nonfederal hours worked, federal election activity hours worked and the type of federal 

election activity that the employee performed. 

D. Draft Final Audit Report 

The Draft Final Audit Report mentioned that DPIL planned to improve its system for 

maintaining payroll logs, and that DPIL provided a sample payroll log that it intended to 

use as part of its general compliance procedures in the future. The Draft Final Audit 

Report acknowledged that if DPIL uses this log properly, it should result in compliance 

wi^ the II CFR § 106.7(d)(1) recordkeeping requirements. 

E. Committee Response to the Draft Final Audit Report 

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

relating to this matter. 

F. Audit Hearing 

This finding was not addressed at the Audit Hearing. 

Commission Conclusion 

On June 26,2014, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended the Commission adopt a finding 

that DPIL failed to maintain payroll logs to document the percentage of time each 

employee spent on federal election activity totaling $729,125. 

The Commission approved a finding that DPIL failed to keep monthly time logs for the 

$412,809 that DPIL disclosed as having been paid with an allocation of federal and non-
11 

federal funds and $1,269 that was paid from an exclusively non-federal account during 

periods in which they were also paid with federal funds. The Commission did not 

approve the portion of the recommended finding related to the $315,047 in payroll paid 

exclusively with non-federal funds during a given month and, as such, the matter is 

presented in the "Additional Issues" section. 

Finding 3. Unreported Levin Fund Activity 

Summary 

During audit fieldwork, an analysis of DPIL's Levin ftrnd activity indicated that DPIL 

raised Levin funds during the period covered by the audit that totaled $254,774. Of this 

amount, DPIL did not report Levin funds totaling $115,274 on its Levin Schedules L 

(Aggregation Page: Levin Funds) or on its Schedules L-A (Itemized Receipts of Levin 

Funds). In addition, DPIL incorrectly disclosed a shared federal election activity 

expenditure in the amount of $144,375 as a shared operating expenditure. In response to 

the Interim Audit Report recommendation, DPIL filed amended reports that materially 

corrected the reporting of Levin activity. 

The Commission approved a finding that DPIL did not report Levin fimds totaling 

$115,274 on its Levin Schedules and incorrectly disclosed a shared federal election 

activity expenditure in the amount of $144,375 as a shared operating expenditure. 

Legal Standard 

A. Reporting. If a state, district or local party committee's combined annual receipts 

and disbursements for federal election activity (FEA) total $5,000 or more during the 

calendar year, the committee must disclose receipts and disbursements of federal funds 

and Levin funds used for FEA. 11 CFR §300.36 (b)(2). 

B. Receipt of Levin Funds. Levin funds expended or disbursed by any state committee 

must be raised solely by the committee that expends or disburses them. Each donation 

must be lawful under the laws of the state in which the committee is organized and the 

funds solicited must not aggregate more than $10,000 in a calendar year. Consequently, 

funds from national party committees, other state, district and local committees, and from 

federal candidates or officeholders, may not be accepted as Levin funds. 11 CFR 

§300.31. 

C. Contents of Levin Reports. Each report must disclose: 

• the amount of cash-on-hand for Levin funds at the beginning and end of the 

reporting period; 

• the total amount of Levin fund receipts for the reporting period and the calendar 

year; 

• the total amount of Levin fund disbursements for the reporting period and the 

calendar year; and 

• certain transactions that require itemization on Schedule L-A (Itemized Receipts 

of Levin Funds) or Schedule L-B (Itemized Disbursements of Levin Funds). 11 

CFR §300.36 (b)(2). 
12 

Facts and Analysis 

A. Facts 

As part of audit fieldwork, the Audit staff found that DPIL raised Levin funds totaling 

$254,774 that it deposited into its non-federal account. It reported Levin funds totaling 

$139,500 on its Schedules I^A. DPIL did not report Levin funds totaling $115,274. In 

addition, DPIL incorrectly disclosed a shared federal election activity expenditure of 

$144,375, of which the Levin share was $114,056, as a shared operating expenditure. 

DPIL did not have a Levin fund bank account for its Levin fund receipts. DPIL 

representatives explained that DPIL kept all Levin funds raised in its non-federal account 

in accordance with 11 CFR §300.30(C)(2) and (3). DPIL provided the Audit staff with a 

reasonable accounting of its Levin fund receipts. A daily cash analysis of DPIL's nonfederal accounts demonstrated that DPIL had sufficient Levin funds at the time DPIL 

transferred the funds to the federal account. 

During the period covered by the audit, DPIL reported shared federal election activity 

expenditures totaling $180,000. The Levin share of these expenditures was $139,500. 

DPIL transferred only $100,000 to its federal account for the Levin share of the allocable 

expenditures. Levin funds totaling $154,774 remain in DPIL's non-federal account. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided DPIL representatives with workpapers 

that detailed a possible overfunding by DPIL's non-federal account. DPIL 

representatives responded that DPIL had incorrectly reported a disbursement in the 

amount of $144,375 on Schedule H-4 (Shared Federal^Ion-Federal Activity) instead of 

Schedule H-6 (Shared Federal Election Activity), and that it could have us^ Levin funds 

to pay the $114,056 share of the direct mail expenditure. They argued that DPIL had 

sufficient Levin funds on hand to pay for the non-federal share, and stated that the reports 

would be amended to correct this matter. The Audit staff concurred that Levin funds 

could have been transferred to the federal account in regard to this expenditure, and that 

DPIL did have sufficient Levin funds available to be transferred. Further, by classifying 

this transaction as such, there no longer would be an overfiinding by the non-federal 

account. 

The Interim Audit Report reconunended that DPIL amend its reports to disclose the 

additional Levin receipts in the amount of $115,274 on Schedules L-A and disclose the 

expenditure in the amount of $144,375 as a shared federal election activity expenditure 

on Schedule H-6. 

C. Committee Response to Interim Audit Report Recommendation 

In response to the Interim Audit Report recommendation, DPIL filed amended reports 

that materially corrected the reporting of Levin activity. 
13 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that DPIL filed amended reports that 

materially corrected the reporting of Levin activity. 

E. Committee Response to the Draft Final Audit Report 

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

relating to this matter. 

F. Audit Hearing 

This finding was not addressed at the Audit Hearing. 

Commission Conclusion 

On June 26,2014, the Commission considered the Audit Division Reconunendation 

Memorandum in which the Audit staff recommended the Commission find that DPIL did 

not report Levin funds totaling $115,274 on its Levin Schedules and incorrectly disclosed 

a shai^ federal election activity expenditure in the amount of $144,375 as a shared 

operating expenditure. 

The Commission approved the Audit staffs recommendation. 

Part V 

Additional Issues 

Issue 1. Recordkeeping for Employees 

Summary 

As detailed in Finding 2 above, DPIL did not maintain monthly payroll logs, as required, 

to track the percentage of time each employee spent on federal election activity. For 

2009 and 2010, the Audit staff identified payments to DPIL employees totaling $729,125 

for which payroll logs were not maintain^. This consisted of $412,809, for which 

payroll was allocated between federal and non-federal fimds, $1,269 that was paid from 

an exclusively non-federal account during periods in which the employee was also paid 

with federal funds, and $315,047 for which payroll was paid from an exclusively nonfederal account during certain months. 

In response to the Interim Audit Report recommendation, DPIL acknowledged that it 

needed to improve its system for maintaining monthly payroll logs, and it provided a 

sample payroll log that it intended to use as part of its general compliance procedures. 

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

staffs recommended finding that DPIL failed to keep monthly time logs for the $315,047 

in payroll paid from an exclusively non-federal account during certain months. Pursuant 

to Commission Directive 70, these expenses are discussed in the "Additional Issues" 

section and the payroll expenditures of $315,047 are not included in Finding 2. 
14 

Legal Standard 

The legal standard in Finding 2 above is incorporated herein. 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reviewed all payroll disbursements made from 

pPIL's federal and non-federal accounts. The only payroll log DPIL maintained was for 

the month of September 2010. This log listed the number of hours worked by each 

employee and the activities performed each day. The information provided did not, 

however, include the percentage of time that the employees spent in connection with 

federal election activity. During audit fieldwork, DPIL representatives explained that 

DPIL did not realize that logs were required until September 1,2010, and that some staff 

left before the end of September without tuming in their logs. Such logs were required to 

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

salaries and wages. 

In addition to the aforementioned logs for the month of September 2010, DPIL provided 

agreement-for-services contracts, campaign employment applications, and IRS W-4 

forms (Employee's Withholding Allowance Certificate) for most of its employees. For 

employees paid from the non-federal account, the campaign employment applications 

noted the non-federal candidates to which the employees were assigned, and for 

employees paid fix)m the federal account, the applications noted that the employee was 

assigned to DPIL's headquarters. Further, DPIL provided copies of in-kind letters that 

were addressed to non-federal candidates. These letters listed salaries and expenses paid 

to employees from its non-federal accounts as in-kind contributions made on behalf of 

non-federal candidates. The documentation provided by DPIL supports its position that 

the employees it considered non-federal could be paid ^m its non-federal accounts. 

DPIL did not, however, maintain sufficient payroll logs to document the percentage of 

time each employee spent in connection wiA federal election activity. 

For 2009 and 2010, logs were required for $729,125 in payroll ($412,809 paid with an 

allocation of shared federal/non-federal funds and $316,316 paid with non-federal funds). 

B. Interim Audit Report & Audit Division Recommendation 

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

recordkeeping issue with DPIL representatives. The representatives provided notarized 

and swom affidavits by DPIL's executive director and coordinated campaign director that 

identified DPIL's employees and discussed the amount of compensated time spent by 

each employee on activities in connection with federal elections. DPIL did not provide 

documentation of the actual percentage of time spent on federal activities. While the 

affidavits were useful for allocation purposes, they alone were not sufficient to fulfill the 

recordkeeping requirement because they were not created and maintained prior to the 

issuance of the audit notification letter. 
15 

For DPIL employees paid with an allocation of federal and non-federal funds, and for 

those employees paid entirely with non-federal funds, the Interim Audit Report 

recommend^ that DPIL provide and implement a plan to maintain such monthly payroll 

logs to track the percentage of time each employee spends on federal election activity. 

C. Committee Response to Interim Audit Report Recommendation 

In response to the Interim Audit Report recommendation, DPIL acknowledged that it 

needed to improve its system for maintaining monthly payroll logs. It also provided a 

sample payroll log that it intended to use as part of its general compliance procedures in 

the future. The sample payroll log contained colunms for each employee to track nonfederal hours worked, federal election activity hours worked and the type of federal 

election activity that the employee performed. If DPIL uses this log properly, it should 

result in compliance with the 11 §CFR 106.7(d)(1) recordkeeping requirements. 

D. Draft Final Audit Report 

The Draft Final Audit Report mentioned that DPIL acknowledged that it needed to 

improve its system for maintaining payroll logs, and that DPIL provided a sample payroll 

log that it intended to use as part of its general compliance procedures in the future. 

E. Committee Response to the Draft Final Audit Report 

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

relating to this matter. 

F. Audit Hearing 

This issue was not addressed at the Audit Hearing. 

Commission Conclusion 

On June 26,2014, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission adopt a 

finding that DPIL failed to maintain logs to document the time employees spent on 

federal election activity totaling $729,125. 

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

staffs recommended finding that DPIL failed to keep monthly time logs for the 

$315,047'° in payroll paid exclusively from non-federal fiinds during certain months. 

Some Commissioners voted to approve the Audit staffs 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 discussed in the "Additional Issues" section pursuant to Commission 

Directive 70. 

See Footnote 8. 
16 

Issue 2. Fundraising Receipts 

Sununaxy 

During audit fieldwork, the Audit staff identified 10 fundraising events from which 

DPIL's federal and non-federal accounts received funds. The federal account received 

$75,800 from these events. Although the federal account was the recipient of these 

funds, it did not appear that DPIL shared any of the costs incurred in raising these funds. 

Four of the events were held to benefit a non-federal campaign and therefore appear to be 

prohibited contributions. For the remaining six events, the Audit staff lacked si^ficient 

information to conclude whether the events were joint fundraising events with other 

political committees or DPIL fundraising events solely benefiting DPIL's federal and 

non-federal accounts. 

In response to the Interim Audit Report recommendation, DPIL transferred $75,800 to its 

non-federal account. DPIL's response also stated that the Interim Audit Report presented 

neither evidence of any failure on DPIL's part to allocate the event costs, nor any 

indication that the events in question were somehow joint fundraisers under II CFR 

§102.17. The response further stated that all of the events were non-federal fundraising 

events, and that the amounts identified by the auditors were insubstantial, when compared 

with the total amounts raised through these events. DPIL requested a hearing before the 

Commission to discuss this matter. (See Audit Hearing section, page I.) 

The Commission did not approve by the required four votes the Audit staff's 

recommended finding that DPIL did not maintain sufficient records to support that these 

contributions totaling $68,300*' may be deposited into its federal account under the 

notification requirements of II CFR §102.5. Pursuant to Commission Directive 70, this 

matter is discussed in the "Additional Issues" section. 

Legal Standard 

Depositing Contributions into Federal Accounts: Only contributions meeting any of 

the following conditions may be deposited in a federal account: 

• contributions designated for the federal account; 

• contributions that result from a solicitation that expressly states that the 

contributions will be used in connection with a federal election; or 

• contributions from contributors who are informed that all contributions are subject 

to the prohibitions and limitations of the Act. II CFR §I02.5(a)(2)(i)-(iii). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff identified 10 fundraising events from which 

DPIL's federal and non-federal accounts received funds. DPIL did not disclose the 

events on Schedules H-2 (Allocation Ratios). In addition, it did not appear that DPIL 

" -See Footnote 6. 
17 

paid any expenses related to these fundraising events from either its federal or nonfederal accounts. From the available documentation, the Audit staff determined that (1) 

solicitations for some of the events requested that checks be made out to the Friends of 

Michael J. Madigan committee,'^ (2) organizations other than DPIL paid the costs for 

some of the events, and (3) most of the disclaimers on the event solicitations did not 

include an accurate statement of federal law regarding the collection and reporting of 

individual contributor information. DPIL provided In-kind Contribution Notification 

forms to document some of the costs of three of the fundraising events. These forms 

noted that the in-kind contributions for the costs were made on behalf of Friends of 

Michael J. Madigan, not DPIL. From the documentation that was made available, it 

appeared that the solicitations for these fundraising events were not intended to raise 

money for the federal account. 

The federal account received $75,800 and the non-federal account received $1,103,925 

from these events. It was not clear whether any other committees received fimds from 

these events. Although the federal account was the recipient of funds, it did not appear to 

have shared in any of the costs incurred in raising these funds. Documentation for three 

of the 10 events showed that in-kind contributions were made to Friends of Michael J. 

Madigan in the amount of $5,077 for some of the costs of these events. There were no 

written agreements available that identified the fundraising representatives and stated the 

allocation formulas, the allocation percentages for distribution of joint fundraising 

proceeds and expenses among the participants. The Audit staff grouped the 10 

fundraising events into two categories. 

I. Fundraising Events Held to Benefit the Non-federal Campaign Committee of 

DPIL's Chairman. Michael J. Madigan 

DPIL received and deposited into its federal account contributions totaling $5,650 

from four of the 10 events. DPIL contends that the events were not DPIL events 

and that it did not solicit the contributions. The four fundraisers were: 

• 2009 Lake Event held in April, 2009; 

• 2010 Lake Event held on April 26,2010; 

• Luciana Event held on September 21,2010; and 

• Union League Event held on September 23,2010. 

Based on the content of the solicitations for these four events, it appeared that 

these events may have been solely for the benefit of the non-federal campaign 

account of Michael J. Madigan. All solicitations from these events asked that 

contributor's checks be made payable to "Friends of Michael J. Madigan." No 

documentation was available to demonstrate that DPIL solicited fimds from or 

participated in these events. 

Friends of Michael J. Madigan is a non-federal committee. Michael J. Madigan is the Speaker of the 

Illinois House of Representatives and Chairman of DPIL. 
18 

As cited above, 11 CFR §102.5(a)(2)(i)-(iii) provides guidance on when funds 

may be deposited into a committee's federal account. Based on the 

documentation provided, the Audit staff concluded that none of the funds that 

DPIL received as a result of these four events was permitted to be deposited into 

DPIL's federal account. Therefore, the funds totaling $5,650 were impermissible 

and should be transferred to DPIL's non-federal account. 

2. The Six Remaining Fundraisine Events 

DPIL received and deposited into its federal account contributions totaling 

$70,150 from the six remaining fiindraising events. Based on the information that 

was available during audit fieldwork, the Audit staff questioned whether these 

events were either joint fundraising events with other political committees or 

fundraising events that solely benefited DPIL's federal and non-federal accounts. 

The six events were as follows: 

• DC 2009 Event held on November 4,2009; 

• WesPAC/IBEW Event held on February 24,2010; 

• Reza's Dinner held on August 12,2010; 

• Janssen Event held on September 28,2010; 

• Hospitality Event held on October 6,2010; and 

• 2010 DC Event held on October 14,2010. 

During audit fieldwork, the Audit staff lacked sufficient information to be able to 

determine into which category these events fell, and as a result, we believed that 

these events appeared to be either joint fundraising events with other committees, 

or events which solely benefited DPIL's federal and non-federal accounts. 

Despite event solicitations that directed contributors to make their checks payable 

to the "Democratic Party of Illinois," the Audit staff did not have information that 

suggested that DPIL participated with any other committees, shared any of the 

costs, or received any of the shared proceeds for these events. Although some of 

the solicitations requested contributors to mail their checks to the event sponsor 

and/or include "paid for by" language to identify the political committee that paid 

for the solicitation, this alone did not establish that the events were joint 

fundraisers with other political conunittees in connection with a federal election. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff presented this issue to the DPIL representatives 

and requested that they document the costs associated with these events, as well as who 

paid for such expenses. DPIL representatives acknowledged that four of the events in 

which DPIL received federal funds were not DPIL events, but argued that the amount of 

federal funds received from the events was de minimis. 
19 

The Interim Audit Report recommended that DPIL: 

• demonstrate that it could permissibly deposit into its federal account funds 

totaling $5,650 from the four fimdraising events identified above; and 

• demonstrate that it could permissibly deposit into its federal account fimds 

totaling $70,150 from the remaining six events. Further, for these events, the 

Interim Audit Report reconunended that DPIL identify which, if any, were joint 

fimdraising events with other political committees, or which, if any, were DPIL 

events benefiting solely its federal and non-federal accounts. In connection with 

those events that benefited solely DPIL's federal and non-federal accounts, the 

Interim Audit Report recommended that DPIL demonstrate that it had properly 

allocated costs between its federal and non-federal accounts. 

Absent such demonstration, the $75,800 deposited in its federal account would be 

considered impermissible and the Interim Audit Report would recormnend that DPIL 

transfer these funds to its non-federal account. 

C. Committee Response to Interim Audit Report Recommendation 

In response to the Interim Audit Report recommendation, DPIL transferred $75,800, to 

its non-federal account on September 18,2013 and provided a copy of the check (front 

only). DPIL stated that the Interim Audit Report presented no evidence of any failure on 

DPIL's part to allocate the event costs, nor any indication that the events in question were 

somehow joint fundraisers under II CFR §102.17. 

The response further stated that all of the events were non-federal fimdraising events, and 

that the federal amounts identified by the auditors were insubstantial, when compared 

with the total amounts raised through these events. The response also stated that neither 

the allocation rules nor the joint fundraising rules were triggered when a bona fide nonfederal fundraising event elicits a de minimis number of federal contributions, and the 

Interim Audit Report presented no evidence that DPIL or the Friends of Michael J. . 

Madigan Committee sought federal contributions through any of these events. However, 

because of the limited documentation available, and to eliminate any question of 

noncompliance, DPIL nonetheless made the recommended transfer. 

Although DPIL complied with the Audit staffs recommendation to transfer the $75,800 

to its non-federal account, the Audit staff did not agree with DPIL's assertions. DPIL did 

not show that any of the funds it deposited in its federal account met the criteria in 11 

CFR §I02.5(a)(2)(i)-(iii). There is no exception to the Commission's rules that would 

permit a de minimis amount of funds, the origins of which are either related to a nonfederal event or an event for which the political purpose (federal/non-federal) cannot be 

determined, to be deposited in a committee's federal account. 

D. Draft Final Audit Report 

The Draft Final Audit Report noted that DPIL transferred the $75,800 to its non-federal 

account, but that DPIL did not show that any of the funds it deposited in its federal 

account from these events met the criteria in II CFR §I02.5(a)(2)(i)-(iii). 
20 

E. Committee Response to the Draft Final Audit Report 

DPIL responded to the Draft Final Audit Report by requesting a hearing because it 

believed that the audit report still asserted potential violations by the committee related to 

proceeds from joint fundraising events, allocation of event costs between federal and 

non-federal accounts and notice requirements to donors. Its request for a hearing was 

granted and subsequently held on April 23,2014. (See Audit Hearing section on page 1.) 

F. Audit Hearing 

During the Audit Hearing, Counsel raised questions about whether the facts related to 

these events were subject to the joint fundraising and allocation requirements of 11 CFR 

§§102.17 and 106.7(d)(4). The Audit staff clarified that the joint fundraising and 

allocation issues were raised early in the audit process and that the only issue that 

remained before the Commission was the requirements at 11 CFR §102.5. Counsel then 

argued that 11 CFR §102.5 was being applied as a source restriction on whether DPIL 

could or could not deposit funds received from non-federal events into its federal 

account. He claimed that the contributions met the source restrictions and contribution 

limitations of the Act and were therefore eligible for deposit in the federal account. 

Counsel stated, however, that there was not a clear unambiguous record of what DPIL's 

donors were told at the time that they made their contributions and he questioned whether 

there was an actual basis for a finding. 

The Audit staff noted that the contributions in question do not facially appear to violate 

contribution limitations or source restrictions. However, without further documentation, 

the Audit staff was unable to determine whether the notification requirements of 11 CFR 

§102.5 were followed with respect to the depositing of these contributions. 

Commission Conclusion 

On June 26,2014, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff reconunended the Commission find that DPIL did 

not maintain sufficient records to support that contributions totaling $68,300 may be 

deposited into its federal account under the notification requirements of 11 CFR §102.5. 

The Commission did not approve by the required four votes the Audit staffs 

recommended finding. Some Commissioners voted to support the finding concluding that 

while the contributions in question do not facially appear to violate the contribution limits 

or source restrictions, DPIL did not verify, affirm, represent, or otherwise establish 

during the audit process that these contributions may be deposited into a federal account. 

Others did not, viewing facial evidence that the contributions in question did not appear 

to violate the source and amount restrictions as sufficient. 

This matter is discussed in the "Additional Issues" section pursuant to Commission 

Directive 70.