FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

December 23,2013 

MEMORANDUM 

To: 

Through: 

From: 

The Conunission 

Alec Palmer 

Staff Director 

Patricia C. Orrock 

Chief Compliance Officer . 

Thomas E. Hintermister~VS\ 

Assistant Staff Director 

Audit Division 

DougKodish 0 ^ 

By: 

Subject: 

Audit Manager 

Paula NurthenC'M 

Lead Auditor ^ 

Audit Division Recommendation Memorandum on the Democratic Party of 

South Carolina ((DPSC) Al 1-19) 

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit Reports), 

the Audit staff presents its recommendations below and discusses the findings in the 

attached Draft Final Audit Report (DFAR). The Office of General Counsel has reviewed 

this memorandum and concurs with the recommendations. 

Finding 1. Recordkeeping for Employees 

For the period covered by the audit, DPSC did not maintain any monthly payroll 

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

federal election activity. For 2009 and 2010, the Audit staff identified payments to 

DPSC employees totaling $481,956 for which payroll logs were not maintained. 

This amount consisted of payroll that was allocated between federal and nonfederal funds. 

In response to the Interim Audit Report (lAR) recommendation, DPSC stated that 

it agrees to maintain monthly payroll logs to track federal election activity for 

those employees who are paid all or in part with non-federal funds. DPSC did not 

file an additional response to the DFAR. 
The Audit staff recommends that the Commission find that DPSC failed to 

maintain logs to document the time employees spent on federal election activity 

totaling $481,956. 

Finding 2. Coordinated Party Expenditures 

The Audit staff detennined that DPSC appeared to have exceeded the 2010 

coordinated party expenditures limit on behalf of a House candidate by $5,117. 

Subsequent to audit fieldwork, DPSC provided additional documentation and filed 

an amended report reclassifying one of the coordinated expenditures to Line 30(b) 

(Federal Election Activity Paid Entirely with Federal Funds). The Audit staff 

concluded in the lAR and DFAR that DPSC did not make excessive coordinated 

expenditures. 

The Audit staff reconunends that the Commission find that DPSC did not exceed 

the 2010 coordinated party expenditure limit. 

DPSC did not request an audit hearing. 

If this memorandum is approved, a Proposed Final Audit Report will be prepared within 

30 days of the Commission's vote. 

In case of an objection. Directive No. 70 states that the Audit Division Recommendation 

Memorandum will be placed on the next regularly scheduled open session agenda. 

Documents related to this audit report can be viewed in the Voting Ballot Matters folder. 

Should you have any questions, please contact Paula Nurthen or Doug Kodish at 694-

1200. 

Attachment: 

- Draft Final Audit Report of the Audit Division on the Democratic Party of South 

Carolina 

cc: Office of General Counsel 
Draft Final Audit Report of the 

Audit Division on the Democratic 

Party of South Carolina 

(January 1, 2009 - December 31, 2010) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial commence 

with the Act^^ne audit 

determine^^^her the 

commiQf^e^l^d with 

the limitations?^ 

prohibitions and 

disclosure requiremiS 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Committee (p. 2) 

The Democratic Party of South^^Hsli 

committee headquartered ii ^ 

information, see the chart c&the Coi 

Financial Activity 

• Receipts 

o Contributio 

o Transfers £^m 

Account 

Tran^fer^Pm #iffilia 

Cc^Pttees 

sfers fro 

ittees 

eceipts 

ursen^Rits 

perating Expenditures 

ederal Election Activity 

Coordinated Expenditures 

Other Disbursements 

Total Disbursements 

Levin Receipts 

• Levin Disbursements 

is^tate party 

th Carolina. For more 

irganization, p. 2. 

670,971 

301,155 

S 2,963,986 

$ 1,597,632 

1.307,227 

50,366 

83,850 

S 3,039,075 

$ 51,000 

S 51,000 

Findings and Recommendations (p. 4) 

• Recordkeeping for Employees (Finding 1) 

• Coordinated Party Expenditures (Finding 2) 

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

Division on the Democratic Party of 

South Carolina 

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

Part I, Background 

Authority for Audit 

Scope of Audit 

Commission Guidance 

Page 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Recommendations 

Finding 1. Recordkeeping for Employees 

Finding 2. Coordinated Party Expenditures 
Part I 

Background 

Authority for Audit 

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

undertaken by the Audit Division of the Federal Election Commission (the Commission) 

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

The Audit Division conducted the audit pursuant to 2 U.S.C. §438(b), which permits the 

Commission to conduct audits and field investigations of any political committee that is 

required to file a report under 2 U.S.C. §434. Prior to coi^^^f^y^di t under this 

subsection, the Commission must perform an internal re^^ ^ re^^^filed by selected 

committees to determine if the reports filed by a partic^yar commi^^^ t the threshold 

requirements for substantial compliance with the Act. 

Scope of Audit 

Following Commission-approved procedures, the Audit staff 

factors and as a result, this audit examined: 

1. the disclosure of individual contributors' 

2. the disclosure of disbursements, debts 

3. the disclosure of expenses allocated bet 

4. the consistency between reported 

5. the completeness of records; 

6. other committee operations m 

Commissioii^ 

Reque^^r Early Com 

Pursi^^^he "Policy Stateme: 

of L^pr^^b^ns by the Co 

question rai^^^ing the audit 

ted various risk 

-federal accounts; 

required under 

fiinds. 

Ion Cf^&sideration of a Legal Question 

Establishing a Program for Requesting Consideration 

^ion," DPSC requested eariy consideration of a legal 

)PSC questioned whether the monthly time logs 

§106.^)(1) applied to employees paid with 100 percent federal 

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

committees to keep amonthly log for employees paid exclusively with 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 fimds and reported as 

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

Finding I - Recordkeeping for Employees of this audit report does not include any DPSC 

employees paid with 100 percent federal fiinds and reported as such. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 
Overview of Financial Activity 

(Audited Amounts) 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Recordkeeping for Employees 

During audit fieldwork, the Audit staff determined that 

monthly payroll logs, as required, to document the perc 

spent on federal election activity. For 2009 and 2010, 

to DPSC employees totaling $481,956^-^ for which pa; 

This amount consisted of payroll which was allocated 

fimds. 

intain any 

employee 

tified payments 

ntaiiii^d. 

eral 

In response to the Interim Audit Report reconmiendation, DPSC^^^dth^ it agrees to 

maintain monthly payroll logs to track federal d^^f^^ctivity forl^^employees who 

are paid all or in-part with non-federal funds.Jrhe A^^^f f consi^s the matter 

resolved. (For more detail, see p. 5.) ^ "^^m 

Finding 2. Coordinate^ 

The Audit staff determined that ~ 

party expenditures liini).on beh: 

audit fieldwork, 

reclassifying 

Paid Entir^^ith Federal 

Audit l^lPrt recommendation, 

matti 

y f^s'l^lS^ures 

appeared t^^^^ceeded the 2010 coordinated 

use candidate by $5,117. In response to the 

ocumentation and filed an amended report 

to Line 30(b) (Federal Election Activity 

the overage. In response to the Interim 

no additional information regarding 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 Conunission Consideration of 

a Legal Question, p. 1.) 

' Payroll is stated net of taxes and benefits. 
Part IV 

Findings and Recommendations 

Finding 1. Recordkeeping for Employees 

Summary 

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

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

spent on federal election activity. For 2009 and 2010, the Audit ^aff identified payments 

to DPSC employees totaling $481,956^'^ for which payrq^ ytmaintained. 

This amount consisted of payroll which was allocated bl^een fed^Ksmd non-federal 

fimds. 

In response to the Interim Audit Report recommendation^^^!^ stated thal^|^p^es to 

maintain monthly payroll logs to track federal election o^n^^ ^ those empf^ees who 

are paid all or in-part with non-federal funds. The Audit staff o^m^rs ihe matter 

resolved. 

Legal Standard 

Maintenance of Monthly Logs. Party co: 

percentage of time each employee sp^^pin corm< 

Allocations of salaries, wages, and^ipge benefit 

• employees who spend 25j^^sit or less o 

monthly log of the 

federal election, 

undertaken as follows: 

ompensated time in a given 

month on feds<S!iii£k&tioi 

or have 

emp]^0es who spei 

on federal electi^ 

>yees who spend m 

^activities may bi 

^ J(d)(l) 

must be paid either from the federal account 

;d as a3f^^rat^ve costs; 

than 2^^rcent of their compensated time in a given 

^tivities^ust be paid only from a federal account; and 

)f their compensated time in a given month on federal 

lid entirely with funds that comply with State law. 11 

Facts and Ani 

A. Facts 

During fieldwork, thtf'Audit staff reviewed disbursements for payroll. DPSC 

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

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

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

employees. For 2009 and 2010, logs were not maintained for $481,956^'^ in payroll. 

* 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, p. 1.) 

^ Payroll is stated net of taxes and benefits. 
This amount consisted of payroll which was allocated between federal and non-federal 

funds. DPSC had no employees paid with exclusively non-federal funds. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the payroll recordkeeping matter with DPSC representatives 

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

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

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

Interim Audit Report recommended that DPSC provide and implement a plan to maintain 

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

election activity. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation 

maintain monthly payroll logs to track federal election SLC 

are paid all or in-part with non-federal funds. Such acti 

guidance with respect to the payroll logs. (See Commission 

staff considers the matter resolved. 

Finding 2. Coordinated P%yt 

stated ^I^I^I^^^^s to 

those en^^^s who 

tent with Commission 

) The Audit 

Summary 

The Audit staff determined that 

party expenditure§d^bei^^^ffiha1lf oi 

audit fieldwoi^ 

reclassifyi^^ne of the coorX 

Paid Ent^^ with Federal Fun^ 

Audit^S^^k,recommendation, 

mat 

speared lo WSh exceeded the 2010 coordinated 

^e candidate by $5,117. In response to the 

lentation and filed an amended report 

expencpafes to Line 30(b) (Federal Election Activity 

thus resolving the overage. In response to the Interim 

IC provided no additional information regarding this 

Legal Stan< 

A. Coordinated l^^^^^nditures. National party committees and state party 

committees are perm'^P^to purchase goods and services on behalf of candidates in the 

general election, ovec^d above the contributions that are subject to contribution limits. 

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

following mles: 

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

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

age population; 

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

committees; > 

• the parties may make these expenditures only in coimection with the general 

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

expenditures; and 

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

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

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

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

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

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

authority assigned, and be received by the assignee before any coordinated party 

expenditure is made pursuant to the assigrunent. The P^^ii^j^^^^ comnittee that is 

assigned authority to make coordinated party expenditu^^^^ ^^im^^ written 

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

Facts and Analysis 

A. Facts 

The combined coordinated party expenditure limit for a House 

Candidate in South Carolina for the 2010 electio: 

limit for both the state party (DPSC) and the 

Committee (DNC)). DPSC reported coordi 

(Itemized Coordinated Party Expenditure;;) 

of Representatives (the Candidate). T^^ported 

state party limit by $5,117. 

resratative's 

was $87,0@^^^£ a $43,500 

((Dem^^ic National 

f $48,617 on Schedule F 

candidate for the House 

expenditures exceeded the 

SC disclosed that the DNC^ designated it to 

te^ During fieldwork, the Audit staff 

letters to document the assignment of 

representatives did not provide any letters or other 

ent of DNC s spending authority. Therefore, the 

's expenditures for the Candidate exceeded the state 

Of the $48,617 

spend $20,250 

requested 

spendin 

dOCU; 

Au( 

party coon 

B. Interim Audfj^^tort^PAudit Division Recommendation 

After the exit confe^^^^ response to the Audit staffs request for documentation to 

show that DPSC hadjmoexceeded the coordinated expenditure limit, DPSC 

representatives stateothat DPSC had mistakenly reported a $10,250 disbursement for 

door hangers as a coordinated expenditure that should have been reported as Federal 

Election Activity on Schedule B, Line 30(b). DPSC's counsel stated that this 

disbursement was an "exempt slate card activity" and DPSC filed an amended report, 

reclassifying the $10,250 expenditure to Line 30(b) as "exempt canvassing material." 

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

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

S 15,118 for the Candidate, which is below the spending limit of S43,500. 

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

document the assigning of its coordinated spending authority. 
Based upon a review of the content of the door hanger and the timing of the invoice 

relative to the election (it appears to have fallen within the established FEA timelines), 

the Audit staff agreed with the reclassification and concluded that DPSC did not make 

excessive coordinated expenditures. 

The Interim Audit Report recommended that DPSC provide any additional information or 

written comments that it considered relevant to this finding. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, DPSC provided no additional 

information regarding this matter.