Preliminary Audit Report of the 

Audit Division on 

New American City, Inc. 

(May 4, 2011 - December 31, 2012) 

Why the Audit 

Was Done 

The Commission audits 

each host committee or 

municipal fund that 

represents a city where a 

publicly financed 

nominating convention 

was held. The audit 

seeks to determine 

whether the committee 

has materially complied 

with the prohibitions and 

disclosure requirements 

ofthe election law.' 

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) 

New American City, Inc. G^AC), headquartered in Charlotte, North 

Carolina, is a committee responsible for hosting the 2012 Democratic 

National Convention. For more information, see the chart on the 

Committee Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions to Defray Convention 

Expenses 

o Transfers from Affiliated Committees 

o Loans Received 

o Refunds, Rebates, Returns of Deposits 

o Other Income 

Total Receipts. 

Disbursements 

o Convention Expenditures 

o Other Disbursements 

Total Disbursements 

$ 19,008,773 

8,783 

1,000,000 

49,669 

950 

$ 20,068,175 

$ 20,056,269 

10,775 

$ 20,067,044 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Disclosure of Receipts (Finding 2) 

• Disclosure of Disbursements (Finding 3) 

• Reporting of Debts and Obligations (Finding 4) 

' 11 CFR §9008.54. 
Preliminary Audit Report of the 

Audit Division on 

New American City, Inc. 

(May 4, 2011 - December 31, 2012) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Inventory of Committee Records 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Findings and Recommendations 3 

Part IV. Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 4 

Finding 2. Disclosure of Receipts 5 

Findings. Disclosure of Disbursements 6 

Finding 4. Reporting of Debts and Obligations 8 
Part I 

Background 

Authority for Audit 

This report is based on an audit of New American City, Inc. (NAG), undertaken by the 

Audit Division of the Federal Election Commission (Ae Commission) as mandated by 

Section 9008.54 of Title 11 of the Code of Federal Regulations. That section states that 

the Commission shall conduct an examination and audit of each host committee 

registered under 11 CFR §9008.51. 

Scope of Audit 

This audit examined: 

1. the receipt of contributions from prohibited sources; 

2. the disclosure of contributions and other receipts; 

3. the disclosure and nature of disbursements; 

4. the disclosure of debts and obligations; 

5. and the completeness of records; 

6. the consistency between reported figures and bank records; 

7. other committee operations necessary to the review. 

Inventory of Committee Records 

The Audit staff routinely conducts an inventory of committee records before it begins the 

audit fieldwork. NAC records were materially complete and the fieldwork began 

thereafter. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration May 18,2011 

• Audit Coverage May 4,2011 - December 31,2012 

Headquarters Charlotte, North Carolina 

Bank Information 

• Bank Depositories One 

• Bank Accounts Two Accounts 

Treasurer 

• Treasurer When Audit Was Conducted Daniel Murrey, M.D. 

• Treasurer During Period Covered by Audit Daniel Murrey, M.D. 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

No 

• Who Handled Accounting and Recordkeeping 

Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand ® April 1,2011 $ 0 

Receipts 

o Contributions to Defray Convention Expenses 19,008,773 

o Transfers from Affiliated Committees 8,783 

o Loans Received 1,000,000 

o Refunds, Rebates, Returns of Deposits 49,669 

o Other Income 950 

Total Receipts $ 20,068,175 

Disbursements 

o Convention Expenditures 20,056,269 

o Loan Repayments Made 0 

o Other Disbursements 10,775 

Total Disbursements $ 20,067,044 

Cash-on-hand @ December 31,2012 S 1,131 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieidwork, a comparison of NAC's reported financial activity with its bank 

records revealed a misstatement of financial activity for disbursements during 2011 

through 2012. The total of the misstated amounts was $2,024,213. The Audit staff 

recommends that NAC amend its disclosure reports to correct the misstatement. (For 

more detail, see p. 4.) 

Finding 2. Disclosure of Receipts 

During audit fieidwork, the Audit staff identified 16 receipts totaling $2,704,569 that 

were missing or lacked required disclosure information. The Audit staff recommends 

that NAC amend its reports and correctly disclose these transactions on Schedule A 

(Itemized Receipts). (For more detail, see p. S.) 

Finding 3. Disclosure of Disbursements 

The Audit staff identified 653 disbursements totaling $4,188,384 that were either missing 

or lacked required disclosure information. The Audit staff recommends that NAC amend 

its reports to correctly disclose these transactions on Schedule B (Itemized 

Disbursements). (For more detail, see p. 6.) 

Finding 4. Reporting of Debts and Obligations 

The Audit staff identified a debt to an equipment rental vendor, in the amount of $25,425 

that was not itemized on Schedule D (Debts and Obligations), as required. The Audit 

staff recommends that NAC file amended reports to disclose this transaction. (For more 

detail, see p. 8.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

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

records revealed a misstatement of financial activity for disbursements during 2011 

through 2012. The total of the misstated amounts was $2,024,213. The Audit staff 

recommends that NAC amend its disclosure reports to correct the misstatement. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• the amount of cash on hand at the beginning and end of the reporting period; 

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

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

year; and 

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

Schedule B (Itemized Disbursements). 2 U.S.C. §434(b)(l), (2), (3), (4) and (S). 

Facts and Analysis 

A. Facts 

The Audit staff reconciled NAC's reported activity with its bank records and identified a 

misstatement of disbursements for 2011 through 2012.^ The following chart details the 

discrepancies and succeeding paragraphs explain the reasons for the misstatements. 

2011-2012 Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

(®May4,2011 

$0 $0 $0 

Receipts $20,061,878 $20,068,175 $6,297 

Understated 

Disbursements $20,035,206 $20,067,044 $31,838 

Understated 

Ending Cash Balance 

@ December 31,2012 

$26,672 $1,131 $25,541 

Overstated 

As indicated in the chart above, reported disbursements for 2011 through 2012 were 

understated by $31,838. Furthermore, the Audit staff identified the following 

adjustments that should be made to correct the reporting of disbursements: 

NAC's first receipt of funds was on May 4,2011. 
• Salary, payroll taxes, and processing fees under or not reported $ 1,022,043 

• Salary and payroll taxes over reported 884,529 

• Duplicate disbursement transactions reported 72,855 

• Correction to reports for checks that were voided 24,260 

• Disbursement amounts over reported (or not debited by the bank) 11,640 

• Disbursements not reported 5,968 

• Bank corrections erroneously reported as disbursements 2.918 

Sum of Reporting Adjustments $2.024.213 

NAG regularly misreported its payroll and payroll taxes over the entire reporting period 

which resulted in a salary and payroll tax understatement of $1,022,043. This consisted 

of payroll tax understatements totaling $885,609 and salary understatements totaling 

$136,434. Conversely, salary and payroll taxes over reported, $884,529, consisted of 

salary payments totaling $872,394 and payroll taxes totaling $12,135. This resulted from 

reporting individual gross salary amounts instead of the net salary amounts. 

B. Preliminary Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed and provided a schedule of the misstated 

amounts to NAC representatives. NAC representatives said they would amend their 

reports in response to the Preliminary Audit Report. 

The Audit staff recommends that, within 60 calendar days of the service of this report, 

NAC amend its disclosure reports to correct the misstatement. 

Finding 2. Disclosure of Receipts ^ 

Summary 

During audit fieldwork, the Audit staff identified 16 receipts totaling $2,704,569 that 

were missing or. lacked required disclosure information. The Audit staff recommends 

that NAC amend its reports and correctly disclose these transactions on Schedule A 

(Itemized Receipts). 

Legal Standard 

Required Information for Contributions. For each itemized contribution, the 

committee must provide the following information: 

• the contributor's full name and address (including zip code); 

• the contributor's occupation and the name of his or her employer (for individual 

contributors); 

• the date of receipt (the date the committee received the contribution); 

• the amount of the contribution; and 

• the calendar year-to-date total of all contributions from the same individual. 

11 CFR §§100.12 and 104.3(a)(4) and 2 U.S.C. §434(b)(3)(A). 
Facts and Anal3rsis 

A. Facts 

The Audit staff identified 16 receipts reported on Schedule A totaling $2,704,569 

(approximately 13 percent of total receipts) that were missing or lacked the required 

disclosure information. These reporting errors consisted of the following: 

• 15 receipts, from 15 different contributors, for $2,699,394 that did not disclose or 

inadequately disclosed the correct address; and 

• One receipt for $5,175 that incorrectly disclosed the contributor's name. 

B. Preliminary Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed the disclosure items with NAC 

representatives and provided a schedule of the receipts disclosed incorrectly. NAC 

representatives said they would amend their reports in response to the Preliminary Audit 

Report. 

The Audit staff recommends that, within 60 calendar days of the service of this report, 

NAC amend its reports to correctly disclose these receipts on Schedule A. 

Finding 3. Disclosure of Disbursements 

Summary 

The Audit staff identified 653 disbursements totaling $4,188,384 that were either missing 

or lacked required disclosure information. The Audit staff recommends that NAC amend 

its reports to correctly disclose these transactions on Schedule B (Itemized 

Disbursements). 

Legal Standard 

A. Reporting Expenditures. When expenditures to the same person exceed $200 in a 

calendar year, the committee must report the: 

• amount; 

• date when the expenditures were made; 

• name and address of the payee; and 

• purpose (a brief description of why the disbursement was made). 2 U.S.C. 

§434(b)(5)(A) and 11 CFR §104.3(b)(3)(i). 

B. Examples of Purpose. 

• Adequate Descriptions. Examples of adequate descriptions of "purpose" include 

the following: dinner expenses, media, salary, polling, travel, party fees, phone 

banks, travel expenses, travel expense reimbursement, catering costs, loan 

repayment, or contribution refund. 11 CFR §104.3 (b)(4)(i)(A). 

• Inadequate Descriptions. The following descriptions do not meet the requirement 

for reporting "purpose": advance, election-day expenses, other expenses, expense 

reimbursement, miscellaneous, outside services, get-out-the-vote and voter 

registration. 11 CFR §104.3 (b)(4)(i)(A). 
C. Reporting Credit Card Transactions. A committee must iteihize a payment to a 

credit card company if the payment exceeds the $200 aggregate threshold for 

itemization. The committee must also itemize, as a memo entry, any specific 

transaction charged on a credit card if the payment to the actual vendor exceeds the 

$200 threshold. The memo entry must include the name and address of the vendor, 

the purpose of the disbursement, and the amount of the disbursement. 11 CFR 

§§ 102.9(b)(2) and 104.9. 

D. Reporting Reimbursements to Individuals. When an individual who is not acting 

as a vendor advances his or her personal funds (or uses a personal credit card) to pay 

for goods or services on behalf of a political committee, the reimbursement must be 

reported as follows: 

• Nontravel Advances. Report the individual as payee, and report the payments 

aggregating over $200 to any one vendor as memo entries on Schedule B; and 

• Travel and Subsistence Advances. If the total amount reimbursed is $500 or less, 

the committee should report the individual as payee. If the total amount exceeds 

$500 and payments to any one vendor used for the expenses total over $200 for 

the calendar year, report the individual as payee, and report the payments 

aggregating over $200 to any one vendor as memo entries on Schedule B. Each 

memo entry must include the name and address of the vendor, as well as the date, 

amount and purpose of the payment. 11 CFR §§104.3(b)(3)(i) and 104.9. 

Facts and Analysis 

A. Facts 

The Audit staff identified 653 disbursements totaling, $4,188,384 (approximately 21 

percent of total disbursements) that were either missing or lacked the required disclosure 

information. The majority of disclosure errors were related to the reporting of addresses 

and purposes. See the table below. 

Description Number of 

Transactions Dollar Value 

Payments with a missing or incomplete 

address disclosure. 224 $1,099,179 

Payments missing or having an 

inadequate disclosure of purpose. 

208 $2,671,674 

Credit card payments lacking niemo 

entry disclosures. 71 $268,473 

Other payment disclosure errors.^ 150 $149,058 

Total $4,188,384 

Seventy-one transactions totaling S93,312 had missing or incomplete addresses and inadequate purposes. 

Seventy-nine reimbursements to individuals totaling SSS,746 lacked memo entries to the ultimate payee. 

Of these transactions, some also improperly or inadequately disclosed the address and/or purpose of the 

transactions. For the 79 transactions described above, 33 were for employee travel/subsistence expense 

reimbursements exceeding the $S00 reporting threshold and 46 were for non-travel reimbursements 

exceeding the S200 aggregate memo reporting threshold. 
B. Preliminary Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed the disclosure items with NAC 

representatives and provided a schedule detailing these items. NAC representatives said 

they would amend their reports in response to the Preliminary Audit Report. 

The Audit staff recommends that, within 60 calendar days of the service of this report, 

NAC amend its reports to correctly disclose these disbursements on Schedule B. 

Finding 4. Reporting of Debts and Obligations 

Summary 

The Audit staff identified a debt to an equipment rental vendor, in the amount of $25,425, 

that was not itemized on Schedule D (Debts and Obligations), as required. The Audit 

staff recommends that NAC file amended reports to disclose this transaction. 

Legal Standard 

Reporting of Debts and Obligations. 

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) andl04.11(a). 

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

owed by the committee and debts owed to the committee, together 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. 

• A debt of $500 or less must be reported once it has been outstanding 60 days from 

the date incurred (the date of the transaction); the committee reports it on the next 

regularly scheduled report. 

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

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

Facts and Analysis 

A. Facts 

The Audit staff identified a debt to an equipment rental vendor, in the amount of $25,425, 

arising from a transaction on August 21,2012 that was outstanding until October 26, 

2012. NAC did not report this as an itemized debt (Schedule D, Debts and Obligations), 

as required, for both its Post Convention and Year End reports. 

B. Preliminary Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided details and discussed the undisclosed debt 

with NAC representatives. NAC representatives said they would amend their reports in 

response to the Preliminary Audit Report. 

The Audit staff recommends that, within 60 calendar days of the service of this report, 

NAC amend its reports to correctly disclose this debt on Schedule D.