Interim Audit Report of the 

Audit Division on the Oklahoma 

Leadership Council 

(January 1, 2011 - December 31, 2012) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

Under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a 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 Oklahoma Leadership Council is a state party committee 

headquartered in Oklahoma City, Oklahoma. For more 

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

Financial Activity (p. 3) 

• Receipts 

o Contributions from Individuals 

o Contributions from Other Political 

Committees (PACs) 

o Transfers from Affiliated/Other Party 

Committees 

o Transfers from Non-federal and 

Levin Accounts 

o Offsets and Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Transfers to Affiliated/Other Party 

Committees 

o Federal Election Activity 

o Other Disbursements 

Total Disbursements 

• Levin Receipts 

• Levin Disbursements 

$ 570,198 

99,942 

9,336,908 

106,953 

1,432 

S 10,115,433 

$918,520 

9,131,482 

96,855 

12,451 

S 10,159,308 

$85,332 

$89,078 

Findings and Recommendations (p. 4) 

• Misstatement of Financial Activity (Finding 1) 

• Misstatement of Financial Activity - Levin Fund (Finding 2) 

• Recordkeeping for Employees (Finding 3) 

• Contributions from Unregistered Political Organizations (Finding 4) 

52 U.S.C. §30111(b). 
Interim Audit Report of the Audit 

Division on the 

Oklahoma Leadership Council 

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

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 3 

Part III. Summaries 

Findings and Recommendations 4 

Part IV. Findings and Recommendations 

Finding!. Misstatement of Financial Activity S 

Finding 2. Misstatement of Financial Activity - Levin Fund 7 

Findings. Recordkeeping for Employees 9 

Finding 4. Contributions from Unregistered Political Organizations 10 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Oklahoma Leadership Council (OLC), 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 S2 U.S.C. §30111(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. Prior to conducting any audit under this 

subsection, the Commission must perform an internal 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. 52 U.S.C. §30111(b). 

Scope of Audit 

Following Commission approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

1. the receipt of contributions from prohibited sources; 

2. the disclosure of individual contributors' occupation and name of employer; 

3. the disclosure of disbursements, debts and obligations; 

4. the disclosure of expenses allocated between federal and non-federal accounts; 

5. the consistency between reported figures and bank records; 

6. the completeness of records; and 

7. other committee operations necessary to the review. . 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration May 13 J 983 

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

Headquarters Oklahoma City, Oklahoma 

Bank Information 

• Bank Depositories Two 

• Bank Accounts Four Federal, One Levin, Two Nonfederal 

Treasurer 

• Treasurer When Audit Was Conducted Peter L. Hodges (9/14/2015 - present) 

Anthony J. Ferate (6/20/2010 -

9/13/2015) 

• Treasurer During Period Covered by Audit Anthony J. Ferate 

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 1,2011 $ 80,801 

o Contributions from Individuals 570,198 

o Contributions from Other Political 

Committees (PACs) 99,942 

o Transfers from Affiliated/Other Party 

Committees 9,336,908 

o Transfers from Non-federal and Levin 

Accounts 106,953 

o Offsets and Other Receipts 1,432 

Total Receipts $ 10,115,433 

o Operating Expenditures 918,520 

o Transfers to Affiliated/Other Party 

Committees 9,131,482 

o Federal Election Activity 96,855 

o Other Disbursements 12,451 

Total Disbursements S 10,159308 

Cash-on-hand ® December 31,2012 S 36,926 

Levin Cash-on-hand ® January 1,2011 815,687 

Total Levin Receipts 85332 

Total Levin Disbursements 89,078 

Levin Cash-on-hand ® December 31,2012 $11,941 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fleldwork, a comparison of OLC's reported financial activity with its bank 

records revealed a misstatement of receipts, disbursements and ending cash-on-hand 

balance for calendar year 2011. OLC understated its 2011 receipts and disbursements by 

$28,491 and $73,543, respectively; and overstated its ending cash-on-hand by $44,550. 

The Audit staff recommends that OLC amend its disclosure reports to correct these 

misstatements. (For more detail, see p. 5.) 

Finding 2. Misstatement of Financial Activity - Levin 

Fund 

During audit fieldwork, a comparison of OLC's reported Levin Fund activity with its 

bank records reveajed a misstatement of disbursements and ending cash-on-hand for 

calendar year 2011, and a misstatement of beginning cash-on-hand and receipts for 

calendar year 2012. For 2011, OLC understated its disbursements by $15,039 and 

overstated its ending cash-on-hand by $12,229. For 2012, OLC understated its receipts 

by $10,000. The Audit staff recommends that OLC amend its disclosure reports to 

correct these misstatements. (For more detail, see p. 7.) 

Finding 3. Recordkeeping for Employees 

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

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

spent in connection with a federal election. For calendar years 2011 and 2012, the Audit 

staiff identified payments to OLC employees totaling $178,305 for which OLC did not 

maintain monthly payroll logs. This entire amount consisted of payroll that was allocated 

with both federal and non-federal funds. For all employees identified above, the Audit 

staff recommends that OLC provide monthly payroll logs that indicate the time spent in 

connection with a federal election. Absent the provision of monthly time logs, the Audit 

staff recommends that OLC provide details of its plan to maintain such monthly payroll 

logs in the future. (For more detail, see p. 9.) 

Finding 4. Contributions from Unregistered Political 

Organizations 

During audit fieldwork, a review of all contributions from unregistered political 

organizations indicated that OLC received contributions totaling $8,150 that may not 

have been made with permissible funds. OLC transferred $7,150 of these contributions 

to its non-federal and Levin accounts but not in a timely manner. The Audit staff 

recommends that OLC demonstrate that the remaining contribution of $1,000 was made 

with permissible funds or refund the contribution. (For more detail, see p. 10.) 
Part IV 

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity • 

Summary 

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

records revealed a misstatement of receipts, disbursements and ending cash-on-hand 

balance for. calendar year 2011. OLC understated its 2011 receipts and disbursements by 

$28,491 and $73,543, respectively; and overstated its ending cash-on-hand by $44,550. 

The Audit staff recommends that OLC amend its disclosure reports to correct these 

misstatements. . . 

Legal Standard 

Contents of Reports. Each report must disclose: 

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

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

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

and 

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

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

Facts and Anal3rsis 

A. Facts 

As part of audit fieidwork, the Audit staff reconciled OLC's reported financial activity 

with its bank records for calendar years 2011 and 2012. The reconciliation revealed that 

OLC.misstated its receipts, disbursements, and ending cash-on-hand for 2011. The 

following chart outlines the discrepancies between OLC's disclosure reports and its bank 

records. The succeeding paragraphs explain why the discrepancies occurred. 

2011 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2011 

$80,299 $80,801 $502 

Understated 

Receipts $276,679 $305,170 $28,491 

Understated 

Disbursements $238,640 $312,183 $73,543 

Understated 

Ending Cash Balance 

@ December 31,2011 

$118,338 $73,788 $44,550 

Overstated 
The beginning cash balance was understated by $502 and is unexplained, but likely 

resulted from prior-period discrepancies. 

The understatement of receipts resulted from the following: 

• One transfer from non-federal account not reported^ $ 10,3 76 

• Four transfers from Levin account not reported^ 15,039 

• Unexplained difference 3.076 

Understatement of Receipts $28.491 

The understatement of disbursements resulted from the following: 

• Net Under Reporting of Payroll Expenses $61,867 

• Unreported disbursements clearing bank records 15,889 

• Non-federal account disbursements reported as federal (3,259) 

• Other reported disbursements not traced to bank records (1,204) 

• Incorrect disbursement amount reported 250 

Net Understatement of Disbursements $73.543 

The $44,550 overstatement of the ending cash-on-hand balance was the result of the 

receipt and disbursement reporting discrepancies described above along with a $502 

understatement of beginning cash-on-hand for 2011. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the misstatement of financial activity with OLC representatives 

at the exit conference and provided work papers detailing the differences. OLC Counsel 

responded to the exit conference by explaining that a portion of the under-reporting of 

payroll expenses seems to be attributable to payroll taxes and payroll vendor 

administration fees. The Audit staff agrees with Counsel that most of the differences are 

likely related to taxes and fees paid to its payroll vendor in 2011. However, it should also 

be noted that there were several periods in 2011 where OLC did not report any payments 

to its payroll vendor, which would include salaries as well as taxes and fees. 

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

amend its disclosure reports to correct the misstatements noted above and reconcile the 

cash balance on its most recent report to identify any subsequent discrepancies that could 

affect the recommended adjustments. The Audit staff further recommends that OLC 

adjust the cash balance as necessary on its most recent report, noting that the adjustment 

is the result of prior-period audit adjustments. 

' This transfer was for allocable activity and did not result in over-funding of federal activity by a nonfederal account. 
Finding 2. Misstatement of Financial Activity - Levin 

Fund ^ 

Summary 

During audit fieldwork, a comparison of OLC's reported Levin Fund activity with its 

bank records revealed a misstatement of disbursements and ending cash-on-hand for 

calendar year 2011, and a misstatement of beginning cash-on-hand and receipts for 

calendar year 2012. For 2011, OLC understated its disbursements by $15,039 and 

overstated its ending cash-on-hand by $12,229. For 2012, OLC understated its receipts 

by $10,000. The Audit staff recommends that OLC amend its disclosure reports to 

correct these misstatements. 

Legal Standard 

A. 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 and disbursements (including allocation 

transfers) for the reporting period and for 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). 

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

not use any Federal funds transferred to it from or otherwise accepted by it from any 

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

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 funds 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 

committee of a 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 Anal3rsis 

A. Facts 

As part of the audit fieldwork, the Audit staff reconciled OLC's reported Levin activity 

with its Levin bank records for 2011 and 2012. The reconciliation revealed that OLC 

misstated its disbursements and ending cash for 2011, and misstated its beginning cashon-hand and receipts for 2012. The following charts outline the discrepancies between 

OLC's disclosure reports and its Levin bank records, and the succeeding paragraphs 

explain why these discrepancies occurred. 
2011 Committee Levin Fund Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

® January 1,2011 

$17,877 $15,687 $2,190 

Overstated 

Receipts $40,332 $45,332 $5,000 

Understated 

Disbursements $30,922 $45,961 $15,039 

Understated 

Ending Cash Balance 

^December 31,2011 

$27,287 $15,058 $12,229 

Overstated 

The understatement of disbursements resulted from four unreported transfers totaling 

$15,039 that OLC made from its Levin Fund to its federal account.^ 

OLC's ending cash-on-hand was overstated by $12,229. This difference resulted from 

the understated disbursements along with smaller differences in beginning cash-on-hand 

and receipts in the chart above. 

2012 Committee Levin Fund Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

^January 1,2012 

$27,287 $15,058 $12,229 

Overstated 

Receipts $30,000 $40,000 . $10,000 

Understated 

Disbursements $40,730 $43,117 $2;387 

Understated 

Ending Cash Balance 

^December 31,2012 

$16,557 $11,941 $4,616 

Overstated 

Notwithstanding the incorrect cash balance carried over from the 2011, OLC's 

understatement of receipts was the result of an unreported deposit in the amount of 

$10,000. The $4,616 overstatement of ending cash resulted from the discrepancies in 

beginning cash, receipts, and disbursements displayed in the chart above. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the misstatements with OLC representatives at the exit 

conference and provided work papers detailing the misstatements. In response to the exit 

conference, OLC Counsel explained that the differences identified are small sums and 

constitute a minimal portion of OLC's overall activity during the audit period. 

^ OLC transferred these Levin fiinds to its federal allocation account for the purpose of paying allocable 

payroll expenses in accordance with 11 CFR §300.33. Also, all Levin funds were raised by OLC in 

accordance with 11 CFR § 300.34. Therefore, the transfers of Levin funds did not present any funding 

issue related to the Levin account. 
The Audit staff recommends that, within 30 calendar days of service of this report, OLC 

amend its 2011 disclosure reports to include the four transfers totaling $15,039 that OLC 

made from its Levin Fund to its federal account. The Audit staff further recommends that 

OLC amend its 2012 disclosure report to include the unreported deposit of $10,000. 

Finally, the Audit staff recommends that OLC adjust the Levin cash balance as necessary 

on its most recent report, noting that the adjustment is the result of prior-period audit 

adjustments. 

I Finding 3. Recordkeeping for Employees 

Summary 

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

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

spent in connection with a federal election. For calendar years 2011 and 2012, the Audit 

staff identified payments to OLC employees totaling $178,305 for which OLC did not 

maintain monthly payroll logs. This entire amount consisted of payroll that was allocated 

with both federal and non-federal funds. For all employees identified above, the Audit 

staff recommends that OLC provide monthly payroll logs that indicate the time spent in 

connection with a federal election. Absent the provision of monthly time logs, the Audit 

staff recommends that OLC provide details of its plan to maintain such monthly payroll 

logs in the future. 

Legal Standard 

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

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

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

• employees who spend 25 percent or less of their compensated time in a given 

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

or be allocated as administrative costs; 

• employees who spend more than 25 percent of their compensated time in a given 

month on federal election activities must be paid only from a federal account; and, 

• employees who spend none of their compensated time in a given month on federal 

election activities may be paid entirely with funds that comply with state law. 11 

CFR§ 106.7(d)(1). 

Facts and Analysis 

A. Facts. 

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

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

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

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

employee salaries and wages. For 2011 and 2012, OLC did not maintain monthly logs 
10 

for $178,305 in payroll/ This amount is made up exclusively of expenditures reported 

on Schedules H4 (Disbursements for Allocated Federal/Non-federal Activity) and paid 

with a mixture of federal and non-federal funds during the same month. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the recordkeeping requirement with OLC representatives 

during audit fieldwork and at the exit conference. In response to the exit conference, 

OLC Counsel stated that after the 2012 election cycle and prior to the commencement of 

the audit, OLC implemented timekeeping protocols in response to the Commission 

memorandum concerning timekeeping requirements. OLC's Chairman instructed its 

employees to comply with the guidelines set forth in this memorandum. The response 

further stated that OLC will continue to work with its staff to ensure payroll 

recordkeeping requirements are followed. 

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

• provide evidence that it maintained monthly time logs to document the percentage 

of time an employee spent in connection with a federal election; or 

• provide details of its plan to maintain monthly payroll logs in the future. 

Finding 4. Contributions from Unregistered Political 

Organizations 

Summary 

During audit fieldwork, a review of all contributions from unregistered political 

organizations indicated that OLC received contributions totaling $8,150 that may not 

have been made with permissible funds. OLC transferred $7,150 of these contributions 

to Its non^federal and Levin accounts but not in a timely manner. The Audit staff 

recommends that OLC demonstrate that the remaining contribution of $1,000 was made 

with permissible funds or refund the contribution. 

Legal Standard 

A. Party Committee Limits. A party committee may not receive more than a total of 

$10,000 per year from any person except that a multicandidate political committee 

may not contribute more than $5,000. 52 U.S.C. §30116(a)(1)(D) and 11 CFR 

§§110.1(a) and (c)(5), 110.2(d) and 110.9. 

B. Handling Contributions That Appear Impermissible or Excessive. If a 

committee receives a contribution that appears to be impermissible or excessive, the 

committee must either: 

1. Return the questionable check to the donor; or 

2. Deposit the check into its federal account and: 

' • Keep enough nrioney in the account to cover all potential refunds; 

4 OLC did not report or pay any payroll consisting of 100 percent federal funds. All payroll-related 

expenses were allocated and reported on Schedules H4. Payroll amounts are stated net of taxes and 

fringe benefits. 
11 

• Keep a written record explaining why the contribution may be illegal; 

• Include this explanation on Schedule A if the contribution has to be itemized 

before its legality is established. 11 CFR §103.3(b)(3), (4) and (5). 

C. Questionable Contributions. If a committee receives a contribution that appears to 

be prohibited (a questionable contribution), it must follow the procedures below: 

1. Within 10 days after the treasurer receives the questionable contribution, the 

committee must either: 

• Return the contribution to the contributor without depositing it; or 

• Deposit the contribution (and follow the steps below). 11 CFR § 103.3(b)(l). 

2. If the committee deposits the questionable contribution, it may not spend the 

funds and must be prepared to refund them. It must therefore maintain sufficient 

funds to make the refunds or establish a separate account in a campaign 

depository for possibly illegal contributions. 11 CFR § 103.3(b)(4). 

3. The committee must keep a written record explaining why the contribution may 

be prohibited and must include this information when reporting the receipt of the 

contribution. II CFR §103.3(b)(5). 

4. Within 30 days of the treasurer's receipt of the questionable contribution, the 

committee must make at least one written or oral request for evidence that the 

contribution is legal. Evidence of legality includes, for example, a written 

statement from the contributor explaining why the contribution is legal or an oral 

explanation that is recorded by the committee in a memorandum. 11 CFR 

§I03.3(b)(l). 

5. Within these 30 days, the committee must either: 

• Confirm the legality of the contribution; or 

• Refund the contribution to the contributor and note the refund on the report 

covering the period in which the refund was made. 11 CFR §103.3(b)(2). 

Facts and Anal3^is 

A. Facts 

During audit fieldwork, the Audit staff identified five contributions totaling $8,150 from 

five state and local political organizations. OLC received three of these contributions 

totaling $2,150 in January 2011, and transferred them to its non-federal account in June 

2011. Along with its entry on its FEC disclosure report of the transfer, OLC included a 

memo text stating that an employee who handled OLC banking was asked to transfer 

funds iri February 2011. OLC stated that this request occurred during a transitional time 

and it later discovered that the transfer had never been processed. Upon discovery that 

the funds had not been transferred, OLC transferred the funds from its federal account to 

a state account and provided bank statements to the Commission in support of this 

transaction. 

OLC also received a $5,000 contribution from an unregistered committee in September 

2012, which was transferred to its Levin Fund account in January 2013. Along with its 

entry on its FEC disclosure report of the transfer, OLC included a memo text stating that 

the contribution was erroneously deposited into the federal account. Both the $2,150 and 
12 

$5,000 contributions above are considered untimely resolved since the transfers from the 

federal account were made beyond thirty days of each contributions receipt. 

Lastly, OLC received a $1,000 contribution from an unregistered committee in April 

2011, which has not been transferred or refunded from its federal account. This 

contribution is considered unresolved. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with OLC's representatives during the exit 

conference and provided copies of relevant work papers. Prior to audit fieldwork, OLC 

transferred $7,150 of the $8,150 referred to in the section above from its federal account 

to its non-federal and Levin Fund accounts. In response to the exit conference, OLC 

Counsel stated that the committee will research the remaining contribution of $1,000 and 

provide additional information regarding the permissibility of the funds as it becomes 

available. 

The Audit staff recommends that, within 30 calendar days of receipt of this report, OLC: 

• provide evidence that the transfers for the contributions totaling $7,150 were 

made timely; and 

• provide evidence demonstrating that the remaining contribution of $ 1,000 was 

made with permissible funds; or 

• . refund the remaining impermissible funds ($1,000) and provide evidence of such 

refund (a copy of the front and back of the negotiated refund check); or 

• if funds are not available to make the necessary refund, disclose the refund due on 

Schedule D (Debts and Obligations) until funds become available to make the 

refund. '