FEDERAL ELECTION COMMISSION

WASHINGTON. D C ~ll4hl

July 30,2001

MEMORANDUM

TO:

FROM:

SUBJECT:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE A/

ROBERT J. COSTA 71"---

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

THE DEMOCRATIC PARTY OF ARKANSAS FEDERAL ACCOUNT

Attached please find a copy ofthe final audit report and related documents on the

Democratic Party of Arkansas Federal Account, which was approved by the Commission

on July 19,2001.

Informational copies ofthe report have been received by all parties involved and

the report may be released to the public.

Attachment as stated

cc: Office ofGeneral Counsel

Office ofPublic Disclosure

Reports Analysis Division

FEe Library
REPORT OF THE AUDIT DIVISION

ON

The Democratic Party of Arkansas

Federal Account

Approved July 19,2001

FEDERAL ELECTION COMMISSION

999 E STREET, N"W.

WASHINGTON, D.C.
TABLE OF CONTENTS

THE DEMOCRATIC PARTY OF ARKANSAS

FEDERAL ACCOUNT

Page

Executive Summary

Final Audit Report 3

Background 3

Findings 5

1;"'~

Transmittal to Committee 7 ~;~,,!;

Chronology 9
FEDERAL ELECTION COMMISSION

REPORT OF THE AUDIT DIVISION

ON

THE DEMOCRATIC PARTY OF ARKANSAS

FEDERAL ACCOUNT

EXECUTIVE SUMMARY

The Democratic Party ofArkansas Federal Account (the Committee) registered

with the Comptroller General ofthe United States on October 16,1972 as the Arkansas

State Democratic Party. The Committee changed its name to the current name on April

12, 1984.

The audit was conducted pursuant to Section 438(b) ofTitle 2 ofthe United States

Code, which states, in part, that the Commission may conduct audits of any political

committee whose reports fail to meet the threshold level of compliance set by the

Commission.

The period covered by the audit was January 1, 1997 through December 31, 1998.

The audit finding summarized below was presented to the Committee at the completion

of fieldwork on September 29, 2000 and later in the interim audit report. The

Committee's response to the finding is contained in the audit report.

The Committee expended $105,755 on broadcast media that criticized the

Republican candidate for U.S. Senator in the 1998 election. These expenditures were

paid using federal funds. The Commission did not consider in the context ofthe audit

whether the costs were contributions to or coordinated expenditures on behalf ofthe

Democratic candidate.

DISCLOSURE OF OCCUPATIONINAME OF EMPLOYER -2 U.S.c. §§434(b)(3)(A);

431 (I3)(A); 432(i); and 11 CFR §104.7(b). A sample review of contributions itemized

on the Committee's reports identified a material error with respect to disclosure ofthe

contributors' occupation and name of employer. Evidence to demonstrate that the

Committee made best efforts to obtain and submit this infomlation was not provided

during the audit. In response to the interim audit report, the Committee filed amended

Schedules A (Itemized Receipts) to correct the reports. Nonetheless, a material number

of errors remained and evidence ofthe Committee's efforts to obtain the information was

not provided.

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FEDERAL ELECTION COMMISSION

WASHINGTON. DC 20463 A99-62

REPORTOF THE AUDITDIVISION

ON

THE DEMOCRATICPARTY OFARKANSAS FEDERAL ACCOUNT

I. BACKGROUND

A. AUDIT AUTHORITY

This report is based on an audit ofThe Democratic Party ofArkansas Federal

Account (the Committee), undertaken by the Audit Division ofthe Federal Election

Commission (the Commission) in accordance with the provisions ofthe Federal Election

Campaign Act of 1971, as amended (the Act). The audit was conducted pursuant to

Section 438(b) ofTitle 2 ofthe United States Code, which states, in part, that the

Commission may conduct audits and field investigations of any political committee

required to file a report under section 434 ofthis title. Prior to conducting any audit under

this subsection, the Commission shall perform an internal review ofreports filed by the

selected committees to determine ifreports filed by a particular committee meet the

threshold requirements for substantial compliance with the Act.

B. AUDIT COVERAGE

The audit covered the period January 1, 1997 through December 31, 1998. During

this period, the Committee reported a begilming cash balance of $22, 191; total receipts for

the period of$2,167,755; total disbursements for the period of$2,162,555; and an ending

cash balance of $27,392'.

Based on a cursory review ofbank statements for the Committee's non-federal

accounts, the Audit staff calculated that during the audit period, the Committee deposited

$1,253,917 and made disbursements totaling $1,467,108 from its non-federal accounts.

C. CAMPAIGN ORGANIZATION

The Committee registered with the Comptroller General ofthe United States on

October 16,1972 as the Arkansas State Democratic Committee. On April 12, 1984, the

Committee filed an amended Statement ofOrganization and changed the name to the

current name, the Democratic Party of Arkansas Federal Account. The Treasurer for the

I All figures in the report have been rounded to the nearest dollar.

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Committee at the beginning ofthe audit period was Mr. Jim Pledger. On September 28,

1998, Mr. Ron Oliver, the current Treasurer, succeeded him. The Committee maintains its

headquarters in Little Rock, Arkansas.

To manage its financial activity, the Committee maintained 18 bank accounts

during the audit period: 8 federal and lOnon-federal. The Committee did not maintain a

separate allocation account to pay for shared federallnon-federal expenses. The

Committee's receipts were composed of contributions from individuals, political party

committees, other political committees (such as PACs), transfers from affiliated/other party

committees, offsets to operating expenditures (such as refunds and rebates), and transfers

from non-federal accounts for joint activity.

D. AUDIT SCOPE AND PROCEDURES

The audit included testing ofthe following categories:

1. the receipt of contributions or loans in excess ofthe statutory limitations;

2. the receipt of contributions from prohibited sources, such as those from

corporations or labor organizations;

3. proper disclosure of contributions from individuals, political committees

and other entities, to include the itemization of contributions when required,

as well as, the completeness and accuracy of the information disclosed (see

Finding II.B.);

4. proper disclosure of disbursements including the itemization of

disbursements when required, as well as, the completeness and accuracy of

the information disclosed;

5. proper disclosure of campaign debts and obligations, including loans;

6. the accuracy oftotal reported receipts, disbursements and cash balances ,1S

compared to bank records;

7. adequate recordkeeping of committee transactions;

8. proper reporting and funding of allocable expenses;

9. review of coordinated expenditures on behalf of general election candidates

(see Finding II.A.);

10. other audit procedures that were deemed necessary in the situation.

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The Committee expended $105,755 on broadcast media that criticized the

Republican candidate for U.S. Senator in the 1998 election. These expenditures were paid

using federal funds. The Commission did not consider in the context ofthe audit whether

the costs were contributions to or coordinated expenditures on behalfofthe Democratic

candidate.

A matter noted during the audit is pending before the Commission in another

context. When the Commission concludes its consideration ofthis matter, information will

be made public in accordance with Commission procedures.

Unless specifically discussed below, no material non-compliance was detected. It

should be noted that the Commission may pursue any ofthe matters discussed in this report

in an enforcement action.

n. AUDIT FINDINGS AND RECOMMENDATIONS

A. DISCLOSURE OF OCCUPATION/NAME OF EMPLOYER

Section 434(b)(3)(A) ofTitle 2 ofthe United States Code requires, in part, a

political committee to report the identification of each person who makes a contribution to

the committee in an aggregate amount or value in excess of$200 per calendar year,

together with the date and amount of any such contribution.

Section 431(l3)(A) ofTitJe 2 ofthe United States Code defines the term

"identification" to be, in the case of any individual, the name, the mailing address, and the

occupation ofsuch individual, as well as the name of his or her employer.

Section 432(i) ofTitle 2 ofthe United States Code states, in part, that when

the treasurer of a political committee shows that best efforts have been used to obtain,

maintain, and submit the information required by this Act for the political committee, any

report or any records ofsuch committee shall be considered in compliance with this Act.

Section 104.7(b) ofTitle 11 ofthe Code of Federal Regulations states, in

relevant part, that the treasurer will only be deemed to have exercised best efforts to obtain,

maintain and report the required information if for each contribution received aggregating

in excess of $200 per calendar year which lacks required contributor information, the

treasurer makes at least one effort after the receipt of the contribution to obtain the missing

information. Such effort shall consist of either a written request sent to the contributor or

an oral request to the contributor documented in writing. The written or oral request must

be made no later than thirty days after receipt of the contribution. The written or oral

request shall not include material on any other subject or any additional solicitation, except

that it may include language solely thanking the contributor for the contribution.

The Audit staff conducted a sample review of contributions received from

individuals to determine if the required infomlation, relative to receipts required to be

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Approved July /9, 200/
itemized, was adequately disclosed. The testing revealed that the Committee did not meet

the minimum requirements for reporting occupation and/or name of employer in 46% of

the items tested. This information was not maintained in the Committee's files and the

Committee was not able to demonstrate that it had exercised best efforts to obtain,

maintain and submit the missing information.

Although requested, the Committee did not provide any documentation such

as copies ofletters, to demonstrate that it had made a follow-up request to those

contributors for which occupation and/or name of employer was incomplete. The Audit

staff examined four types ofsolicitation devices in the Committee's receipts records. Each

device correctly requested the required information; however, no information was

identified which indicated to whom the solicitation devices were sent. Further, there was

no evidence of any follow-up pursuant to II CFR §104.7(b).

At the exit conference, the Audit staff presented this matter to the

Committee. The Committee officials did not provide any relevant information on this

matter.

In the interim audit report the Audit staffrecommended that the Committee

take the following action:

• Provide solicitation materials and materials which demonstrate that best efforts

were used to obtain, maintain, and submit the required disclosure information;

or

• Absent such a demonstration, make an effort to contact those individuals for

whom the required information is missing or incomplete, in accordance with 11

CFR 104.7; and

• Provide documentation ofsuch effort, such as copies of letters to the

contributors and/or phone logs of oral requests; and

• File amended Schedules A (Itemized Receipts) to disclose any information

obtained from those contacts.

In response to the interim audit report, the Committee filed amended

Schedules A for each report filed for the audit period. A review ofthese schedules

revealed that the Committee made some attempt albeit untimely, to correct the disclosure

of occupation and name of employer. This was evidenced by handwritten additions and

revisions to the previously reported information. However, a material number of errors

remained. Materials, such as letters to the contributors or phone logs of oral requests, to

document the Committee's efforts made within the 30 day window provided at 11 CFR

!i 104.7(b) to obtain the required information were not presented. Therefore the Committee

has not demonstrated that best efforts were used.

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Approved July 19, JOOI
FEDERAL ELECTION COMMISSION

WASHIr-;CTO" DC 204b'

July 20, 2001

E';

iij

Mr. Ron Oliver, Treasurer

The Democratic Party of Arkansas Federal Account

1300 West Capital Street

Little Rock, AR 72201

Dear Mr. Oliver:

Attached please find the Final Audit Report on The Democratic Party of Arkansas

Federal Account. The Commission approved the report on July 19, 2001.

The Commission approved Final Audit Report will be placed on the public record

on July 30,2001. Should you have any questions regarding the public release ofthe

report, please contact the Commission's Press Office at (202) 694-1220. Any questions

you have related to matters covered during the audit or in the report should be directed to

Wanda Thomas ofthe Audit Division at (202) 694-1200 or toll free at (800) 424-9530.

Sincerely,

f~J~· Robert J. Costa

Assistant StaffDirector

Audit Division

Attachment as stated

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Approved July 19,2001
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CHRONOLOGY

THE DEMOCRATIC PARTY OF ARKANSAS

FEDERAL ACCOUNT

Audit Fieldwork

Interim Audit Report to the

Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

9

Approved July J9, 200J

September 5, 2000 -

September 19, 2000

May 1,2001

June 19,2001

July 19,2001
I ; I '

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