FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

February 19,2014 

MEMORANDUM 

To: The Commission 

Through: Alec Palmer 

Staff Director 

From: Patricia C. Orrock 

Chief Cornpliance Officer 

Thomas E. Hintermister-T\\ 

Assistant Staff Director 

Audit Division 

Kendrick Smi 

Audit Manager 

By: Nicole Burgess 

Lead Auditor 

Subject: Audit Division Recommendation Memorandum on the State Democratic 

Executive Committee of Alabama ((SDA) Al 1-22) 

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

Audit staff presents its recommendation below and discusses the finding in the attached Draft 

Final Audit Report (DFAR).. The Office of General Counsel has reviewed this memorandum and 

concurs with the recommendation. 

Recordkeeping for Employees 

For the period covered by the audit, SDA did hot 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 SDA employees 

totaling $279,429 for which monthly payroll logs were not maintained. All of these 

. individuals were paid with an allocation of federal and non-federal funds and disclosed 

on Schedule: H4 ($248,930) or with exclusively non-federal funds during a given month 

($30,499). . 
In response to the Interim Audit Report reconunendation, SDA stated it will implement 

procedures to make sure all employees, paid entirely or in part with federal and/or nonfederal ftmds, are documented by die use of monthly time sheets. 

It should be noted that this finding does not contain contract labor totaling $110,908. 

The Audit staff reconunends that the Commission find that SDA failed to maintain logs 

to document the time employees spent on federal election activity for employees totaling 

$279,429. This amount includes payroll paid as follows to SDA employees. 

A. Employees reported on Schedule H4 and paid with allocated federal and nonfederal funds during the same mondi (totding $248,930); and, 

B. Employees paid exclusively with non-federal funds in a given month and not 

reported by SDA (totaling $30,499). 

SDA 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 Nicole Burgess or Kendrick Smith at 694-1200. 

Attachment: 

Draft Final Audit Report of the Audit Division on the State Democratic Executive Committee of 

Alabama 

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

Audit Division on tlie 

State Democratic Executive 

Committee of Alabama 

(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 conunittee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(die Act). The 

Conunission generally 

conducts such audits 

when a conunittee 

appears not to have m^ 

the threshold 

requirements for 

substantial compliance 

widi die Actiir^—-"'' ''^^ _^_ii;audit 

determinerwhether^l^^ 

comi^^^ complied wl^ | 

die linMii^s, i 

prohibitioi^^ 

disclosure recrements 

of the Act. 

Future Actioii^ 

The Commission may 

initiate an enforcement 

action, at a later time, 

widi respect to die matter 

discussed in this report. 

About the Committe^ 

The State Democratic Executi^ Committee of Alabama is a state 

party committee headqu 

more information, see th^^ 

p. 2. 

Financial Activity 

• Receipts 

jQontributions froni^|dividuals 

Fansfcrs from AffKlc d 

}m Odicr 

iic(^ 

ontgomery, Alabama. For 

IC Committee Organization, 

mmitlccs 

C^tribuiion; 

Polil^o i 

Traiiiprs from Non-federal 

Accoul^s 

All Oth%Bl£ceipts 

lAlReceips 

Disbursements 

' b ©perating Disbursements 

g. Federal Election Activity 

^o All Odier Disbursements 

Total Disbursements 

$ 342,232 

413,892 

225,377 

316,171 

173,243 

$ 1,470,915 

$ 950,626 

456,345 

72,274 

$ 1^79,245 

Finding and Reconunendation (p. 3) 

• Recordkeeping for Employees 

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

Audit Division on the 

State Democratic Executive 

Committee of Alabama 

(January 1, 2009 - Decent 31. 2010) 

y^ 
Table of Contents 

Page 

Parti. Background 

Authority for Audit 

Scope of Audit 

Commission Guidance 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Sununary 

Finding and Reconunendation 

Part IV. Finding and Reconui^i^tiod 

Recordkeeping for Employees 

4i 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the State Democratic Executive Conunittee of 

Alabama (SDA), undertaken by the Audit Division of die Federal Election Commission 

(die Commission) in accordance widi die Federal Election Campaign Act of 1971, as 

amended (die Act). The Audit Division conducted the audit pursuant to 2 U.S.C. 

§438(b), which permits the Commission to conduct audits and f^M^nvestigations of any 

political committee that is required to file a report under 2 U.^^§4i^. Prior to 

conducting any audit under this subsection, the Commissic^s^te^ perform an intemal 

review of reports filed by selected committees to determp^li^cr the reports filed by a 

particular committee meet the threshold requirementsjrar^ibstaniiiil^compliance with die 

Act. 2 U.S.C. §438(b). ^' 

Scope of Audit 

Following Commission-approved procedures, the Audit s| 

factors and as a result, this audit examined: 

1. the disclosure of individual contr^^s' occupation' 

die disclosure of disbursements, deft^|^^ligations; 

die disclosure of expenses allocated few^^iM^ral and imn-federal accounts; 

the consistency between reported figi^es aiiicpbsttll^ggjgiS; 

evaluated various risk 

name of employer; 

die disclosure of intofNint expenditul^;' 

the completeness 

other committeiei 

CommisfJ^ 

essary to tlfeTcview. 

on>Consideration of a Legal Question 

Statement Establishing a Program for Requesting 

Requ4|it for Earl 

PursUi%t the Commisi 

Considem||i.of Legal Qi^tions b^^ die Commission," SDA requested early 

consideration^' |,a legal qu^ion raised during die audit. SDA questioned whether die 

mondily time l^^quiredlunder 11 C.F.R. § 106.7(d)(1) applied to employees paid widi 

100 percent federlfruiidsf^(See Finding, page 4.) 

The Conunission coiCluded, by a vote of 5-1, diat 11 C.F.R. §106.7(d)(l) does requne 

committees to keep a monthly log for employees paid exclusively with federal funds. 

Exercising its prosecutorial discretion, however, the Commission decided it will not 

pursue recordkeeping violations for die failure to keep time logs or to provide affidavits 

to account for employee salaries paid widi 100 percent federal funds and reported as 

such. The Audit staff informed SDA Counsel of die Commission's decision on SDA's 

request. The findmg presented in diis audit report. Recordkeeping for Employees, does 

not include SDA employees paid with 100 percent federal funds and reported as such. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration July 10.1976 

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

Headquarters Montgomery, Alabaii^k. 

Banic Information 

• Bank Depositories Two ^ 

• Bank Accounts Three Federfi^Twol^iii-rederal, One Levin 

Treasurer 

• ^ Treasurer When Audit Was Conducted Mr. Edfar C? Gentle, III (»/ ! 1 - 7/18/12) 

Mrf|mes B. ^^avidson (7/1 w4 2 - 12/5/12) 

lCl% s D.^e r (12/6/12 - 6/19/13) 

Mr. EdM^Genffe, III (6/20/13 - Present) 

• Treasurer During Period Covered by , 

Audit 

Mr. Brann^J^alden (5/22/08-1/30/11) 

Management Information ^^"^ 

• Attended Commission Campaign Financ^ 

Seminar ^ 

• Who Handled Accounting and 

Recordkeeping Tasks 

'^^Staff r 

Ove^ew^ Financial Activity 

. (Audited Amounts) 

Cash-oif-^l4 @ January1SP09 ^ $ 13,139 

Receipts M 

o Contributio]^^|pm Individ^s 342,232 

o Transfers fromli^^iated Committees 413,892 

o Contributions fron^dii#PoliticaI 

Committees |^ 225,377 

o Transfers from Non-Tederal Accounts 316,171 

o All Other Receipts 173,243 

Total Receipts $ 1,470,915 

Disbursements 

o Operating Disbursements $ 950,626 

o Federal Election Activity 456,345 

0 All Other Disbursements 72,274 

Total Disbursements $ 1,479,245 

Cash-on-hand @ December 31,2010 $ 4,809 
Part III 

Simimary 

Finding and Recommendation 

Recordkeeping for Employees 

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

monddy payroll logs, as required, to document die percentage (^ti^^each employee 

spent on federal election activity. For 2009 and 2010, the A^^taff identified payments 

to SDA employees totaling $279,429^, for whom SDA did^^^tain mondily payroll 

logs. This consisted of $248,930, for which payroll was^i&ocat^^^een federal and 

non-federal funds, and $30,499, for which payroll vy;a^^a^sively nd^jfederal. Prior and 

subsequent to die exit conference, SDA representg|^es provided the staff with 

affidavits for most of die employees attesting to^ilTc percentage of time s^t on federal 

election activity. • 

In response to the Interim Audit Report reconunendation. SDA stated it will implement 

procedures to make sure all employe^^pid all or in part with federal and/or non-federal 

funds, are documented by die use of ni^lly time sheets. The Audit staff considers this 

matter resolved. (For more detail, see p%) ^ 

'•••m4 

^ 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 Commission Consideration of a 

Legal Question, Page 1). 
Part IV 

Finding and Recommendation 

I Recordkeeping for Employees 

Summary 

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

mondily payroll logs, as required, to document die percentage of time each employee 

spent on federal election activity. For 2009 and 2010, die AudiySi&^dentified payments 

to SDA employees totaling $279,429^, for whom SDA did r^^aintain mondily payroll 

logs. This consisted of $248,930, for which payroll was ^^^ d between federal and 

non-federal funds, and $30,499, for which payroll was eMusivcly non-federal. Prior and 

subsequent to the exit conference, SDA representati^l^Yided ihc .Audit staff with 

affidavits for most of the employees attesting to th^ercentage of time spent on federal 

election activity. 

In response to the Interim Audit Report reconunendiilion. SD/IL stated it will implement 

procedures to make sure all employees, paid all or in pari |vith federal and/or non-federal 

funds, are documented by the use of t&ndily time sheetsi'^i^e Audit staff considers this 

matter resolved. 

Party coiid^iltees musjkeep a monthly log of the 

spends in Coimection widi a federal election. 

fringe benents^|ire to be undertaken as follows: 

Legal Standard 

Maintenance of Month|p!||l^ 

percentage of time eadf^^empl^ 

Allocations of salai^gwages. „ . 

• employees who'^i^^d ^^r^g t or less^Oi dieir compensated time in a given 

mon^|^^^ral^^^ri%^^i^ ^ be paid eidier from the federal account 

oi^l^e^l^^^^^adj^^^ative costs; 

• .^l^ployees whdig)cnd i^rc th|n 25 percent of dieir compensated time in a given 

^^"^^^^ on federanclcction aciiv^ities must be paid only from a federal account; and 

• e^^^es who spciul non/of their compensated time in a given month on federal 

elec^^^tivities n ^ be paid entirely with fimds that comply widi State law. 

11C.F^§106.7(( 

Facts and Analyj 

A. Facts 

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

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

time its employees spent in coimection with federal election activity. These logs are 

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

^ 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 Commission Consideration of a 

Legal Question, Page 1). 
employees. For 2009 and 2010, logs were not maintained for $279,429 in payroll.* All of 

these individuals were disclosed as having been paid with an allocation of federal and 

non-federal fimds ($248,930) or exclusively non-federal funds ($30,499). ^ 

The Audit staff requested diat SDA provide documentation to verify the time employees 

spent on federal election activity. In response, SDA provided signed affidavits for five of 

the 11 employees noted above. The affidavits stated die employee name, job titie and 

responsibilities, the time period covered by die affidavit and the funding used. They also 

included a brief statement conceming the time spent on federal election activity. 

B. Interim Audit Report & Audit Division Recommendation- ''^x, 

The Audit staff discussed this matter again widi SDA repres^^ives at the exit 

conference. SDA did not provide die requested mondily ^^^^durmg the response 

period; SDA did, however, submit additional affidavit f%[i threefcmployees and another 

after die response period. Each of these affidavits ^S^ ^ employee i^ne, job title and 

responsibilities, die time period covered by the api^vit and die fundii^^ed, and 

included a brief statement regarding die time j^^kon fed^pl election acu^i^^^e 

affidavits provided by SDA, prior to and subseq^^to th^^^conference,^m not 

preclude this matter from die audit report because M>A did not create and maintain diese 

documents prior to die audit notificat|<^n letter. Instead, ih&affidavits were prepared 

during fieldwork after requests from tkft^udit staff for veillicciiion documentation. 

The Interim Audit Report reconunended %at SDi^^pide ev idence that it maintained 

mondily time logs to document how muc&m^ach'S^iybe spent on federal election 

activity or a plan to mm^f^"^'^^ 

employee spends on J^eral 

•Si* 

l^gndily payrdtelogs to tra^ die percentage of time each 

'^^pn activity."^ 

C. Committee Respons|M In^i^^y^udit Report 

In response tqt^tel^^erini^^K SDA stated it will implement 

procedurjE^ji^td'ni^^^t^all e^^yees, paid entirely or in part with federal and/or nonfedergL|^ds, are docM^ted ^ge^se of mondily time sheets. Such action is 

conslf t^l^ith CommisWon guidan^ widi respect to payroll logs. As such, the Audit 

staff consTtts^this matter resolved^ 

* Payroll is stated net of taxes and benefits. 

^ Payments to SDA employees paid with 100 percent federal funds and reported as such are not included in 

this fmding (see Part I, Background, Commission Guidance, Request for Early Commission 

Consideration of a Legal Question, Page 1).