Interim Audit Report of the 

Audit Division on the Hawaii 

Democratic Party 

(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 Hawaii Democratic Party is a state party committee 

headquartered in Honolulu, Hawaii. For more information, see 

the chart on the Committee organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Political 

Committees 

o Transfers from Affiliates 

o Loans Received 

o Transfers from Non-federal 

Accounts 

o Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Coordinated Party Expenditures 

o Loan Repayments Made 

o Refrmds of Contributions 

o Other Disbursements 

o Federal Election Activity 

Total Disbursements 

$ 406,264 

280,044 

440,659 

30,000 

152,404 

18,034 

$1,327,405 

$ 655,840 

117,803 

10,000 

20,175 

249,293 

247,795 

$1,300,906 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Receipt of Contributions that Exceed Limits (Finding 2) 

• Receipt of Apparent Impermissible Funds (Finding 3) 

• Reporting of Debts and Obligations (Finding 4) 

• Recordkeeping for Employees (Finding 5) 

• Failure to File Reports and Properly Disclose Independent 

Expenditures (Finding 6) 

• Allocation of Expenditures (Finding 7) 

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

Division on the 

Hawaii Democratic Party 

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

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Commission Guidance 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 5 

Finding 2. Receipt of Contributions that Exceed Limits 8 

Findings. Receipt of Apparent Impermissible Funds 9 

Finding 4. Reporting of Debts and Obligations 13 

Finding S. Recordkeeping for Employees 14 

Finding 6. Failure to File Reports and Properly Disclose 

Independent Expenditures 16 

Finding?. Allocation of Expenditures 19 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Hawaii Democratic Party (HDP), 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 52 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 excessive contributions and loans; 

2. the receipt of contributions fi-om prohibited sources; 

3. the disclosure of contributions received; 

4. the disclosure of disbursements, debts and obligations; 

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

6. the consistency between reported figures and bank records; 

7. the completeness of records; 

8. the disclosure of independent expenditures; and 

9. other committee operations necessary to the review. 

Commission Guidance 

Request for Early Commission Consideration of a Legal Question 

Pursuant to the Commission's "Policy Statement Establishing a Program for Requesting 

Consideration of Legal Questions by the Cormnission," several state party committees 

unaffiliated with HDP requested early consideration of a legal question raised during audits 

covering the 2010 election cycle. Specifically, the Commission addressed whether monthly time 

logs under 11 CFR §106.7(d)(l) were required for employees paid with 100 percent federal 

funds. 

The Commission concluded, by a vote of 5-1, that 11 CFR § 106.7(d)(1) does require 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 the failure to keep time logs or to provide affidavits to account for employee 

salaries paid with 100 percent federal funds and reported as such. The Audit staff informed HDP 

representatives of the payroll requirement and the Commission's decision not to pursue 

recordkeeping violations for failure to keep payroll logs for salaries paid and correctly reported 

as 100 percent federal. This audit report does not include any findings or recommendations Avith 

respect to HDP employees paid with 100 percent federal funds and reported as such. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration December 17,1986 

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

Headquarters Honolulu, Hawaii 

Bank Information 

• Bank Depositories One 

• Bank Accounts Four Federal and Three Non-Federal 

Treasurer 

• Treasurer When Audit Was Conducted Yuriko J Sugimura (07/20/94 - 08/20/14); 

Florence Kong Kee (08/20/14 - 07/09/16); 

Tambry Young (07/09/16 - Present) 

• Treasurer During Period Covered by Audit Yuriko J. Sugimura 

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 S 8365 

Receipts 

o Contributions from Individuals 406,264 

o Contributions from Political Committees 280,044 

o Transfers from Affiliates 440,659 

o Loans Received 30,000 

o Transfers from Non-federal Accounts 152,404 

o Other Receipts 18,034 

Total Receipts $ 1327,405 

Disbursements 

o Operating Expenditures 655,840 

o Coordinated Party Expenditures 117,803 

o Loan Repayments Made 10,000 

o Refunds of Contributions 20,175 

o Other Disbursements 249,293 

o Federal Election Activity 247,795 

Total Disbursements $ 1300,906 

Cash-on-hand @ December 31,2012 S 534,864 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of HDP's bank activity with its most recent 

amended reports filed prior to the audit revealed material misstatements in both 2011 and 

2012. The Audit staff recommends that HDP amend its disclosure reports to correct the 

misstatements identified in 2011 and 2012. 

In addition, a comparison of HDP's bank activity with its original reports filed for 2011 

and 2012 also revealed a material misstatement of disbursement activity. For the 

misstatement of disbursements on HDP's original reports, the Audit staff recommends 

that HDP provide any comments it deems necessary with respect to this matter. (For 

more detail, see p. S) 

Finding 2. Receipt of Contributions that Exceed Limits 

. HDP accepted contributions from two political action committees that exceeded the 

limitation by $20,000. Both of the excessive contributions were untimely refunded. 

However, documentation was not available demonstrating that one refund totaling $5,000 

had cleared the bank. The Audit staff recommends that HDP provide documentation 

demonstrating this excessive contribution refund had cleared the bank. Absent such 

documentation, HDP should resolve the excessive portion by making a refund to the 

contributor, or by disclosing the excessive portion on Schedule D (Debts and 

Obligations) until funds become available to satisfy the obligation. Additionally, the 

Audit staff recommends that HDP submit any written comments it considers relevant to 

this issue. (For more detail, see p. 8) 

Finding 3. Receipt of Apparent Impermissible Funds 

During audit fieldwork, the Audit staff identified 75 receipts, totaling $169,586, 

deposited into HDP's federal account during 2012 that appeared to be from 

impermissible sources. The Audit staff recommends that HDP provide documentation 

demonstrating that these receipts were not from prohibited sources, were refunded in a 

timely matter, or were timely transferred to a non-federal account. Absent such 

documentation, HDP should resolve the impermissible receipts by making a refund to the 

contributors, or by disclosing the impermissible receipts on Schedule D until funds 

become available to satisfy the obligation. (For more detail, see p. 9) 

Finding 4. Reporting of Debts and Obligations 

During audit fieldwork, the Audit staff identified debts and obligations from 17 vendors, 

totaling $115,967, which were not itemized or were under reported on Schedules D 

(Debts and Obligations). The Audit staff recommends that HDP provide additional 

documentation demonstrating that these transactions were not obligations which required 
reporting on Schedule D. Absent such documentation, the Audit staff recommends that 

HDP amend its reports to correctly report and disclose these debts and obligations on 

Schedule D. (For more detail, see p. 13) 

Finding 5. Recordkeeping for Employees 

During audit fieldwork, the Audit staff determined that HDP 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 2011 and 2012, the Audit staff identified 

payments to HDP employees totaling $60,923 for which HDP did not maintain monthly 

payroll logs. This consisted of $48,510 for which payroll was allocated with federal and 

non-federal funds, and $12,413 for which payroll was exclusively paid with non-federal 

funds. For HDP employees paid with an allocation of federal and non-federal funds or 

exclusively non-federal funds, the Audit staff recommends that HDP provide monthly 

payroll logs that indicate the time spent in connection with a federal election. Absent the 

provision of monthly payroll logs, the Audit staff recommends that HDP implement a 

plan to maintain such monthly payroll logs in the future. (For more detail, see p. 14) 

Finding 6. Failure to File Reports and Properly Disclose 

Independent Expenditures 

During audit fieldwork, the Audit staff identified disbursements totaling $30,148, which 

appeared to be media related independent expenditures requiring disclosure on Schedule 

E, that HDP disclosed on Schedule B, Line 30b (Federal Election Activity) and Schedule 

F (Coordinated Party Expenditures). 

Additionally, of the $30,148 disclosed as Federal Election Activity and Coordinated 

Party Expenditures which appeared to be independent expenditures, HDP did not file the 

required 24-hour reports totaling $29,725. 

If HDP believes that the apparent independent expenditures totaling $30,148 did not 

require reporting as independent expenditures, the Audit staff recommends that HDP 

provide evidence to support its conclusion. Absent such evidence, the Audit staff 

recommends that HDP amend its reports to disclose these disbursements as independent 

expenditures on Schedule E (Itemized Independent Expenditures) and submit revised 

procedures for reporting independent expenditures. Lastly, the Audit staff recommends 

that HDP provide any comments it deems necessary with respect to the undisclosed 24-

hour reports. (For more detail, see p. 16) 

Finding 7. Allocation of Expenditures 

During audit fieldwork, the review of disbursements made from the federal and nonfederal accoimts identified an apparent non-federal overfunding.of activity in the amount 

of $82,722. The Audit strff recommends that HDP provide documentation 

demonstrating that the expenditures causing the non-federal overfimding were 

permissible allocable activity or were properly paid by the non-federal account. Absent 

such evidence, the Audit staff recommends that HDP reimburse the non-federal account 

$82,722 or disclose the non-federal overfimding on Schedule D as a debt until federal 

funds become available to satisfy the obligation. (For more detail, see p. 19) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of HDP's bank activity with its most recent 

amended reports filed prior to the audit revealed material misstatements in both 2011 and 

2012. The Audit staff recommends that HDP amend its disclosure reports to correct the 

misstatements identified in 2011 and 2012. 

In addition, a comparison of HDP's bank activity with its original reports filed for 2011 

and 2012 also revealed a material misstatement of disbursement activity. For the 

misstatement of disbursements on HDP's original reports, the Audit staff recommends 

that HDP provide any comments it deems necessary with respect to this matter. 

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 Analysis 

A. Misstatement of Financial Activity- Most Recent Reports Filed Prior to the 

Audit 

1. Facts 

The Audit staff reconciled HDP's reported financial activity with its bank records for 

calendar years 2011 and 2012. The following charts outline the discrepancies 

between HDP's disclosure reports and its bank records. The succeeding paragraphs 

explain why the discrepancies occurred. 

2011 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand @ 

January 1,2011 

$ 44,653 $ 8,365 $36,288. 

Overstated 

Receipts $282,712 $295,136 $12,424 

Understated 

Disbursements . $278,375 $290,981 $12,606 

Understated 

Ending Cash-on-Hand @ 

December 31,2011 

$ 48,990 $ 12,520 $36,470 

Overstated 
The beginning cash-on-hand was overstated by $36,288 and the discrepancy is 

unexplained, but likely resulted from prior period discrepancies. 

The understatement of receipts resulted from the following: 

• Unreported in-kind contributions^ $12,156 

• Return deposit items reported as disbursements 

instead of a negative entry on Schedule A (50) 

• Unexplained difference 318 

Net Understatement of Receipts $12.424 

The understatement of disbursements resulted from the following: 

• Unreported in-kind contributions $12,156 

• Disbursements not reported 4,890 

• Disbursements reported but not in bank activity (4,269) 

• Disbursement amounts reported incorrectly 157 

• Retum deposit items reported as disbursements 

instead of a negative entry on Schedule A (50) 

• Unexplained difference (21%^ 

Net Understatement of Disbursements $12.606 

The overstatement of $36,470 of the ending cash-on-hand was a result of the 

reporting discrepancies described above. 

2012 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand @ 

January 1,2012 

$ 48,990 $ 12,520 $ 36,470 

Overstated 

Receipts $875,660 $1,032,269 $156,609 

Understated 

Disbursements $895,253 $1,009,925 $114,672 

Understated 

Ending Cash-on-Hand @ 

December 31,2012 

$ 29,397 $ 34,864 $ 5,467 

Understated 

The overstatement of $36,470 of the beginning cash-on-hand was a result of the 

reporting discrepancies noted in 2011. 

The understatement of receipts resulted from the following: 

• Unreported in-kind contributions 

• Receipts over-reported 

$ 16,208 

(25,937) 

^ All unreported in-kind contribution discrepancies during calendar years 2011 and 2012 were for 

disbursements paid by the Democratic National Committee (DNC) on behalf of HDP for voter file 

updates and maintenance. The DNC reported these transactions as in-kind contributions made to HDP. 

To help assure the correct cash balance is reported, these amounts should be disclosed as in-kind 

contributions. 
• Receipts under-reported . 179,118 

• Over-reported unitemized receipts (21,774) 

• Return deposit items reported as disbursements 

instead of a negative entry on Schedule A (1,665) 

• Unexplained difference ^ 10.659 

Net Understatement of Receipts $156.609 

The understatement of disbursements resulted from the following: 

• Unreported in-kind contributions $ 16,208 

• Disbursements not reported 101,152 

• Disbursements reported but not in bank activity (2,497) 

• Disbursement reported as memo entry clearing bank 5,000 

• Inter-account transfer reported (4,205) 

• Disbursement amounts reported incorrectly 679 

• Retum deposit items reported as disbursements 

instead of a negative entry on Schedule A (1.6651 

Net Understatement of Disbursements $114.672 

The $5,467 understatement of the ending cash-on-hand was a result of the 2012 

reporting discrepancies noted above. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter at the exit conference and provided HDP 

representatives a schedule of the misstated amounts. HDP representatives said they 

would amend their reports in response to the Interim Audit Report. 

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

HDP amend its disclosure reports to correct the misstatements 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 reconunends that HDP 

adjust the cash-on-hand as necessary on its most recent report, noting that the 

adjustment is the result of prior period audit adjustments. 

B. Misstatement of Financial Activity - Original Reports Filed 

1. Facts 

During audit fieldwork, in addition to examining HDP's most recent reports filed 

prior to the audit notification, the Audit staff compared HDP's originally filed reports 

with its bank records. The purpose of this additional reconciliation was to identify 

the degree to which HDP had misstated its original filings. 

The Audit staff calculated that HDP understated disbursements on the original reports 

filed by $358,942 over the two-year period (2011-2012). This figure includes the 

$12,606 and $114,672 understatement of disbursements from 2011 and 2012 

discussed in Section A above (Misstatement of Financial Activity - Most Recent 

Reports Filed Prior to the Audit). 
8 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the understatement of disbursements on its original reports 

during the exit conference and provided HDP representatives a copy of the relevant 

schedule. HDP representatives had no specific comments at the time. 

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

HDP provide any additional comments it deems necessary with respect to this matter. 

Finding 2: Receipt of Contributions that Exceed Limits | 

Summary 

HDP accepted contributions from two political action conunittees that exceeded the 

limitation by S20,000. Both of the excessive contributions were untimely refunded. 

However, documentation was not available demonstrating that one refund totaling $5,000 

had cleared the bank. The Audit staff recommends that HDP provide documentation 

demonstrating this excessive contribution refund had cleared the bank. Absent such 

documentation, HDP should resolve the excessive portion by making a refund to the 

contributor, or by disclosing the excessive portion on Schedule D (Debts and 

Obligations) until funds become available to satisfy the obligation. Additionally, the 

Audit staff recommends that HDP submit any written comments it considers relevant to 

this issue. 

Legal Standard 

A. Party Committee Limits. A state, district or local committee of a political party may 

not receive more than a total of $5,000 per calendar year from a multicandidate 

political committee. 52 U.S.C. §30116(a)(2)(C) and 11 CFR §110.2(d). 

A state, district or local committee of a political party may not receive more than a 

total of $10,000 per calendar year from a non-multicandidate political committee. 52 

U.S.C. §30116(a)(1)(D) and 11 CFR §110.1(c)(5). 

B. Handling Contributions That Appear Excessive. If a committee receives a 

contribution that appears to be excessive, the committee must either: 

• Return the questionable check to the donor; or 

• Deposit the check into its federal account and: 

o Keep enough money in the account to cover all potential refunds; 

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

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

before its legality is established; 

o Seek a reattribution or redesignation of the excessive portion, following the 

instructions provided in the Commission regulations; and 

o If the committee does not receive a proper reattribution or redesignation 

within 60 days after receiving the excessive contribution, refund the excessive 

portion to the donor. 11 CFR § 103.3(b)(3), (4) and (5). 
Facts and Analysis 

A. Facts 

HDP accepted contributions from two political action committees that exceeded the 

limitation by $20,000. One contribution from a non-multicandidate political action 

committee was received on March IS, 2012 for $25,000, resulting in an excessive 

contribution of $15,000. HDP untimely refunded the excessive portion on September 28, 

2012 (197 days later). 

The second contribution from a multicandidate political action committee was received 

on October 19,2012 for $10,000, resulting in an excessive contribution of $5,000. HDP 

reported an untimely refund of the excessive portion on June 19,2013 (243 days later); 

however, documentation was not available demonstrating the refund check had cleared 

the bank. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter at the exit conference and provided HDP 

representatives a schedule of the apparent excessive contributions. HDP representatives 

had no specific comments at the time. 

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

provide documentation demonstrating that the refund, totaling $5,000, reported on June 

19,2013, had cleared the bank. Absent this documentation, the Audit staff recommends 

that HDP: 

• Void the original refimd check and issue another refund for the excessive portion 

($5,000) and provide evidence the check has cleared the bank; or, 

• If funds are not available to make the necessary refund, disclose the excessive 

portion on Schedule D until funds become available to satisfy the obligation. 

Finding 3. Receipt of Apparent Impermissible Funds 

Summary 

During audit fieldwork, the Audit staff identified 75 receipts, totaling $169,586, 

deposited into HDP's federal account during 2012 that appeared to be from 

impermissible sources. The Audit staff reconunends that HDP provide documentation 

demonstrating that these receipts were not from prohibited sources, were refunded in a 

timely matter, or were timely transferred to a non-federal account. Absent such 

documentation, HDP should resolve the impermissible receipts by making a refund to the 

contributors, or by disclosing the impermissible receipts on Schedule D until funds 

become available to satisfy the obligation. 

Legal Stanidard 

A. Receipt of Prohibited Contributions - General Prohibition. Candidates and 

conunittees may not accept contributions (in the form of money, in-kind contributions 

or loans) from the following prohibited sources: 

• Corporations organized by authority of any law of Congress; 
10 

• Labor Organizations; 

• National Banks (except a loan made in accordance with the applicable 

banking laws and regulations and in the ordinary course of business); 

• Federal Government Contractors (including partnerships, individuals, and sole 

proprietors who have contracts with the federal government); 

• Foreign Nationals (including individuals who are not U.S. citizens and not 

lawfully admitted for permanent residence); foreign governments and foreign 

political parties; and groups organized under the laws of a foreign country or 

groups whose principal place of business is in a foreign country, as defined in 

22U.S.C. §611(b); and 

• In the name of another. 52 U.S.C. §§30118,30119, 30121, and 30122. 

B. Definition of Limited Liability Company. A limited liability company (LLC) is a 

business entity recognized as an LLC under the laws of the State in which it was 

established. 11 CFR §110.1(g)(1). 

C. Application of Limits and Prohibition to LLC Contributions. A contribution 

from an LLC is subject to contribution limits and prohibitions, depending on several 

factors, as explained below: 

1. LLC as Partnership. The contribution is considered a contribution from a 

partnership if the LLC chooses to be treated as a partnership rmder Internal 

Revenue Service (IRS) tax rules, or if it makes no choice at all about its tax status. 

A contribution by partnership is attributed to each partner by his or her share of 

the partnership profits. 11 CFR §110.1 (e)( 1) and (g)(2). 

2. LLC as Corporation. The contribution is considered a corporate contribution-and 

is barred under the Act-if the LLC chooses to be treated as a corporation under 

IRS rules, or if its shares are traded publicly. 11 CFR § 110.1(g)(3). 

3. LLC with Single Member. The contribution is considered a contribution from a 

single individual if the LLC is a single-member LLC that has not chosen to be 

treated as a corporation under IRS rules. 11 CFR § 110.1 (g)(4). 

D. Limited Liability Company's Responsibility to Notify Recipient Committee. At 

the time it makes a contribution, an LLC must notify the recipient committee: 

• That it is eligible to make the contribution; and 

• In the case of an LLC that considers itself a partnership (for tax purposes), how 

the contribution should be attributed among the LLC's members. 11 CFR 

§no.i(g)(5). 

E. 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: 

• Retum 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 
11 

3. 

4. 

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

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

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. 11 CFR § 103.3(b)(5). 

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. If the 

contribution cannot be determined to be legal, the treasurer shall, within thirty 

days of the treasurer's receipt of the contribution, refund the contribution to the 

contributor. 11 CFR §103.3(b)(l). 

F. Contributions to delegate and delegate committees. .Fimds received for the 

purpose of furthering the selection of a delegate to a national nominating convention 

are contributions for the purpose of influencing a federal election. 11 CFR 

§110.14(c). 

G. Federal v. Nonfederal Account. The federal account may contain only those funds 

that are permissible under the federal election law; the nonfederal account may 

contain funds that are not permitted under the federal law (but are legal under state 

law), such as contributions that exceed the limits of the federal law and contributions 

from prohibited sources, such as corporations and labor organizations. 11 CFR 

§102.5 (a)(l)(i) and (a)(3). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff identified 75 receipts totaling $169,586 deposited 

into HDP's federal account during 2012 that appeared to be from impermissible soiuces. 

The sources of these receipts were as follows: 

Source 

Number of 

Transactions Total 

Labor Unions 8 $6,871 

Corporations 20 $141,005 

Limited Liability Companies 13 $10,455 

Unregistered Organizations^ 34 $11,255 

Total 75 $169,586 

The purposes of these receipts were mostly for: 

• Contributions'* - 20 transactions totaling $96,420; 

^ An unregistered organization is a political committee that has not registered with the Federal Election 

Commission. 

* Three corporate contributions were erroneously disclosed as political action committees and two were 

erroneously disclosed as individuals. 
12 

• State party convention fees (i.e. registration fee, convention booth fee) - 49 

transactions totaling $15,085; and 

• Democratic National Convention Credentials - 4 transactions totaling $58,000. 

Four of the receipts from corporations totaling $27,000 were imtimely refunded. 

However, documentation was not available demonstrating the refund checks had cleared 

the bank. The remaining 71 receipts totaling $142,586 remain unresolved. 

Hawaii state campaign finance statutes permit the receipt of funds to a party from labor 

unions, domestic corporations^, and limited liability companies in an aggregate amount 

no greater than $25,000 in any two-year election period. However, federal regulations 

prohibit such contributions to be deposited into a federal accoimt or used to influence 

federal elections. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter at the exit conference and provided HDP 

representatives a schedule of the apparent impermissible receipts. HDP representatives 

stated they would review the schedule. 

The Audit staff recommends that, vnthin 30 calendar days of service of this report, HDP 

submit documentation demonstrating that these receipts were refunded in a timely matter, 

were timely transferred to a non-federal account, or were not from prohibited sources: 

• For corporations, documentation from the contributor verifying it is not a 

corporation; 

• For LLC s, documentation from the contributor verifying its non corporate tax 

status; 

• For unregistered political organizations and labor organizations, documentation 

from the contributor attesting to the permissibility of the receipts. 

In addition, with respect to receipts received for the Hawaii state party convention, the 

Audit staff recommends that HDP submit documentation demonstrating that these 

receipts were not in connection with a nominating convention that nominated candidates 

for federal office. 

Absent this documentation, the Audit staff recommends that HDP: 

• Refund the impermissible receipts and provide evidence of the refund; or 

• If funds are not available to make the necessary refunds, disclose the 

impermissible receipts totaling $169,586 on Schedule D until funds become 

available to satisfy the obligation. 

^ Foreign corporations, including a domestic subsidiary of a foreign corporation, a domestic corporation 

that is own^ by a foreign national, or a local subsidiary where administraitive control is retained by the 

foreign corporation are prohibited under Hawaii state campaign finance statutes. 
13 

Finding 4. Reporting of Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff identified debts and obligations from 17 vendors, 

totaling $115,967, which were not itemized or were under reported on Schedules D 

(Debts and Obligations). The Audit staff recommends that HDP provide additional 

documentation demonstrating that these transactions were not obligations which required 

reporting on Schedule D. Absent such documentation, the Audit staff reconunends that 

HDP amend its reports to correctly report and disclose these debts and obligations on 

Schedule D. 

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. 52 

U.S.C. §30104(b)(8) and 11 CFR §§104.3(d) and 104.11(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). 

D. Advances by Committee Staff and Other Individuals. 

1. Scope. This section applies to individuals who are not acting as commercial 

vendors. Individuals who are acting as commercial vendors shall follow the 

requirements of 11 CFR §§116.3 and 116.4. 

2. The treatment as contributions. The payment by an individual from his or her 

personal funds, including a personal credit card, for the costs incurred in 

providing goods or services to, or obtaining goods or services that are used by or 

on behalf of, a candidate or political committee is a contribution unless the 

payment is exempted under 11 CFR 100.79, it shall be considered a contribution 

by the individual unlessa) The payment is for the individual's transportation expenses incurred while 

traveling on behalf of a candidate or political committee of a political party or 

for usual and normal subsistence expenses incurred by an individual, other 

than a volunteer, while traveling on behalf of a candidate or political 

committee of a political party; and 

b) The individual is reimbursed within sixty days after the closing date of the 

billing statement on which the charges first appear if the payment was made 

using a personal credit card, or within thirty, days after the date on which the 
14 

expenses were incurred if a personal credit card was not used. For purposes 

of this section, the closing date shall be the date indicated on the billing 

statement which serves as the cutoff date for determine which charges are 

included on that billing statement. In addition, "subsistence expense" includes 

only expenditures for personal living expenses related to a particular 

individual traveling on conunittee business, such as food or lodging. 11 CFR 

§116.5(b). 

3. Treatment as debts. A political committee shall treat the obligation arisihg from 

a payment described in paragraph (b) of this section as an outstanding debt until 

reimbursed. 11 CFR § 116.S(c). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff used available disbursement records to reconcile 

the accounts^ of 17 HDP vendors. This review identified debts and obligations from 

these vendors, totaling $115,967 that were not itemized or under reported on Schedules 

D. Of this amount, $68,744 were debts not reported, and $47,223 were debts that were 

under reported. These vendors provided HDP with services such as office space, polling, 

accounting, database accounting software, website hosting, printing, insurance, 

telephone, copier lease, and staff reimbursements'. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter at the exit conference and provided HDP 

representatives a schedule of the debts and obligations that were not itemized or were 

under reported. HDP representatives stated they would review the schedule of debts and 

obligations. 

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

provide additional documentation demonstrating that these transactions were not. 

obligations which required reporting on Schedule D. Absent such documentation, die 

Audit staff recommends that HDP amend its reports to correctly report and disclose these 

debts and obligations on Schedule D. 

I Finding 5. Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff determined that HDP 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 2011 and 2012, the Audit staff identified 

The reconciliation consisted of calculating invoiced and paid amounts for each reporting period in the 

2011 -2012 election cycle. The Audit staff then determined whether any outstanding debts were correctly 

disclosed on Schedule D. Each debt amount was counted once, even if it required disclosure over 

multiple reporting periods. 

Staff reimbursements consisted of three individuals with debts not reported totaling SI 0,768 and debts 

under reported totaling $1,998. 
15 

payments to HDP employees totaling $60,923 for which HDP did not maintain monthly 

payroll logs. This consisted of $48,510 for which payroll was allocated with federal and 

non-federal funds, and $12,413 for which payroll was exclusively paid with non-federal 

funds. For HDP employees paid with an allocation of federal and non-federal funds or 

exclusively non-federal funds, the Audit staff recommends that HDP provide monthly 

payroll logs that indicate the time spent in connection with a federal election. Absent the 

provision of monthly payroll logs, the Audit staff recommends that HDP implement a 

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 ^nge 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 fedpral 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)(l). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reviewed disbursements for payroll. HDP 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 are required 

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

salaries and wages. For 2011 and 2012, HDP did not maintain monthly logs for $60,923 

in payroll.' This amount includes payroll paid as follows to HDP employees. 

1. Employees reported on Schedule H4 (Shared Federal/Non-Feder^ Activity) and 

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

(totaling $48,510); and 

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

reported by HDP (totaling $12,413). 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter at the exit conference and provided HDP 

representatives a schedule of the disbursements for payroll lacking monthly payroll logs. 

HDP representatives had no specific comments at the time. 

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

' 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). Payroll amounts do not include fringe benefits. 
16 

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

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

• Implement a plan to maintain monthly payroll logs in the future. 

Finding 6. Failure to File Reports and Properly Disclose 

Independent Expenditures 

Summary 

During audit fieldwork, the Audit staff identified disbursements totaling $30,148, which 

appeared to be media related independent expenditures requiring disclosme on Schedule 

E, that HDP disclosed on Schedule B, Line 30b (Federal Election Activity) and Schedule 

F (Coordinated Party Expenditures). 

Additionally, of the $30,148 disclosed as Federal Election Activity and Coordinated 

Party Expenditures which appeared to be independent expenditures, HDP did not file the 

required 24-hour reports totaling $29,725. 

If HDP believes that the apparent independent expenditures totaling $30,148 did not 

require reporting as independent expenditures, the Audit staff recommends that HDP 

provide evidence to support its conclusion. Absent such evidence, the Audit staff 

recommends that HDP amend its reports to disclose these disbursements as independent 

expenditures on Schedule E (Itemized Independent Expenditures) and submit revised 

procedures for reporting independent expenditures. Lastly, the Audit staff recommends 

that HDP provide any comments it deems necessary with respect to the undisclosed 24-

hour reports. 

Legal Standard 

A. Definition of Independent Expenditures. An independent expenditure is an 

expenditure made for a communication expressly advocating the election or defeat of 

a clearly identified candidate that is not made in cooperation, consultation, or concert 

with, or at the request or suggestion of, a candidate, a candidate's authorized 

committee, or their agents, or a political party or its agents. 

A clearly identified candidate is one whose name, nickname, photograph or drawing 

appears, or whose identity is apparent through unambiguous reference, such as "your 

Congressman," or through an unambiguous reference to his or her status as a 

candidate, such as "the Democratic presidential nominee" or "Republican candidate 

for Senate in this state." 

Expressly advocating means any communication that: 

• Uses phrases such as "vote for the President" or "re-elect your Congressman" or 

communications of campaign slogan(s) or individual word(s), which in context 

can have no other reasonable meaning than to urge election or defeat of one or 

more clearly identified candidates; or 

• When taken as a whole and with limited references to external events, such as 

proximity to the election, could be interpreted by a reasonable person only as 
17 

advocating the election or defeat of one or more clearly identified candidates. 11 

CFR §§100.16(a), 100.17 and 100.22. 

B. Disclosure Requirements - General Guidelines. An independent expenditure shall 

be reported on Schedule E if, when added to other independent expenditures made to 

the same payee during the same calendar year, it exceeds $200. Independent 

expenditures made (i.e., publicly disseminated) prior to payment should be disclosed 

as memo entries on Schedule E and as a debt on Schedule D. Independent 

expenditures of $200 or less need not be itemized, though the committee must report 

the total of those expenditures on line (b) on Schedule E. 11 CFR §§104.3(b)(3)(vii), 

104.4(a) and 104.11. 

C. Last-Minute Independent Expenditure Reports (24-Honr Reports). Any 

independent expenditures aggregating $1,000 or more, with respect to any given 

election, and made after the 20"* day but more than 24 hours before the day of an 

election, must be reported and the report must be received by the Commission within 

24 hours after the expenditure is made. A 24-hour report is required each time 

additional independent expenditures aggregate $1,000 or more. The 24-hour report 

must be filed on a Schedule E. The date that a communication is publicly 

disseminated serves as the date that the committee must use to determine whether the 

total amount of independent expenditures has, in the aggregate, reached or exceeded 

the threshold reporting amount of $1,000. 11 CFR §§104.4(f) and 104.S(g)(2). 

D. Independent Expenditure Reports (48-Hour Reports). Any independent 

expenditures aggregating $10,000 or more with respect to any given election, at any 

time during a calendar year, up to and including the 20th day before an election, must 

be disclosed within 48 hours each time the expenditures aggregate $10,000 or more. 

The reports must be filed with the Commission within 48 hours after the expenditure 

is made. 11 CFR §§ 104.4(f) and 104.5(g)(1). 

E. Requirements for Maintaining Records. Reporting committees are required to 

maintain records which provide, in sufficient detail, the information from which the 

filed reports may be verified. 11 CFR §104.14(b)(1). 

Facts and Analysis 

A. Reporting of Independent Expenditures 

1. Facts 

During audit fieldwork, the Audit staff reviewed disbursements to ensure the 

reporting completeness and accuracy of independent expenditures. The Audit staff 

noted that HDP made media-related expenditures totaling $30,148 and disclosed them 

as Federal Election Activity or Coordinated Party Expenditures that may be 

considered independent expenditures. A breakdown of the analysis for these 

expenditures is as follows: 
18 

Apparent Independent Expenditures Reported as Coordinated Party 

Expenditures and Federal Election Activity (Copy of Communication Made 

Available) 

HDP made 18 apparent independent expenditures totaling $30,148 for which it 

provided supporting documentation such as invoices, scripts, ads, etc. 

i) For apparent independent expenditures totaling $ 18,226, the 

communications contained language expressly advocating the election or 

defeat of a clearly identified candidate as defined under 11 CFR 

§ 100.22(a). This amount consisted of costs associated with 16 radio 

advertisements and one newspaper advertisement containing express 

advocacy.' The radio advertisements included the statement: "And on 

November 6th, let's furlough Linda Linglel", and included the disclaimer, 

"Paid for by the Democratic Party of Hawaii, which is responsible for the 

content of this advertising". 

The 16 radio advertisements were disclosed on Schedule F as Coordinated 

Party Expenditures. Aside from being reported as Coordinated Party 

Expenditures, no documentation was available demonstrating 

coordination. Also, Counsel for HDP believed these expenditures were 

not coordinated. Given these reasons, the Audit staff believes the 

communications should be reported as Independent Expenditures. 

However, should HDP continue to maintain that these radio 

advertisements were not coordinated, the committee would have exceeded 

its spending limit by $15,203. 

The newspaper advertisement included the statement: "Vote Democrat in 

the General Election" with pictures below of Barack Obama, Joe Biden, 

Mazie Hirono, and Tulsi Gabbard. The advertisement included the 

disclaimer "Paid for by the Democratic Party of Hawaii, Not authorized by 

any candidate or candidate committee". Given the content and the 

disclaimer, the Audit staff believes the communication should be reported 

as an Independent Expenditure. 

ii) For an apparent independent expenditure totaling $11,922, the production 

and design costs associated with a television advertisement were paid by 

HDP. The television advertisement depicted the Hawaii Senatorial 

candidate, Linda Lingle, making a speech at the 2008 Republican National 

convention. While this depiction continued, the narrator stated the 

Candidate, "Linda Lingle, was vn-ong then, about a lot of things, and she's 

wrong for Hawaii now." The Audit staff believes the phrase, "she's 

wrong for Hawaii" was express advocacy because it had the same 

meaning as "defeat" and therefore could have no other meaning than to 

urge the defeat of the Candidate. The television advertisement was 

disclosed on Schedule B, Line 30(b) as Federal Election Activity and 

included the disclaimer, "Paid for by Vote Hawaii 2012, Not authorized by 

' The newspaper ad was not itemized on the FEC report (cost, S423). 
19 

any candidate or candidate's committee". Given the content and the 

disclaimer, the Audit staff believes the cost associated with the 

communication should be reported as an Independent Expenditure. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter at the exit conference and provided HDP 

representatives a schedule of disclosure errors for independent expenditures. HDP 

representatives stated they would review the schedule. •, 

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

HDP provide documentation and evidence that apparent independent expenditures 

totaling $30,148 did not require reporting as independent expenditures. Absent such 

evidence, the Audit staff recommends that HDP amend its reports to disclose these 

disbiu-sements as independent expenditures on Schedule E and submit revised 

procedures for reporting independent expenditures. 

B. Failure to File 24/48-Hour Reports for Independent Expenditures 

1. Facts 

The Audit staff reviewed the apparent independent expenditures noted above to 

determine whether additional reporting of a 24/48-hour report was required.'" The 

Audit staff determined that HDP did not file 24-hour reports, as required, totaling 

$29,725. No 48-hour reports were required for these expenditures. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter at the exit conference and provided HDP 

representatives a schedule of 24-hour reports that were not filed. HDP 

representatives stated they would review the schedule. 

Absent documentation and evidence that apparent independent expenditures totaling 

$30,148, did not require reporting as independent expenditures (per Part A above), 

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

HDP provide any comments it deems necessary with respect to the 24-hour reports 

that were not filed. 

Finding 7. Allocation of Expenditures , 

Summary 

During audit fieldwork, the review of disbursements made from the federal and nonfederal accounts identified an apparent non-federal overfimding of activity in the amount 

of $82,722. The Audit staff recommends that HDP provide documentation 

demonstrating that the expenditures causing the non-federal overfimding were 

The date the expenditure is publicly distributed serves as the date that the independent expenditure is 

made for purposes of the additional 24/48-hour report filing requirement. In the absence of a known 

date for public dissemination, the Audit staff used the invoice date or date of incurrence to determine if 

a 24/48-hour report Was required. 
20 

permissible allocable activity or were properly paid by the non-federal account. Absent 

such evidence, the Audit staff recommends that HDP reimburse the non-federal account 

$82,722 or disclose the non-federal overfunding on Schedule D as a debt until federal 

funds become available to satisfy the obligation. 

Legal Standard 

A. Paying for Allocable Expenses. The Commission regulations offer party committees 

two ways to pay for allocable, shared federal/non-federal expenses. • 

• they may pay the entire amount of the shared expense from the federal account 

and transfer funds from the non-federal accoimt to the federal account to cover the 

non-federal share of that expenses; or 

• They may establish a separate, federal allocation account into which the 

committee deposits funds from both its federal and non-federal accounts solely 

for the purpose of paying the allocable expenses. 11 CFR § 106.7(b). 

B. Transfers. Generally, a political committee may not transfer funds from its nonfederal account to its federal account, except when the committee follows specific 

rules for paying for shared federal/non-federal election activity. 11 CFR 

§§102.5(a(l)(i) and 106.7(f). 

C. Reporting Allocable Expenses. A political committee that allocates 

federal/nonfederal expenses must report each disbursement it niakes from its federal 

account (or separate allocation account) to pay for a shared federal/non-federal 

expense. Committees report these kinds of disbursements on Schedule H4 (Joint 

Federal/Non-federal Activity Schedule). 11 CFR §104.17(b)(3). 

D. Allocation Ratio for Administrative & Generic Voter Drive Costs. State and local 

party committees must allocate their administrative expenses and generic voter drive 

costs dependent upon which federal offices appear on the ballot for the election year. 

The minimum percentage of federal funds would be at least: 

• 36 percent if both a Presidential candidate and a Senate candidate appear on the 

ballot; 

• 28 percent if a Presidential candidate but not a Senate candidate appears on the 

ballot; 

• . 21 percent if a Senate candidate, but not a Presidential candidate, appears on the 

ballot; and, 

• 15 percent if neither a Presidential nor a Senate candidate appears on the ballot. 

11 CFR § 106.7(d)(2) and (3). 

E. Definition of Federal Election Activity. Federal election activity (FEA) is a 

specifically defined term of art for activity by state, district or local party committees 

that triggers special payment and reporting requirements. As a general rule, FEA 

must be paid for with federal funds. No non-federal funds may be used for FEA. 

There are four types of FEA: 

• Voter registration activity during the period 120 days before a regularly scheduled 

federal election including the election day itself; 
21 

• Voter identification, get-out-the-vote and generic campaign activity conducted in 

connection with an election in which a candidate for federial office appears on the 

ballot; 

• A public communication that refers to a clearly identified candidate for federal 

ofRce and that promotes, attacks, supports or opposes (PASOs) a candidate for 

that office. The communication need not expressly advocate the election or 

defeat of the federal candidate to qualify as FEA; and 

• Services provided during any given calendar month by an employee of a state, 

district or local party committee who spends more than 25 percent of his or her 

compensated time during that month in activities in connection with a federal 

election, including FEA mentioned above. 11 CFR § 100.24(b). 

F. Salaries and Wages. Committees must keep a monthly log of the percentage of time 

each employee spends in connection with a Federal election. Employees who spend 

25 percent or less of their compensated time in a given month on Federal election 

activity or on activities in cormection with a Federal election must either be paid only 

from the Federal accoimt or have their salaries allocated as an administrative cost. 11 

CFR § 106.7(d)(1). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the review of disbursements made from the federal and nonfederal accounts identified an apparent non-federal overfunding of activity in the 

amount of $82,722. 

1. Expenses reported as allocated on Schedules H4. The Audit staff calculated 

the non-federal share of expenditures required to be disclosed on Schedules H4 

and compared that to the amount transferred from the non-federal account for the 

period between 2011 and 2Q12. The non-federal portion of shared activity for this 

period was $110,092. However, the non-federal account transferred a net amount 

of $160,083, resulting in an overfunding of allocable expenses totaling $49,991. 

a) Below is a breakdown of the Audit staffs calculation of overfunding of 

allocable expenses totaling $49,991. The following expenses were disclosed 

on Schedule H4 but, based on available documentation, were not allocable 

and should have been paid with 100 percent federal funds: 

i) Payroll and Associated Costs: HDP paid expenses from a federal account 

but disclosed these as allocable administrative expenses on Schedule H4. 

HDP did not provide monthly logs, timesheets, or affidavits demonstrating 

that these costs were solely non-federal or allocable expenses (see Finding 

5). 

ii) Generic Voter Drive (GVD) Expenses. HDP paid expenses from a federal 

account that appeared to be GOTV activity during the FEA time period, 

but disclosed these as allocable expenses on Schedule H4. A portion of 
22 

these expenses were disclosed as allocable Generic Voter Drive expenses 

on Schedule H4. The remaining were disclosed as shared administrative 

expenses on Schedule H4. Based upon the dates and purpose of the 

disbursements and the limited documentation provided, it appears these 

disbursements should have been paid with 100 percent federal funds and 

not disclosed as shared expenses on Schedules H4". 

iii) Miscellaneous Expenses. HDP disclosed expenses on Schedule H4 that 

were not sufficiently documented to allow the Audit staff to determine 

whether they could be shared. Included in this total were disbursements 

for rent and utilities. The documentation to support these disbursements 

was insufficient to determine if these expenses were made to support the 

headquarters' office or temporary campaign office locations. 

2. Expenses paid from the non-federal account. HDP paid certain expenses 

directly from the non-federal account that appeared to represent 100 percent 

federal activity or allocable activity that should have been disclosed on Schedules 

H4, resulting in an overfunding of expenses totaling $32,731. 

a) Below is a breakdown of the Audit staffs calculation of overfunding of 

expenses paid from the non-federal account totaling $32,731. Based on 

available documentation, these expenses should have been paid with 100 

percent federal funds or allocated on Schedules H4: 

i) Federal Election Activity Expenses. HDP paid expenses totaling $30,576 

from its non-federal account that appeared to be PEA Type II (GOTV) 

activity that should have been paid with 100% federal fiinds. Based on 

available documentation, it appeared these expenses pertained to various 

GOTV rallies. These costs included consulting services, facility and 

equipment rentals, food and beverages, entertainment and transportation 

expenses. 

ii) Miscellaneous Administrative Expenses. HDP paid expenses from its 

non-federal account that, based on available documentation, appeared to 

be expenses that should have been allocated between the federal and nonfederal accounts. The federal share of these expenses totaled $2,155. 

These expenses pertained to office rent, bank fees, office vehicle repairs 

and accounting services. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this ihatter at the exit conference and provided HDP 

representatives schedules identifying the transactions causing the non-federal 

overfunding. HDP representatives stated they were working on getting three former staff 

'' For the 2012 election cycle, a candidate for federal office appeared on the ballot in the state of Hawaii. 

For HDP, the FEA Voter ID, Generic Campaign Activity and GOTV period was June 5,2012 through 

November 6,2012. Further, the FEA voter registration period was November 8,2011 through March 

13,2012 and April 13,2012 through November 6,2012. 
23 

to sign payroll affidavits for disbursements disclosed as allocable administrative expenses 

on Schedule H4. 

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

provide documentation demonstrating that the expenditures above did not cause an overfunding from the non-federal account of $82,722 ($49,991 + $32,731). Absent such 

evidence, the Audit staff recommends that HDP reimburse the non-federal account 

$82,722 or disclose the non-federal .overfunding on Schedule D as a debt until funds 

become available to satisfy the obligation.