December 20,2013 

MEMORANDUM 

To: . The Commission 

Through: Alec Palmer 

Staff Director 

From: Patricia C. Orrock 

Chief Compliance Officer 

Thomas E. Hintermister 

Assistant Staff Director 

Audit Division 

Zuzana Pacious 

Audit Manager 

Kendrick Smith 

Audit Manager 

By: Rhonda Gillingwater 

Lead Auditor 

Subject: Audit Division Recommendation Memorandum on the Republican Party of 

Iowa (RPIA) (All-24) 

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

the Audit staff presents its recommendations below and discusses the findings in the 

attached Draft Final Audit Report (DFAR). The Office of General Coimsel has reviewed 

this memorandum and concurs with the recommendations. 

Finding 1. Recordkeeping for Employees 

For the period covered by the audit, RPIA did not 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 

RPIA employees totaling $476,442 for whom RPIA was required to maintain 

monthly payroll logs. In response to the Interim Audit Report reconmiendation, 

RPIA stated that it has implemented a plan to keep a monthly log of all work 

performed by staff for federal election activity. RPIA made no fiirther comments 

in response to the DFAR. 
The Audit staff recommends that the Commission find that RPIA failed to 

maintain monthly time logs to document the time employees spent on federal 

election activity totaling $476,442. 

Finding 2. Failure to Itemize Debts & Obligations 

During audit fieldwork, the Audit staff noted that RPIA had failed to disclose debts 

and obligations totaling $179,856. In response to the Interim Audit Report 

recommendation, RPIA filed amended reports to correctly disclose these debts and 

obligations. RPIA made no further comments in response to the DFAR. 

The Audit staff recommends that the Commission find that RPIA failed to itemize 

debts and obligations totaling $179,856. 

RPIA 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 Rhonda Gillingwater or Zuzana Pacious at 

694-1200. 

Attachment: 

- Draft Final Audit Report of the Audit Division on the Republican Party of Iowa 

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

Audit Diviision on the 

Republican Party of Iowa 

(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 committee that 

is required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Conmiission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial compliance^^^is^^ 

with the Act.' The mMi 

determines wheth^rm^^^^ 

committee complied 

with the limitations^. 

prohibitiG«-'«? l 

disclosure requirements^^, 

ofthe^fe^ 

About the Committee (p. 2) 

The Republican Party of Iowa is a state party committee, 

headquartered in Des Moines, lowa.^For more information, 

see chart on Committee Organizati^f^p,., 2. 

Financial Activity^Cp. 2) 

. Receipts ^'^ ^ ' 

o Contribut^^ from Individuals 

o Contribu^^ from St 

Political Comini^tees^ 

o Transfers from Poliiiciil 

li^ommittees 

o N^dera l Transfer 

Total Receipts 

Disburseinents 

Operating.Expenditures 

^^'^ Federal Efeetibn Activity 

l^llDcated/Federal/Non-federal 

Expeiiipitures 

Coordinated Expenditures 

er Disbursements 

Toi^l Disbursements 

1,130,254 

489,716 

633,129 

325,042 

164,904 

$ 2,743,045 

$ 953.976 

526,610 

931,448 

276,578 

54,736 

$ 2,743,348 

Future A^l^ion 

The Commission^fi^ A 

initiate an enforceifi^#' 

action, at a later timep 

with respect to any of 

the matters discussed in 

this report. 

Findings and Recommendations (p. 3) 

• Recordkeeping for Employees (Finding 1) 

• Failure to Itemize Debts & Obligations (Finding 2) 

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

the Audit Division on the 

Republican Party of Iowa 

(January 1, 2009 - December 31, 2010) 

MS.-F VV" 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 

Scope of Audit 

Commission Guidance 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Recomnieli4g^^o^\ 

Finding 1. Recordkeeping for Employees '^^l? ^ 

Finding 2. Failure to Itemize Debts & Obligations^^ 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Republican Party of Iowa (RPIA), 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 2 U.S.C. §438(b), which permits the 

Commission to conduct audits and field investigations of any politi|^l committee that is 

required to file a report under 2 U.S.C. §434. Prior to conduct!^' any^audit under this 

subsection, the Commission must perform an intemal revi^^^g)orts filed by selected 

committees to determine whether die reports filed by a p^icul^&mmittee meet the 

threshold requirements for substantial compliance v^^^Act . §438(b). 

Scope of Audit 

Following Conmiission-approved procedures^^e^^dit st^scvaluated varipuf'risk 

factors and as a result, this audit examined: ^^Si^ /^^ " 

1. the receipt of excessive contributions and loans; ^i^^^i,. 

2. the disclosure of individual contribbtors' occupation^^^mme of employer; 

3. the consistency between reported figures suid bank records; .-.^ 

4. the disclosure of disbursements, debts, aiid otiligations; Z'^ 

5. the completeness of records; and \ .J^^'^^'-^S^'^-f'^ 

6. other committee opQra;tipns necessary tSjthfe review. 

Commission'^GIddancSe: 

Request for EaFlyj€omniis§ion Cbnside^liion of a Legal Question 

Pursuant to'the c*..*— 

Consideration of Legal^QuestiorisWhthe Commission," several state party 

unaffiliatjid^with RPIA requested early consideration of a legal question raised during an 

audit. Specifically, the CdMkiissidn addressed whether monthly time logs under 11 CFR 

§ 106.7(d)(l)^5^re requirelifor employees paid with 100 percent federal fiinds. 

The Commission ^o|?Gluded, by a vote of 5-1, that 11 CFR § 106.7(d)(1) does require 

committees to keep a^'nionthly log for employees paid exclusively with federal fimds. 

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 fiinds and reported as 

such. Audit staff informed RPIA representatives of the payroll log requirement and of 

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. Finding 1, 

Recordkeeping for Employees, of this audit report does not include RPIA employees paid 

with 100 percent federal funds and reported as such. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration October 14,1975 

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

Headquarters Des Moines, Iowa 

Bank Information /if*. 

• Bank Depositories One ...^^K 

.>:.if = 

• Bank Accounts Four federalj-o^lfesNon-federal, and one 

building fuiia account 

Treasurer 

• Treasurer When Audit Was Conducted Craig^WiUiams 7/9/ri3fia5/12 

• Treasurer During Period Covered by Audit Qppal Krishna 6/24/08-T;^/09 

44att.RandalL l/27/09-7/0»®^ 

Management Information 

• Attended Commission Campaign Finance 

Seminar I'^^a^,^ 

No ""^^^ 

• Who Handled Accounting and 

Recordkeeping Tasks % 

.Paid Staff ^^Ifew 

Overview of F%£aciMi\ctivity 

"^l&udited }^oimts) 

Cash-on-handJ^Jailuary l,im $ 218,208 

Receipts ..^"^^ k 

o Contribldtions from Inctiyiduals ^'"Tfe?-/ 1,130,254 

o Cohtributions from Othef^Pblitical^"^ 

Conunittee^, M 489,716 

o Transfers from-^plitical Cqnimittees 633,129 

o Non-federal Transfers JZ' 325,042 

o Other Receipts ZZ^Z' 164,904 

Total Receipts J^' $ 2,743,045 

Disbursements 

o Operating Expenditures 953,976 

o Federal Election Activity 526,610 

0 Allocated Federal/Non-federal Expenditures 931,448 

o Coordinated Expenditures 276,578 

o Other Disbursements 54.736 

Total Disbursements $ 2,743,348 

Cash-on-hand @ December 31,2010 $ 217,905 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Recordkeeping for Employees 

During audit fieldwork, the Audit staff determined that RPIA did not maintain monthly 

payroll logs, as required, to track the percentage of time each employee spent on federal 

election activity. For 2009 and 2010, the amount of payroll for which logs were required, 

was $476,442. This consisted of $334,580, shared federal/non-f^d^ral payroll, and 

$141,862, paid exclusively with non-federal funds. Subseque^jto the exit conference, 

RPIA representatives provided the Audit staff with affida^ts fron^^ employees 

attesting to the percentage of time spent on federal election activity^^ 

In response to the Interim Audit Report recommgadation, RPIA stated thp^it has 

implemented a plan to keep a monthly log of alll work performed by staff for:federal 

election activity. (For more detail, see p. 4.) ^ ^ 

Finding 2. Failure to Itemize Dehts & Ohligations 

During audit fieldwork, the Audit staf^^^diat RPIA hM^dJed to disclose debts and 

obligations totaling $179,856. In resp(^^^ie^Interim Aud^^'^ort recommendation, 

RPIA filed amended reports to correctly Bjsclo^p^Ji^bts and obligations. (For more 

detail, see p. 5.) 

2 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 

Findings and Recommendations 

Finding 1. Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff determined that RPIA did not maintain monthly 

payroll logs, as required, to track the percentage of time each employee spent on federal 

election activity. For 2009 and 2010, the amount of payroll for yi&ich logs were required, 

was $476,442. This consisted of $334,580, shared federal/non^ederal payroll, and 

$141,862, paid exclusively with non-federal funds. Subseq^^to the exit conference, 

RPIA representatives provided the Audit staff with affid^^its frdr^jwo employees 

attesting to the percentage of time spent on federal ^^^rii^activity^^ 

In response to the Interim Audit Report reconrniendation, ^PIA stated thai^i|has. 

implemented a plan to keep a monthly log of*all%Qrk perf^ned by staff for^feaeral 

election activity. "'S^i. jw 

Legal Standard ^ ''%]|r 

Maintenance of Monthly Logs. Parfyi^Oiininittees must ^J%r.a monthly log of the 

percentage of time each employee spenhs^iSlfltoection wit^®|fe3eral election. 

Allocations of salaries, wages, and fringdlbenefitsV^^i^i^oJbe undertaken as follows: 

• employees who spgnd,25 percent oii4jss>^6f thei^^:cDjiipensated time in a given 

month on federj^etWif^n activities njust be paid-%ither from the federal account 

or be allocatect^as administrative coststit 

• employees'who^^nd more than 25 per^t of their compensated time in a given 

month on feder^^lccii()^^i:i\'iiicN musfbe paid only from a federal account; and, 

• emgl^^^^ho spend ime of ihcir compensated time in a given month on federal 

d&tion acti^^^nay bf: paid entirely with funds that comply with state law. 11 

^^^ i §106.7(d^ 

Facts and|Anal3rsis 

A. Facts ^"^^^>, 

During fieldwork, the Aiidit staff reviewed disbursements made to employees totaling 

$476,442"*, for which RPIA did not provide monthly payroll logs to document the 

percentage of time the employee spent in connection with federal election activity. These 

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

to pay these workers. The total of $476,442 consisted of $334,580, for which payroll was 

allocated between federal and non-federal funds, and $141,862 that was paid exclusively 

with non-federal funds. 

^ 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 are stated net of taxes and fringe benefits. 
B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the recordkeeping issue with RPIA representatives during audit 

fieldwork and at the exit conference. While the representatives did not address logs or 

other documentation to support the payroll recordkeeping requirements, they pointed out 

that RPIA Counsel had drafted affidavits to document the work performed by RPIA 

employees. Subsequently, RPIA provided affidavits from two employees who attested to 

the percentage of time they had spent in connection with federal election activity. These 

documents, however, do not resolve the recordkeeping finding because RPIA provided 

the affidavits only after notification of the audit. As such, RPIA did not appear to satisfy 

the requirement to maintain and provide payroll records during or^ptipr to audit 

fieldwork. 

The Interim Audit Report recommended that RPIA proviSl| evid^^^|hat it maintained 

monthly time logs to document employees' time spenjbnte.deral efe^|p activity, or, 

that it had implemented a plan to maintain monthly^ayroU logs to track&e percentage of 

time each employee spends on federal election,^a|tivity. > "^^^^^f^ 

C. Committee Response to Interim Audit Report:- ' ^ 

In response to the Interim Audit Report recommendatio'ii^J^PIA said that it has 

implemented a plan to keep a monthl j|log.^of all work peitj^ned by staff for federal 

election activity. RPIA further stated 3i|t^|^lDg.is kept and co|nple?ted by the Executive 

Director of RPIA and shared with the Tr&sui:ei<Qf^RPIA. Updn'discussion and 

agreement by these RPIA officials, the log' .is theii 'saive^x^s>j)oth an electronic and paper 

copy in a secure location^j^f^^iSvplan is consiBjieht with Commission guidance with respect 

to payroll logs. ^ 

Finding 2. FailufjELto I^^mize I|ebts & Ohligations 

Duri|LgSiidit fieldwork^^t^^, Auditf!||a|f^iioted that RPIA had failed to disclose debts and 

obligations .totaling $179i85?6. In response to the Interim Audit Report recommendation, 

RPIA filed^mcnded report^Uo correctly disclose these debts and obligations. The Audit 

staff considers titiis matter resolved. 

Legal Standards 

A. Continuous Reporting Required. A political committee must disclose the amount 

and nature of outstariiding debts and obligations until those debts are extinguished. 

2 U.S.C §434(b)(8) and 11 CFR §§ 104.3(d) and 104.11(a). 

B. Itemizing Debts and Obligations. 

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

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

regularly scheduled report. 

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

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

A. Facts 

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

the accounts^ for two RPIA vendors. These vendors provided RPIA with fundraising, 

telemarketing, phone services and direct mail. The debt balances owed were outstanding 

in almost every reporting period throughout the period covered by the audit. As 

described below, die Audit staff identified debts and obligations totaling $179,856 that 

were not disclosed on Schedule D (Debts and Obligations). This figure was adjusted 

from the Interim Audit Report amount of $ 186,515. 

The Audit staff reviewed invoiced information and identified 4^Bt ana obligations to one 

of these vendors totaling $166,890 that were previously not:;fep|jjted. This unreported 

debt represents 93% of total reportable debt by RPIA. ^ 

In addition to the unreported debt discussed abov|j^RPWunder-reportcd^ebt totaling 

$12,966^ to another vendor. 

B. Interim Audit Report & Audit Division Recomme^lt^n 

I The Audit staff presented this matter to RPIA represel^^s at the exit conference and 

! provided schedules detailing the unr^oricd debts for each^i)orting period for the 

audited cycle. ^ 

The Interim Audit Report recommended tiat RjpS^r^|i||^ocumentation demonstrating 

; that these expenditures did^^nptrequire repottmg on Sch^|ule D. Absent such 

documentation, the Interim Alttdit Report further recommended that RPIA amend its 

reports to disclose.thei^unreport^didebts totalini.J$ 166,890 and to correct the underreported debt totaling $12,SI66. i^l,, S 

C. CommitteeResponse iMUke Interihf "^Audit Report 

In respQtise to the Lffetim^.Auditffec^ RPIA said it had addressed this issue 

by wotKiiig with its attoMi^^s, acdoj^i^is and compliance team. RPIA amended its 

reports aiii^correctly discl^d the^debts and obligations. 

The reconciliation consisted of calculating invoiced and paid amounts for individual reporting periods in 

the 2009-2010 election cycle. The Audit staff dien 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. 

The total amount reportable to this vendor was $16,039. RPIA reported only $3,073 on its 2009 and 

2010 disclosure reports. The under-reported amount was calculated as follows: $16,039 - $3,073 = 

$12,966.