Interim Audit Report of the 

Audit Division on the 

Democratic Party of Arkansas 

January 1, 2007 - December 31. 2008 

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 

(tiie Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial compliance 

witii tiie Act.* The audit 

determines whether the 

committee complied 

with the limitations, 

prohibitions and 

disclosure requirements 

of tiie 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 Democratic Party of Arkansas is a state party committee 

headquartered in Little Rock, Arkansas. For more information, see 

the chart on the Committee Organization, p. 2. 

Financial Activity (p. 2) 

Receipts 

o Contributions from Individuals $ 620,492 

o Contributions from Other Political 

Conunittees 326,600 

o Transfers from Affiliated Party 

Committees 113,217 

o Transfers from Non-Federal Accounts 1,507,775 

o Other Receipts 119,305 

Total Receipts $2,687^389 

Disbursements 

o Operating Disbursements $ 2,217,050 

o Loan Repayments Made 31,319 

o Federal Election Activity 107,908 

o Transfers to Non-Federal 

Account 224,349 

o Other Disbursements 117,600 

Total Disbursements $ 2,698,226 

Finding and Recommendation (p. 3) 

• Misstatement of Financial Activity 

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

Audit Division on the 

Democratic Party of Arkansas 

January 1, 2007 - December 31, 2008 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Fart in. Summary 

Finding and Recommendation 3 

Part IV. Finding and Recommendation 

Misstatement of Financial Activity 4 
Parti 

Background 

Authority for Audit 

This report is based on an audit of tiie Democratic Party of Arkansas (DPA), undertaken 

by the Audit Division of the Federal Election Commission (the Commission) in 

accordance witii the Federal Election Campaign Act of 1971, as amended (tiie Act). The 

Audit Division conducted tiie audit pursuant to 2 U.S.C. §438(b), which permits tiie 

Conimission to conduct audits and field investigations of any political committee that is 

required to file a report under 2 U.S.C. §434. Prior to conducting any audit under this 

subsection, the Commission must perform an intemal 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. 2 U.S.C. §438(b). 

Scope of Audit 

Following Commission approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

1. The disclosure of disbursements, debts and obligations. 

2. The disclosure of expenses allocated between federal and non-federal accounts. 

3. The disclosure of individual contributors' occupation and name of employer. 

4. The consistency between reported figures and bank records. 

5. The completeness of records. 

6. Other committee operations necessary to the review. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates Democratic Party of Arkansas 

• Dateof Registration March 8,1976 

• Audit Coverage January 1,2007 - December 31,2008 

Headquarters Little Rock, Arkansas 

Bank Information 

• Bank Depositories Four 

• Bank Accounts Seven Federal, Five Non-federal, One 

Levin 

Treasurer 

• Treasurer When Audit Was Conducted Karen Garcia 

• Treasurer During Period Covered by Audit Karen Garcia 

Management Information 

• Attended FEC Campaign Finance Seminar Yes 

• Used Commonly Available Campaign 

Management Software Package 

Yes 

• Who Handled Accounting and Recordkeeping 

Tasks 

Paid staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand @ January 1,2007 $ 71,616 

Receipts 

o Contributions from Individuals $ 620,492 

o Contributions from Other Political Committees 326,600 

o Transfers from Affiliated Party Committees 113,217 

o Transfers from Non-Federal Accounts 1,507,775 

o Other Receipts 119,305 

Total Receipts $2,687,389 

Disbursements 

o Operating Disbursements $ 2,217,050 

o Loan Repayments Made 31,319 

o Federal Election Activity 107,908 

o Transfers to Non-Federal Account 224,349 

o Other Disbursements 117,600 

Total Disbursements $2,698,226 

Cash on hand @ December 31,2008 $ 60,779 
Part III 

Summary 

Finding and Recommendation 

Misstatement of Financial Activity 

A comparison of DPA's reported activity to bank records revealed a misstatement of 

receipts and disbursements in 2007. DPA understated receipts and disbursements by 

$148,974 and $149,617, respectively. The Audit staff recommends tiiat DPA amend its 

disclosure reports to correct these misstatements for 2007. (For more detail, see p. 4) 
Part IV 

Finding and Recommendation 

Misstatement of Financial Activity 

Summary 

A comparison of DPA's reported activity to bank records revealed a misstatement of 

receipts and disbursements in 2007. DPA understated receipts and disbursements by 

$148,974 and $149,617, respectively. The Audit staff recommends that DPA amend its 

disclosure reports to correct these misstatements for 2007. 

Legal standard 

Contents of Reports. Each report must disclose: 

• The amount of cash on hand at the beginnmg and end of the reporting period; 

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

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

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

Schedule B (Itemized Disbursements). 2 U.S.C. §434(b)(l), (2), (3), (4) and (5). 

Facts and Analsrsis 

The Audit staff reconciled DPA's reported activity to its bank records for 2007 and 2008. 

The following chart outlines the discrepancies for the beginning cash balance, receipts, 

disbursements, and the ending cash balance. Succeeding paragraphs address the reasons 

for tiie misstatements. 

2007 Committee Activity 

Reported Bank Records Discrepancy 

Beginnuig Cash Balance 

@ January 1,2007 

$67,443 $71,616 $4,173 

Understated 

Receipts $1,410,249 $1,559,223 $148,974 

Understated 

Disbursements $1,400,534 $1,550,151 $149,617 

Understated 

Ending Cash Balance 

©December 31,2007 

$77,158 $80,688 $3,530 

Understated 

The beginning cash balance was understated by $4,173 and is unexplained, but likely 

resulted from prior period discrepancies. 
The understatement of receipts resulted from the following: 

• Unreported fundraising proceeds $ 87,496 

• Unreported transfer from non-federal account 66,000 

• Unexplained difference (4,522) 

Net understatement of receipts $ 148,974 

The understatement of disbursements resulted from the following: 

• Unreported transfer of fundraising proceeds to non-federal 

account $ 87,496 

• Checks reported as "void" but clearing bank 2,039 

• Disbursements reported but not supported by check or debit (381) 

• Disbursements made but not reported 68,449 

• Unexplained difference (7,986) 

Net understatement of disbursements $ 149,617 

The $87,496 included in both the understatement of receipts and disbursements 

represents net non-federal proceeds from fundraiser events in which DPA received both 

federal and non-federal contributions. The contributions were received in the form of the 

ticket price paid to attend the event and were collected by a commercial ticket processing 

company. The company subsequently submitted a check to DPA for the proceeds, less its 

service fee. DPA deposited the check into its federal account, tiien calculated the nonfederal share and transferred that amount to the non-federal account but failed to report 

the receipt of the non-federal portion of the proceeds and the transfer to the non-federal 

account ($87,496). The federal portion along with the service fees were reported by 

DPA. 

The $3,530 understatement of the closing cash on hand was the result of the 

misstatements described above. 

The Audit staff discussed the misstatements for 2007 with DPA representatives at the exit 

conference and provided relevant workpapers detailing the reporting errors. Regarding 

the reporting of the non-federal proceeds and subsequent transfer, DPA representatives 

explained that both the receipt and the transfer were excluded from the report because 

tiiey only deposited the proceeds in the federal account after receiving a single, comingled check which included both federal and non-federal fiinds. Hiey further added 

that they would amend the appropriate schedules as necessary to correct the 

misstatements. 

Interim Audit Report Recommendation 

The Audit staff recommends that, within 30 days of receipt of this report, DPA amend its 

2007 reports to correct the misstatements noted above by reporting the non-federal 

portion of the proceeds on line 17, Other Federal Receipts, and the transfer to the nonfederal account on line 29, Other Disbursements.