We know D.C. Get our free newsletter to stay in the know.

D.C. Democrats improperly raised funds for their trip to the 2008 Democratic National Convention, a city audit has found.

At issue has been the relationship between the state party organization, the D.C. Democratic State Committee, and an organization established last year to raise funds for the Denver convention. Organizers maintained that the two bodies were entirely separate, but the final audit report [PDF] released today by the Office of Campaign Finance found that the convention account, which raised a total of $126,000, “is indistinguishable as a separate entity and bares absolutely no independent identity.”

The report noted the intermingled personnel between the two groups and the repeated use of the DCDSC name in the course of the convention fundraising.

The consequences are this: The convention donations and expenditures, according to the audit findings, should have been reported to the city and should have followed city contribution limits. The Democratic State Committee could be forced to return tens of thousands in donations that exceeded those limits, in addition to fines, which together could all but bankrupt the organization.

At a meeting earlier this month, DCDSC widely anticipated the finding of the final report and voted to challenge the findings before the Board of Elections and Ethics, and in courts of law if necessary.

The audit also found various irregularities in the DCDSC’s reporting of its contributions and expenditures between January 2007 and January 2009. The DCDSC is not disputing those findings; the committee may be subject to fines or other sanctions.