FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

May 25, 2023

MEMORANDUM 

To: The Commission

Through: Alec Palmer

Staff Director

From: Patricia C. Orrock

Chief Compliance Officer

Dayna C. Brown

Assistant Staff Director

Audit Division

Kendrick Smith

Audit Manager

By: Camilla Reminsky

Lead Auditor

Subject: Audit Division Recommendation Memorandum on Steve Daines for

Montana (A21-04)

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

the Audit staff presented the Draft Final Audit Report (DFAR) to Steve Daines for Montana

(SDFM) on March 31, 2023 (see attachment). SDFM did not request an audit hearing.

This memorandum provides the Audit staff’s recommendation for each finding outlined in 

the DFAR.

In response to the DFAR, SDFM provided additional information, as noted below.

Additionally, the Office of General Counsel (OGC) issued comments (LRA 1146, dated 

May 24, 2023, attached) on SDFM’s response to the DFAR.

Finding 1. Receipt of Contributions in Excess of the Limit 

In response to the DFAR, SDFM provided additional check copies, totaling $18,300,

to substantiate refunded checks for excessive contributions. SDFM further stated

that it “intends to resolve all remaining excessive contributions that have not be[en]
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2 

refunded, reattributed, or redesignated as permitted at the conclusion of this audit

once the Commission’s findings are finalized.”

SDFM reiterated its objection to the use of sampling in the audit process. SDFM

stated that it was able to resolve a “significant number” of the excessive

contributions specifically identified by the Audit staff and provided to the

committee, however, it does not “understand how it is possible that it could have

corrected the remaining projected errors that were not specifically identified.” 

SDFM noted that the projected amount has no “complete, itemized list of identified

and confirmed excessive contributions,” and that the projected amount may vary by

hundreds of thousands of dollars. Accordingly, SDFM objects to the placement on 

the public record of a report stating that SDFM did not resolve excessive

contributions based on a sample projection when it “worked diligently to correct the

actual, identified excessive contributions that the Audit Division brought to its

attention.”

Audit sampling is a well-established method used in both public and private sectors

during audits which have a large data population. It is used when the manual

inspection of the entire population is deemed impractical, either due to the

prohibitive costs involved or the sheer volume of data being audited. By selecting 

a representative subset of the population using statistical methods, auditors can

obtain a comprehensive understanding of the population’s composition and 

characteristics, without the need for a time-consuming and potentially costly fulldata inspection. The Audit staff restates that the use of statistical sampling has been

approved by the Commission for use in Title 52 audits for over 30 years, and the

Audit staff notified SDFM of the possible use of sampling to project the dollar value

of exceptions, errors, or discrepancies in its Audit Notification Letter dated April 

28, 2021. The Audit staff acknowledges that no specific list of contributions was

given to SDFM to remediate the sample projection. However, it should be noted

that, after being advised of the sample projection of excessive contributions at the

February 25, 2022 exit conference, it was incumbent upon SDFM (1) to conduct a 

thorough review of the contributions received, and once completed, refund all

excessive contributions found, or (2) disgorge the amount of excessive contributions

projected by the sample review to the U.S. Treasury. Both are acceptable options

to remediate sample projections of errors. However, SDFM did not utilize either of 

these options. The Audit staff notes that, after notification of the errors at the exit 

conference, SDFM had more than 14 months in which to examine its own records

to further identify and refund any discovered excessive contributions. 

The Audit staff recommends that the Commission find that SDFM received

excessive contributions from individuals totaling $496,604. 

Finding 2. Disclosure of Debts and Obligations 

In response to the DFAR, SDFM reiterated its position that the ad buy of $108,750 

was not placed at the time of the invoice. Instead, SDFM contends the ad buy was

delayed until September 2020, at which time SDFM issued payment. SDFM stated, 

“To the best of the Committee’s knowledge, its media vendor did not withdraw and

reissue the June 2020 invoice.” Additionally, SDFM stated, “The Committee did

not produce written records evidencing the delay of the ad buy. It is possible that

arrangements were made by telephone and no written records exist. The Committee
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 

contends, however, that its explanation is reasonable and entirely consistent with the

realities of media placement/ad buy invoicing, and that no substantiating written 

documentation is necessary in these circumstances.” SDFM further restated that it

had received several invoices during one reporting period, and it paid the invoices

early in the next reporting period. SDFM “contends that the absence of this debt

reporting is immaterial to the public record.”

The Audit staff maintains its position that the ad buy of $108,750 required debt

reporting. According to bank records and FEC disclosure reports filed during the

2020 election cycle, SDFM spent more than $4.5 million with this specific media

vendor. Given this significant business relationship, the Audit staff recommended 

SDFM provide documentation to substantiate its “delayed” placement contention. 

Without some form of evidence that SDFM and the media vendor did not abide by 

the terms of the invoice, the Audit staff must solely rely on the media vendor invoice

for determining required debt reporting. Regarding the invoice payments that 

SDFM characterizes as “immaterial to the public record”, 11 CFR §104.11(b) is

clear that a debt exceeding $500 must be disclosed in the report that covers the date

on which the debt was incurred, and there are no exceptions to this reporting

requirement.

The Audit staff recommends that the Commission find that SDFM failed to disclose

debts and obligations totaling $373,967. 

Finding 3. Disclosure of Receipts 

In response to the DFAR, SDFM reiterated its objection to the use of sampling in

this audit. SDFM stated that it was able to addressthe errorsfound within the sample

itself, which were provided by the Audit staff, however, it “does not understand how

it is possible that it could have corrected the remaining projected errors that were

not specifically identified.” SDFM noted that “as we understand it, no complete, 

itemized list of identified and confirmed incorrect disclosures actually exists,” and

that “the total [projected error] figure may be incorrect by hundreds of thousands of

dollars.” Accordingly, SDFM objects to the Commission’s placement of a report

on the public record stating that it failed to correct 97% of the disclosure errors for

contributions from individuals and that its disclosure errors remain materially

incorrect. SDFM stated, “both assertions are deeply misleading and quite simply

incorrect.” SDFM added that it “worked diligently to correct the actual, identified

reporting errors that the Audit Division brought to its attention, and objects to being

faulted for not correcting unspecified projected disclosure errors.” Regarding the

disclosure of joint fundraising receipts, SDFM stated that a significant portion of the

error amount consists of “minor reporting errors that in no way materially impacted 

the public record or deprived anyone of information.” SDFM noted that it

mistakenly reported the date of receipt as the date it received the transfer from the 

joint fundraising committee, rather that the date the contribution was received by

the joint fundraising committee. SDFM characterized this as a “harmless error” as

the “contributor’s identity and the contribution amount were reported on the public

record as required.”

The Audit staff maintains its position on the use of statistical sampling as outlined

in Finding 1 (Receipt of Contributions in Excess of the Limit). However, the Audit

staff notes that, in this finding, SDFM did not correct the disclosure of any of the
 

 

 

 

 

 

 

 

 

 

 

 

 

4 

specific errors included in the sample projection and provided by the Audit staff to 

SDFM via spreadsheet during the February 25, 2022 exit conference. This

contradicts SDFM’s statement that it “worked diligently to correct the actual,

identified reporting errors that the Audit Division brought to its attention”. These

contribution errors, along with all the other errors outlined in this memorandum,

were provided to SDFM more than 14 months ago. Regarding the disclosure of joint

fundraising receipts, 11 CFR §102.17(c)(3)(iii) and (c)(8)(i)(B) state a joint

fundraising participant must report the date of receipt of a contribution received

through a joint fundraising committee as the day the joint fundraising representative

received the contribution. 

The Audit staff recommends that the Commission find that SDFM failed to correctly

disclose receipts totaling $1,469,835. 

OGC has reviewed this memorandum and concurs with the recommendations. 

If this memorandum is approved, the Proposed Final Audit Report will be prepared and 

circulated within 30 days of the Commission’s approval. 

If this Audit Division Recommendation Memorandum is not approved on a tally vote, 

Directive No. 70 states that the matter 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 Camilla Reminsky or Kendrick Smith at

694-1200.

Attachments:

- Draft Final Audit Report of the Audit Division on Steve Daines for Montana

- Comments on Steve Daines for Montana Response to the Draft Final Audit Report,

dated May 24, 2023 (LRA 1146)

cc: Office of General Counsel
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Draft Final Audit Report of the 

Audit Division on 

Steve Daines for Montana 

(January 1, 2019 - December 31, 2020) 

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.1 The audit

determines whether the 

committee complied with

the limitations,

prohibitions and 

disclosure requirements

Future Action 

The Commission may 

of the Act.

DRAFT

initiate an enforcement 

action, at a later time,

with respect to any of the

matters discussed in this

report.

About the Campaign (p. 2)

Steve Daines for Montana is the principal campaign committee

for Steve Daines, Republican candidate for the United States

Senate from the state of Montana, and is headquartered in Helena,

Montana. For more information, see the Campaign Organization 

Chart, p. 2. 

Financial Activity (p. 2)

• Receipts 

o Contributions from Individuals $ 27,131,569 

o Contributions from Political

Committees 3,304,667 

o Transfers from Authorized

Committees 1,371,488 

o Other Receipts 71,802 

Total Receipts $ 31,879,526 

• Disbursements 

o Operating Expenditures $ 29,508,162 

o Transfers to Authorized

Committees 7,754 

o Contribution Refunds to

Individuals 498,117 

o Contribution Refunds to

Political Committees 34,003 

o Other Disbursements 3,173,883 

Total Disbursements $ 33,221,919 

Findings and Recommendations (p. 4)

• Receipt of Contributions in Excess of the Limit (Finding 1)

• Disclosure of Debts and Obligations (Finding 2)

• Disclosure of Receipts (Finding 3)

1 52 U.S.C. §30111(b).
Draft Final Audit Report of the 

Audit Division on 

Steve Daines for Montana 

DRAFT

(January 1, 2019 - December 31, 2020) 
 

 

 

 

 

Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Part II. Overview of Campaign 

Campaign Organization 2 

Overview of Financial Activity 3 

DRAFT

Part III. Summaries 

Findings and Recommendations 4 

Part IV. Findings and Recommendations 

Finding 1. Receipt of Contributions in Excess of the Limit 6

Finding 2. Disclosure of Debts and Obligations 11

Finding 3. Disclosure of Receipts 14
 

 

 

 

 

 

 

 

 

 

 

 

1 

Part I 

Background 

Authority for Audit 

This report is based on an audit of Steve Daines for Montana (SDFM), 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 shall 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;

2. the receipt of contributions from prohibited sources;

3. the disclosure of contributions received;

4. the disclosure of individual contributors’ occupation and name of employer;

5. the disclosure of debts and obligations;

6. the consistency between reported figures and bank records;

7. the completeness of records; and

8. other committee operations necessary to the review.

DRAFT
 

 

 

 

 

2 

Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration November 12, 2010

• Audit Coverage January 1, 2019 – December 31, 2020

Headquarters Helena, Montana

Bank Information 

• Bank Depositories Three

• Bank Accounts Three checking, One money market, One 

CD

Treasurer 

• Treasurer When Audit Was Conducted Lorna Kuney

• Treasurer During Period Covered by Audit Lorna Kuney

Management Information 

• Attended FEC Campaign Finance Seminar No

• Who Handled Accounting and 

Recordkeeping Tasks

Paid Staff

DRAFT
 

 

3 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand @ January 1, 2019 $ 1,450,176 

Receipts 

o Contributions from Individuals 27,131,569

o Contributions from Political Committees 3,304,667

o Transfers from Authorized Committees 1,371,488

o Other Receipts 71,802

Total Receipts $ 31,879,526 

Disbursements 

o Operating Expenditures 29,508,162

o Transfers to Authorized Committees 7,754

o Contribution Refunds to Individuals 498,117

o Contribution Refunds to Political Committees 34,003

o Other Disbursements 3,173,883

Total Disbursements $ 33,221,919 

Cash on hand @ December 31, 2020 $ 107,783 

DRAFT
 

 

 

 

 

 

 

 

 

 

4 

Part III 

Summaries 

Findings and Recommendations 

Finding 1. Receipt of Contributions in Excess of the Limit 

During audit fieldwork, the Audit staff reviewed contributions from individuals to 

determine if any exceeded the contribution limit. This review, as revised for the Draft

Final Audit Report, indicated that SDFM received apparent excessive contributions

totaling $496,604. These errors occurred as a result of SDFM not resolving the excessive 

portions of contributions by requesting and receiving signed reattribution letters from its

contributors, issuing refunds for the excessive portion of contributions in a timely 

manner, or ensuring that issued refunds were resolved in a timely manner. In response to 

the Interim Audit Report recommendation, SDFM maintained its objection to the use of

sampling to estimate or project errors. SDFM resolved excessive contributions, totaling 

$114,177, albeit untimely. SDFM stated that an additional $36,000 in refunds were

issued; however, it did not provide cancelled checks to the contributors, or an acceptable

alternative, to substantiate these refunds. The Audit staff recommends that SDFM

provide documentation demonstrating that the remaining excessive contributions, totaling 

$382,427, were not excessive, or if excessive, that the contributions were resolved in a

timely manner. Absent such demonstration, the Audit staff further recommends that

SDFM obtain a signed reattribution letter from each contributor, refund any remaining 

excessive amounts, or disgorge to the U.S. Treasury any refunds it has been unable to 

process. 

(For more detail, see p. 6.)

DRAFT

Finding 2. Disclosure of Debts and Obligations 

During audit fieldwork, the Audit staff noted that SDFM failed to disclose debts and 

obligations to five vendors, totaling $373,967. In response to the Interim Audit Report

recommendation, SDFM filed amended disclosure reports; however, it did not include

these debts and obligations. In its narrative response, SDFM stated that an ad buy of

$108,750 did not require reporting because it was not incurred at the time of the invoice. 

SDFM stated the ad buy was “delayed” and the invoice was paid, instead, when the

vendor indicated the obligation was made. SDFM did not provide additional

documentation, such as email communications with the vendor, to substantiate this

position. SDFM further stated that invoices, totaling $48,868, did not require reporting 

as debts because the invoiced amounts were disputed, and it paid the invoices once

clarification was received from the vendor. Regarding the remaining debts and 

obligations, SDFM stated that the debts should be excluded from the finding because they

only overlapped reporting periods by 6-8 days and were therefore “...immaterial to the

public record.”

The Audit staff maintains that SDFM should provide documentation to support its

position that the ad buy was delayed and appropriately paid once incurred. For the
 

 

 

 

 

 

 

 

 

 

 

5 

possible disputed debts and remaining obligations, the explanations provided by SDFM

do not exclude the debts and obligations from the reporting requirements. Absent the

provision of supporting documentation, the Audit staff maintains that these debts and 

obligations were required to be reported on Schedule D (Debts and Obligations). 

(For more detail, see p. 11.)

Finding 3. Disclosure of Receipts 

During audit fieldwork, the Audit staff reviewed receipts to verify the accuracy of the

information disclosed on SDFM’s reports. The review indicated that SDFM did not

correctly disclose contributions from individuals and political committees, totaling

$568,804 and $39,000, respectively on Schedule A (Itemized Receipts). In addition, the

Audit staff determined that SDFM received a total of $1,409,254 in net proceeds from

joint fundraising activity from 22 joint fundraising committees. However, SDFM did not

itemize or correctly disclose transfers and memo entries, totaling $843,231, on Schedule

A, as required. Finally, the Audit staff determined that SDFM received a total of $9,400 

in net proceeds through one conduit. The conduit was itemized on Line 12 (Transfers

from Other Authorized Committees) instead of disclosed as a memo entry, and the 

original contributors, totaling $9,400, were not itemized. In response to the Interim Audit

Report recommendation, SDFM maintained its objection to the use of sampling to

estimate or project errors. Additionally, SDFM filed amended reports for the 2020 

election cycle; however, the amended reports did not materially correct the public record. 

SDFM’s amended reports corrected most of the disclosure errors for the political 

committees, the joint fundraising activity, and the conduit. However, nearly all of the

identified errors for contributions from individuals remain inaccurately disclosed.2 The 

Audit staff recommends that SDFM amend its disclosure reports or file a Form 99 

(Miscellaneous Electronic Submission) to correctly disclose the contributions from

individuals totaling $549,204. 

(For more detail, see p. 14.)

DRAFT 2 The disclosure errors for contributions from individuals are presented in the chart, Disclosure Errors for

Individuals, on page 16.
 

 

 

 

 

 

 

 

 

 

 

 

 

6 

Part IV 

Findings and Recommendations 

Finding 1. Receipt of Contributions in Excess of the Limit 

Summary 

During audit fieldwork, the Audit staff reviewed contributions from individuals to 

determine if any exceeded the contribution limit. This review, as revised for the Draft

Final Audit Report, indicated that SDFM received apparent excessive contributions

totaling $496,604. These errors occurred as a result of SDFM not resolving the excessive 

portions of contributions by requesting and receiving signed reattribution letters from its

contributors, issuing refunds for the excessive portion of contributions in a timely 

manner, or ensuring that issued refunds were resolved in a timely manner. In response to 

the Interim Audit Report recommendation, SDFM maintained its objection to the use of

sampling to estimate or project errors. SDFM resolved excessive contributions, totaling 

$114,177, albeit untimely. SDFM stated that an additional $36,000 in refunds were

issued; however, it did not provide cancelled checks to the contributors, or an acceptable 

alternative, to substantiate these refunds. The Audit staff recommends that SDFM

provide documentation demonstrating that the remaining excessive contributions, totaling 

$382,427, were not excessive, or if excessive, that the contributions were resolved in a 

timely manner. Absent such demonstration, the Audit staff further recommends that

SDFM obtain a signed reattribution letter from each contributor, refund any remaining 

excessive amounts, or disgorge to the U.S. Treasury any refunds it has been unable to 

process. 

Legal Standard 

A. Authorized Committee Limits. For the 2020 election, an authorized committee may

not receive more than a total of $2,800 per election from any one person or $5,000 

per election from a multicandidate political committee. 52 U.S.C. §§30116(a)(1)(A) 

and (a)(2)(A); 11 CFR §§110.1(a) and (b) and 110.9. 

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:

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

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

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

before its legality is established;

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

instructions provided in the Commission regulations (see below for

explanations of reattribution and redesignation); and 

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

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

DRAFT
 

 

 

 

 

 

 

 

7 

portion to the donor. 11 CFR §§103.3(b)(3), (4) and (5) and 110.1(k)(3)(ii)

(B).

C. Joint Contributions. Any contribution made by more than one person (except for a

contribution made by a partnership) must include the signature of each contributor on 

the check, money order, or other negotiable instrument or in a separate writing. A

joint contribution is attributed equally to each donor unless a statement indicates that

the funds should be divided differently. 11 CFR §110.1(k)(1) and (2).

D. Reattribution of Excessive Contributions. The Commission regulations permit

committees to ask donors of excessive contributions (or contributions that exceed the

committee’s net debts outstanding) whether they had intended their contribution to be

a joint contribution from more than one person and whether they would like to 

reattribute the excess amount to the other contributor. The committee must inform 

the contributor that:

• The reattribution must be signed by both contributors;

• The reattribution must be received by the committee within 60 days after the 

committee received the original contribution; and

• The contributor may instead request a refund of the excessive amount. 11 CFR

§110.1(k)(3).

Within 60 days after receiving the excessive contribution, the committee must either

receive the proper reattribution or refund the excessive portion to the donor. 11 CFR

§§103.3(b) (3) and 110.1(k)(3)(ii)(B). Further, a political committee must retain 

written records concerning the reattribution in order for it to be effective. 11 CFR

§110.1(l)(5).

Notwithstanding the above, any excessive contribution that was made on a written 

instrument that is imprinted with the names of more than one individual may be

attributed among the individuals listed unless instructed otherwise by the

contributor(s). The committee must inform each contributor:

• How the contribution was attributed; and 

• The contributor may instead request a refund of the excessive amount. 11 CFR

§110.1(k)(3)(ii)(B).

E. Redesignation of Excessive Contributions. When an authorized candidate

committee receives an excessive contribution (or a contribution that exceeds the

committee’s net debts outstanding), the committee may ask the contributor to

redesignate the excess portion of the contribution for use in another election. The

committee must inform the contributor that:

• The redesignation must be signed by the contributor;

• The redesignation must be received by the committee within 60 days after the

committee received the original contribution; and 

• The contributor may instead request a refund of the excessive amount. 11 CFR

§110.1(b)(5).

DRAFT
 

 

 

 

 

 

 

 

 

 

 

8 

Within 60 days after receiving the excessive contribution, the committee must either

receive the proper redesignation or refund the excessive portion to the donor. 11 CFR

§§103.3(b) (3) and 110.1(b) (5) (ii) (A). Further, a political committee must retain 

written records concerning the redesignation in order for it to be effective. 11 CFR

§110.1(l)(5).

When an individual makes an excessive contribution to a candidate’s authorized 

committee, the campaign may presumptively redesignate the excessive portion to the

general election if the contribution:

• Is made before that candidate’s primary election;

• Is not designated in writing for a particular election;

• Would be excessive if treated as a primary election contribution; and 

• As redesignated, does not cause the contributor to exceed any other contribution 

limit. 11 CFR §110.1(b)(5)(ii)(B)(1)-(4).

The committee is required to notify the contributor of the redesignation within 60 

days of the treasurer’s receipt of the contribution and must offer the contributor the

option to receive a refund instead. 

Facts and Analysis 

A. Facts 

1. Facts 

The Audit staff utilized sample testing and a review of other contributions, not

included in the sample population, to identify apparent excessive contributions from

individuals, as noted below. 

DRAFT

Excessive Contributions - Testing Method 

Sample Projection Amount 3 $291,803 

100% Review of High Dollar Contributions $152,4514

100% Review of Contributions Received Through

Joint Fundraisers $52,350 

Total Amount of Excessive Contributions $496,604 

Reason for Excessive Contributions 

Contributions Not Resolved via Signed Reattribution

Letter or Refund $496,604 

3 The sample error amount ($291,803) was projected using a Monetary Unit Sample with a 95 percent

confidence level. The sample estimate could be as low as $143,260 or as high as $583,597. 4 After reviewing the response to the Interim Audit Report, the Audit staff removed one contribution 

totaling $2,800 from the finding. This contribution, while excessive, was refunded prior to the Audit. 

Additionally, the Audit staff removed excessive contributions, totaling $2,400, after discovering that the

contributions were presumptively redesignated by SDFM prior to the Audit. As such, the finding has

been updated from $501,804 in total excessive contributions to $496,604.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9 

Excessive Contributions - Testing Method 

Total Amount of Excessive Contributions $496,604 

2. Additional Information 

The errors were primarily a result of SDFM not resolving the excessive portions of

contributions made on single/joint account checks, credit card, or through a joint

fundraiser by requesting signed reattribution letters or a refund. SDFM did issue

refunds, however, some of the refunds were not cashed by the contributors. The total 

amount of refunds issued, but not cashed, is $60,327. 

SDFM did not maintain a separate account for questionable contributions. Based on 

its cash on hand at the end of the audit period, it appears that SDFM did not maintain

sufficient funds to refund the apparent excessive contributions.

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with SDFM representatives at the exit conference 

and provided a schedule of the apparent excessive contributions. SDFM representatives

questioned the use of sampling in the audit, and the Audit staff explained that the Audit

Division has used statistical sampling for many years and that it is a widely used tool in 

accounting and auditing. The Audit staff then walked SDFM representatives through 

each excessive contribution, at their request. 

In response to the exit conference, SDFM representatives stated that they object to the

use of sampling to project errors. The Audit staff notes that the use of statistical 

sampling has been approved by the Commission for use in Title 52 audits for over 30 

years.

SDFM representatives also contended that contributions, for which it issued refunds but

the refund checks were not cashed by the contributors, should be treated as a separate 

category from those contributions that were never refunded. The Audit staff

acknowledged that SDFM issued refund checks, which were not cashed, for excessive 

contributions; however, these checks should have been re-issued, or the excessive

amounts disgorged to the U.S. Treasury, so that the amount of the excessive contribution 

did not remain in SDFM’s bank accounts. 

SDFM representatives also objected to the inclusion of a contribution that they stated was

not actually excessive. SDFM’s database records and its disclosure reports showed the 

receipt of three contributions on the same date from a single contributor, one in the

amount of $5,600, and two in the amount of $2,800 each. The $5,600 contribution was

refunded timely, via a credit card chargeback, so SDFM did not believe this contributor

made excessive contributions. However, the Audit staff reviewed the credit card records

provided by SDFM, and found three contributions from this same contributor, all on the

same date, each for $5,600, for a total of $16,800. There was one chargeback that

refunded one of the $5,600 contributions in a timely manner. SDFM may designate one

of the remaining two $5,600 contributions, as $2,800 for the primary election and 

DRAFT
 

 

 

 

 

 

 

 

 

 

 

 

 

10 

presumptively redesignate $2,800 to the general election. However, the final $5,600 

contribution remains excessive and should be refunded. 

The Interim Audit Report recommended that SDFM:

• Provide evidence, which demonstrates that the contributions, totaling $496,604,5

were not excessive, or if excessive, were resolved in a timely manner. 

• Absent such demonstration, SDFM should have obtained a signed authorization 

letter from the contributor, refunded any remaining excessive amounts, or

disgorged any refunds, which were not cashed by the contributors, to the U.S. 

Treasury.

• If funds were not available to make such refunds, SDFM should have reported

the excessive contributions as debts owed on Schedule D (Debts and Obligations)

until funds became available to make the refunds.

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, SDFM representatives

maintained their objection to the use of sampling to project errors. The Audit staff

reiterates that the use of statistical sampling has been approved by the Commission for

use in Title 52 audits for over 30 years. 

SDFM representatives also restated their contention that contributions, for which it issued 

refund checks, but the refund checks were not cashed by the contributors, should be

treated as a separate category from contributions that were never refunded. The Audit 

staff again acknowledges that SDFM issued refund checks for excessive contributions, 

which were not cashed; however, these refund checks should have been voided and reissued, or the excessive amounts disgorged to the U.S. Treasury, so that the excessive

contributions did not remain in SDFM’s bank accounts. 

In addition, SDFM stated that excessive contributions, totaling $56,920, were disgorged 

to the U.S. Treasury and provided bank records showing the same. SDFM further stated 

that “all remaining contributions specifically identified by the Audit Division as

excessive” were refunded, and that the refunds were reported on its 2022 October

Quarterly Report, with additional refunds to appear on its next disclosure report. SDFM

reported refunds, totaling $96,782, on its 2022 October Quarterly Report, however, bank 

records documenting the refunds were provided for only $57,282 of the $96,782 in 

reported refunds. 

DRAFT 5 See footnote 4.
 

 

 

 

 

 

 

 

 

 

 

11 

Corrective Action Taken by SDFM – Excessive Contributions 

Total Excessive Contributions as of the

Draft Final Audit Report $496,6046

Contributions Refunded – Issued Untimely, Refunds 

Supported by Documentation – Resolved $57,2827

Contributions Disgorged to the U.S. Treasury –

Disgorged Untimely, Disgorgements Supported by 

Documentation – Resolved 

$56,8958

Contributions Refunded – Issued Untimely, No 

Documentation to Support Refunds – Not Resolved $36,0007

Amount of Excessive Contributions –Not Resolved $382,427 

DRAFT

The Audit staff concludes that SDFM resolved excessive contributions, totaling 

$114,177,9 albeit untimely. The Audit staff recommends that SDFM provide

documentation demonstrating that the remaining excessive contributions, totaling 

$382,427,10 were not excessive, or if excessive, were resolved in a timely manner. 

Absent such demonstration, the Audit staff further recommends that SDFM obtain a

signed reattribution letter from each contributor, refund any remaining excessive

amounts, or disgorge to the U.S. Treasury any refunds it has been unable to process. 

Finding 2. Disclosure of Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff noted that SDFM failed to disclose debts and 

obligations to five vendors, totaling $373,967. In response to the Interim Audit Report

recommendation, SDFM filed amended disclosure reports; however, it did not include

these debts and obligations. In its narrative response, SDFM stated that an ad buy of

$108,750 did not require reporting because it was not incurred at the time of the invoice. 

SDFM stated the ad buy was “delayed” and the invoice was paid, instead, when the

6 See footnote 4. 7 The reported refunds, totaling $96,782, exceed the amount of the corrective action taken ($57,282 +

$36,000 = $93,282) because SDFM refunded $3,500 in contributions that were not included in the

violation amount for this finding.

8 The reported disgorgements to the U.S. Treasury ($56,920) exceed the amount of the corrective action

taken ($56,895) because SDFM disgorged $25 in contributions that were not included in the violation 

amount for this finding.

9 $57,282 + $56,895 = $114,177

10 $496,604 - $114,177 = $382,427 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12 

vendor indicated the obligation was made. SDFM did not provide additional

documentation, such as email communication with the vendor, to substantiate this

position. SDFM further stated that invoices, totaling $48,868, did not require reporting 

as debts because the invoiced amounts were disputed, and it paid the invoices once

clarification was received from the vendor. Regarding the remaining debts and 

obligations, SDFM stated that the debts should be excluded from the finding because they

only overlapped reporting periods by 6-8 days and were therefore “...immaterial to the

public record.”

The Audit staff maintains that SDFM should provide documentation to support its

position that the ad buy was delayed and appropriately paid once incurred. For the

possible disputed debts and remaining obligations, the explanations provided by SDFM

do not exclude the debts and obligations from the reporting requirements. Absent the

provision of supporting documentation, the Audit staff maintains that these debts and

obligations were required to be reported on Schedule D (Debts and Obligations).

Legal Standard 

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. Reporting Disputed Debts 

A disputed debt shall be reported in accordance with 11 CFR§ 104.3(d) and 104.11 if 

the creditor has provided something of value to the political committee. Until the

dispute is resolved, the political committee shall disclose on the appropriate reports

any amounts paid to the creditor, any amount the political committee admits it owes

and the amount the creditor claims is owed. The political committee may also note on 

the appropriate reports that the disclosure of the disputed debt does not constitute an 

admission of liability or a waiver of any claims the political committee may have

against the creditor. 11 CFR §116.10(a).

DRAFT
 

 

 

 

 

 

 

 

 

 

 

 

 

 

13 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reviewed SDFM’s disbursement records and

disclosure reports for the proper reporting of debts and obligations. This review

identified debts, owed to five vendors totaling $373,967,11 that SDFM failed to report on

Schedule D during the audit period. Based on a review of the records, these vendors

provided advertising, fundraising, direct mail, website and listing services, shipping,

event catering, and consulting services. SDFM reported debt, totaling $758,664, on

Schedule D during the audit period. The Audit staff calculated the debts, owed to the

vendors, based on the invoice date and the subsequent payment date. Debts were

outstanding for periods ranging from 13 to 108 days.

DRAFT

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with SDFM representatives at the exit conference

and provided a schedule detailing those transactions requiring disclosure on Schedule D.

The SDFM representatives had no comments at that time.

In response to the exit conference, SDFM provided additional documentation for $23,907 

of the outstanding debt showing that the invoices were provided at a later date than the

dates reflected on these invoices. As a result, this amount was deducted from the overall

undisclosed debt balance discussed at the exit conference and is not included in this

finding. SDFM did not provide comments on the remaining undisclosed debts. 

The Interim Audit Report recommended that SDFM provide additional documentation 

demonstrating that the transactions, totaling $373,967, were not obligations which 

required reporting on Schedule D. Absent such documentation, it was further

recommended that SDFM amend its disclosure reports or file a Form 99 (Miscellaneous

Electronic Submission)12 to disclose these debts and obligations.

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, an SDFM representative stated

that while one debt for an ad buy, totaling $108,750, was invoiced in June 2020, SDFM

did not actually purchase this ad buy until September of 2020, and therefore no reporting

of the debt was required. In addition, the SDFM representative stated that SDFM

disputed the amount of two debts owed to one vendor totaling $48,868, and once that

dispute was resolved, the debts were paid promptly. Finally, the SDFM representative

stated that the remaining debts were only unreported for brief periods of time (6-8 days),

and are therefore “...immaterial to the public record,” as the debts were paid in the

subsequent reporting period.

Regarding the ad buy, the Audit staff requested additional documentation, such as an 

email with the vendor, to verify this, and none was provided. For the debts that SDFM

11 Each debt was counted only once, even if it was required to be disclosed over multiple periods. 12 If SDFM chooses to file a Form 99 instead of amending its disclosure reports, the form must contain all

pertinent information that is required on each schedule.
 

 

 

 

 

 

 

 

 

 

 

14 

DRAFT

disputed, the Audit staff notes that, per 11 CFR §116.10(a), disputed debts must be

reported if the creditor has provided something of value to the political committee. 

Furthermore, the Audit staff notes that 11 CFR §104.11(b) states that debts in excess of

$500 must be disclosed in the report that covers the date on which the debt was incurred. 

Each of these debts exceeded $500 and were not paid in the reporting period in which 

they were incurred.

Absent the provision of documentation to show that the $108,750 ad buy was not actually 

incurred in June 2020, the Audit staff maintains that all the transactions, totaling 

$373,967, were debts and obligations that required reporting on Schedule D. 

Finding 3. Disclosure of Receipts 

Summary 

During audit fieldwork, the Audit staff reviewed receipts to verify the accuracy of the

information disclosed on SDFM’s reports. The review indicated that SDFM did not

correctly disclose contributions from individuals and political committees, totaling

$568,804 and $39,000 respectively, on Schedule A (Itemized Receipts). In addition, the

Audit staff determined that SDFM received a total of $1,409,254 in net proceeds from

joint fundraising activity from 22 joint fundraising committees. However, SDFM did not

itemize or correctly disclose transfers and memo entries, totaling $843,231, on Schedule

A, as required. Finally, the Audit staff determined that SDFM received a total of $9,400 

in net proceeds through one conduit. The conduit was itemized on Line 12 (Transfers

from Other Authorized Committees) instead of disclosed as a memo entry, and the 

original contributors, totaling $9,400, were not itemized. In response to the Interim Audit

Report recommendation, SDFM maintained its objection to the use of sampling to 

estimate or project errors. Additionally, SDFM filed amended reports for the 2020 

election cycle; however, the amended reports did not materially correct the public record. 

SDFM’s amended reports corrected most of the disclosure errors for the political 

committees, the joint fundraising activity, and the conduit. However, nearly all of the

identified errors for contributions from individuals13 remain inaccurately disclosed. The

Audit staff recommends that SDFM amend its disclosure reports or file a Form 99 

(Miscellaneous Electronic Submission) to correctly disclose the contributions from

individuals totaling $549,204. 

Legal Standard 

A. Itemization Required for Contributions from Individuals. An authorized 

candidate committee must itemize any contribution from an individual if it exceeds

$200 per election cycle, either by itself or when combined with other contributions

from the same contributor. 52 U.S.C. §30104(b)(3)(A). (Authorized)

B. Election Cycle. The election cycle begins on the first day following the date of the

previous general election and ends on the date of the next general election. If 

13 See chart, Disclosure Errors for Individuals, on page 16.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

15 

contributions and expenditures are designated for another election cycle, then the

election cycle begins when the first contribution is received or expenditure is made. 

11 CFR §100.3(b).

C. Required Information for Contributions from Individuals. For each itemized

contribution from an individual, the committee must provide the following 

information:

• The contributor’s full name and address (including zip code);

• The contributor’s occupation and the name of his or her employer;

• The date of receipt (the date the committee received the contribution);

• The amount of the contribution; and 

• The calendar year-to-date (Unauthorized) election cycle-to-date (Authorized) total 

of all contributions from the same individual. 11 CFR §§100.12 and 104.3(a)(4)

and 52 U.S.C. §30104(b)(3)(A).

D. Best Efforts Ensures Compliance. When the treasurer of a political committee

shows that the committee used best efforts (see below) to obtain, maintain, and 

submit the information required by the Act, the committee’s reports and records will

be considered in compliance with the Act. 52 U.S.C. §30102(i). 

E. Definition of Best Efforts. The treasurer and the committee will be considered to

have used “best efforts” if the committee satisfied all of the following criteria:

• All written solicitations for contributions included:

 A clear request for the contributor's full name, mailing address, 

occupation, and name of employer; and 

 The statement that such reporting is required by Federal law.

• Within 30 days after the receipt of the contribution, the treasurer made at least one 

effort to obtain the missing information, in either a written request or a

documented oral request.

• The treasurer reported any contributor information that, although not initially 

provided by the contributor, was obtained in a follow-up communication or was

contained in the committee’s records or in prior reports that the committee filed

during the same two-year election cycle. 11 CFR §104.7(b).

F. Itemization of Contributions from Joint Fundraising Efforts. After the joint 

fundraising representative distributes the net proceeds, each participating political 

committee reports its share as a transfer-in from the joint fundraising representative

and itemizes the transfer on a separate schedule A for that Line. Using the records

received from the joint fundraising representative, a participating committee also

must itemize its share of gross receipts as contributions from the original donors on a

memo entry Schedule A to the extent required under 11 CFR §104.3(a).

When itemizing gross contributions, the participant must report the date of receipt as

the day the joint fundraising representative received the contribution. 11 CFR

§102.17(c)(3)(iii) and (c)(8)(i)(B).

DRAFT
 

 

 

 

 

 

 

 

16 

Facts and Analysis 

A. Disclosure of Receipts 

1. Facts 

The Audit staff utilized sample testing and a review of other contributions not

included in the sample population to identify contributions from individuals, totaling 

$568,804, and political committees, totaling $39,000, which were not correctly

disclosed on Schedule A of SDFM’s disclosure reports. These reporting errors

consisted of the following. 

DRAFT

Disclosure of Contributions - Testing Method 

Sample Projection Amount14 $535,012 

100% Review of High Dollar Contributions from

Individuals $33,792 

100% Review of Contributions from Political

Committees $39,000 

Total Error Amount $607,804 

The types of errors discovered in the sample review include incorrect disclosure of

receipt date, name, and/or disclosure without a partnership attribution.

Disclosure Errors for Individuals 

Type of Review 100%

Contributions Disclosed without Partnership Attribution $19,600

Contributions Disclosed with Incorrect Receipt Date $5,600

Contributions Disclosed with Incorrect Amount $5,592

Contributions Disclosed with Incorrect Name $3,000

Total Error Amount $33,792 

14 The sample error amount ($535,012) was projected using a Monetary Unit Sample with a 95 percent

confidence level. The sample estimate could be as low as $273,748 or as high as $970,100.
 

 

 

 

 

 

 

 

 

 

 

 

 

17 

Disclosure Errors for PACs15

Type of Review 100%

Contributions Disclosed without an Address $27,000

Contributions Disclosed with Incorrect Name $16,000

Contributions Disclosed with an Incorrect Election Designation $1,000

Total Error Amount $39,000 

DRAFT

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the disclosure errors at the exit conference and provided 

schedules detailing the incorrectly disclosed contributions. SDFM representatives

inquired, and the Audit staff confirmed the method for determining date errors, and 

that contemporaneous documentation would be sufficient to show the date of the 

contribution receipt.

In response to the exit conference, SDFM stated that the date reported was correct

for two contributions. The Audit staff accepted SDFM’s explanation, and those

contributions are not included in the error amounts within the report. Additionally, 

SDFM representatives stated that they object to the use of sampling to project errors. 

The Audit staff reiterated that the use of statistical sampling has been approved by 

the Commission for use in Title 52 audits for over 30 years. Finally, SDFM

indicated that it would amend disclosure reports to correct the errors.

The Interim Audit Report recommended that SDFM amend its disclosure reports or 

file a Form 99 (Miscellaneous Electronic Submission)

12 to correctly disclose these 

contributions. 

3. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, SDFM maintained its

objection to the use of sampling to estimate or project errors. SDFM amended all 

of its disclosure reports for calendar years 2019 and 2020 to correct the disclosure 

of contributions, as detailed below. Furthermore, an SDFM representative stated 

their belief that several contributions noted by the Audit staff as being reported with 

an incorrect date “...involve immaterial discrepancies that have no impact on the

public record.” The Audit staff notes that committees are required to report the date 

of receipt of a contribution. In the case of these contributions, SDFM did not

15 This group of errors and their respective dollar value exceed total errors ($39,000) because one 

contribution, totaling $5,000, had multiple disclosure errors. Each contribution was only counted once,

toward the total error amounts, even if there were multiple errors.
 

 

 

 

 

 

 

 

 

 

 

18 

provide proof of a receipt date that differed from documentation provided. 

Therefore, the Audit staff maintains that these discrepancies should be corrected

and SDFM should amend its disclosure reports.

Corrective Action Taken by SDFM – Disclosure of Receipts 

Incorrect Disclosures as of the 

Interim Audit Report $607,804 

Reports Amended - 100% Review of High Dollar

Contributions from Individuals – Corrected $19,600 

Reports Amended - 100% Review of Contributions

from Political Committees – Corrected $38,000 

Amount of Incorrectly Disclosed Contributions – Not 

Resolved $550,20416

DRAFT

The Audit staff concludes that incorrect disclosure of receipts, totaling $550,204, 

remains unresolved.

B. Disclosure of Joint Fundraising Transfers and Memo Entries 

1. Facts 

During audit fieldwork, the Audit staff determined that SDFM received a total of

$1,409,254 in net proceeds from joint fundraising activity from 22 joint fundraising 

committees. However, SDFM did not itemize or correctly disclose transfers and 

memo entries, totaling $843,231, on Schedules A (Itemized Receipts). These 

reporting errors consisted of the following:

Disclosure Errors17

Type of Review 100%

Transfers Disclosed on Schedule A – Missing Address $84,110

Transfers Disclosed on Schedule A – Incorrect Receipt Date $78,941

Transfers Disclosed on Schedule A – Incorrect Amount $111

16 $607,804 - $19,600 - $38,000 = $550,204. This amount includes contributions from individuals, totaling 

$549,204, and contributions from political committees, totaling $1,000.

17 These groups of errors and their respective dollar value exceed total errors ($843,231) because three 

contributions, totaling $5,100, had multiple disclosure errors. Each contribution was only counted once

toward the total error amount, even if there were multiple errors.
 

 

 

 

 

 

 

 

 

19 

DRAFT

Disclosure Errors17

Memo Entries Not Itemized $306,585

Memo Entries Disclosed on Schedule A - Incorrect Receipt

Date $345,034 

Memo Entries Disclosed on Schedule A – Apparent Duplicate

Entries $22,250 

Memo Entries Disclosed on Schedule A – Incorrect Address $5,100

Memo Entries Disclosed on Schedule A – Incorrect or

Missing Name $3,200 

Memo Entries Disclosed on Schedule A – Incorrect Election

Designation $2,400 

Memo Entries Disclosed on Schedule A – Incorrect

Aggregate Total $600 

Total Error Amount $843,231 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with SDFM representatives at the exit 

conference and provided schedules detailing the missing or incorrectly disclosed 

contributions. SDFM representatives did not directly comment on these errors in 

response to the exit conference.

The Interim Audit Report recommended that SDFM amend its disclosure reports or 

file a Form 99 (Miscellaneous Electronic Submission)

12 to correctly disclose the 

joint fundraising transfers and memo entries. 

3. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, SDFM amended all of its

disclosure reports for calendar years 2019 and 2020 to correct the disclosure of

transfers and memo entries, as detailed below.
 

 

 

 

 

 

 

 

20 

DRAFT

The Audit staff concludes that the incorrect disclosure of joint fundraising transfers

and memo entries, totaling $10,937, remains unresolved. 

C. Disclosure of Contribution from a Conduit 

1. Facts 

During audit fieldwork, the Audit staff determined that SDFM received a total of

$9,400 in net proceeds through one conduit. The conduit was itemized on Line 12 

(Transfers from Other Authorized Committees), however, the original contributors, 

totaling $9,400, were not itemized. This resulted in a total of $18,800 of incorrectly

disclosed contributions. These reporting errors consisted of the following. 

Corrective Action Taken by SDFM – Disclosure of Joint Fundraising Transfers 

and Memo Entries 

Incorrect Disclosures as of the Interim Audit Report $843,231 

Reports Amended – Transfers Corrected $163,162 

Reports Amended – Memo Entries Corrected $669,132 

Amount of Incorrect Disclosures Remaining–Not 

Resolved $10,93718

Disclosure Errors 

Type of Review 100%

Conduit Incorrectly Itemized on Line 12 $9,400

Contributors Not Itemized $9,400

Total Error Amount $18,800 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with SDFM representatives at the exit 

conference and provided schedules detailing the missing or incorrectly disclosed 

contributions. SDFM representatives did not directly comment on these errors in 

response to the exit conference.

18 $843,231 - $163,162 - $669,132 = $10,937
 

 

 

 

 

 

 

21 

The Interim Audit Report recommended that SDFM amend its disclosure reports or

file a Form 99 (Miscellaneous Electronic Submission)12 to itemize the required

contributions and report the conduit as a memo entry. 

3. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, SDFM amended all of its

disclosure reports for calendar years 2019 and 2020 to correct the disclosure of

contribution from a conduit, as detailed below. 

Corrective Action Taken by SDFM – Disclosure of Contribution from a Conduit 

Incorrect Disclosures as of the Interim Audit Report $18,800 

Reports Amended – Conduit Corrected $9,400 

Reports Amended – Contributors Corrected $6,600 

Amount of Incorrectly Disclosed Contributions – Not 

Resolved $2,80019

DRAFT

The Audit staff concludes that the incorrect disclosure of a $2,800 contribution 

from one contributor remains unresolved.

In summary, the Audit staff concludes that SDFM corrected 97% of the disclosure errors

for political committees, 99% of disclosure errors for the joint fundraising activity, and 

85% of the disclosure errors for the conduit. However, because SDFM did not correct

97% of the disclosure errors for contributions from individuals, totaling $549,204, 

SDFM’s disclosure errors remain materially incorrect.20 Therefore, the Audit staff

recommends that SDFM amend its disclosure reports or file a Form 99 to correctly 

disclose the remaining contributions from individuals totaling $549,204. 

19 $18,800 - $9,400 - $6,600 = $2,800.

20 The Audit staff calculated the percentages of the corrected disclosure information by dividing the

disclosure errors resolved by total disclosure errors for each disclosure category.
 

 

 

 

 

FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

May 24, 2023 

MEMORANDUM 

TO: Patricia C. Orrock 

 Chief Compliance Officer 

 Dayna C. Brown 

 Assistant Staff Director, Audit Division 

FROM: Neven Stipanovic 

 Associate General Counsel, Policy Division 

 Jessica Selinkoff 

 Assistant General Counsel, Compliance Advice 

for NS

SUBJECT: Audit Division Recommendation Memorandum on Steve Daines for Montana 

(LRA 1146) 

Joshua Blume 

Attorney 

The Office of the General Counsel has reviewed the Audit Division Recommendation 

Memorandum (“ADRM”) on Steve Daines for Montana (“SDFM”). Per Directive 70, the 

ADRM attaches a copy of the Draft Final Audit Report (“DFAR”), which has already been sent 

to the Committee. The DFAR contains three findings: (1) Receipt of Contributions in Excess of 

the Limit, (2) Disclosure of Debts and Obligations, and (3) Disclosure of Receipts. OGC 

concurs with the ADRM’s recommendations that the Commission make all three findings in the 

amounts presented in the DFAR. The analysis below explains this concurrence, notwithstanding 

SDFM’s objections in response to the DFAR. 

I. FINDINGS 1 AND 3: STATISTICAL SAMPLING 

Portions of Findings 1 and 3 include errors identified by Audit staff’s use of statistical 

sampling. SDFM opposed the Audit staff’s use of statistical sampling to project errors in 

Findings 1 and 3 in response to the Exit Conference and to the Interim Audit Report (“IAR”), but 
ADRM Comments 

Steve Daines for Montana (LRA 1146) 

Page2 

without providing specific reasons. 1 SDFM has now explained its objection to sampling in 

response to the DFAR.2 Regarding Findings 1 and 3, SDFM argues that the use of sampling is 

improper because the committee cannot identify and coITect disclosure eITors projected through 

sampling, and because the broad range of projected eITor misrepresents the total value of 

SDFM's errors. 

OGC cone u es t at stahshca samp mg 111 Co1ll1Illss10n audits, 

as approved by the Commission- remains a valid, useful, and appropriate 

audit tool. Thus, as explained furthe~bcl~~OGC~-oncludes that the use of statistical sampling 

in the SDFM audit is proper and concurs in the findings in which statistical sampling was used. 

A. Statistical Sampling Procedures 

Statistical sampling is a common auditing tool.4 The American Institute of Ce1iified 

Public Accountants ("AICP A"), a professional organization that sets standards of ethics for 

CP As as well as standards for the conduct and quality of audits, 

5 sets standards for the conduct 

of sampling in audits. 6 The AICPA audit sampling standards defme "audit sampling" as "[t]he 

selection and evaluation of less than 100 percent of the population of audit relevance such that 

See Exit Conference Response at 2 (Mar. 11, 2022) (stating SDFM "objects generally to the use of a 

'sample review' for the pwp ose of projecting eITors"); IAR Response at 1 (Oct. 31, 2022) ("At the outset, we note 

that the Committee maintains its objection to the use of sampling to estimate or project e1rnrs. "). 

2 DFAR Response at 1-2, 4-7 (Apr. 18, 2023). 

4 Memorandum from Joe Stoltz, Assistant Staff Director, Audit Division, to the Commission, Audit 

Sampling Policy and Procedw-es at 1 (Aug. 12, 2010) ("Attachment"). 

5 See generally About Us: Pwpose in Action, AICPA & CIMA, https://v.rwv.•.a.icpacima.com/about/landing/pwpose-in-action (last visited May 18, 2023). 

6 AICPA Auditing Standards Board, Statement on Auditing Standards: Audit Sampling , at AU-C § 530 et 

seq. (2021) ("AICPA Audit Sampling Standards"); see also Clarified Statements on Auditing Standards, AICPA, 

https://us.aicpa.org/research/standards/auditattest/clarifiedsas (last visited May 18, 2023) (explaining and linking to 

all current auditing standards). 
 

 

 

 

 

 

 

 

 

 

 

ADRM Comments 

Steve Daines for Montana (LRA 1146) 

Page 3 

the auditor expects the items selected (the sample) to be representative of the population and, 

thus, likely to provide a reasonable basis for conclusions about the population.”7  The AICPA 

audit sampling standards also contain guidelines for auditors to use in sample design; sample size 

and the selection of items for testing; performing audit procedures; determining the nature and 

causes of deviations or misstatements; projecting the results of sampling; and evaluating those 

results.8 The AICPA audit sampling standards elaborate on each of the definitions and 

guidelines in interpretive commentary. 

The Commission’s Audit Division began to use statistical sampling in 1980 on the advice 

of the accounting firm Ernst and Whinney, now Ernst and Young, to assess the matching fund 

submissions of presidential committees seeking public funding.9 Sampling has been standard 

practice in all Commission audits to evaluate compliance with the Federal Election Campaign 

Act, 52 U.S.C. §§ 30101-45 (the “Act”), including those of committees not receiving public 

funds, for decades and its use has been included in Commission-approved audit programs since 

at least 1990; statistical sampling in the SDFM audit is governed by the current Commissionapproved Audit Program and Materiality Thresholds. The Audit Division’s statistical sampling 

procedures are standardized and conducted with the assistance of a computer program from 

AICPA that determines the appropriate sample size, selects the sample from a computer file, and 

analyzes the sample results.

10 

Federal courts have upheld the use of statistical sampling by government agencies in 

several contexts in which the size of the populations to be reviewed would make individual 

review prohibitively costly or inefficient.11 As a practical matter, the Commission’s Audit 

7 AICPA Audit Sampling Standards, at AU-C § 530.05 (2021) (further defining “representative” to mean 

that “evaluation of the sample will result in conclusions that, subject to the limitations of sampling risk, are similar 

to those that would be drawn if the same procedures were applied to the entire population”). 

8 Id. at AU-C §§ 530.06-.11. 

9 See Attachment at 2; see also11 C.F.R. §§ 9007.1(f)(1), 9038.1(f)(1) (expressly authorizing sampling in 

public finance audits); Public Financing of Presidential Primary and General Election Candidates, 60 Fed. Reg. 

31854, 31862 (June 16, 1995) (explaining that “[t]he use of statistical sampling is legally acceptable for projecting 

certain components of a large universe, such as excessive and prohibited contributions”) (citations omitted). 

10 See Attachment at 2 (explaining that the original software came from AICPA and was updated in 2006-07 

with the help of a statistical consulting firm). The Audit Division continues to use this software today. 

11 See, e.g., In re Chevron, 109 F.3d 1016, 1020 (5th Cir. 1997) (citing cases endorsing use of inferential 

statistics in different contexts while holding that, when used for class action tort litigation, plaintiffs selected must be 

shown to be representative of class before extrapolation to class may occur); Hilao v. Estate of Marcos, 103 F.3d 

767, 785-86 (9th Cir. 1996) (upholding use of sampling to determine validity of claims selected for sampling); 

Chaves County Home Health Service, Inc. v. Sullivan, 931 F.2d 914, 917-919 (D.C. Cir. 1991) (upholding use of 

sampling in review of Medicare overpayments when individualized review conducted preceding initial payout by 

Medicare contractors); Ratanasen v. State of California, Department of Health Services, 11 F.3d 1467, 1471 (9th 

Cir. 1993) (Medicare overpayments); Michigan Dep’t of Education v. U.S. Dep’t of Education, 875 F.2d 1196 (6th 

Cir. 1989) (vocational rehabilitation); Illinois Physicians Union v. Miller, 675 F.2d 151, 157 (7th Cir. 1982) (“in 

view of the enormous logistical problems of Medicaid enforcement, statistical sampling is the only feasible method 

available”); Georgia v. Califano, 446 F. Supp. 404 (N.D. Ga. 1977) (Medicaid overpayments); see also United 

States v. Annamalai, 939 F.3d 1216, 1236-37 (11th Cir. 2019) (distinguishing decisions of other circuits approving 
 

 

SDFM’s first objection to sampling is that it cannot identify and correct projected or 

estimated disclosure errors because “no complete, itemized list of identified and confirmed 

excessive contributions actually exists” for sample-projected errors.

14 SDFM cites no authority 

for its contention that audit staff must identify individual contributions accepted and misreported 

by SDFM before SDFM corrects its reports. 

 

 

 

 

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Division would be unable to perform much of its work without statistical sampling because of 

the resources required for individual review and the size of the populations to be evaluated. In 

this audit, for example, statistical sampling was used to project errors for Finding 1 (Receipt of 

Excessive Contributions), in which there were 569,271 individual transactions and 85 joint 

fundraising distributions totaling $29,288,400.37,12 and for subpart A of Finding 3 (Reporting of 

Receipts/Disclosure of Contributions), in which there were 91,515 reported transactions totaling 

$16,714,128.65. 

By its very nature, statistical sampling provides estimates rather than precise values; no 

sampling procedure may be conducted with 100 percent confidence. The Audit Division’s 

sampling method typically results in an estimate of the amount of error in a population at a 95 

percent confidence level — a commonly used level — and audit reports specify the upper and 

lower ranges of the statistical estimate.

13 

C. SDFM’s Contentions 

In fact, the Act and Commission regulations place such responsibility on a committee 

treasurer. As relevant to the excessive contributions in Finding 1, Commission regulations 

specify that the committee “treasurer shall be responsible for examining all contributions 

received for evidence of illegality and for ascertaining whether contributions received, when 

aggregated with other contributions from the same contributor, exceed the contribution 

limitations.”15 As relevant to the identification of contributors in Finding 3, the Act states that 

“[e]ach treasurer of a political committee shall file reports of receipts...” and specifies that such 

reports shall include, among other information, the full name of certain contributors and “the 

date and amount of any such contribution.”16 Moreover, Commission regulations require that 

use of statistical extrapolation or sampling to determine reasonable estimate of loss for purpose of applying U.S. 

Sentencing Guidelines and concluding sampling inappropriate because based on unfounded factual assumption). 

12 Each joint fundraising distribution included multiple memo entries itemizing individual contributors. See 

11 C.F.R. § 102.17(c)(8)(B) (requiring participating committees to report contributions received via distribution of 

net proceeds from joint fundraising representative in memos on Schedule A). 

13 See, e.g., DFAR on SDFM at notes 3 and 12; and see Attachment at 3 (explaining that a 95 percent 

confidence level means that if an infinite number of samples of the same size were drawn from the same population, 

the identified range will contain the actual value in 95 percent of the samples). 

14 DFAR Response at 2. 

15 11 C.F.R. § 103.3(b). 

16 52 U.S.C. §§ 30104(a)(1) and (b)(3), 30101(13). 
 

 

 

 

 

 

ADRM Comments 

Steve Daines for Montana (LRA 1146) 

Page 5 

committees “shall maintain all records ... which shall provide in sufficient detail the necessary 

information and data from which the filed reports and statements can be verified, explained, 

clarified, and checked for accuracy and completeness” and committee treasurers “shall be 

personally responsible for the timely and complete filing” of a report “and for the accuracy of 

any information or statement contained in it.”17 There is no provision of the Act or Commission 

regulations that relieves committees and treasurers of these responsibilities during the course of 

an audit or in circumstances where the Commission or its staff brought inaccuracies to the 

treasurer’s attention. 

With the assistance of statistical sampling, auditors can estimate the prevalence of errors 

in a large population and identify their salient characteristics to aid the committee in identifying 

reporting errors and correcting them.18 This helps committees undergoing an audit to fulfill their 

duty to identify and correct inaccurate reporting, but it does not relieve them of the need to fulfill 

that duty themselves by reviewing their records.

19 

The Committee’s second objection to sampling is that the presentation, in a final audit 

report, of the broad range of estimated error value arguably could overstate the true error value 

by hundreds of thousands of dollars, especially if it indicates SDFM did not correct those errors. 

SDFM argues that the audit report’s identification of unresolved errors is “greatly inflated by the 

projected sample amount.”20 As with the first objection, SDFM provides no authority in support 

of its contention. 

SDFM’s objection appears to be to the nature of statistical inference used in sampling, 

generally, which, as discussed above, is a scientifically validated technique used to extrapolate 

the characteristics of large populations from representative samples. Statistical sampling, as 

discussed above, has been approved by the Commission, is consistent with industry standards, 

and has, in other contexts, been approved by courts. The Audit staff’s sampling program ensures 

that error projections are precise to a 95 percent confidence level given the margin of error, 

which is a high degree of precision considering that a perfect, or 100 percent, confidence level is 

not possible in statistical extrapolation. 

While such extrapolations are necessarily estimates and have associated margins of error, 

they do capture the approximate prevalence of error in the tested population and are therefore 

17 11 C.F.R. § 104.14(b)(1), (d); see also Advisory Opinion 1995-10 (Helms for Senate) (discussing in detail 

treasurer’s various recordkeeping and reporting obligations); Statement of Policy Regarding Treasurers Subject to 

Enforcement Proceedings, 70 Fed. Reg. 1, 5 (Jan. 3, 2005) (same). 

18 See Attachment at 3 (explaining that by examining the specific errors identified in the sample, committees 

may be able to determine how their systems failed and take corrective action). 

19 See, e.g., Final Audit Report of the Commission on Weber for Congress at 10-11 (Sept. 1, 2022) (indicating 

that audited committee “reviewed its contribution records and identified an additional ten excessive contributions” 

for which it took efforts to make corrections identified in sample projection of error, materially resolving finding); 

Final Audit Report of the Commission on Paul Tonko for Congress at 6 (Nov. 2, 2012) (approving finding despite 

committee argument that IAR did not associate projected amount with particular contribution rendering it 

impossible for the committee to demonstrate that its contributions were made with permissible funds). 

20 DFAR Response at 2. 
 

 

ADRM Comments 

Steve Daines for Montana (LRA 1146) 

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valid components of audit findings. The specific projected error amounts in Findings 1 and 3A 

present, with 95% confidence, the value of SDFM’s errors, and the ranges illustrate, in dollar 

terms for Findings 1 and 3A, the margin of error.21 Understood in this way, the ranges within 

which projected error amounts are located do not “inflate” the magnitude of errors in the 

population but instead reliably convey the magnitude of the errors in the population, which in 

Findings 1 and 3A total hundreds of thousands of dollars. 

To the extent that SDFM disputes, as circumstantial evidence, the use of sampling in 

establishing its level of non-compliance, such an evidentiary argument is better suited for the 

post-audit enforcement process, if any such process follows this audit. Even in an enforcement 

context, however, the level of proof would not require 100% certainty. The information before 

the Commission at the reason to believe stage of an enforcement matter need only raise a 

reasonable inference, i.e., credibly allege, that a violation occurred,22 and a post-enforcement 

civil proceeding following a finding of probable cause would require the Commission to 

establish a violation of the Act based upon only the preponderance of the evidence.23 

SDFM does not argue that the use of sampling in this audit has revealed no errors. 

Indeed, the samples themselves revealed such errors and identified those to SDFM. SDFM also 

does not argue that the use of statistical sampling in this audit has not revealed material errors. 

As discussed above, it did. In an audit of another committee that made a similar objection to 

sampling, the Commission approved the sampling-based finding.24 OGC concludes that the 

objection in this audit should similarly be rejected.

25 

II. FINDING 2: DEBT 

A portion of Finding 2 concerns SDFM’s failure to report a debt relating to a June 2020 

invoice from digital media buyer Connell Donatelli, Inc., in the amount of $108,750, which 

states that payment is due upon receipt, but that SDFM did not pay until September 2020. 

21 In Finding 1, the projected sample error amount is $291,803, in a range that could be as low as $143,260 

and as high as $583,597. In Finding 3 subpart A, the projected sample error amount is $535,012, in a range that 

could be as low as $273,748 or as high as $970,100. 

22 See Statement of Policy Regarding Commission Action in Matters at the Initial Stage in the Enforcement 

Process, 72 Fed. Reg. 12545, 12545 (Mar. 16, 2007) (explaining also that “reason to believe” findings “indicate only 

that the Commission found sufficient legal justification to open an investigation to determine whether a violation of 

the Act has occurred”). 

23 See Herman & MacLean v. Huddleston, 459 U.S. 375, 387 (1983) (“In a typical civil suit for money 

damages, plaintiffs must prove their case by a preponderance of the evidence.”). 

24 See Final Audit Report of the Commission on Paul Tonko for Congress, at 6 (Nov. 2, 2012). 

25 In another audit, the audited committee examined its records and amended its reports of outstanding debt 

after receiving Audit’s sampling-based finding. It then showed Audit that the sample exceeded the actual amount of 

debt reporting that required correction and Audit adjusted its finding accordingly. Final Audit Report of the 

Commission on Djou for Hawaii, at 8 (Oct. 2, 2012). Here, in contrast, the Committee has declined to examine its 

records in response to the sampling-based finding. 
 

 

ADRM Comments 

Steve Daines for Montana (LRA 1146) 

Page 7 

Section 104.11(b) of Commission regulations requires that debts exceeding $500 be disclosed in 

the report that covers the date on which the debt was incurred. 

SDFM asserts that this unpaid invoice was not a debt because “the advertising buy that 

was to be funded with the invoiced amount was not placed at that time; rather it was delayed 

until September 2020” although the vendor “did not withdraw and reissue the June 2020 

invoice.”26 SDFM argues that it did not submit supporting documentation for this assertion 

because a lack of documentation allegedly “is reasonable and entirely consistent with the 

realities of media placement/ad buy invoicing.”27 SDFM further asserts that invoices for 

television and radio advertising buys “are typically issued ... in advance ... before any actual 

contractual obligation to the television or radio station exists,” though the media buyer 

“generally does not commit to purchase airtime until payment is received.”28 Therefore, SDFM 

asserts, “an invoice for an ad buy does not (in most cases) reflect an actual, incurred legal 

obligation,” until the ad is placed and the ad buyer has the committee’s funds, at which point 

“the ad buyer then incurs the obligation on the committee’s behalf” to the station’s brokers.29 

SDFM presents no authority in support of its position. 

OGC concludes that, without any supporting documentation that payment was not due on 

the date indicated on the face of the invoice (because the buy was delayed or for some other 

reason), including the invoiced amount as an unreported debt in the finding is appropriate and 

consistent with prior audits.30 

By analogy, in enforcement matters concerning whether a committee received an 

impermissible extension of credit, the Commission has required some proffer of evidence from 

the respondent in support of an assertion that an extension of credit was made in the ordinary 

course of business under 11 C.F.R. § 116.3.31 While the present finding concerns debt reporting 

26 DFAR Response at 3. 

27 Id. (explaining, in response to DFAR recommendation that SDFM provide some form of documentary 

evidence to corroborate the delayed media buy, that “it is possible that arrangements were made by telephone and no 

written records exist”). 

28 Id. 

29 Id. (internal emphasis omitted). 

30 The Commission has previously approved proposed debt findings in cases where committee arguments 

were not adequately supported by documentation. See Final Audit Report on Conservative Majority Fund, at 22 

(Dec. 14, 2017) (inadequate documentation to support claim that certain debts were not incurred by committee but 

by separate organization); Final Audit Report on Utah Republican Party, at 21 (Jan. 23, 2017) (inadequate 

documentation to support using incurrence dates other than dates appearing on expense reimbursement forms 

submitted by staff member); Final Audit Report on Friends of Weiner, at 11 (July 22, 2009) (no documentation to 

support assertions regarding credit card debt). 

31 See 11 C.F.R. § 116.3 (providing that corporate vendor that extends credit in the ordinary course of 

business — as determined by factors including whether vendor followed its established procedures and past practice 

and whether extension conformed to the usual and normal practice in the vendor’s trade or industry — will not be 

deemed to have made an impermissible contribution); and compare Factual and Legal Analysis at 10, MUR 7343 
 

 

 

ADRM Comments 

Steve Daines for Montana (LRA 1146) 

Page 8 

rather than extension of credit, SDFM similarly asserts that it followed industry practice in the 

ordinary course of business. OGC therefore concludes that SDFM may overcome the 

presumption that payment was due on the date indicated on the face of the invoice, and 

substantiate its assertion of industry practice, with the types of documentation the Commission 

has accepted in those MURs as evidence of the usual and normal practice in the vendor’s trade or 

industry under 11 C.F.R. § 116.3(c)(3). Such documentation could include, in addition to sworn 

statements by the relevant SDFM and Connell Donatelli persons, documents detailing Connell 

Donatelli’s invoicing practices, and documents substantiating counsel’s unsworn assertions 

regarding media buying industry practices. 

Attachment 

Memorandum from Joe Stoltz, Assistant Staff Director, Audit Division, to Commission on Audit 

Sampling Policy and Procedures (Aug. 12, 2010). 

(Highway 31) (finding RTB on lack of documentation); Factual and Legal Analysis, at 6-10, MUR 6101 (Heller for 

Congress) (same); and Conciliation Agreement, MUR 5396 (Bauer for President 2000) (Nov. 16, 2004); with 

Factual and Legal Analysis at 8-14, MUR 6141 (Dave Reichert for Congress) (finding no RTB on sworn statements 

attesting to practices); and Factual and Legal Analysis at 18, MUR 6023 (John McCain 2008) (finding no RTB on 

documentation showing reasonable resolution of commercial dispute). 
Attachment

Page 1 of 3

FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

l\1EMORANDUM 

TO: THE COMMISSION 

THROUGH: ALEC PALMER 

ACTING STAFF DIRECTOR 

PATRICIA CARMONA --{)0 

CHIEF COMPLIANCE OFFICER 

FROM: JOE STOLTZ tt_a 

ASSISTANT efA.~DIRECTOR 

AUDIT DIVISION 

SUBJECT: 

ff SENSITIVE 

AUDIT SAMPLING POLICY AND PROCEDURES 

At the Executive Session of July 27, 2010, the Commission requested information on the 

use of sampling in the audit process. Presented below is a summary of the use of this tool in 

Commission audits. 

Sampling is a common auditing tool. While the use of this tool by the Audit Division has 

become more sophisticated over time, its goal remains the same: to evaluate transactions for 

compliance with the requirements of the Federal Election Campaign Act (FECA) by examining a 

portion of those transactions. The May 2008 American Institute of Certified Accountants 

(A/CPA) Audit Guide, Audit Sampling defines audit sampling as the application of an audit 

procedure to less than 100 percent of the items in an account balance or class of transactions for 

the purpose of evaluating some characteristic of the balance or class. While both statistical and 

non-statistical sampling can be used in the audit function, the Audit Division relies on statistical 

sampling. In statistical samples, the sample is selected on a random basis. This means that each 

item has an equal chance of being selected, which allows the calculation of not only a value for 

the estimated characteristic of interest, but also the probability that the estimate is correct within 

a range. With non-statistical sampling, no such calculation is possible. 

Sampling is an efficient and effective tool. Many of the populations the Audit Division 

evaluates are quite large and cannot practically be evaluated on a 100 percent basis. 

Statistical audit sampling falls within two broad categories, attribute sampling and 

variables sampling. Attribute sampling examines how many transactions in a population have a 

specific characteristic, for example, how many contributions are in whole or in part in excess of 

the limitations. Variables sampling predicts the value of a given variable, for example, how 
Attachment

Page 2 of 3

much did a committee receive in excessive contributions. The Audit Division commonly 

employs variables sampling. 

The Audit Division uses Monetary or Dollar Unit Sampling (DUS) for most of the testing 

during audits. 1 According to the A/CPA Audit Guide, Audit Sampling, DUS is a sampling tool 

that was developed and adapted specifically for audit use, and has been used in auditing since the 

1960s. In the audit context, DUS has advantages such as simplicity compared to other variables 

sampling methods, and it is well suited for accounting populations that typically have low 

misstatement rates. DUS uses attribute sampling theory to reach conclusions about a population 

in dollar amounts rather than rates of occurrence. One advantage of DUS is that it automatically 

selects a sample in proportion to an item's value or dollar amount. Thus, provided that the 

population is homogenous (i.e., items to be sampled are found to vary in value over a relatively 

narrow range), it is unnecessary to stratify2 a population to reduce its variability. The sampling 

program used by the Audit Division selects from a population of pennies; thus, for a transaction 

to be selected, a penny associated with it must be selected. The larger the transaction, the more 

likely it is that one of its pennies will be included in the sample. DUS can also easily 

accommodate a situation where a particular transaction contains the characteristic of interest but 

not in its entirety. For example, a $1,000 contribution that exceeds the limitation by $100 is 

recognized as one-tenth excessive (rather than excessive in whole). 

The Commission began using DUS in audits 30 years ago. DUS was originally used to 

review matching fund submissions. The recommendation that DUS be used in our work came 

from a study performed on the matching fund process by the accounting firm Ernst and 

Whinney; now Ernst and Young. Based on the results of DUS, the Commission could reject a 

percentage of the amount submitted for matching that was found to be defective and approve for 

matching the corresponding amount which was found in compliance with the applicable 

requirements. 3 

The original software, which the Audit Division used to determine the appropriate sample 

size, select the sample from a computer file, and analyze the sample results, came from the 

AICPA. In late 2006 and early 2007 a statistical consulting firm was engaged to update this 

software using the same algorithms as contained in the original program. The revised program 

incorporates a graphic user interface making it considerably more user-friendly. It also uses a 

more modem random number algorithm. 

As a rule, the Audit Division tests receipts and disbursements on a sample basis. 

However, there are exceptions. Very small populations are more efficiently reviewed on a 100 

percent basis. Condition of records can also be a factor in the decision. A very well organized 

record system may make a 100 percent review more efficient, whereas sampling may be more 

efficient for a less well-arranged record system of similar size. A very high exception rate may 

indicate the need to review on a 100 percent basis or to segregate a portion of a population for 

1 Although this plan is called Dollar Unit Sampling, it is something of a misnomer; the Audit Division's program 

goes further and actually samples on the penny. 2 Stratification is the process of grouping items in the population into relatively homogeneous subgroups before 

sampling. 

3 In 1992, DUS was incorporated into the Title 26 audit programs for the testing of contributions from individuals. 

2 
Attachment

Page 3 of 3

100 percent review and use sampling to evaluate the remainder. DUS sample size is very 

sensitive to rate of occurrence of the characteristic of interest. For example a sample of 300 

produces a sampling error of approx 1 % if one exception is observed. To produce the same 

sampling error with 2 exceptions requires a sample of 400. If some subset of transactions can be 

conveniently segregated for 100 percent review, it can be more efficient than relying entirely on 

sampling. 

Samples produce an estimate of the value of the characteristic of interest, not a precise 

count. They produce this estimate at a much lower cost to both the Commission and the audited 

committee. The confidence that one may have in that estimate is calculable, as is the potential 

sampling error. The Audit Division uses a confidence level of 95 percent, which is a commonly 

used level. This level of confidence literally means that if an infinite number of samples of the 

same size were randomly drawn from the same population, in 95 percent of the samples the 

range produced by the estimate and the sampling error will contain the actual value in the 

population. The sampling error, usually expressed as a percentage or dollar value, is a measure 

of the potential error in the population. The sampling error for various sample tests is specified 

in the Audit Division Materiality Thresholds and varies depending on the characteristic being 

tested and the rate of occurrence in the sample. The sample size and therefore the staff time 

needed to review the sample is very sensitive to both rates of occurrence and to sampling error. 

The levels set are an attempt to balance efficiency and precision in the estimate. 

In responding to a sample-based finding, the audited committee will not have a 

complete listing of all the problem transactions in the population tested. Rather, it will have the 

estimate of the amount of non-compliance and, unless it compromises the integrity of the sample, 

a list of the problem transactions found in the sample. By reviewing the problem transactions, 

the committee may be able to determine how its systems failed and take corrective action. When 

the sample deals with characteristics such as missing records, the sample errors may not be 

shared directly with the committee. Instead the committee may be asked to review the whole 

deposit which contains an unidentified sample item, or the sample items may be communicated 

directly to a third party such as the committee's bank and the records provided directly to the 

auditors. This preserves the integrity of the sample so that it may be used to evaluate the 

committee's corrective efforts. 

If a committee can demonstrate that one or more transactions identified as problematic 

in the sample were actually in compliance, then the sample projection will be modified. 

However, once a correct sample projection has been established, the correction of a few sample 

items does not resolve the level of non-compliance found in the population tested. Rather it is 

the responsibility of the audited committee to research and resolve the non-compliance in the 

entire population. In the case of excessive or prohibited contributions, the committee has the 

option of making a disgorgement to the U.S. Department of Treasury rather than researching the 

entire population for non-compliance. If the sample results indicate that the committee's reports 

should be amended, it is the committee's responsibility to take the needed corrective action, 

including identifying all of the transactions that require correction. 

Should you have any questions or require further clarification, please contact Joe Stoltz at 

extension 1209. 

3