10

$64,336 remained outstanding on December 31, 2000 and are detailed on the chart
below:

VENDOR DEBT OWED ON 12-31-00
United Printing $ 31,334
Acxiom $ 17,445
Blaemire Communications $4,508
Kennedy Memorial Foundation $ 4,032
Basin Electric $ 2,307
The Printers $1,478
Holiday Inn — Bismarck $1,390
Kranzler-Kingsley Communications | $_ 1,000
Spherion I S841

TOTAL | $ 64,335

The NDP’s representative was informed of the unreported debts at the exit conference
and provided schedules of these debts. He indicated that the appropriate amendments
would be filed.

Interim Audit Report Recommendations and Committee Response
The Audit staff recommended that the NDP file Schedules D (Debts Owed By The
Committee), by reporting period, to disclose the debts and obligations addressed above.
In response to the interim audit report, the NDP complied with this recommendation.


Part I
Background

Authority for Audit

This report is based on an audit of the North Dakota Democratic-Nonpartisan League
Party (NDP), undertaken by the Audit Division of the Federal Election Commission (the
Commission) in accordance with the Federal Election Campaign Act of 1971, as
amended (the Act). The Audit Division conducted the audit pursuant to 2 U.S.C.
§438(b), which permits the Commission to conduct audits and field investigations of any
political committee that is required to file a report under 2 U.S.C. §434. Prior to
conducting any audit under this subsection, the Commission must perform an 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. 2 U.S.C. §438(b)

Scope of Audit

Following Commission approved procedures, the Audit staff evaluated various factors
and as a result, this audit examined:

. The receipt of excessive contributions and loans.

. The receipt of contributions from prohibited sources.

. The disclosure of contributions and other receipts.

. The disclosure of disbursements, debts, and obligations.

. The disclosure of expenses allocated between federal and non-federal accounts.
. The consistency between reported figures and bank records.

. The completeness of records.

. Other committee operations necessary to the review.

OIDWAWNE

Changes to the Law

On March 27, 2002, President Bush signed into law the Bipartisan Campaign Reform Act
of 2002 (BCRA). The BCRA contains many substantial and technical changes to the
federal campaign finance law. Most of the changes became effective November 6, 2002.
The period covered by this audit pre-dates these changes. Therefore, the statutory and
regulatory requirements cited in this report are those that were in effect during the audit
period. :


First, the Audit staff notes that the undated letters did not establish that the reattributions
were accomplished within the 60-day time frame required by 11 CFR §103.3(b)(3).
Further, since the cashier’s check only indicated the names of two individuals, the initial
attributions by the NDP on its disclosure reports have not been documented. The
repayment of the loans by the non-federal account constitutes an impermissible
contribution to the federal account by the non-federal account that remained outstanding
for fourteen months.

| Finding 2. Reporting of Receipts

Summary
The NDP failed to itemize:
e Six transfers received from its non-federal accounts totaling $102,500;
¢ Three offsets to operating expenditures (refunds, rebates, etc.) totaling $36,492;
e Twenty-seven contributions from political committees totaling $26,152; and
e Sixty-four contributions from individuals totaling $6,903.

In addition, the NDP failed to properly disclose the name of the contributor, the amount
of the contribution and/or the correct year-to-date total for fifty-five contributions from
individuals totaling $6,041. In response to the interim audit report, the NDP amended its
reports to correctly disclose the receipts noted above.

Legal Standard
When to Itemize. Political committees must itemize:

e any contribution from an individual if it exceeds $200 per calendar year either by
itself or when aggregated with other contributions from the same contributor. 2
U.S.C. §434(b)(3)(A).

© every contribution from any political committee, regardless of the amount. 2
U.S.C. §434(b)(3)(B).

e every rebate, refund, or other offset to operating expenditures in an aggregate
amount or value in excess of $200 within the calendar year. 2 U.S.C.
§434(b)(3)(F).

e all transfers from its non-federal account used to pay the allocated non-federal
portion of administrative/generic voter drive costs. 11 CFR §104.10(a)(2).

Definition of Itemization. Itemization of contributions and other receipts means that
the recipient committee discloses, on a separate schedule, the following information:
* The amount of the contribution or other receipt;
« The date the committee received the contribution or other receipt;
e The full name and address of the contributor or of the person who provides an
other receipt;
e In the case of contributions from individual contributors, the contributor’s
occupation and the name of his or her employer; and
e The year-to-date total of all contributions from the same contributor. 11 CFR
§§100.12, 104.3(a)(4) & 104.10(a)(2) and 2 U.S.C. §434(b)(3)(A), (B) & (F).


os)

Part III
Summaries

Findings and Recommendations

Finding 1. Receipt of Excessive Contributions

The NDP received contributions, in the form of loans from two individuals, which
exceeded the contribution limitations by $9,875. The loans had been reported as received
from the contributors and their spouses. In response to the interim audit report, the NDP
provided undated letters from the individuals and their spouses to support the attribution
of the loans as disclosed on its reports. Documentation was also provided demonstrating
the NDP’s non-federal account had inadvertently repaid these loans, but not within the 60
days allowed for the disposition of excessive contributions. The payment by the non-
federal account was an impermissible contribution to the federal account. The NDP
disclosed a debt to the non-federal account that remained outstanding for fourteen
months. (For more detail, see p. 4)

Finding 2. Reporting of Receipts

The NDP failed to itemize:

Six transfers received from its non-federal accounts totaling $102,500;

Three offsets to operating expenditures (refunds, rebates, etc.) totaling $36,492;
Twenty-seven contributions from political committees totaling $26,152; and
Sixty-four contributions from individuals totaling $6,903.

eocee

In addition, the NDP failed to properly disclose the name of the contributor, the amount
of the contribution and/or the correct year-to-date total for fifty-five contributions from
individuals totaling $6,041. In response to the interim audit report, the NDP amended its
reports to correctly disclose the receipts noted above. (For more detail, see p. 6)

Finding 3. Misstatement of Financial Activity

When the NDP’s reported activity was compared to its bank records for calendar year
2000, the Audit staff found that receipts, disbursements and ending cash on hand had
been misstated. In response to the interim audit report, the NDP filed comprehensive
amended reports, which corrected the misstatements noted above. (For more detail, see
p. 8)

Finding 4. Reporting-of Debts and Obligations#

The NDP failed to report debts owed to 24 vendors, which totaled as much as $104,788
during calendar year 2000. In response to the interim audit report, the NDP filed
Schedules D, by reporting period, which correctly disclosed the debts noted above. (For
more detail, see p. 9)


Part II

Overview of Committee

Committee Organization

Important Dates

| North Dakota Democratic-Nonpartisan League
Party

e __ Date of Registration

| August 29, 1972

e Audit Coverage

| January 1, 1999 — December 31, 2000
T

Headquarters

Bismarck, ND

Bank Information

° Bank Depositories

e Bank Accounts

|

{2

| 3 Federal and 3 Non-Federal Accounts
1

Treasurers

¢ ___ Treasurer When Audit Was Conducted

Ken Ziegler

e __ Treasurer During Period Covered by Audit

Manann Lang

Management Information

e Attended FEC Campaign Finance Seminar _| No

e Used Commonly Available Campaign Yes
Management Software Package

e Who Handled Accounting and Paid Staff

Recordkeeping Tasks

Overview of Financial Activity

(Audited Amounts)

Cash on hand @ January 1, 1999 s 462
Receipts
¢ Contributions from Individuals $ 238,554
¢ Contributions from Political Party & Other Political Committees 146,277
¢ Transfers from Affiliated/Other Party Committees 146,874
e Loans Received 19,750
+ _ Offsets to Operating Expenditures

_* Other Federal Receipts
e Transfers from Non-Federal Accounts for Joint Activity
Total Receipts $1,136,895
Disbursements,
* Operating Disbursements $ 995.279
e Transfers to Non-Federal Accounts 85.000
e __ Transfers to Affiliated/Other Party Committees 39.367
Total Disbursements {S$ 1,119,646
Cash on hand @ December 31, 2000 |$ 17,249


does not meet the requirements established for paying allocable expenses shall be
presumed to be a loan or contribution from the non-federal account to a federal account,
in violation of the Act. 11 CFR §106.5(g)(iii).

Facts and Analysis

The Audit staff reviewed $19,750 in loans received by the NDP on November 15, 2000.
On its 30-Day Post-Election Report for 2000, the NDP disclosed the loans as having been
made by four individuals. However, only the names of two individuals appeared on the
cashier’s check received by the NDP; no other documentation was available for the loans.
Further, the NDP did not provide documentation supporting that a portion of each loan
was to be reattributed to the spouses of the individuals named on the cashier's check.
One of the individuals had contributed $125 prior to the loan. The loans caused each of
the two individuals to exceed the $5,000 limitation; the excessive portions totaled $9,875.

Interim Audit Report Recommendations

The Audit staff recommended that the NDP provide evidence demonstrating that the
loans are not excessive contributions. Absent such evidence, the Audit staff
recommended that the NDP refund (repay) $9,875 and provide evidence of such refunds
(copies of the front and back of the negotiated refund checks).

Committee Response to Recommendation and the Audit Staff ‘s
Assessment

In response to the interim audit report, the NDP provided undated letters entitled
“Confirmation of Attribution of Loan” signed by each individual to whom the loans were
attributed on its disclosure reports. The letters were obtained by the NDP to support that
the original attributions, as disclosed on its reports, were accurate and in accordance with
the individuals’ original intent. The response concludes that the loans did not result in
any excessive contributions.

In a subsequent submission, the NDP provided documentation supporting the repayment
of these loans. On its 2001 Mid-Year disclosure report, the NDP reported repayment of
the loans to the individuals as memo entries on Schedule B (Itemized Disbursements).

On the same report, the NDP reported a debt to the non-federal account for the amount of
the loans ($19,750). According to the NDP, its non-federal account had inadvertently
repaid the loans. A copy of a cancelled check indicated that on February 15, 2001, 90
days after receipt of the loans, the non-federal account paid $29,968 to a financial
institution’ to extinguish the loans. -According to the NDP representative this payment by
the non-federal account was for the federal portion loan. The memo line of that check
indicates that it was intended for the principal of the loans. On April 17, 2002, over
fourteen months after the non-federal payment to the financial institution, the NDP issued
a $19,750 check to the non-federal account to extinguish that debt.

° According to the NDP’s representative, the funds for the loans made by the two individuals
originated from a bank loan. The loan was for $48,000, of which $19,750 was attributed to the
NDP. The remaining $28,250 was deposited into a non-federal account and was reported as a
contribution on the NDP’s state disclosure reports.



FEDERAL ELECTION COMMISSION
Washington, DC 20463

May 29, 2003

MEMORANDUM

TO: RON M. HARRIS
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ (9G7
ASSISTANT STAF €TOR
AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE AUDIT REPORT ON THE
NORTH DAKOTA DEMOCRATIC — NONPARTISAN LEAGUE PARTY

Attached please find a copy of the audit report and related documents on the
North Dakota Democratic — Nonpartisan League Party, which was approved by the
Commission on May 22, 2003.

The report may be released to the public on May 29, 2003.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library


Interim Audit Report Recommendations and Committee Response
The Audit staff recommended that the NDP file Schedules A and Schedules H3 by
reporting period to properly disclose the receipts discussed above. In response to the
interim audit report, the NDP complied with the recommendations.

| Finding 3. Misstatement of Financial Activity

Summary

When the NDP’s reported activity was compared to its bank records for calendar year
2000, the Audit staff found that receipts, disbursements and ending cash on hand had
been misstated. In response to the interim audit report, the NDP filed comprehensive
amended reports, which corrected the misstatements noted above.

Legal Standard
Each report must disclose:
e The amount of cash on hand at the beginning and end of the reporting period;
e The total amount of receipts for the reporting period and for the calendar year;
and
e The total amount of disbursements for the reporting period and for the calendar
year. 2 U.S.C. §§434(b)(1), (2) and (4).

Facts and Analysis

The Audit staff's reconciliation of the NDP’s reported financial activity to its bank
activity, for the period January 1, 2000, through December 31, 2000, indicated that
receipts, disbursements and ending cash on hand were misstated. The misstatements are
discussed below. The NDP did not provide records to explain how the amounts shown
on its disclosure reports were calculated; as such not all discrepancies could be explained.

2000 Activity Reported { Bank Records Discrepancy
Receipts $ 759.888 | S$ 841.389 $ 81,501 Understated
Disbursements 753.951 __! 849.067 95,117 Understated
Ending Cash Balance $ 30.925 | S$ 17.249 | _$ 13,677 Overstated
The understatement of receipts resulted front
» Contributions from political committees not reported S$ 20,245
e Transfers received from the non: federal account not reported 102,500
e Transfers received from the non-tederal account amount overstated - 69,377
¢ Contributions from individuals not reported woe : 5,406
e Transfers from affiliated party committees not reported 5,000
e Offsets to operating expenditures (1.e.- refunds) not reported 36.492
e Offsets to operating expenditures (i.e.- refunds) amount overstated - 20,025
e Transfer from affiliate reported twice - 919
e Anunexplained understatement of receipts 2,179

Total (Net) Understatement of Receipts $81,501


Facts and Analysis

e Transfers from Non-Federal Accounts for Joint Activity
All transfers from the NDP’s non-federal accounts into its federal accounts were
reviewed. Six transfers, totaling $102,500, were neither included in reported totals
nor disclosed on Schedules H3 (Transfer from Nonfederal Account). See Finding 3.,
Misstatement of Financial Activity at page 8.

e Offsets to Operating Expenditures (Refunds, Rebates, etc.)

It was determined that the NDP did not include three offsets, totaling $36,492, in its
reported totals; nor were they disclosed on Schedules A (Itemized Receipts). See
Finding 3., Misstatement of Financial Activity at page 8.

e Contributions from Political Committees
All contributions from political committees were reviewed and it was determined
that the NDP did not itemize 27 totaling $26,152 on Schedules A. Of this total,
$20,245 was received during 2000 and was not included in reported totals. See
Finding 3., Misstatement of Financial Activity at page 8.

¢ Contributions from Individuals
The Audit staff reviewed all contributions from individuals and determined that the
NDP did not itemize 64 such contributions totaling $6,903 on Schedules A. It
should be noted that of this amount, $5,406 occurred during 2000 and was not
included in reported totals (See Finding 3., Misstatement of Financial Activity at
page 8). The majority of the errors (55) were contributions in amounts less than or
equal to $200 that, when aggregated with earlier contributions from the same
contributor, exceeded $200, and were required to be itemized. The remaining nine
errors were contributions in amounts that exceeded $200.

Further, the NDP did not properly disclose 55 contributions totaling $6,041 on
Schedules A as required. The majority of the errors (35) resulted from incorrect
year-to-date totals being reported. In addition, for seven of these 35 contributions
the amount was incorrectly disclosed causing an aggregation error. The remaining
twenty errors occurred when the contributor’s name was incorrectly disclosed.

At the exit conference the NDP representative could not explain why these receipts were
not itemized since he was not involved with the committee’s reporting process. The
representative was given schedules detailing the receipts that were not itemized and he
indicated that the proper amended reports would be filed. Subsequent to the exit
conference, the NDP representative was provided schedules of the contributions that were
not properly disclosed. He indicated that the amended reports to be filed would correct
these errors as well.



Part IV
Findings and Recommendations

| Finding 1. Receipt of Excessive Contributions

Summary

The NDP received contributions, in the form of loans from two individuals, which
exceeded the contribution limitations by $9,875. The loans had been reported as received
from the contributors and their spouses. In response to the interim audit report, the NDP
provided undated letters from the individuals and their spouses to support the attribution
of the loans as disclosed on its reports. Documentation was also provided demonstrating
the NDP’s non-federal account had inadvertently repaid these loans, but not within the 60
days allowed for the disposition of excessive contributions. The payment by the non-
federal account was an impermissible contribution to the federal account. The NDP
disclosed a debt to the non-federal account that remained outstanding for fourteen
months.

Legal Standard

Loans Defined as Contributions. The term “contribution” includes any loan made by
any person for the purpose of influencing any election for federal office. A loan that
exceeds the contribution limitations is unlawful whether or not it is repaid. 2 U.S.C.

§431(8)(A)(i); 11 CFR §§100.7(a)(1).

Party Committee Limits. A party committee may not receive more than a total of
$5,000 per year from any one contributor. 2 U.S.C. §441a(a)(1)(C); 11 CFR §§110.1(a)
and (d) and 110.9(a).

Reattribution of Excessive Contributions. FEC regulations permit committees to ask

donors of excessive contributions whether they had intended their contribution to be a

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

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

that:

1. The reattribution must be signed by both contributors;

2. The reattribution must be received by the committee within 60 days after the
committee received the original contribution: and

3. 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(1)(5).

Transfers Between Federal and Non-federal Accounts. Any portion of a transfer from
a committee’s non-federal account to its federal account or its allocation account that


Page

COON

Table of Contents

Part I. Background
Authority for Audit
Scope of Audit

Changes to the Law

Part II. Overview of Committee
Committee Organization
Overview of Financial Activity

Part III. Summaries
Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Receipt of Excessive Contributions
Finding 2. Reporting of Receipts

Finding 3. Misstatement of Financial Activity
Finding 4. Reporting of Debts and Obligations


Report of the

Audit Division on the
North Dakota Democratic-
Nonpartisan League Party

January 1, 1999 - December 31, 2000



Report of the Audit Division
on the North Dakota Democratic-
Nonpartisan League Party

January 1, 1999 - December 31, 2000

Why the Audit
Was Done
Federal law permits
the Commission to
conduct an audit and
field investigation of
any political
committee that is
required to file reports
under the Federal
Election Campaign Act
(the Act). The
Commission generally
conducts such audits
when a committee
appears not to have
met the threshold
requirements for
substantial compliance
with the Act.' The
audit determines
whether the committee
complied with the
limitations,
prohibitions and
disclosure
requirements of the
Act.

Future Action
The Commission may
initiate an enforcement
action, at a later time,
with respect to any of
the matters discussed
in this report.

About the Committee (p. 2)

The North Dakota Democratic-Nonpartisan League Party is a state party
committee headquartered in Bismarck, ND. For more information, see chart
on the Committee Organization, p 2.

Financial Activity (p. 2)

e Receipts
o. Transfers from Non-Federal Accounts $ 501,780
o Contributions from Individuals 238,554
o Transfers from Other Party Committees 146,874
o Contributions from Other Political 146,277
Committees
o Loans Received 19,750
o All Other Receipts 83,660
o Total Receipts $ 1,136,895
e Disbursements
o Operating Expenditures $ 995,279
o Transfers to Non-Federal Accounts 85,000
o Transfers to Party Committees 39,367
o Total Disbursements $ 1,119,646

Findings and Recommendations (p.3)
¢ Receipt of Excessive Contributions (Finding 1)
¢ Reporting of Receipts (Finding 2)
e Misstatement of Financial Activity (Finding 3)
¢ Reporting of Debts and Obligations (Finding 4)

'2 U.S.C. §438(b).


The understatement of disbursements resulted from:
© The failure to report four transfers to a non-federal account
The failure to report operating expenditures
Expenditure reported twice or amount overstated
An unexplained overstatement of disbursements
Total (Net) Understatement of Disbursements

S$ 85.000
11,549
-1,362

-70
95,117

The overstatement of ending cash on hand on December 31, 2000 by $13,677 resulted

primarily from the misstatements detailed above.

After the exit conference, the NDP representative was provided a schedule detailing the

misstatements. He agreed to file amended disclosure reports.

Interim Audit Report Recommendations and Committee Response
The Audit staff recommended that the NDP file a comprehensive amended report for
calendar year 2000, that was to include Summary and Detailed Summary Pages to
correctly disclose its reported activity, as well as amended Schedules A, B, H3 and H4,
by report period, as necessary. In response to the interim audit report, the NDP amended

its reports to correct the misstatements noted above.

| Finding 4. Reporting of Debts and Obligations

Summary

The NDP failed to report debts owed to 24 vendors, which totaled as much as $104,788

during calendar year 2000. In response to the interim audit report, the NDP filed

Schedules D, by reporting period, which correctly disclosed the debts noted above.

Legal Standard

Continuous Reporting Required. A political committee must disclose the amount and
nature of outstanding debts and obligations until those debts are extinguished. 2 U.S.C

§434(b)(8) and 11 CFR §§104.3(d) and 104.11(a).

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).

iemizing Debts and Obligations
debt of $500 or less must be reported once it has been outstanding oU days
::e incurred (the date of the transaction); the committee reports 1t on the nex
regularly scheduled report.

trom the
t

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

the debt was incurred. 11 CFR §104.11(b).

Facts and Analysis

Disclosure reports filed by the NDP during the audit period did not disclose any debts.
Based on available records and computer files, reportable debts of $104,788 to 24
vendors were identified, of which $40,452 was paid during calendar year 2000. Debts of