FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

July 20,2009 

MEMORANDUM 

To: Judith Ingram 

Press Officer 

From: Joseph F. StOlt~-r!J Assistant Staff 

Audit Division 

Subject: Public Issuance of the Audit Report on South Dakota Republican Party 

(A05-29) 

Attached please find a copy of the audit report on South Dakota Republican Party, 

which was approved by the Commission on July 2, 2009. 

All parties involved have received informational copies of the report and the report 

may be released to the public July 20, 2009. 

Attachment as stated 

cc:	 Office of General Counsel 

Office of Public Disclosure 

Reports Analysis Division 

FEC Library 

lTD Web 
About the Committee (p. 2)
 

The South Dakota Republican Party (SDRP) is a state party
 

committee headquartered in Pierre, SD. For more information,
 

see the Committee Organization Chart, p. 2.
 

Report of the 

Audit Division on the 

South Dakota Republican Party 

January 1,2003 - December 31,2004 

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. I The audit 

determines whether the 

committee complied 

with the limitations, 

prohibitions and 

disclosure requirements 

ofthe 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. 

Financial Activity (p. 2) 

•	 Federal Receipts 

o	 Contributions from Individuals $ 6,158,820 

o	 Contributions from Political Committees 217,371 

o	 Transfers from Affiliated Party Committees 1,314,511 

o	 Transfers from Non-federal and Levin Funds 876,529 

o	 Other Federal Receipts 77,215 

o	 Total Receipts $ 8,644,446 

•	 Federal Disbursements 

0 Operating Expenditures $ 4,623,676 

0 Independent Expenditures 354,886 

0 Federal Election Activity 2,446,057 

0 Other Federal Disbursements 551,401 

0 Total Disbursements $ 7,976,020 

•	 Levin Receipts $1,666 

•	 Levin Disbursements $0 

FiRdings and Recommendations (p. 3) 

•	 Misstatement ofFinancial Activity (Finding 1) 

•	 Disclosure ofOccupationIName ofEmployer (Finding 2) 

1 2 U.S.c. §438(b). 
Table of Contents
 

Page 

Part I. Background 

Authority for Audit 1
 

Scope ofAudit 1
 

Part II. Overview of South Dakota Republican Party
 

Committee Organization 2
 

Overview of Financial Activity 2
 

Part III. Summaries 

Findings and Recommendations 3
 

Part IV. Findings and Recommendations
 

Finding 1. Misstatement of Financial Activity 4
 

Finding 2. Disclosure of Occupation/Name of Employer 7
 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the South Dakota Republican Party (SDRP), 

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 ofreports filed by selected 

committees to determine if the reports filed by a particular committee meet the threshold 

requirements for substantial compliance with the Act. 2 U.S.c. §438(b). 

Scope of Audit 

Following Commission approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

1.	 The disclosure of occupation and name of employer for contributions from 

individuals. 

2.	 The disclosure of disbursements, debts and obligations. 

3.	 The disclosure of contributions from other political committees. 

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

Levin accounts. 

5.	 The consistency between reported figures and bank records. 

6.	 The completeness of records. 

7.	 Other committee operations necessary to the review. 
2 

Part II 

Overview of Committee 

Committee Organization 

Important Dates South Dakota Republican Party 

• Date of Registration July 14, 1975 

• Audit Coverage January 1,2003 - December 31,2004 

Headquarters Pierre, SD 

Bank Information 

• Bank Depositories 3 

• Bank Accounts 5 Federal, 1 Non-federal (Savings), 1 Levin 

Treasurer 

• Treasurer When Audit Was Conducted Thomas G. Leckey 

• Treasurer During Period Covered by Audit Thomas G. Leckey 

Management Information 

• Attended FEC Campaign Finance Seminar Yes 

• Used Commonly Available Campaign 

Management Software Package 

Yes 

•	 Who Handled Accounting and Recordkeeping Paid Staff 

Tasks 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand @ January 1, 2003 $118,210 

0 Contributions from Individuals 6,158,820 

0 Contributions from Other Political Committees 217,371 

0 Transfers from Affiliated Party Committees 1,314,511 

0 Transfers from Non-federal and Levin Funds 876,529 

0 Other Receipts 77,215 

Total Receipts $ 8,644,446 

0 Operating Expenditures 4,623,676 

0 Independent Expenditures 354,886 

0 Federal Election Activity 2,446,057 

0 Other Federal Disbursements 551,401 

Total Disbursements $ 7,976,020 

Cash on hand (iiJ December 31, 2004 $ 786,636 

Levin Cash on hand (iiJ January 1,2003 $0 

Total Levin Receipts $1,666 

Total Levin Disbursements $0 

Levin Cash on hand @ December 31,2004 $1,666 
3 

Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

A comparison of SDRP's reported activity to bank records revealed a material 

misstatement ofreceipts and disbursements in 2003 and 2004. In 2003, receipts and 

disbursements were understated by $338,654 and $345,552, respectively. In 2004, 

receipts and disbursements were understated by $1,051,962 and $853,382, respectively. 

A significant amount of the understated activity relates to not reporting non-federal 

activity handled through its federal account. The Audit staff recommended that SDRP 

file amended disclosure reports to correct the misstatements for the audit period and 

reconcile reported activity to bank records for periods subsequent to the audit period and 

file amended disclosure reports, as necessary. In response to the recommendation in the 

interim audit report, SDRP filed amended reports that corrected the misstatements. 

(For more detail, see p. 4) 

Finding 2. Disclosure of Occupation/Name of Employer 

SDRP did not adequately disclose occupation and/or name of employer for 39% of 

contributions from individuals itemized on its Schedules A (Itemized Receipts). In 

addition, SDRP did not demonstrate that "best efforts" were exercised to obtain, 

maintain, and submit the information. The Audit staff recommended that SDRP provide 

evidence that it exercised "best efforts" or contact each contributor lacking this 

information, submit evidence of such contact, and disclose information received in 

amended reports. In response to the recommendation in the interim audit report, SDRP 

obtained the necessary contributor information and filed amended reports that materially 

corrected the disclosure errors. 

(For more detail, see p. 7) 
4 

Part IV
 

Findings and Recommendations
 

IFinding 1. Misstatement of Financial Activity 

Summary 

A comparison ofSDRP's reported activity to bank records revealed a material 

misstatement of receipts and disbursements in 2003 and 2004. In 2003, receipts and 

disbursements were understated by $338,654 and $345,552, respectively. In 2004, 

receipts and disbursements were understated by $1,051,962 and $853,382, respectively. 

A significant amount of the understated activity relates to not reporting non-federal 

activity handled through its federal account. The Audit staff recommended that SDRP 

file amended disclosure reports to correct the misstatements for the audit period and 

reconcile reported activity to bank records for periods subsequent to the audit period and 

file amended disclosure reports, as necessary. In response to the recommendation in the 

interim audit report, SDRP filed amended reports that corrected the misstatements. 

Legal Standard 

A. Contents of Reports. Each report must disclose: 

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

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

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

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

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

B. Transfers from Non-Federal Accounts. Generally, a political committee may not 

transfer funds from its non-federal account to its federal account, except when the 

committee follows specific rules for paying for shared federal/non-federal election 

activity. 11 CFR §102.5(a)(I)(i) and 106.7(1). 

Facts and Analysis 

The Audit staff reconciled SDRP's reported financial activity to its bank records for 2003 

and 2004. Below are charts that outline the discrepancies in both years followed by 

explanations of the misstatements. 
5 

2003 Activity 

Reported Bank Records 

$118,210 

Discrepancy 

Opening Cash Balance 

@ January 1,2003 

$191,378 $73,168 

Overstated 

Receipts $885,104 $1,223,758 $338,654 

Understated 

Disbursements $714,940 $1,060,492 $345,552 

Understated 

Ending Cash Balance 

@ December 31, 2003 

$361,541 $281,477 $80,064 

Overstated 

The understatement ofreceipts was the result ofthe following: 

• Transfers from the non-federal account not reported + $332,592 

• Unexplained difference + 6,062 

• Understatement of Receipts. $338,654 

The understatement of disbursements was due to the following: 

• Disbursements not reported/ + $346,480 

• Disbursements reported with incorrect amounts + 2,982 

• Voided disbursements reported 150 

• Memo disbursements reported as actual disbursements 1,890 

• Reported disbursements that did not go through bank 1,870 

• Understatement of Disbursements $345,552 

2004 Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance 

@ January 1,2004 

$361,541 $281,477 $80,064 

Overstated 

Receipts $6,368,726 $7,420,6883 $1,05.1,962 

Understated 

Disbursements . $6,062,147 $6,915,529 $853,382 

Understated 

Ending Cash Balance 

@ December 31, 2004 

$668,120 $786,636 $118,516 

Understated 

2 Includes payments totaling $218,123 to the Rounds for Governor committee. 

3 Includes $19,556 in contributions erroneously deposited into the Levin Fund account. These 

contributions were subsequently transferred to a federal account when the error was detected. 
6 

The understatement ofreceipts was due to the following: 

•	 Contributions from joint fundraiser not reported" + 119,919 

•	 Unreported excess campaign funds from Bush-Cheney '04 + 150,000 

(Primary) Inc. 

•	 Receipts that were reported as negative disbursements + 9,046 

•	 Transfers from the non-federal account not reported + 356,532 

•	 Individual contributions not reported + 425,535 

•	 Unexplained Difference 9,070 

•	 Understatement of Receipts $1,051,962 

The understatement of disbursements was due to the following: 

•	 Disbursements not reported + $965,569 

•	 Receipts that were reported as negative disbursements + 9,046 

•	 Disbursements reported with incorrect amounts (Net) + 2,797 

•	 Reported disbursements that did not go through bank 138,348 

•	 Unexplained Difference + 14,318 

•	 Understatement of Disbursements $853,382 

Cash Balances 

SDRP misstated cash balances throughout 2003 and 2004. The overstated cash balance 

of $73, 168 on January 1, 2003 is unexplained, but likely resulted from misstatements 

occurring in prior periods. On December 31, 2004, the cash balance was understated by 

$118,516 resulting from the discrepancies noted above. 

The primary reason for the understatement ofreceipts and disbursements was SDRP's 

failure to properly account for non-federal activity. During the audit period, SDRP did 

not maintain a non-federal checking account to make disbursements considered to be 

solely for non-federal purposes such as contributions made to state and local candidates. 

Instead, SDRP made these non-federal disbursements from their federal allocation 

account but failed to report the activity on their FEC reports. In addition, SDRP did not 

report a significant amount oftransfers from its non-federal savings account to the federal 

account. Although such transfers between the federal and non-federal accounts for non-­

allocable expenses are prohibited, the Audit staffs analysis indicated that non-federal 

funds were not used to pay for federal activity. 

The Audit staff presented these matters to SDRP's Finance Director during the exit 

conference along with schedules detailing the discrepancies. It was also advised that, in 

the future, if SDRP does not wish to disclose solely non-federal activity on its FEC 

disclosure reports, it should establish a non-federal checking account to pay any solely 

non-federal expenses. The Finance Director stated that SDRP would amend its reports to 

correct the misstatements. 

4 SDRP received $119,919 in net proceeds from a joint fundraiser named 2004 Special Teams Committee. 

SDRP also did not itemize the gross amount of contributions totaling $137,648 as memo entries from this 

event as required. 

5 SDRP incorrectly reported $9,046 in vendor refunds as negative disbursements. These receipts should 

have been reported as offsets to operating expenditures. 
7 

Interim Audit Report Recommendation and Committee Response 

The Audit staff recommended that SDRP file amended disclosure reports to correct the 

misstatements noted above. Since similar misstatements may have occurred after the 

audit period, it was further recommended that SDRP reconcile reported activity to bank 

records for periods subsequent to the audit period and file amended disclosure reports, as 

necessary. In response to the recommendation in the interim audit report, SDRP filed 

amended reports that corrected the misstatements. 

IFinding 2. Disclosure of Occupation/Name of Employer 

Summary 

SDRP did not adequately disclose occupation and/or name of employer for 39% of 

contributions from individuals itemized on its Schedules A (Itemized Receipts). In 

addition, SDRP did not demonstrate that "best efforts" were exercised to obtain, 

maintain, and submit the information. The Audit staffrecommended that SDRP provide 

evidence that it exercised "best efforts" or contact each contributor lacking this 

information, submit evidence of such contact, and disclose information received in 

amended reports. In response to the recommendation in the interim audit report, SDRP 

obtained the necessary contributor information and filed amended reports that materially 

corrected the disclosure errors. 

Legal Standard 

A. Itemization Required for Contributions from Individuals. A political committee 

other than an authorized committee must itemize any contribution from an individual ifit 

exceeds $200 per calendar year, either by itself or when combined with other 

contributions from the same contributor. 2 U.S.c. §434(b)(3)(A). 

B. 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 total of all contributions from the same individual. 11 

CFR §§ 100.12 and 104.3(a)(4) and 2 U.S.c. §434(b)(3)(A). 

C. 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. 2 U.S.C. §432(h)(2)(i). 

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

have used "best efforts" ifthe committee satisfied all ofthe following criteria: 

•	 All written solicitations for contributions included: 

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

and name of employer; and 

o	 The statement that such reporting is required by Federal law. 
8 

•	 Within 30 days after the receipt ofthe 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). 

Facts and Analysis 

SDRP did not adequately disclose occupation and/or name of employer for 39% of 

contributions from individuals itemized on its Schedule A. Most of these contributions 

were disclosed with no contributor occupation and/or name of employer or with a 

notation of "information requested." In response to several Requests for Additional 

Information (RFAI's) sent by the Commission's Report Analysis Division concerning the 

matter, SDRP stated that "best efforts" procedures were utilized and that new contributor 

information was contained in amended reports. 

During the entrance conference, the Audit staff asked a SDRP representative to provide 

documentation in support of their "best efforts" procedures. In response, the SDRP 

representative explained that original solicitations and follow-up letters to the contributor 

contained a request for the occupation and name of employer. It was further stated that 

any information received in return was entered directly into SDRP receipts database and 

no paper trail was maintained. The SDRP representative explained that disclosure reports 

reflected the most current contributor information at the time of filing. 

The Audit staff determined that the occupation and name of employer information had 

been updated on Schedules A for only a small number of contributors that gave during 

the audit period. The updated information was limited to those contributors that had 

contributed more than once during the audit period and had likely provided the 

information in response to a subsequent solicitation and not as a result of a follow-up 

letter requesting the missing information. It is also noted that SDRP did not file amended 

disclosure reports that included any additional contributor information. 

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

SDRP represenfatives stated that in the future copies of the original solicitation cards, 

follow-up letters, and any resp~nses from the contributors would be maintained. 

Interim Audit Report Recommendation and Committee Response 

The Audit staff recommended that SDRP provide evidence that it exercised "best efforts" 

to obtain, maintain, and submit the contributor information. Absent such evidence, 

SDRP should contact each contributor for whom information is lacking, submit evidence 

of such contact, and disclose any information received in amended reports. SDRP should 

also submit a copy ofwritten procedures implemented to ensure "best efforts" are 

exercised to obtain contributor information in the future. In response to the 

recommendation in the interim audit report, SDRP obtained the necessary contributor 

information and filed amended reports that materially corrected the disclosure errors.