Interim Audit Report of the 

Audit Division on the South 

Dakota Democratic Party 

(January 1, 2009 - December 31, 2010) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political conunittee 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.' llie 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 South Dakota Democratic Party is a state party committee 

headquartered in Sioux Falls, South Dakota. For more 

information, see the chart on the Conunittee Organization, p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Political 

Party and Other Political 

Committees 

o Transfers from Affiliated/Other 

Party Committees 

o All Other Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Coordinated Expenditures Made 

by Party Committees 

Federal Election Activity 

All Other Disbursements 

o 

o 

Total Disbursements 

$ 180,424 

133,843 

593,756 

13,042 

S 921,065 

$ 571,639 

144,700 

184,970 

88,966 

$ 990,275 

Findings and Recommendations (p. 1) 

• Misstatement of Financial Activity (Finding 1) 

• Recordkeeping for Employees (Finding 2) 

• Reporting of Coordinated Party Expenditures (Finding 3) 

• Contributions from Unregistered Political Organization 

(Finding 4) 

• Disclosure of Occupation/Name of Employer (Finding 5) 

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

Division on the 

South Dakota Democratic Party 

(January 1, 2009 - December 31, 2010) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Commission Guidance 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Findings and Recommendations 3 

Part IV. Findings and Recommendations 

Finding!. Misstatement of Financial Activity 5 

Finding 2. Recordkeeping for Employees 7 

Findings. Reporting of Coordinated Party Expenditures 8 

Finding 4. Contributions from Unregistered Political Organizations 11 

Finding S. Disclosure of Occupation/Name of Employer 13 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the South Dakota Democratic Party (SDDP), 

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 whether 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 receipt of contributions from prohibited sources; 

2. the disclosure of individual contributors' occupation and name of employer; 

3. the disclosure of disbursements, debts and obligations; 

4. the disclosure of expenses allocated between federal and non-federal accounts; 

5. the consistency between reported figures and bank records; 

6. the disclosure of independent and coordinated expenditures; 

7. the completeness of records; and 

8. other committee operations necessary to the review. 

Commission Guidance 

Request for Early Commission Consideration of a Legal Question 

Pursuant to the "Policy Statement Establishing a Program for Requesting Consideration 

of Legal Questions by the Commission," SDDP requested early consideration of a legal 

question raised during the audit. SDDP questioned whether the monthly time logs 

required under 11 C.F.R. § 106.7(d)(1) applied to employees paid with 100 percent 

federal funds. (See Finding 2.) 

The Commission concluded, by a vote of S-1, that 11 C.F.R. §106.7(d)(l) does require 

committees to keep a monthly log for employees paid exclusively with federal funds. 

Exercising its prosecutorial discretion, however, the Commission decided it will not 

pursue recordkeeping violations for the failure to keep time logs or to provide affidavits 

to account for employee salaries paid with 100 percent federal funds and reported as 

such. Finding 2, Recordkeeping for Employees, of this audit report does not include 

SDDP employees paid with 100 percent federal funds and reported as such. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration April 24,1982 

• Audit Coverage January 1,2009 - December 31,2010 

Headquarters Sioux Falls, South Dakota 

Bank Information 

• Bank Depositories Two 

• Bank Accounts Four Federal and Three Non-federal 

Treasurer 

• Treasurer When Audit Was Conducted Bill Nibbelink 

• Treasurer During Period Covered by Audit BillNibbelink 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand ® January 1,2009 S 93,826 

Receipts 

o Contributions from Individuals 180,424 

o Contributions from Political Party and Other 

Political Conunittees 133,843 

o Transfers from Affiliated/Other Party 

Committees 593,756 

o All Other Receipts 13,042 

Total Receipts S 921,065 

Disbursements 

o Operating Expenditures 571,639 

o Coordinated Expenditures Made by Party 

Committees . 144,700 

o Federal Election Activity 184,970 

o All Other Disbursements 88,966 

Total Disbursements 5 990,275 

Cash-on-hand @ December 31,2010 5 24,616 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieidwork, a comparison of SDDP's reported financial activity with its bank 

records revealed misstatements for calendar years 2009 and 2010. For 2009, SDDP 

understated disbursements by $1S,1SS. For 2010, SDDP understated receipts by $26,721. 

Subsequent to audit notification, SDDP amended its reports, which corrected the 

misstatement for 2009. The Audit staff recommends that SDDP amend its disclosure 

reports to correct the misstatement for 2010. (For more detail, see p. S.) 

Finding 2. Recordkeeping for Employees 

During audit fieidwork, the Audit staff determined that SDDP did not maintain any 

monthly payroll logs, as required, to document the percentage of time each employee 

spent on federal election activity. For 2009 and 2010, the Audit staff identified payments 

to SDDP employees totaling $60,143, for which monthly payroll logs were not 

maintained. This consisted of $42,557, reported as allocated between federal and nonfederal funds; $15,187 that was paid from an exclusively non-federal account, and $2,399 

that was paid from an exclusively non-federal account during periods in which the same 

employee was also paid from a federal account. Subsequent to being notified of the 

audit, SDDP filed amended reports for 2009 disclosing all allocated payroll on Line 30b 

as paid with 100 percent federal funds. The Audit staff verified the change in SDDP's 

reporting and in light of the Commission's guidance with respect to recordkeeping for 

employees paid vtdth 100 percent federal funds and reported as such, the Audit staff 

concludes no further action is necessary. (For more detail, see p. 7.) 

Finding 3. Reporting of Coordinated Party Expenditures 

The Audit staff found that SDDP made an apparent excessive in-kind contribution of 

$16,277 to a House candidate, resulting from coordinated expenditures made in excess of 

the coordinated party spending limitation. During the audit exit conference, SDDP 

officials stated that ^ey had erroneously reported $19,529 for two direct mail pieces as 

Coordinated Party Expenditures on Schedule F, line 25, when the expenditure was 

actually for Federal Election/Exempt activity, diat SDDP should have reported on 

Schedule B, line 30b. SDDP argues that the disbursements should not be counted 

towards its coordinated party expenditure limit because the disbursements qualify for the 

volunteer materials exemption but were not properly disclosed on its reports. However, 

SDDP provided only limited evidence that volunteer activity exists. The Audit staff 

recommends that SDDP provide further documentation to support volunteer activity, 

including a more detailed statement and any other evidence it deems appropriate to 
support the volunteer materials exemption. SDDP should also amend its reports in 

accordance with its earlier statements at the audit exit conference. (For more detail, see 

p. 8.) 

Finding 4. Contributions from Unregistered Political 

Organizations 

SDDP received contributions totaling $14,831 from unregistered political organizations 

that may not have used permissible funds. SDDP refunded contributions totaling $4,891 

of the $ 14,831, though it did so in an untimely manner. The Audit staff reconunends that 

absent evidence of permissibility, SDDP demonstrate that it has refunded the remaining 

$9,940 to the contributor and/or show that it has disgorged any reimuning amounts to the 

U.S. Treasury. (For more detail, see p. 11.) 

Finding 5. Disclosure of Occupation/Name of Employer 

The Audit staff reviewed individual contributions, for which itemization is required, and 

found that 78 contributions totaling $30,702 lacked adequate disclosure of occupation 

and/or name of employer (OCC/NOE) information. Furthermore, prior to the notification 

of the audit, SDDP did not sufficiently document "best efforts" to obtain, maintain, and 

submit contributor information. After being notified of the audit, SDDP obtained some 

of the missing contributor information and filed amended reports for calendar year 2009, 

which materially corrected the disclosure of OCC/NOE. The Audit staff recommends 

that SDDP provide any additional information it considers relevant to this matter. (For 

more detail, see p. 13.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieidwork, a comparison of SDDP's reported financial activity with its bank 

records revealed misstatements for calendar years 2009 and 2010. For 2009, SDDP 

understated disbursements by $15,155. For 2010, SDDP understated receipts by $26,721. 

Subsequent to audit notification, SDDP amended its reports, which corrected the 

misstatement for 2009. The Audit staff recommends that SDDP amend its disclosure 

reports to correct the misstatement for 2010. 

Legal Standard 

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 of receipts for the reporting period and for the calendar year; 

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

year; and 

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

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

Facts and Analysis 

A. Facts 

The Audit staff reconciled reported activity with bank records for calendar years 2009 

and 2010. The following charts outline the discrepancies for the beginning cash 

balances, receipts, disbursements and ending cash balances for each year. Succeeding 

paragraphs adth^ss the reasons for the misstatements. 

2009 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2009 

$94,626 $93,826 $ 800 

Overstated 

Receipts $194,044 $197,026 $ 2,982 

Understated 

Disbursements $261,047 $276,202 $15,155 

Understated 

Ending Cash Balance @ 

December 31,2009 

$11,645'' $14,650 $3,005 

Understated 

' SDDP did not carry the correct ending cash balance to the subsequent report's beginning cash balance 

from the July 2009 Monthly report through the Year End 2009 report. As a result of these discrepancies, 

the amounts in the "Reported" column do not total correctly. 
The understatement of disbursements resulted from the following: 

• Disbursements not reported $ 18,938 

• Disbursement reported but not supported by a check or debit (3,390) 

• Unexplained difference f393^ 

Net Understatement of Disbursements $ 15.155 

Unreported disbursements of $18,938 consist primarily of payments for salaries and a 

loan payment. 

The $3,00S understatement of the ending cash balance on December 31,2009 resulted 

from the misstatements described above, as well as discrepancies in the beginning cash 

balance and receipts. 

Subsequent to audit notification, SDDP amended its reports for calendar year 2009, 

which corrected the misstatements noted above. 

2010 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2010 

$11,655' $14,650 $2,995 

Understated 

Receipts $697,318 $724,039 $26,721 

Understated 

Disbursements $707,313 $714,073 $6,760 

Understated 

Ending Cash Balance @ 

December 31,2010 

$21,191" $24,616 $3,425 

Understated 

The understatement of receipts resulted from the following: 

• Receipts from political committees not reported 

• In-kind receipt reported twice 

• Unexplained difference 

Net Understatement of Receipts 

$ 28,534 

(2,026) 

m 

^ 26.721 

The $3,425 understatement of the ending cash balance on December 31,2010 resulted 

from the misstatements described above, as well as discrepancies in the beginning cash 

balance on January 1,2010 and disbursements. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed the misstatements with SDDP 

representatives and provided copies of relevant schedules. As discussed above, SDDP 

has filed amendments correcting the misstatements for 2009 and SDDP stated ftat it 

would file corrective amendments for 2010. This has not, however, occurred. 

^ Sec Footnote 4. 

* This column does not total due to discrepancies throughout 2010 between reported amounts for ending 

cash and the subsequent period's beginning cash balance. 
The Audit staff recommends that, within 30 calendar days of receipt of this report, 

SDDP: 

• Amend its reports to correct the misstatements noted above for calendar year 

2010; 

• Amend its most recently filed report to correct the cash-on-hand balance with an 

explanation that the change resulted from a prior period audit adjustment; 

• Reconcile the cash balance of its most recent report to identify any subsequent 

discrepancies that may affect the adjustment recommended by the Audit staff. 

Finding 2. Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff determined that SDDP did not mmntain any 

monthly payroll logs, as required, to document the percentage of time each employee 

spent on federal election activity. For 2009 and 2010, the Audit staff identified payments 

to SDDP employees totaling $60,143, for which monthly payroll logs were not 

maintained. This consisted of $42,557, reported as allocated between federal and nonfederal Rmds; $15,187 that was paid from an exclusively non-federal account, and $2,399 

that was paid from an exclusively non-federal account during periods in which the same 

employee was also paid from a federal account. Subsequent to being notified of the 

audit, SDDP filed amended reports for 2009 disclosing all allocated payroll on Line 30b 

as paid with 100 percent federal funds. The Audit staff verified the change in SDDP's 

reporting and in light of the Commission's guidance with respect to recordkeeping for 

employees paid with 100 percent federal funds and reported as such, the Audit staff 

concludes no further action is necessary. 

Legal Standard 

Maintenance of Monthly Logs. Committees must keep a monthly log of the percentage 

of time each employee spends in connection with a federal election. Allocations of 

salaries, wages, and fnnge benefits are to be undertaken as follows: 

• Employees who spend 25% or less of their compensated time in a given month on 

federal election activities must be paid either from the federal account or have 

their pay allocated as administrative costs; 

• Employees who spend more than 25% of their compensated time in a given 

month on federal election activities must be paid only from a federal account; and, 

• Employees who spend none of their compensated time in a given month on 

federal election activities may be paid entirely with funds that comply with State 

law. llCFR§106.7(d)(l). 

Facts and Anal3rsis 

A. Facts 

During fieldwork, the Audit staff reviewed disbursements for payroll. SDDP did not 

maintain any monthly logs or equivalent records to document the percentage of time each 

employee spent in connection with federal election activity. These logs are required to 

document the proper allocation of federal and non-federal funds used to pay employee 
8 

salaries and wages. For 2009 and 2010, SDDP did not maintain logs for $60,143^ in 

payroll. This consisted of $42,557, reported as allocated between federal and non-federal 

funds; $15,187 that was paid from an exclusively non-federal account, and $2,399 that 

was paid from an exclusively non-federal account but also included employees paid from 

a federal account during the same periods. 

Subsequent to audit notification, SDDP filed amended reports for calendar year 2009 that 

moved all previously allocated salaries to line 30b, Federal Election Activity. The 

remaining payroll amount was immaterial. During fieldwork, the Audit staff asked SDDP 

representatives why SDDP made changes for its 2009 payroll disclosures. SDDP 

representatives said the following: 

These changes were made as the result of two things. The first is that due 

to the fact that allocation transfers were never completed for these 

individuals' expense, these items were mis-reported. Secondly, with the 

knowledge of their roles, it is understood that their time was spent beyond 

25 percent on federal activity. 

The Audit staff acknowledges that the changes made by SDDP in the reporting of its 

payroll obviates the need for monthly timesheets since the payroll was paid with 

exclusively federal funds and reported as such. However, since SDDP amended reports 

after notification of the audit, this matter is included in this audit report. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference. Audit staff presented the matter of maintaining monthly payroll 

logs to track the amount of time spent on federal election activity. SDDP Counsel stated 

that SDDP's position is that no payroll logs are required for activity reported and paid as 

100 percent federal. As noted above, the Audit staff acknowledges and verified the 

changes made by SDDP with respect to the reporting of its payroll. As such, no further 

action is required. 

Finding 3. Reporting of Coordinated Party EKpenditures 

Summary 

The Audit staff found that SDDP made an apparent excessive in-kind contribution of 

$16,277 to a House candidate, resulting from coordinated expenditures made in excess of 

the coordinated party spending limitation. During the audit exit conference, SDDP 

officials stated that ^ey had erroneously reported $19,529 for two direct mail pieces as 

Coordinated Party Expenditures on Schedule F, line 25, when the expenditure was 

actually for Federal Election/Exempt activity, that SDDP should have reported on 

Schedule B, line 30b. SDDP argues that the disbursements should not be counted 

towards its coordinated party expenditure limit because the disbursements qualify for the 

volunteer materials exemption but were not properly disclosed on its reports. However, 

^ Amounts are net of payroll taxes and benefits. This total does not include payroll for employees paid 

with 100 percent federal funds and reported as sUch. (See Part I, Background, Commission Guidance, 

Request for Early Consideration of a Legal Question, p. 1). For all future payroll, the Audit staff 

recommended that SDDP maintain payroll logs for all employees. 
SDDP provided only limited evidence that volunteer activity exists. The Audit staff 

recommends that SDDP provide further documentation to support volunteer activity, 

including a more detailed statement and any other evidence it deems appropriate to 

support the volunteer materials exemption. SDDP should also amend its reports in 

accordance vnth its earlier statements at the audit exit conference. 

Legal Standard 

A. Coordinated Party Expenditure. National party committees and state party 

committees may each make coordinated party expenditures in connection with the 

general election campaign of a candidate in that state who is affiliated vtdth the party. 

11CFR§ 109.32(b). 

B. Assignment of Coordinated Party Expenditure Limit. A political party may 

assign its authority to make coordinated party expenditures to another political party 

committee. Such an assigrunent must be made in writing, state the amount of the 

authority assigned, and be received by the assignee before any coordinated party 

expenditure is made pursuant to the assignment. The political party committee that is 

assigned authority to make coordinated party expenditures must maintain the written 

assignment for at least three years. 11 CFR §§104.14 and 109.33(a) and (c). 

C. Exempt Activity. The payment by a state committee of a political party of the costs 

of campaign materials (such as pins, bumper stickers, handbills, brochures, posters, 

party tabloids or newsletters, and yard signs) used by such committee in connection 

with volunteer activities on behalf of any nominee(s) of such party is not a 

contribution, provided that the following conditions are met: 

• Such payment is not for cost incurred in connection with any broadcasting, 

newspaper, magazine, bill board, direct mail, or similar type of general public 

communication or political advertising. The term direct mail means any 

mailing(s) by a commercial vendor or any mailing(s) made from commercial lists; 

• The portion of the cost of such materials allocable to Federal candidates must be 

paid from contributions subject to the limitations and prohibitions of the Act; 

• Such payment is not made from contributions designated by the donor to be spent 

on behalf of a particular candidate for federal office; 

• Such materials are distributed by volunteers and not by commercial or for-profit 

operations; 

• If made by a political committee such payments shall be reported by the political 

committee as a disbursement in accordance with 11 CFR §104.3 but need not be 

allocated to specific candidates in committee reports; and 

• The exemption is not applicable to campaign materials purchased by the national 

party committees. 11 CFR §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR 

§100.147 (a), (b),(c),(d),(e) and (g). 

D. Coordinated Party Communication. A political party communication is 

coordinated with a candidate, a candidate's authorized committee, or agent of any of 

the foregoing, when the communication satisfies the following conditions: 

(1) The communication is paid for by a political party committee or its agent. 
10 

(2) The communication satisfies at least one of the content standards. 

o Must expressly advocate a candidate's election of defeat 11 CFR 

§ 100.22(a) and (b). 

o Involve the dissemination, distribution or republication of a candidate's 

campaign materials, 

o Refers to a federal candidate, is directed to the candidate's constituents 

and is distributed within certain time frame before an election. 

(3) The communication satisfies at least one of the conduct standards in 11 CFR 

§109.21(d)(l) through (d)(6), subject to the provisions of 11 CFR §109.21(e), 

(g), and (h). 

o Must have been created, produced or distributed at the request of the 

candidate or its' agent, 

o Developed with a "material involvement" of the candidate, 

o Created, produced or distributed after "substantial discussion" with the 

candidate or his agents, 

o The use of a common vendor in the creation, production or distribution of 

a communication. 11 CFR § 109.37. 

Facts and Analysis 

A. Facts 

The combined coordinated party expenditure limit for a 2010 candidate for the House of 

Representatives from South Dakota was SI74,000, with an $87,000 limit for both SDDP 

and the National Party (Democratic National Committee (DNC)). SDDP reported 

coordinated expenditures of $164,229^ on Schedule F (Itemized Coordinated Party 

Expenditures) for Stephanie Herseth Sandlin, a candidate for the House of 

representatives. The Democratic Congressional Campaign Committee (DCCC) reported 

coordinated expenditures for the candidate of $26,048. The total reported coordinated 

expenditures by both the SDDP and the DCCC exceeded the coordinated expenditure 

limit by $16,277. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided a schedule of the coordinated 

expenditures subject to the limit and discussed them with SDDP representatives. During 

the discussion, SDDP representatives said that the SDDP had erroneously included a 

direct mail piece costing $19,529 in its Coordinated Expenses of $164,229 and that it 

should have reported this expenditure as volunteer exempt activity. 

The Audit staff requested further documentation to support the reporting of the direct 

mailers as exempt activity. In response, SDDP provided pictures of volunteers working 

on the direct mailers. It is also noted that the vendor for the two direct mail pieces was 

the same as the vendor used for other direct mail pieces reported as having exempt 

activity. 

' Of the SI 64,229 reported on Schedule F. SDDP provided assignment letters disclosing that the DNC 

(through DCCC) designated it to make expenditures of SMS,809 on behalf of the candidate. 
11 

Both mail pieces are brochures containing four pages, including the back and front cover. 

One of the mail pieces emphasizes the words, "Reckless and Wrong" when discussing the 

plans of the opposing political party's congressional candidate. The other mail piece's 

message is that the candidate,".. .does what's right for South Dakota Seniors," and then 

goes on to discuss, primarily. Medicare. The candidate's and the opponent's viewpoints 

and plans are provided. The final words on the inside cover urge a no vote for the other 

candidate.^ 

The Commission addressed the applicability of the volunteer materials exemption in the 

Final Audit Reports of the Democratic Executive Committee of Florida and Ae 

Tennessee Republican Party. In these reports, the Commission recognized that a lack of 

clarity exists regarding the application of the volunteer materials exemption. The 

Commission had attempted to formulate a consensus policy regarding what constitutes 

substantial volunteer involvement for the purpose of applying the exemption,' but this 

was never achieved. Since a lack of clarity exists concerning the application of the 

volunteer materials exemption, it follows that the type and amount of documentation 

needed to support volunteer involvement is also unclear. 

In view of the uncertainty regarding the amount of volunteer involvement needed to 

qualify for the volunteer materials exemption and to document that involvement, the 

Audit staff recommends that, within 30 calendar days of receipt of this report, SDDP 

provide a more detailed statement^ and further documentation regarding the volunteers' 

involvement for the two mailers. In addition, SDDP should amend its reports in 

accordance with its earlier statements at the audit exit conference. Absent such further 

information, the disbursement may be considered to be a coordinated expenditure, 

resulting in SDDP exceeding the coordinated expenditure limit by $16,277. 

Finding 4. Contributions from Unregistered Political 

Organizations 

Summary 

SDDP received contributions totaling $14,831 from unregistered political organizations 

that may not have used permissible funds. SDDP refunded contributions totaling $4,891 

of the $14,831, though it did so in an untimely manner. The Audit staff recommends that 

absent evidence of permissibility, SDDP demonstrate that it has refunded the remaining 

$9,940 to the contributor and/or show that it has disgorged any remaining amounts to the 

U.S. Treasury. 

Legal Standard 

A. Party Committee Limits. A party committee may not receive more than a total of 

$10,000 per year from any one individual. This limit is shared by state, district, & local 

^ Each mailer includes a statement, "Paid for by the South Dakota Democratic Party." 

' Proposed Interim Enforcement Policy, Agenda document No. 10-16. 

' SDDP might want to consider providing a sworn statement which might be considered stronger evidence 

of volunteer involvement. 
12 

party committees. 2 U.S.C. §441a(a)(l)(C), (2)(C) and (f); 11 CFR §§110.1(a) and (d) and 

110.9(a). 

B. Handling Contributions that Appear Impermissible or Excessive. If a committee 

receives a contribution that appears to be impermissible or excessive, the committee must 

either: 

1. Return the questionable check to the donor; or 

2. Deposit the check into its federal account and: 

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

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

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

before its legality is established. 11 CFR § 103.3(b)(3), (4) and (5). 

C. Receipt of Contributions. Organizations that are political committees under the Act, 

other than national party committees shall establish a separate Federal account in a 

depository in accordance with 11 CFR part 103. Such account shall be treated as a 

separate Federal political committee that must comply with the requirements of the Act 

including the registration and reporting requirements of 11 CFR parts 102 and 104. Only 

funds subject to the prohibitions and limitations of the Act shall be deposited in such 

separate Federal account. 11 CFR §102.S(a). 

Facts and Analysis 

A. Facts 

During the 2010 audit cycle, SDDP deposited 16 contributions, totaling $14,831, from 

unregistered political organizations into its federal account. Following the issuance of 

the audit notification letter, SDDP issued untimely refunds totaling $4,891SDDP has 

taken no action with respect to the remaining $9,940 and the Audit staff considers the 

contributions at issue impermissible and unresolved. 

The Audit staff reviewed all documentation provided by SDDP pertaining to 

contributions received from unregistered political organizations. In several instances, 

notations in SDDP records were made stating, "mis-deposited into the federal committee 

funds." However, the Audit staff found no attempt on the part of SDDP to make refunds 

of those contributions prior to being notified of the audit. In addition, the Audit staff 

found no attempt on the part of SDDP to ascertain the permissibility of other unregistered 

political organization contributions. 

B. Interim Audit Report & Audit Division Recommendation 

During audit fieldwork. Audit staff presented this matter to SDDP representatives. SDDP 

responded that one of the contributions for $S,000 should have been reported as an offset 

for door hangers, not as a contribution. In addition, the SDDP representatives also said 

that an effort would be made to contact the unregistered political organizations to 

substantiate that funds were from permissible sources. 

SDDP issued refund checks totaling S6,691 but only S4,891 has cleared SDDP's bank account. 
13 

The Audit staff requested additional information concerning the door hangers and the 

results of SDDP's efforts to contact unregistered political committees to substantiate that 

the funds were from permissible sources, but received no further information. Absent 

such additional information, the Audit staff concludes that these items are impermissible 

contributions that need to be refunded to the contributor or disgorged to the U.S. 

Treasury. 

The Audit staff recommends that, within 30 calendar days of receipt of this report, SDDP 

provide: 

• Documentation that the unregistered political organizations contributions were 

from permissible sources (including documentation relating to the $S,000 that 

SDDP believes should be reported as an offset to the door hangers); or 

• Demonstrate that the remaining $9,940 has been refunded to the original 

contributor and/or show this amount has been disgorged to the U.S. Treasury. 

SDDP should provide evidence of any refunds or disgorgements by providing the front 

and back of the negotiated checks. 

I Finding 5. Disclosure of Occttpation/Name of Employer 

Summary 

The Audit staff reviewed individual contributions, for which itemization is required, and 

found that 78 contributions totaling $30,702 lacked adequate disclosure of occupation 

and/or name of employer (OCC/NOE) information. Furthermore, prior to the notification 

of the audit, SDDP did not sufficiently document "best efforts" to obtain, maintain, and 

submit contributor information. After being notified of the audit, SDDP obtained some 

of the missing contributor information and filed amended reports for calendar year 2009, 

which materially corrected the disclosure of OCC/NOE. The Audit staff recommends 

that SDDP provide any additional information it considers relevant to this matter. 

Legal Standard 

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

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

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

contributions from the same contributions. 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). 
14 

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" with respect to contributions, if the committee satisfied all of 

the following criteria: 

• All written solicitations for contributions included: 

o A clear request for the contributors full name, mailing address, 

occupation, and name of employer; and 

o 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 

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

contained in the committees' records or in prior reports that the committee 

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

Facts and Analysis 

A. Facts 

Using the most recent reports for the audit period filed prior to the audit, the Audit staff 

determined that 78 contributions fixim individuals totaling $30,702 (approximately 24 

percent of itemized contributions) lacked adequate disclosure of occupation and/or name 

of employer (OCC/NOE) information. Most of the errors either disclosed a notation, 

"best efforts" or were left blank on the Schedule A, Itemized Receipts, filed with the 

Commission. 

After notification of the audit and prior to audit fieldwork, SDDP provided the Audit staff 

with copies of letters that were sent to contributors to obtain OCC/NOE information. 

These letters were dated after SDDP was notified of the audit. Also, after notification of 

the audit, SDDP filed amended reports for 2009 that materially corrected the previously 

undisclosed OCC/NOE information. Since SDDP took corrective action after 

notification of the audit, this matter is included in this audit report. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the disclosure of OCC/NOE information with SDDP 

representatives at the exit conference and provided a schedule of the remaining errors. 

The Audit staff recommends that, within 30 calendar days of receipt of this report, SDDP 

provide any additional information it considers relevant to this matter. 
Attachment 1 

Summary of Previous Audit Reports 

Name of Committee: South Dakota Democratic Party 

Election Cycle Audited: 1998 

Final Audit Report Release Date: December 1,2000 

Finding 1. Misstatement of Financial Activity 

Disclosure reports filed for the period January 1,1997 through December 31,1998 

contained material misstatements. For 1997, reported receipts were overstated by 

$29,593 while disbursements were understated by $12,448. For 1998, reported receipts 

were understated by $74,567 while disbursements were understated by $47,166. As a 

result of identified reporting discrepancies, the cash figure at December 31,1998 was 

overstated by $71,973. The SDDP filed amended 1997 and 1998 reports which corrected 

these misstatements. 

Finding 2. Itemization of Contributions from Political Committees 

The SDDP did not itemize 18 receipts, totaling $83,226, received in 1998 fixnn 

political committees. These 18 items were comprised of ten contributions, totaling 

$10,500, from political committees and eight transfers, totaling $72,726, from affiliated 

committees. The SDDP filed amended reports which materially corrected the 

deficiencies noted by the Audit staff. 

Findings. Itemization of Disbursements 

The Audit staff reviewed disbursements made by the SDDP and identified 315 

disbursements, totaling $99,610, which were not itemized as required. Of these 315 

disbursements, 162, totaling $43,769, were made in 1997 and 153, totaling $55,841, were 

made in 1998. Based on the records made available, it appeared that all of these 

disbursements were for shared expenses and therefore should have been reported on 

Schedules H-4 (Joint Federal/ Non-Federal Activity Schedule). The SDDP filed 

amended Schedules H-4 which conected these deficiencies.