Part II
Overview of Campaign

Campaign Organization

Important Dates

Tim Johnson for South Dakota, Inc.

Date of Registration

January 24, 1986

Audit Coverage

January 1, 2001 through December 31,
2002

Headquarters

Sioux Falls, South Dakota

Bank Information

Bank Depositories

5

Bank Accounts

9 (1 Checking, 1 Savings, , 2 Money
Market and 5 Investment Accounts)

Treasurer

Treasurer When Audit Was Conducted

Berniece F. Mayer

Treasurer During Period Covered by Audit

Berniece F. Mayer

Management Information

Attended FEC Campaign Finance Seminar

No

Used Commonly Available Campaign
Management Software Package

Yes

Who Handled Accounting, Recordkeeping
Tasks and Other Day-to-Day Operations

Chad Schuldt, Controller

Overview of Financial Activity
(Audited Amounts)

Cash on hand @ January 1, 2001 $553,477
Receipts

o From Individuals $3,345,766
o From Political Party Committees 34,972
o From Other Political Committees 2,106,759
co Transfers From Other Authorized Committees 37,151
o Offsets to Operating Expenditures 29,303
o Other Receipts 114,039
Total Receipts $5,667,990
Disbursements

o Operating & Other Disbursements $6,196,026
Total Disbursements $ 6,196,026
Cash on hand @ December 31, 2002 $ 25,441



The Audit staff was unable to determine the cause of the $11,171 understatement of
beginning cash on hand or the $22,333 overstatement of receipts for 2001. TJFSD
representatives could not explain these discrepancies either.

The understatement of disbursements resulted primarily from the failure to report
disbursements totaling $58,086. Although no specific reason was identified for some
disbursements not being reported, 53% of the amount ($30,955) was in the 4" quarter of
2001.

The overstatement of the closing cash on hand resulted from the misstatements described
above.

The Audit staff discussed these matters with TJFSD representatives at the exit conference
and provided them with schedules detailing the disbursements not reported. TJFSD
representatives stated that any unreported disbursements will be disclosed in amended
reports.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that TJFSD amend its reports to correct the misstatements
noted above. In response to the interim audit report, TJFSD amended its reports to
correct the misstatements noted above.


Part I
Background

Authority for Audit

This report is based on an audit of Tim Johnson for South Dakota, Inc. (TJFSD),
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 received.

The consistency between reported figures and bank records.

The completeness of records.

Other committee operations necessary to the review.

ANPWND

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.
Except for November 7, 2002 through December 31, 2002, the period covered by this
audit pre-dates these changes. Therefore, the statutory and regulatory requirements cited
in this report are primarily those that were in effect prior to November 7, 2002.



Part III
Summary

Finding and Recommendation

Misstatement of Financial Activity

When TJFSD’s reported activity was compared to its bank records, the Audit staff found
that for calendar year 2001, cash on hand and disbursements had been misstated. In
response to the interim audit report, TJFSD filed amended reports, which corrected the
misstatements noted above.

(For more detail, see p. 4)


FEDERAL ELECTION COMMISSION
Washington, DC 20463

April 30, 2004

MEMORANDUM

TO: ROBERT W. BIERSACK
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ, CG
ASSISTANT STAFF DIRECTOR
AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE AUDIT REPORT ON
TIM JOHNSON FOR SOUTH DAKOTA, INC.

Attached please find a copy of the audit report and related documents on
Tim Johnson for South Dakota, Inc., which was approved by the Commission on
April 19, 2004.

The report may be released to the public on April 30, 2004.

Attachment as stated

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


Part IV

Finding and Recommendation

| Misstatement of Financial Activity

Summary

When TJFSD’s reported activity was compared to its bank records, the Audit staff found
that for calendar year 2001, cash on hand and disbursements had been misstated. In
response to the interim audit report, TJFSD filed amended reports, which corrected the

misstatements noted above.

Legal Standard

Contents of Reports. Each report must disclose:

¢ 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

TJFSD used a commonly available campaign management software package, in conjunction
with QuickBooks, to prepare its disclosure reports. The date of receipt and the date of
deposit were provided for most transactions. The date of receipt was used for reporting
purposes. The Audit staffs bank reconciliations for both 2001 and 2002 used date of
deposit as shown on TJFSD’s bank statements to determine correct reportable receipts.
As a result, offsetting differences arose between years on the bank reconciliations.
However, reported receipts were materially correct over the two year audit period.

The following chart details the discrepancies between TJFSD’s reported activity and its
bank records for 2001 not attributable to the noted timing differences. Succeeding
paragraphs explain why the discrepancies occurred. TJFSD did not provide work papers
detailing the derivation of its reported figures; as such, the Audit staff was not able to

explain all discrepancies.

2001 Campaign Activity

Reported Bank Records Discrepancy

Cash on Hand at 1/1/01 $595,311 $606,482 $11,171
Understated

Receipts $2,058,763 $2,036,430 $22,333
Overstated

Disbursements $932,264 $990,626 $58,362
Understated

Cash on Hand at 12/31/01 $1,721,810 $1,652,286 $69,524

Overstated



Report of the Audit Division on

Tim Johnson for South Dakota, Inc.
January 1, 2001 - December 31, 2002

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.' 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)
Tim Johnson for South Dakota, Inc. (TJFSD) is the principal
campaign committee for Senator Tim Johnson, Democratic
candidate for the U.S. Senate from the state of South Dakota.
TJFSD is headquartered in Sioux Falls, South Dakota. For more
information, see chart on the Campaign Organization, p.2.

Financial Activity (p. 2)

Finding and Recommendation (p.

' 2 U.S.C. §438(b).

Receipts

o From Individuals

o From Political Party Committees

o From Other Political Committees

o Transfers From Other Authorized
Committees

o Offsets to Operating Expenditures

o Other Receipts

o Total Receipts

Disbursements

o Total Operating & Other
Disbursements

Misstatement of Financial Activity

$3,345,766
34,972
2,106,759

37,151
29,303

114,039
$ 5,667,990

S$ 6,196,026

3)


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Changes to the Law

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

Part III. Summary

Finding and Recommendation

Part IV. Finding and Recommendation
Misstatement of Financial Activity

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