Interim Audit Report of the 

Audit Division on tlie 

North Dakota Republican 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 committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a conmiittee 

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 Republican Party^ is a state party committee 

headquartered in Bismarck, North Dakota. For more 

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

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals 

o Contributions from Political Committees 

o Transfers from Affiliates 

o Loans Redbived 

o Transfers from Non-federal Accounts 

o Other Federal Receipts 

Total Receipts 

• Disbursements 

o Operating Expenditures 

o Transfers to Affiliates 

o Loan Repayments Made 

o Federal Election Activity 

o Other Disbursements 

Total Disbursements 

$ 1,322,913 

41.050 

175,358 

10,325 

114.818 

61,906 

$ 1,726,370 

$ 1.424,964 

23,536 

51,646 

212,263 

5,075 

$ 1,717,484 

Findings and Recommendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Reporting of Debts and Obligations (Finding 2) 

' 2U.S.C.§438(b). 

^ Formerly known as the North Dakota State Republican Committee. 
Interim Audit Report of the 

Audit Division on the 

North Dakota Republican Party 

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

Page 

Parti. Background 

Authority for Audit 1 

Scope of Audit 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 1. Misstatementof Financial Activity 4 

Finding 2. Reporting of Debts and Obligations 7 
Part I 

Background 

Autliority for Audit 

This report is based on an audit of the North Dakota Republican Party (NDRP), 

undert^efi by the Audit Division of the Federal Election Commission (the Commission) 

in accordance with die 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 

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

Scope of Audit 

Following Conmiission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

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

2. the consistency between reported figures and bank records; 

3. the disclosure of disbursements, debts and obligations; 

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

5. the disclosure of independent expenditures; 

6. the completeness of records; and 

7. other committee operations necessary to the review. 
Part n 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration April 17,1972 

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

Headquarters Bismarck, North Dakota 

Bank Information 

• Bank Depositories Two 

• Bank Accounts Nine Federal; Four Non-federal 

Treasurer 

• Treasurer When Audit Was Conducted Robert Harms 

• Treasurer During Period Covered by 

Audit 

Theresa Tokach (1/1/09 - 7/12/09) 

Robert Harms (7/13/09 - present) 

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 

Receipts 

o Contributions from Individuals 

o Contributions from Political Committees 

o Transfers from Affiliates 

o Loans Received 

o Transfers from Non-federal Accounts 

o Other Federal Receipts 

Total Receipts 

Disbursements 

o Operating Expenditures 

o Transfers to Affiliates 

o Loan Repayments Made 

o Federal Election Activity 

o Other Disbursements 

Total Disbursements 

Cash-on-hand @ December 31,2010 

$2,151 

1,322,913 

41,050 

175,358 

10,325 

114,818 

61.906 

$1.726,370 

1,424,964 

23,536 

51,646 

212,263 

5,075 

$1,717,484 

$ 11,037 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of NDRP's reported financial activity with its bank 

records revealed a misstatement of the beginning cash-on-hand balance in 2009 and 

receipts and disbursements in 2009 and 2010. For 2009, NDRP overstated its beginning 

cash-on-hand balance by $13,345 and understated receipts and disbursements by $21,935 

and $17,282, respectively. In 2010, receipts and disbursements were understated by 

$159,262 and $222,982, respectively. The Audit staff.recommends that NDRP amend its 

disclosure reports to correct these misstatements. 

In addition, NDRP filed original reports for 2009 and 2010 that were materially 

understated. Specifically, NDRP's original reports understated disbursements by 

$657,482 in 2009 and 2010. Amended reports filed prior to the notification of this audit 

did not correct the misstated disbursement activity. The Audit staff recommends that 

NDRP submit any additional information or written comments it considers relevant to the 

matter. (For more detail, see p. 4.) 

Finding 2. Reporting of Debts and Obligations 

Audit fieldwork indicated that NDRP did not disclose debts and obligations for nine 

vendors totaling $235,563 on Schedule D (Debts and Obligations) of its disclosure 

reports. The Audit staff recommends that NDRP amend its disclosure reports to include 

these debts and obligations. (For more detail, see p. 7.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity | 

Summary 

During audit fieldwork, a comparison of NDRP* s reported fmancial activity with its bank 

records revealed a misstatement of the beginning cash^on-hand balance in 2009 and 

receipts and disbursements in 2009 and 2010. For 2009, NDRP overstated its beginning 

cash-on-hand balance by $13,345 and understated receipts and disbursements by $21,935 

and $17,282, respectively. In 2010, receipts and disbursements were understated by 

$159,262 and $222,982, respectively. The Audit staff recommends that NDRP amend its 

disclosure reports to correct these misstatements. 

In addition, NDRP filed original reports for 2009 and 2010 that were materially 

understated. Specifically, NDRP's origmal reports understated disbursements by 

$657,482 in 2009 and 2Q10. Amended reports filed prior to the notification of this audit 

did not correct the misstated disbursement activity''. The Audit staff recommends that 

NDRP submit any additional information or written comments it considers relevant to the 

matter. 

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 election cycle; 

• the total amount of disbursements for the reporting period and for the election 

cycle; 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. Misstatement of Financial Activity - 2009 and 2010 

1. Facts 

As part of diis audit, the Audit staff reconciled NDRP's reported financial activity 

with its bank records for 2009 and 2010. The following charts outline the 

discrepancies between NDRP's disclosure reports and its bank records. Succeeding 

paragraphs explain why the discrepancies occurred. 

3 On average, NDRP filed four amended reports per reporting period. There were seven reporting periods 

during 2010 in which NDRP filed six or more amendments for the reporting period. 
2009 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand 

@ January 1,2009 

$15,496 $2,151 $13,345 

Overstated 

Receipts $563,007 $584,942 ($21,935) 

Understated 

Disbursements $497,890 $515,172 ($17,282) 

Understated 

Ending Cash-on-Hand 

©December 31,2009 

$80,613 $71,921 $8,692 

Overstated 

The overstatement of beginning cash-on-hand of $13,345 likely resulted from priorperiod discrepancies. 

The understatement in receipts resulted from the following. 

• Transfers from non-federal account, not reported^ $ 94,500 

• Non-federal receipts reported in error^ (85,230) 

• Receipts not reported 12,811 

• Unexplained difference (146) 

Net Understatement of Receipts $ 21,935 

The understatement in disbursements resulted from the following. 

• Debits and checks diat cleared the bank, not reported $ 25,492 

• Reported disbursements that did not clear bank accounts (8,629) 

• Unexplained difference 419 

Net Understatement of Disbursements $ 17,282 

The misstatements described above resulted in the overstatement of ending cash-onhand. 

2010 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand 

©January 1,2010 

$80,613 $71,921 $8,692 

overstated 

Receipts $982,166 $1,141,428 . ($159,262) 

understated 

Disbursements $979,328 $1,202,310 ($222,982) 

understated 

Ending Cash-on-Hand 

©December 31,2010 

$83,451 $11,039 $72,412 

overstated 

^ In July 2009, NDRP failed to disclose two transfers ($60,000 and $34,500) from its non-federal account 

to its federal account. 

^ These receipts consist of individual ($83,865) and PAC ($1,365) non-federal contributions that were 

deposited into the non-federal account but were mistakenly included by NDRP in its disclosure reports. 
The understatement in receipts resulted from the following. 

• Transfers from non-federal account, not reported $ 20,318 

• Republican National Committee (RNC) transfers, not reported 79,400 

• Non-federal PAC contributions reported in error (2,050) 

• Bank interest received, not reported 236 

• Unexplained difference 61.358 

Net Understatement of Receipts $ 159,262 

The understatement in disbursements resulted from the following. 

• Media and operating disbursements, not reported^ $ 244,047 

• Transfers to non-federal accounts, not reported 20,475 

• Inter-account transfers reported in error^ (37,151) 

• In-kind contributions, not reported 7,448 

• Disbursements reported twice (7,936) 

• Unexplained difference (3,901) 

Net Understatement of Disbursements $ 222,982 

The misstatements described above resulted in the overstatement of ending cash-onhand. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the misstatements for 2009 and 2010 with NDRP 

representatives during the exit conference and provided copies of relevant work 

papers detailing die misstatements. The representatives asked questions and made 

comments regarding the reconciling adjustments presented and stated that the 

necessary amended reports would be filed in response to the Interim Audit Report. 

The Audit staff reconunends that, widiin 30 calendar days of service of this report, 

NDRP take the following actions: 

• Amend its disclosure reports to correct the misstatements noted above; and 

• Reconcile the cash-on-hand on its most recent report to identify any subsequent 

discrepancies diat could affect the recommended adjustments. Further, adjust 

cash-on-hand as necessary on its most recent report noting diat the adjustment is 

die result of prior-period audit adjustments. 

B. Misstatement of Financial Activity - Increased Activity 

1. Facts 

In addition to examining NDRP's most recent reports filed prior to die audit 

notification, the Audit staff compared NDRP's original reports filed with bank 

records and discovered a $657,482 understatement of disbursements over the twoyear period (2009 and 2010). As noted in the charts above, the latest amendments 

filed prior to this audit also included a net understatement of disbursements totaling 

These disbursements consist of media ($109,722), operating ($124,511) and merchant fee ($9,814) 

payments that cleared the bank account but were not reported by NDRP in its disclosure reports. 

These inter-account transfers were mistakenly included in NDRP's disclosure reports as operating 

expenditures. 
$240,264 ($17,282 in 2009 plus $222,982 in 2010). Therefore, the latest 

amendments filed prior to this audit did not correct all of the understated 

disbursement activity for die two-year period. 

2. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed die understatement of disbursements on its original reports 

filed with NDRP representatives during the exit conference and provided copies of 

relevant work papers detailing die disbursements not reported. The representatives 

had no specific comments at the time. 

The Audit staff recommends that, within 30 calendar days of service of diis report, 

NDRP submit any additional information or written comments it considers relevant to 

this matter. 

I Finding 2. Reporting of Debts and Obligations 

. Summary 

Audit fieldwork indicated diat NDRP did not disclose debts and obligations for nine 

vendors totaling $235,563 on Schedule D (Debts and Obligations) of its disclosure 

reports. The Audit staff recommends diat NDRP amend its disclosure reports to include 

these debts and obligations. 

Legal Standard 

A. Continuous Reporting Required. A political committee must disclose die amount 

and nature of outstanding debts and obligations until diose debts are extinguished. 

2 U.S.C. §434(b)(8) and 11 CFR §§104.3(d) and 104.11(a). 

B. Separate Schedules. A political committee must file separate schedules for debts 

owed by and to the committee widi a statement explaining the circumstances and 

conditions under which each debt and obligation was incurred or extinguished. 

11 CFR §104.11(a). 

C. Itemizing Debts and Obligations. 

• Once it has been outstanding 60 days from die date incurred, a debt of $500 or 

less must be reported on the next regularly scheduled report. 

• A debt exceeding $500 must be disclosed in die report diat covers die date on 

which die debt was incurred. 11 CFR § 104.11(b). 

Pacts and Analysis 

A. Facts 

During audit fieldwork, die Audit staff reviewed disbursement records and disclosure 

reports for proper reporting of debts and obligations. NDRP reported no debt during the 

audit period; however, the review identified debts totaling $235,563^ owed to nine 

' Each debt in this amount was counted once even if it required disclosure over multiple periods. In order 

for NDRP to correctly file amended reports, schedules were provided diat included the amount of each 

debt required to be reported for each reporting period. 
vendors diat NRDP should have disclosed on Schedule D. Based on die records, diese 

nine vendors mainly provided telemarketing, printing and direct mail services. Most of 

the identified debts were greater dian $500, and all remained outstanding during the 

reporting period in which diey were incurred. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed die reporting of debts and obligations 

widi NDRP representatives and provided a schedule detailing the transactions requiring 

disclosure. The representatives asked general questions about the disclosure 

requirements for debts, specifically, when and how debts and obligations are disclosed. 

Audit staff referred NDRP to die regulations at 11 CFR §104.11(b) for guidance on 

itemizing debts and obligations and subsequently forwarded copies of Schedule D and its 

instructions to NDRP representatives. 

The Audit staff recommends diat, widiin 30 calendar days of service of diis report, NDRP 

amend its reports to disclose debts and obligations of $235,563 on Schedule D.