Part II
Overview of Campaign

Campaign Organization

Important Dates Friends of Duane Sand

e Date of Registration January 29, 2004

e Audit Coverage January 20, 2004 — December 31, 2004
Headquarters Fargo, ND

Bank Information

e Bank Depositories Two

e Bank Accounts 3 Checking

Treasurer

e Treasurer When Audit Was Conducted Karen Risky

¢ __ Treasurer During Period Covered by Audit | Karen Risky

Management Information

e Attended FEC Campaign Finance Seminar _| No

e¢ Used Commonly Available Campaign Yes
Management Software Package

¢ Who Handled Accounting and Paid Staff
Recordkeeping Tasks

Overview of Financial Activity

(Audited Amounts)
Cash on hand @ January 20, 2004 $0
o Contribution from Individuals $903,162
o Contributions from Political Committees 122,056
o Other Receipts 21,815
Total Receipts $ 1,047,033
o Operating Expenditures $1,022,942
o Contribution Refunds 2,860
o Other Disbursements 65
Total Disbursements $ 1,025,867
Cash on hand @ December 31, 2004 $ 21,166



Facts and Analysis

A review of contributions from individuals disclosed on Schedules A (Itemized Receipts)
indicated that 747 contributions totaling $143,367 did not adequately disclose an
occupation and/or name of employer. 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)
concerning this matter, FODS stated that “best efforts” procedures were utilized and that
new contributor information was contained in amended reports. FODS also provided a
copy of a form letter sent to contributors requesting their employer and occupation
information. However, those FODS records made available to the Audit staff did not
include a copy or confirmation of these letters purportedly sent to contributors.

This matter was discussed with the Candidate during fieldwork. In response, the
Candidate indicated that contributors were contacted by phone to obtain the missing
information; however, documentation to support this action was also not provided.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that FODS either provide documentation to demonstrate
that “best efforts” were made to obtain missing occupation and name of employer
information. Absent such evidence, it was recommended that FODS contact each
contributor lacking the occupation and/or name of employer, submit evidence of such
contact, and disclose any information received in amended reports. In response, the
Candidate indicated that he would send a letter and self-addressed stamped envelope to
those contributors for whom the occupation and/or name of employer was not adequately
disclosed and file amended reports when contributor responses were received. FODS did
not provide any documentation to support that letters were sent to contributors nor were
amended reports filed.

| Finding 2. Recordkeeping for Receipts

Summary

A sample review of contributions from individuals indicated that 29% of the receipts
tested were not properly documented. The Audit staff recommended that FODS provide
any additional records that it was able to locate and provide any other relevant
information. In response, FODS did not provide any additional receipt records.

Legal Standard
A. Retention of Check Copies. For contributions in excess of $50, committees must
maintain a photocopy or digital image of the check or written instrument. 2 U.S.C.

§102.9(A)(4)

B. Preserving Documents. Committees must preserve these records for 3 years after a
report is filed. 2 U.S.C. §432(d).

Facts and Analysis
The Audit staff reviewed contributions from individuals on a sample basis and
determined that 29% of the items tested lacked a copy of the contributor’s check.


Part I
Background

Authority for Audit

This report is based on an audit of Friends of Duane Sand (FODS), 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 risk factors and
as a result, this audit examined:

1. The receipt of excessive contributions and loans.

2. The receipt of contributions from prohibited sources.

3. The disclosure of contributions received.

4. The consistency between reported figures and bank records.
5. The completeness of records.

6. Other committee operations necessary to the review.
Limitations

Prior to audit fieldwork, Duane Sand (the Candidate) was ordered to active military duty
overseas and he requested a postponement of the audit until his return. Upon his return, the
Audit staff conducted an inventory of FODS receipt records and determined that a significant
portion was missing. The Candidate contacted former FODS personnel but was unable to locate
additional records. The lack of adequate records limited the Audit staff’s testing of receipts for
possible prohibited or excessive contributions as well as the verification of disclosure
information. (See Finding 2)

Committee History

The Candidate was running for election to the U.S. Senate seat from North Dakota until January
29, 2004, when he filed a Statement of Candidacy (FEC Form 2) declaring his candidacy for the
House of Representatives. On the same date, FODS filed a Statement of Organization (FEC
Form 1) and obtained a new committee identification number from the Commission. FODS
continued to operate with the existing bank accounts of the Senate committee. Financial activity
relating to the Candidate’s campaign for the House of Representatives began on January 20,
2004 and was subject to this audit.


Part III
Summaries

Findings and Recommendations

Finding 1. Disclosure of Occupation/Name of Employer
FODS did not adequately disclose the occupation and/or name of employer for 747
contributions totaling $143,367. In addition, FODS did not demonstrate that “best
efforts” were exercised to obtain, maintain and submit the information. The Audit staff
recommended that FODS provide evidence that it exercised “best efforts” to obtain the
contributor information or contact each contributor for whom information was lacking,
submit evidence of such contact, and disclose any information received in amended
reports. In response, FODS indicated that efforts were made to contact contributors,
however, evidence of such action was not provided and amended reports were not filed.
(For more detail, see p. 4)

Finding 2. Recordkeeping for Receipts

A sample review of contributions from individuals indicated that 29% of the receipts
tested were not properly documented. The Audit staff recommended that FODS provide
any additional records that it was able to locate and provide any other relevant
information. In response, FODS did not provide any additional receipt records.

(For more detail, see p. 5)


This matter was discussed with FODS representatives during fieldwork. In response, a
FODS representative explained the process for making FODS deposits which included a
procedure for copying contributor checks. However, based on communications with
several FODS representatives and the Candidate, it appeared that these records were not
maintained in a central location and subsequently may have been lost.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that FODS provide any additional records that it was able
to locate and provide any other relevant information. In response, the Candidate stated
that FODS made copies of contributor checks and that the records provided to the Audit
staff for examination were complete. The Candidate also acknowledged the records had
been moved by a relative and that he had no control or possession of the records during
his military duty overseas. No additional receipt records were submitted to the Audit
staff.



FEDERAL ELECTION COMMISSION
Washington, DC 20463

January 17, 2007

MEMORANDUM

To: Robert W. Biersack
Press Officer

From: Joseph F. Stoltz iL

Assistant Staff Difector
Audit Division

Subject: Public Issuance of the Audit Report on Friends of Duane Sand
Attached please find a copy of the audit report and related documents on Friends of
Duane Sand, which was approved by the Commission on December 6, 2006.

The report may be released to the public on January 17, 2007.

Attachment as stated

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


Part IV
Findings and Recommendations

| Finding 1. Disclosure of Occupation/Name of Employer

Summary

FODS did not adequately disclose the occupation and/or name of employer for 747
contributions totaling $143,367. In addition, FODS did not demonstrate that “best
efforts” were exercised to obtain, maintain and submit the information. The Audit staff
recommended that FODS provide evidence that it exercised “best efforts” to obtain the
contributor information or contact each contributor for whom information was lacking,
submit evidence of such contact, and disclose any information received in amended
reports. In response, FODS indicated that efforts were made to contact contributors,
however, evidence of such action was not provided and amended reports were not filed.

Legal Standard

A. 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 election cycle-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).

B. 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).

C. Definition of Best Efforts. The treasurer and the committee will be considered to
have used “best efforts” if the committee satisfied all of the following criteria:

e All written solicitations for contributions included:

o Aclear 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.

e 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.

e 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).


Report of the
Audit Division on

Friends of Duane Sand
January 20, 2004 - 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.' 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.

' 2 U.S.C. §438(b).

About the Campaign (p. 2)

Friends of Duane Sand (FODS) is the principal campaign
committee for Duane Sand, Republican candidate for the U.S.
House of Representatives from the state of North Dakota. FODS
is headquartered in Fargo, ND. For more information, see chart
on the Campaign Organization, p 2.

Financial Activity (p. 2)
¢ Receipts

o Contribution from Individuals $ 903,162
o Contributions from Political

Committees 122,056
o Other Receipts 21,815
o Total Receipts $ 1,047,033

¢ Disbursements

o Operating Expenditures $ 1,022,942
o Contribution Refunds 2,860

o Other Disbursements 65
o Total Disbursements $ 1,025,867

Findings and Recommendations (p. 3)
e Disclosure of Occupation/Name of Employer (Finding 1)
e Recordkeeping for Receipts (Finding 2)



Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Limitations
Committee History

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

Part III. Summaries
Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Disclosure of Occupation/Name of Employer
Finding 2. Recordkeeping for Receipts

Page

eee