Draft Final Audit Report of the 

Audit Division on the South 

Dakota Democratic Party 

(January 1, 2015 - December 31, 2016) 

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.1

 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 South Dakota Democratic Party is a state party committee 

headquartered in Sioux Falls, South 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 Affiliated 

Committees 

o Transfers from Non-Federal 

Account 

o Other Receipts 

Total Receipts

$ 391,785 

136,576 

2,691,498 

2,275 

16,598 

 $ 3,238,732 

 Disbursements

o Operating Expenditures 

o Transfers to Affiliated 

Committees 

o Federal Election Activity 

o Other Disbursements 

Total Disbursements 

$ 329,937 

2,494,343 

371,481 

19,360 

$ 3,215,121 

Findings and Recommendations (p. 3) 

 Misstatement of Financial Activity – Increased Activity 

(Finding 1) 

 Contributions from Unregistered Organizations (Finding 2) 

 Reporting of Debts and Obligations (Finding 3) 

 

1

 52 U.S.C. §30111(b). 
Draft Final Audit Report of the 

Audit Division on the 

South Dakota Democratic Party 

(January 1, 2015 - December 31, 2016) 
Table of Contents 

 Page

Part I. 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. Misstatement of Financial Activity – Increased Activity 4

Finding 2. Contributions from Unregistered Organizations 5

Finding 3. Reporting of Debts and Obligations 7
 1 

Part I 

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 52 U.S.C. §30111(b), which permits 

the Commission to conduct audits and field investigations of any political committee that 

is required to file a report under 52 U.S.C. §30104. 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. 52 U.S.C. §30111(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; 

2. the receipt of contributions from prohibited sources; 

3. the disclosure of contributions received; 

4. the disclosure of individual contributors’ occupation and name of employer; 

5. the disclosure of disbursements, debts and obligations; 

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

7. the consistency between reported figures and bank records; 

8. the completeness of records; and 

9. other committee operations necessary to the review. 
 2 

Part II 

Overview of Committee 

Committee Organization 

Overview of Financial Activity 

(Audited Amounts) 

 

Cash on hand @ January 1, 2015 $ 21,496 

Receipts 

o Contributions from Individuals 391,785 

o Contributions from Political Committees 136,576 

o Transfers from Affiliated Committees 2,691,498 

o Transfers from Non-Federal Account 2,275 

o Other Receipts 16,598 

Total Receipts $ 3,238,732 

Disbursements 

o Operating Expenditures 329,937 

o Transfers to Affiliated Committees 2,494,343

o Federal Election Activity 371,481 

o Other Disbursements 19,360 

Total Disbursements $ 3,215,121 

Cash on hand @ December 31, 2016 $ 45,107 

Important Dates 

 Date of Registration April 24, 1982 

 Audit Coverage January 1, 2015 - December 31, 2016 

Headquarters Sioux Falls, South Dakota 

Bank Information 

 Bank Depositories Two 

 Bank Accounts Two Federal, One Non-Federal 

Treasurer 

 Treasurer When Audit Was Conducted Bill Nibbelink 

 Treasurer During Period Covered by Audit Bill Nibbelink (7/15/00 - Present) 

Management Information 

 Attended FEC Campaign Finance Seminar No 

 Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 
 3 

Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity - Increased 

Activity 

A comparison of SDDP’s bank activity with its original reports filed with the 

Commission revealed that disbursements were understated by $2,500,147 for calendar 

years 2015 and 2016. In response to the Interim Audit Report recommendation, SDDP 

stated it overlooked filing procedures, required better training on reporting to the 

Commission and there was no intent to understate disbursements on the original reports 

filed. 

(For more detail, see p. 4.) 

Finding 2. Contributions from Unregistered Organizations 

During audit fieldwork, the Audit staff identified 144 contributions from unregistered 

organizations totaling $67,182 that may have been made with impermissible funds. In 

response to the Interim Audit Report recommendation, SDDP submitted statements from 

the unregistered organizations attesting to the permissibility of 52 contributions, totaling 

$19,190. As a result, 92 contributions, totaling $47,992, remain impermissible. 

(For more detail, see p. 5.) 

Finding 3. Reporting of Debts and Obligations 

During audit fieldwork, the Audit staff noted that SDDP failed to disclose debts and 

obligations to nine vendors, totaling $46,097. In response to the Interim Audit Report 

recommendation, SDDP filed amended disclosure reports to disclose these debts and 

obligations, however, these transactions were disclosed incorrectly. 

(For more detail, see p. 7.) 
 4 

Part IV 

Findings and Recommendations

Finding 1. Misstatement of Financial Activity – Increased 

Activity 

Summary 

A comparison of SDDP’s bank activity with its original reports filed with the 

Commission revealed that disbursements were understated by $2,500,147 for calendar 

years 2015 and 2016. In response to the Interim Audit Report recommendation, SDDP 

stated it overlooked filing procedures, required better training on reporting to the 

Commission and there was no intent to understate disbursements on the original reports 

filed. 

Legal Standard 

Contents of Federal 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 B (Itemized 

Disbursements). 52 U.S.C. 30104 (b) (4) and (5). 

Facts and Analysis 

A. Facts 

During audit fieldwork, in addition to examining SDDP’s most recent reports filed prior 

to audit notification, the Audit staff also compared its originally filed reports with its 

bank records. The purpose of this additional reconciliation was to identify the degree to 

which SDDP had misstated its original filings. 

The Audit staff calculated that SDDP understated disbursements by $2,500,147 on the 

original reports filed over the two year period ending December 31, 2016. Most of the 

disbursements that were understated ($2,494,000) related to transfers to the Democratic 

National Committee which were not disclosed on the originally filed reports. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with the SDDP representative during the exit 

conference and provided the relevant work paper. In response to the exit conference, 

SDDP stated that the increased activity was due to reporting changes. 

The Interim Audit Report recommended that SDDP provide any comments it deemed 

relevant to this matter. 
 5 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendation, SDDP stated it overlooked 

filing procedures and required better training on reporting to the Commission. SDDP 

added that there was no intent to understate disbursements on the original reports filed. 

Finding 2. Contributions from Unregistered Organizations 

Summary 

During audit fieldwork, the Audit staff identified 144 contributions from unregistered 

organizations totaling $67,182 that may have been made with impermissible funds. In 

response to the Interim Audit Report recommendation, SDDP submitted statements from 

the unregistered organizations attesting to the permissibility of 52 contributions, totaling 

$19,190. As a result, 92 contributions, totaling $47,992, remain impermissible. 

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 the state, district, 

and local party committees. 52 U.S.C. §30116(a)(1)(D) and 11 CFR §110.9. 

B. Organizations Not Registered With the Commission. Any organization that makes 

contributions and expenditures, but that does not qualify as a political committee 

under 11 CFR §100.5, must keep records of receipts and disbursements and, upon 

request, must make such records available for examination by the Commission. The 

organization must demonstrate through a reasonable accounting method that, 

whenever such an organization makes a contribution or expenditure, the organization 

has received sufficient funds subject to the limitations and prohibitions of the Act to 

make such contribution or expenditure. 11 CFR §102.5(b). 

C. Questionable Contributions. It is the Treasurer’s responsibility to ensure that all 

contributions are lawful. 11 CFR §103.3(b). If a committee receives a contribution 

that appears to be prohibited (a questionable contribution), it must follow the 

procedures below: 

1. within 10 days after the treasurer receives the questionable contribution, the 

committee must either: 

 Return the contribution to the contributor without depositing it; or 

 Deposit the contribution (and follow steps below). 11 CFR §103.3(b)(1). 

2. if the committee deposits the questionable contribution, it may not spend the 

funds and must be prepared to refund them. It must therefore maintain 

sufficient funds to make the refunds or establish a separate account in a 

campaign depository for possibly illegal contributions. 11 CFR §103.3 (b)(4). 

3. the committee must keep a written record explaining why the contribution 

may be prohibited and must include this information when reporting the 

receipt of the contribution. 11 CFR §103.3(b)(5). 
 6 

4. within 30 days of the treasurer’s receipt of the questionable contribution, the 

committee must make at least one written or oral request for evidence that the 

contribution is legal. Evidence of legality includes, for example, a written 

statement from the contributor explaining why the contribution is legal or 

an oral explanation that is recorded by the committee in a memorandum. 

11 CFR §103.3(b)(1). 

5. within these 30 days, the committee must either: 

 confirm the legality of the contribution; or 

 refund the contribution to the contributor and note the refund on the report 

covering the period in which the refund was made. 11 CFR §103.3(b)(1). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff identified 144 receipts, totaling $67,182, from 

unregistered organizations, which SDDP reported as follows: 

 129 receipts, totaling $62,062, on Line 11 (Contributions) of Schedule A 

(Itemized Receipts) from individuals and political committees; 

 14 receipts, totaling $3,620, that were not itemized on Schedule A; and 

 1 receipt, in the amount of $1,500, on Line 17 (Other Federal Receipts) of 

Schedule A. 

SDDP received eight contributions, noted above, totaling $12,175 from three 

unregistered political organizations which appear to be state political action committees 

(state PACs). These state PACs could have accepted corporate and union contributions 

under South Dakota state law which may have been federally impermissible. 

The Audit staff considered the receipts noted above to be contributions. SDDP did not 

have any records available to show that these contributions from unregistered 

organizations were made with permissible funds or other evidence to show they were not 

contributions. To date, none of these contributions have been refunded to the 

contributors. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with the SDDP representative during the exit 

conference and provided a schedule of the receipts noted above. In response to the exit 

conference, SDDP stated it was in the process of collecting letters from the contributors 

regarding the permissibility of the funds. 

The Interim Audit Report recommended that SDDP: 

 Provide evidence that the 144 receipts in question were made from permissible 

funds, including information on how it was determined that sufficient permissible 

funds were on hand when eight contributions from three state PACs were made; 

or 
 7 

 Provide evidence to show the receipts were not contributions; or 

 Refund the impermissible funds and provide evidence of such refunds (copies of 

front and back of the refund check); or 

 Transfer the impermissible funds to the non-federal account; or 

 Disgorge the impermissible funds to a governmental entity (federal, state or local) 

or to a qualified charitable organization described in 26 U.S.C. §170© and 

provide evidence of such disgorgement; or

 If funds were not available to make the necessary refunds or disgorgement, 

disclose the contributions requiring refunds on Schedule D (Debts and 

Obligations) until funds become available to make such refunds. 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendation, SDDP submitted the following 

documentation: 

Contributions for which permissibility was demonstrated for unregistered 

organizations ($19,190) 

Statements were provided from 26 unregistered organizations attesting to the 

permissibility of 52 contributions, totaling $19,190. 

Contributions for which sufficient permissibility documentation was not provided 

for state PACs ($11,500) 

Statements were provided from two state PACs attesting to the permissibility for six 

contributions, totaling $11,500. However, these statements did not include information on 

how it was determined that sufficient permissible funds were on hand when the contributions 

were made. 

Contributions for which documentation was not provided in response to the Interim 

Audit Report 

 84 contributions, totaling $35,817, from unregistered organizations

 Two contributions, totaling $675, from state PACs 

As a result, SDDP did not demonstrate that 92 contributions, totaling $47,992, were made 

from permissible funds.2

Finding 3. Reporting of Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff noted that SDDP failed to disclose debts and 

obligations to nine vendors, totaling $46,097. In response to the Interim Audit Report 

recommendation, SDDP filed amended disclosure reports to disclose these debts and 

obligations, however, these transactions were disclosed incorrectly. 

 

2

 ($11,500 + $35,817 + $675). 
 8 

Legal Standard 

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

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

52 U.S.C. §30104(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 the committee and debts owed to the committee, together with 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 

 A debt of $500 or less must be reported once it has been outstanding 60 days from 

the date incurred (the date of the transaction); the committee reports it on the next 

regularly scheduled report. 

 A debt exceeding $500 must be disclosed in the report that covers the date on 

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

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reviewed SDDP’s disbursement records and 

disclosure reports for proper reporting of debts and obligations. This review identified 

debts owed to nine vendors, totaling $46,097,3

 which SDDP failed to report on Schedule 

D during the audit period. Based on a review of the records, these vendors mainly 

provided printing and catering services. SDDP reported no debts during the audit period. 

The Audit staff calculated the debts owed to the vendors based on the invoice date and 

the subsequent payment date. Debts were outstanding for periods ranging from 9 days to 

187 days.

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the reporting of debts and obligations with the SDDP 

representative at the exit conference and provided a schedule of transactions not disclosed 

on Schedule D. In response to the exit conference, SDDP stated that it reported debts 

incorrectly and will amend its disclosure reports. 

The Interim Audit Report recommended that SDDP provide documentation 

demonstrating that these transactions were not obligations which required reporting on 

Schedule D. Absent such documentation, the Interim Audit Report further recommended 

that SDDP amend its reports or file a Form 994

 to correctly disclose these debts and 

obligations. 

 

3

 Each debt in this amount was counted only once, even if it was required to be disclosed over multiple 

periods. 4

 SDDP was advised by the Audit staff that if it chose to file a Form 99, instead of amending its disclosure 

reports, the form must contain all pertinent information that is required on each schedule. 

 
 9 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendation, SDDP filed amended Schedule 

D’s for 2015 and 2016 in an attempt to properly disclose the debts and obligations 

discussed above. However, these transactions were not disclosed correctly. All debts 

and obligations contained inadequate purposes and were not disclosed in the correct 

reporting periods through extinguishment.