FEDERAL ELECTION COMMISSION

Washington, DC 20463

A99-54

December l, 2000

MEMORANDUM

• TO:

FROM:

SUBJECT:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERT J. COSTA

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

PUBLIC ISSUANCE OF THE REPORT OF THE AUDIT DIVISION

ON THE SOUTH DAKOTA DEMOCRATIC PARTY

Attached please find a copy ofthe final audit report and related documents on the

South Dakota Democratic Party which was approved by the Commission on November 9,

2000.

Informational copies of the report have been received by all parties involved and

the report may be released to the public.

Attachment as stated

cc: Office of General Counsel

Office of Public Disclosure

Reports Analysis Division

FEC Library
A99-54

FEDERAL ELECTION COMMISSION

Washington, DC 20463

•

SOUTH DAKOTA DEMOCRATIC PARTY

EXECIJTIVE SUMMARY

The South Dakota Democratic Party (SDDP) registered with the Commission on

August 24, 1982. The audit was conducted pursuant to 2 U.S.C §438(b), which states

that the Commission may conduct audits of any political committee whose reports fail to

meet the threshold level of compliance set by the Commission

The findings of the audit were presented to the SDDP at an exit conference held

at the completion of fieldwork on June 28, 2000 and later in the interim audit report. The

relevant parts ofthe SDDP's response to those findings are included in this audit report.

The following is an overview ofthe findings contained in the audit report.

Misstatement of Financial Activitv - 2 U.s.c. §434(b)(l),(2) and (4).

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

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

S29,593 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.

Itemization ofContributions from Political Committees - 2 U.S.c. §434(b)(3), 2

U.S.C. §43I(I3)(B)and 11 CFR§102.I7(c)(8)(B). The SDDPdid not itemize 18

receipts, totaling $83,226, received in 1998 from political committees. These 18 items

were comprised often 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.

Itemization of Disbursements - 2 U.S.C. §434(b)(5)(A) and II CFR

§104. IO(b)(4). 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

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$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 SDOP filed

amended Schedules H-4 which corrected these deficiencies.

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A99-54

FEDERAL ELECTION COMMISSION

W,\SHf;\.'CTON, 0 C 20~6J

REPORT OF THE AUDIT DIVISION

ON11IE

SOUTH DAKOTA DEMOCRA11C PARTY

I. BACKGROUND

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 provisions ofthe Federal Election Campaign Act of

1971, as amended (the Act). The audit was conducted pursuant to Section 438(b) ofTitle

2 of the United States Code which states, in part, that the Commission may conduct

audits and field investigations of any political committee required to file a report under

section 434 ofthis title. Prior to conducting any audit under this subsection, the

Commission shall perform an internal review ofreports filed by selected committees to

determine if the reports filed by a particular committee meet the threshold requirements

for substantial compliance with the Act.

A. AUDIT AVTHORITY

B. AUDIT COVERAGE

The audit covered the period from January I, 1997 through December 31,

1998. During this period, the SDDP reported a beginning cash balance of $83,766; total

receipts of$1 ,666,147; total disbursements of $1,637,017; and a closing cash balance of

$112,896 I

C. COMMITTEE ORGANIZATION

The SDDP registered with the Commission on August 24, 19822 and

maintains its headquarters in Sioux Falls, South Dakota. The Treasurers during the

period covered by the audit were Henry Maicki (January 1, 1997 through July 6, 1998),

Scott McGregor (July 7, 1998 through December 4, 1998) and Mark Anderson

(December 5, 1998 through December 31, 1998). The current Treasurer is Bill

Nibbelink.

1 All figures in this report have been rounded to the nearest dollar.

2 Originally named the Democratic Majority Campaign Commillee, an amended Statement ofOrganization

was flied in March, 1992 which changed the name to South Dakota Democratic Party.

Page 3 of 11 Approved 11/9/00
2

To manage its federal financial activity, the SDDP used five bank accounts

and purchased three certificates ofdeposits. From these accounts the SOOP made

approximately 2,500 disbursements. Receipts were composed of contributions from

individuals totaling $522,780; contributions from other political committees and transfers

from affiliated and other party committees $372,050; interest income of 5292; refunds and

rebates of $8,649, other federal recei pts of $ I00 and transfers from its non-federal

accounts totaling $807,050. The SDDP also maintained four non-federal accounts frolll

which it expended $1,132,218.

D. AUDIT SCOPE AND PROCEDURES

Although the SDOP met the minimum recordkeeping requirements of2

USc. §432(c) with respect to disbursements, the Audit staff was unable to test transfers

from SDDP's non-federal accounts to its federal accounts to determine if they lVere Illade

no more than J0 days before or 60 days after the payments as required by r1CFR

§106.5(g)(2)(ii)(B).

The audit included testing of the following general categories:

I The rcccipt of contributions or loans in excess oflhe staturory limitations:

2. the receipt of contributions from prohibited sources, such as those from

corporations or labor organizations;

3. proper disclosure of contributions from individuals, political commil1ces

and other entities, to include the itemization of contributions when

required, as well as, the completeness and accuracy ofthe information

disclosed (See Finding \I.B.);

4. proper disclosure of disbursements including the itemization of

disbursements when required, as well as, the completeness and accuracy

of the information disclosed (See Finding Il.c.);

5. proper disclosure of debts and obligations;

6. the accuracy oftotal reported receipts, disbursements and cash balances as

compared to bank records (See Finding II.A);

7. adequate recordkeeping for committee transactions;

8. proper disclosure ofthe allocation of costs associated with administrative

expenses and activities conducted jointly on behalf of federal and nonfederal elections and candidates; and

9. other audit procedures that were deemed necessary in the situation.

Page 4 of I 1 Approved 11/9/00
3

Unless specifically discussed below, no material non-compliance with

statutoI}' or regulatol}' requirements was detected. It should be noted that the

Commission may pursue further any ofthe matters discussed in this report in an

enforcement action.

fI. AUDIT FINDINGS AND RECOMMENDAnONS

A. MISSTATEJ"lENT OF FINANCIAL ACTIVITY

Sections 434(b)(I), (2) and (4) of Title 2 of the United States Code require

a political committee to disclose the amount of cash on hand at the beginning of each

reporting period and the total amount of all receipts and disbursements for each reporting

period and the calendar year.

The Audit staffs reconciliation ofthe SDDP's reported financial activity

to its bank activity, for the period January I, 1997, through December 31, 1998, disclosed

that the SDOP had misstated its receipts, disbursements and cash on hand balances. The

SOOP did not provide workpapers detailing how the dollar amounts shown on its

disclosure reports were calculated.

The SDDP overstated its 1997 reported receipts by $29,593. This net

overstatement was primarily due to the following: over reporting contributions from

individuals, totaling $19,388; over reporting contributions from political party

committees, totaling $9,700; erroneously reporting transfers from "ASDC - Dollars for

Democrats" which were apparently deposited into a non-federal account, totaling $8,000;

not reporting transfers from a non-federal account, totaling $4,700; and, not reporting

refunds and rebates, totaling $2,695.

The SODP understated its 1997 reported disbursements by $12,448. This

net understatement was primarily due to the following: not reporting 162 disbursements,

totaling $43,769 (see Finding II.C.); erroneously reporting payments made from an SODP

non-federal account, totaling $13,612; reporting disbursements twice, totaling 12,427;

and, reporting voided checks without proper adjusting entries, totaling $5,120.

The SDDP's reported beginning cash on hand balance at January 1, 1997

was overstated by $57,332. SOOP officials were unable to explain this discrepancy. The

reported ending cash on hand balance at December 31, 1997 was overstated by $99,374.

This overstatement resulted from the misstatements detailed above and from the

overstatement of beginning cash on hand at January I, 1997.

The SDOP understated its 1998 reported receipts by $74,567. This net

understatement was primarily due to the following: not reporting 18 contributions and

transfers from political committees, totaling $83,226 (see Finding II.B.); over reporting

contributions from individuals, totaling $22,417; not reporting a transfer from a nonPage 5 of I 1 Approved 1119/00
4

federal account in the amount of$15,000; and, over reporting a transfer from a nonfederal account in the amount of$2,000.

The SDDP understated its reported 1998 disbursements by 547,166. This

net understatement was primarily due to the following: not reporting 153 disbursements.

totaling $55,841 (see Finding II.C.); reporting disbursements twice, totaling 55,996; and.

reporting voided checks without proper adjusting entries, totaling 51,735.

The SDDP's reported ending cash on hand balance at December 31, 1998.

was overstated by $71,973 due to the misstatements detailed above.

At the Exit Conference, the SDDP representatives were provided with

documentation explaining the misstatements. SDDP representatives did not provide any

infonnation at that time.

In the interim audit report, the Audit staff recommended that the SDDP

file amended reports by report period for 1997 and 1998 which included Summary and

Detailed Summary pages and the appropriate Schedules A (Itemized Receipts), B

(Itemized Disbursements), C (Loans), H3 (Transfers from Non-Federal Accounts) and H4

(Joint FederallNon-Federal Activity Schedule) to correct the misstatements noted above.

In response to the interim audit report the SDDP filed amendments which corrected these

misstatements.

B. ITEMIZATION OF CONTRIBUTIONS FROM POLITICAL COMMITTEES

Section 434(b)(3)(B) ofTitle 2 ofthe United States Code states that each

report under this section shall disclose the identification of each political committee

which makes a contribution to the reporting committee during the reporting period,

together with the date and amount of any such contribution.

Section 434(b)(3)(D) ofTitle 2 ofthe United States Code states, in part,

that each report under this section shall disclose the identification of each affiliated

committee which makes a transfer to the reporting committee during the reporting period

and, where the reporting committee is a political party committee, each transfer offunds

to the reporting committee from another political party committee, together with the date

and amount ofsuch transfer.

Section 431(13)(B) ofTitle 2 ofthe United States Code defines

"identification" to be, in the case of any other person (which includes committees), the

full name and address ofsuch person.

Section 102.17 (c)(8)(B) ofTitle 11 ofthe Code ofFederal Regulations

states, in part, that each committee participating in a joint fundraising activity shall report

its share of net proceeds received as a transfer-in from the fundraising representative and

Page 6 of 11 Approved 11/9/00
5

shall also file a memo Schedule A itemizing its share of gross receipts as contributions

from original contributors to the extent required under 11 eFR 104.3(a)

The Audit staff reviewed all contributions received from political

committees and all transfers received from affiliated committees and determined that the

SDDP did not itemize 18 receipts, totaling $83,226, received In 1998 from political

committees. These 18 items were comprised often contributions, totaling$!0,500, from

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

Ofthe eight transfers from affiliates, four were from the Democratic National

Committee, totaling $3, I79, three were from the Association of State Democratic

ChairsIDolJars for Democrats (AS DC), totaling $6,547 and one was trom the South

Dakota Democratic Victory Fund Non-Federal in the amount of 563,000 None of these

items were included in the SDDP's reported 1998 receipt totals (see Finding II.A).

According to disclosure reports filed by the ASDC, the three transfers

from the ASDC, totaling $6,547, v,Iere "proceeds" -- but no memo Schedules A were

filed by the SDDP to itemize its share of gross proceeds as required by 11 eFR §I02.17

(c)(8)(B).

At the exit conference, the Audit staff provided the SDDP representatives

a detailed schedule ofthe errors. SDDP representatives did not provide any information

at that time.

In the interim audit report the Audit staffrecommended that the SDDP file

amended Schedules A, by reporting period, which disclosed the contributions and

transfers not previously itemized, as well as memo Schedules A relative to the proceeds

transferred by the ASDC, and that these amendments be prepared in conjunction with the

amendments recommended in Finding II.A In response to the interim audit report the

SDDP filed amended Schedules A itemizing the 18 transfers, totaling $83,226, not

previously itemized. In addition, the Committee provided photocopies or memo

Schedules A filed by ASDC, covering activity between January 1, 1998 and June 30,

1998; these schedules reflected $46,924 in unitemized receipts labeled as "SOUTH

DAKOTA"

C. ITEMIZATION OF DISBURSEMENTS

Section 434(b)(5)(A) ofTitle 2 ofthe United States Code requires the

reporting committee to disclose the name and address of each person to whom an

expenditure in an aggregate amount or value in excess of$200 within the calendar year is

made by the reporting committee to meet a committee operating expense, together with

the date, amount, and purpose ofsuch operating expenditure.

Section 104.10(b)(4) ofTitle II ofthe Code ofFederal Regulations states,

in relevant part, that a political committee that pays allocable expenses in accordance

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6

with I I eFR §106.5(g) shall also report each disbursement from its federal account or its

separate allocation account in payment for a joint federal and non-federal expense or

activity. In the report covering the period in which the disbursement occurred, the

committee shall state the full name and address of each person to whom the disbursement

was made, and the date, amount and purpose of each such disbursement.

Thc SDDP maintained separate federal and non-federal accounts and paid

shared expenses from a separate allocation account pursuant to I I eFR § l06.5(g). The

Audit slaff reviewed disbursements made by the SDDP and identified 315 disbursements,

totaling S99,610, which were not itemized as required. Ofthese 315 items, 162, totaling

$43,769, were made in 1997 and 153, totaling $55,841, were made in 1998. None of

these jrems were included in the SDDP's reported disbursement totals for 1997 or 1998

(see Finding lI.A.). Based on the records reviewed by the Audit staff, it appeared that

nearly all ofthese disbursements were for shared expenses and were required to be

reported on Schedules H-4.

At the exit conference, SDDP representatives were provided with

schedules detailing the items which were not itemized as required. SDDP representatives

did not provide any information at that time.

In the interim audit report the Audit staff recommended that the SDDP file

amended Schedules H-4, by reporting period, for the items nored above and that these

amendments be prepared in conjunction with the amendments recommended in Finding

ILA. In response to the interim audit report the SDDP filed amended Schedules H-4

which corrected the public record.

Page 8 of II Approved 11/9/00
FEDERAL ELECTION COMMISSION

Washington, DC 20463

A99-54

if!

November ::.2000

Mr. Bill Nibbelink, Treasurer

South Dakota Democratic Party

P.O. Box 737

Sioux Falls, SD 57101

Dear Mr. Nibbelink:

Attached please find the Report ofthe Audit Division on the South Dakota

Democratic Party. The Commission approved the report on NO\'ember 9, 2000.

The Commission approved Final Audit Report will be placed on the public record

on December 1,2000. Should you have any questions regarding the public release ofthe

report, please contact the Commission's Press Office at (202) 694-1220. Any questions

you have related to matters covered during the audit or in the report should be directed to

Robert Morcomb or Marty Favin ofthe Audit Division at (202) 694-1200 or toll free at

(800) 424-9530.

Sincerely,

~~Robert J. Costa

Assistant Staff Director

Audit Division

cc: Mr. Marc Elias, Counsel, Perkins eoie LLP

Ms. Diane Evans, Consultant, Evans & Katz LLC

Attachment as stated

Page 9 of 11 Approved 1l/9/00
Page 10 of 11 Approved 1119100
CHRONOLOGY

SOUTH DAKOTA DEl\1OCRATIC PARTY

Audit Fieldwork

Interim Audit Report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

3/23/00--6/28/00

9/08'00

10/23/00

11109/00

Page 11 of 11 Approved 1119/00