Draft Final Audit Report of the 

Audit Division on the South 

Dakota Democratic 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 committee 

appears not to have met 

the threshold ^ 

requirements for . 

substantial compl^ 

with the Act.^ Theaud 

determines^M^ 

commi^^om. 

the lii^^ions. 

pro^im d 

disclosui ments 

of the Act. 

Future Ai * ••• i 

The Commission ma^ 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Committee 

The South Dakota Democratic 

headquartered in Sioux Fal 

information, see the chart 

Financial 

• Receipts 

o Contri^"' from 

o Contributid^ 

Party and Ot 

%Qpmmittees 

o ' 

o Ai 

Total 

Disburs 

o Operai 

o Coordi 

from AI 

ittees 

Expenditures 

Expenditures Made 

vity 

All Other Disbursements 

^ Disbursements 

state party committee 

1 Dakota. For more 

mittee Organization, p. 2. 

$ 180,424 

133,843 

593,756 

13,042 

S 921,065 

$ 574,603 

144,700 

184,970 

88,966 

$ 993,239 

ler 

Findings and Recommendations (p. 1) 

• Misstatement of Financial Activity (Finding 1) 

• Recordkeeping for Employees (Finding 2) 

• Reporting of Coordinated Party Expenditures (Finding 3) 

• Contributions from Unregistered Political Organizations 

(Finding 4) 

• Disclosure of Occupation/Name of Employer (Finding 5) 

On September 1,2014, the Federal Election Campaign Act of 1971, as amended ("the Act"), was 

transferred from Title 2 of the United States Code to the new Title S2 of the United States Code. 

^ 52 U.S.C. § 30111(b) (formerly 2 U.S.C. §438(b)). 
Draft Final Audit Report of the 

Audit Division on the 

South Dakota Democratic Party 

(January 1, 2009 - December 31, 2010) 

% 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Commission Guidance 1 

Part II. Overview of Committee 

Committee Organization Aiy ^ 

Overview of Financial Activity 2 

4 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Recom 

Finding!. Misstatement of Financial Activity S 

Finding 2. Recordkeeping for Ei^E^yees 7 

Findings. Reporting of Coordina^^^^^pendi 9 

Finding 4. Contributions from Unr^s^^l^itical Org ions 12 

Finding S. Disclosure of Occupation^imejgf^^ ' ^ 14 
Parti 

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) (formerly 2 

U.S.C. §438(b)), which permits the Commission to conduct audi^^d field 

investigations of any political committee that is required to under 52 U.S.C. § 

30104 (formerly 2 U.S.C. §434). Prior to conducting any a^^^der this subsection, the 

Commission must perform an intemal review of reports b^^^ted committees to 

determine whether the reports filed by a particular corjgj^ee mel^^threshold 

requirements for substantial compliance with the § 3w|l (formerly 2 

U.S.C. §438(b)). 

Scope of Audit 

Following Commission-approved procedures, the 

factors and as a result, this audit ex 

1. the receipt of contributions from p: 

the disclosure of individual contribul 

the disclosure of disbursements, del 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

the disclosure of ex 

the consistency 

the disclosure 

the completeness 

other committee o 

evaluated various risk 

of employer; 

ocated 

:ed figu; 

id coordi: 

1 federm^ra non-federal accounts; 

id bank r^ords; 

expenditures; 

review. 

Com III CiMiil.inCiRequesrst^^arly Coi isideration of a Legal Question 

Pursuant t^l^'Policv Sta^nent Establishing a Program for Requesting Consideration 

of Legal Qu^^ ' the ^mmission," SDDP requested early consideration of a legal 

question raised > t^^dit. SDDP questioned whether the monthly time logs 

required under i i 106.7(d)(1) applied to employees paid with 100 percent 

federal funds. (See ^ding 2.) 

The Commission concluded, by a vote of 5-1, that 11 C.F.R. § 106.7(d)(1) does require 

committees to keep a monthly log for employees paid exclusively with federal funds. 

Exercising its prosecutorial discretion, however, the Commission decided it will not 

pursue recordkeeping violations for the failure to keep time logs or to provide affidavits 

to account for employee salaries paid with 100 percent federal funds and reported as 

such. Accordingly, Finding 2, Recordkeeping for Employees, of this audit report does 

not include a recommendation to pursue a recordkeeping violation for employees paid 

with 100 percent federal funds and reported as such. 
Part 11 

Overview of Committee 

Committee Organization 

Important Dates 

e Date of Registration April 24,1982 

• Audit Coverage January 1,2009- Jl^mber 31,2010 

Headquarters Sioux Falls, SoimlDalcbta 

Bank Information 

e Bank Depositories Two ^ 

e Bank Accounts Four^^^rsfkand Tfil^i -federal 

Treasurer 

• Treasurer When Audit Was Conducted .^^^ibbeli^ ^ 

• Treasurer During Period Covered by Audit 

Management Information •• 

• Attended Commission Campaign Finance Yes 

Seminar ^ '4 

e Who Handled Accounting and 

Recordkeeping Tasks 

ff 

Ovvrvu-w of Fiimncial Activity 

lAiiilited Amounts) 

Cash-on-h|^ ® Janil^ S 93,826 

a 

o Contribu^^;^ from Ind Is ^ 180,424 

o Contributio^^m Politic 'arty and Other 

Political Com^^^s 133,843 

o Transfers from '^...er Party . 

Committees 593,756 

o All Other Receipts ^ 13,042 

Total Receipts $ 921,065 

Disbursements 

o Operating Expenditures 574,603 

o Coordinated Expenditures Made by Party 

Conunittees 144,700 

o Federal Election Activity 184,970 

o All Other Disbursements 88,966 

Total Disbursements S 993,239 

Cash-on-hand @ December 31,2010 $ 21,652 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of SDDP's reported finanj^^^tivity with its bank 

records revealed misstatements for calendar years 2009 and ). For 2009, SDDP 

understated disbursements by $15,155. For 2010, SDDP^ |^d receipts by $26,721. 

Subsequent to audit notification, SDDP amended its repe^, whrc rected the 

misstatement for 2009. In response to the Interim Au^^^port n nendation, SDDP 

amended its 2010 reports to materially correct its^^mai^g misstateii^ For more 

detail, see p. 5.) 

Finding 2. Recordkeeping for Eiii|i| 

During audit fieldwork, the Audit st£^ determined thal^ 

monthly payroll logs, as required, to d^Mgent the percef 

)P did not maintain any 

^f time each employee 

spent on federal election activity. For 

to SDDP employees totaling $60,143, fd! 

maintained. This consisted of $42,557, 

federal funds; $15,187 

that was paid from M^CIUS^ 

employee was alse^^^bfrom a: 

audit, SDDP filed amei 

(Federal Ell ivit ^aii 

Interim ^ 

on th ports to Fi 

resol more 

^010, the identified payments 

jly pay^logs were not 

between federal and nondlusivelpibn-federal account; and $2,399 

lunt during periods in which the same 

|uent to being notified of the 

sing all allocated payroll on Line 30b 

:nt federal funds. In response to the 

ition. Counsel said SDDP moved all payroll expenses 

jvity. The Audit staff considers this matter 

lid from 

inon-fedei 

accoun 

2009 di 

Findiii_ >^Repor' liig of Coordinated Party Expenditures 

The Audit staf?^ that 'DP made an apparent excessive in-kind contribution of 

$16,277 to a Hou; ^^te, resulting from coordinated expenditures made in excess of 

the coordinated p: pending limitation. During the audit exit conference, SDDP 

officials stated that ttiey had erroneously reported $19,529 for two direct mail pieces as 

Coordinated Party Expenditures on Schedule F, Line 25, when the expenditure was 

actually for Federal Election/Exempt activity, that SDDP should have reported on 

Schedule B, Line 30b. SDDP argued that the disbursements should not have been 

counted towards its coordinated party expenditure limit because the disbursements 

qualify for the volunteer materials exemption but were not properly disclosed on its 

reports. However, SDDP provided only limited evidence that volunteer activity existed. 
In response to the Interim Audit Report recommendations, SDDP amended its reports to 

disclose $19,529 as a volunteer exempt expense and provided a signed declaration that 

this type of mailing was generally performed by volunteers. Given the uncertainty 

regarding the level of volunteer involvement needed to qualify for the volunteer materials 

exemption, as well as the amount of documentation required to support such an 

exemption, the expenditures are no longer being attributed to SDDP's coordinated 

expenditure limit. (For more detail, see p. 9.) 

Finding 4. Contributions from Unregisteii i||Political 

Organizations 

SDDP received contributions totaling $ 14,831 from unreg^ ^^litical organizations 

that may not have used permissible funds. SDDP refunc^cond^ ' is totaling $4,891 

of the $14,831, though it did so in an untimely manng^ 

M ^ 

DDP proviaei letters 

lie sources. on, 

no^a contributi^ but rather a 

oor hanger. SDDP also issued 

I" " r the balance of the 

In response to the Interim Audit Report recor 

from contributors confirming that $3,140 

SDDP provided documentation supporting that $5^ 

reimbursement from a non-federal committee related 

a disgorgement check for $1,800 payl"' ' :U.S. 

impermissible contributions. (Formoi P-12.) 

Finding 5. Disclosure of OC^MI >1111 ^Htoane of Employer 

The Audit staff reviewe^S al contril^iras, for itemization is required, and 

ced adequate disclosure of occupation 

informant Furthermore, prior to the notification 

: docume^^best efforts" to obtain, maintain, and 

jtified of the audit, SDDP obtained some 

amended reports for calendar year 2009, 

•je of OCC/NOE. 

found that 78 contril 

and/or name of < 

of the audit, SDDP dii 

submit coi 

of the mis! 

whi< erially cor 

In the Ir ^Audit Repoi 

additional ii^ on it c« 

response to th( t repot 

reports to include pi 

contributions from i 

; Ai^it staff recommended that SDDP provide any 

lers relevant to this matter. SDDP made no comment in 

owever, although not required, SDDP amended its 2010 

Sy undisclosed OCC/NOE information for $10,206 in 

uals. (For more detail, see p. 14.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

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

records revealed misstatements for calendar years 2009 and 2010. For 2009, SDDP 

understated disbursements by $15,155. For 2010, SDDP understa^ receipts by $26,721. 

Subsequent to audit notification, SDDP amended its reports, ^ i^rrected the 

misstatement for 2009. In response to the Interim Audit commendation, SDDP 

amended its 2010 reports to materially correct its remaining ;nts. 

' of the rei ^fSriod; 

for the calei^r year; 

;riod and for the calendar 

Legal Standard 

Contents of Reports. Each report must discloi 

• The amount of casb-on-band at the bi 

• The total amount of receipts for the repo: 

• The total amount of disbursements for the 

year; and 

• Certain transactions that require on on 

Schedule B (Itemized Disburseir § 3 

(formerly 2 U.S.C. §434(b)(l). 

Facts and Anal> ^ 

A. Facts 

The Audit staff reconc 

and 2010^ 

balancejs^cceipts. 

idress tb 

itemized Receipts) or 

i)(l),(2),(3),(4) and (5) 

tsi bank records for calendar years 2009 

l^outli crepancies for the beginning cash 

ending cash balances for each year. Succeeding 

is tof^EHI^isstatements. 

2009 Co^^ttee Acth 

Reported Bank Records Discrepancy 

Beginning C. liBe 

@ January 1, 

$94,626 $93,826 $ 800 

Overstated 

Receipts $194,044 $197,026 $ 2,982 

Understated 

Disbursements $261,047 $276,202 $15,155 

Understated 

Ending Cash Balance @ 

December 31,2009 

$11,645' $14,650 $3,005 

Understated 

^ SDDP did not carry the correct ending cash balance to the subsequent report's beginning cash balance 

from the July 2009 Monthly report through the Year End 2009 report. As a result of these discrepancies, 

the amounts in the "Reported" column do not total correctly. 
The understatement of disbursements resulted from the following: 

• Disbursements not reported $ 18,938 

• Disbursement reported but not supported by a check or debit ( 3,390) 

• Unexplained difference (3931 

Net Understatement of Disbursements $ 15.155 

Unreported disbursements of $18,938 consist primarily of payments for salaries and a 

loan payment. 

The $3,005 understatement of the ending cash balance on 

from the misstatements described above, as well as discn 

balance and receipts. < 

3^1,2009 resulted 

in the beginning cash 

Subsequent to audit notification, SDDP amended^' . to for calenaa 2009, 

which corrected the misstatements noted abov 

2010 Committee Activity 

Rraorted - • .Records Discrepancy 

Beginning Cash Balance 

@ January 1,2010 

I $2,995 

Understated 

Receipts s^3i <039 $26,721 

Understated 

Disbursements ^ $707,1^3 >$717,037 $9,724 

Understated 

Ending Cash B£li ^ $21,191% 

December 31.2010 ,jP\ 

f $21,652 $461 

Understated 

Theu statemehf^ 

eceipts fror jcal 

II " d receipt re d 

I ,jjained diffi e 

Net lOn latemMt of Receipts 

ted from the following: 

s not reported $ 28,534 

(2,026) 

m 

^ 26.721 

The $461 understa of the ending cash balance on December 31,2010, resulted 

from the misstatemeto described above, as well as discrepancies in the beginning cash 

balance on January 1,2010, and disbursements. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed the misstatements with SDDP 

representatives and provided copies of relevant schedules. SDDP filed amendments 

* The beginning cash balance was not carried forward correctly from the previous period. 

^ This column does not total due to discrepancies throughout 2010 between reported amounts for ending 

cash and the subsequent period's beginning cash balance. 
correcting the misstatements for 2009 and said that it would file corrective amendments 

for 2010. 

The Interim Audit Report recommended that SDDP amend its reports to correct the 

misstatements noted above for calendar year 2010 and amend its most recently filed 

report to correct the cash-on-hand balance with an explanation that the change resulted 

from a prior period audit adjustment. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendations, SDDP reconciled its accounts 

and filed amended reports for 2010 that materially corrected its mfestatements.^ 

Finding 2. Recordkeeping for Emplo: 

Summary 

During audit fieldwork, the Audit staff d 

monthly payroll logs, as required, to documi 

spent on federal election activity. For 2009 and 2 

to SDDP employees totaling $60,143. for which montl 

maintained. This consisted of $42,S^^ported as all 

that SI^P did not ny 

Tcent^^of time eac oyee 

staff identi^ed payments 

ayroll logs were not 

setween federal and nonfederal funds; $15,187 that was paid 

that was paid from an exclusively non-fi 

employee was also paid from a federal 

audit, SDDP filed amen^i^aprts for 200* 

(Federal Election with 100 

Interim Audit Repfifw mme^tion, Couni 

on their reports to Fei ty. 

resolved. 

dusively nmS^^eral account; and $2,399 

during^iods in which the same 

it^^SQBS^^^to being notified of the 

^losing^^llocated payroll on Line 30b 

;nt federal funds. In response to the 

dd SDDP moved all payroll expenses 

'Audit staff considers this matter 

Legiil >tandanl 

MaiA- of Mont 

of time e'^^^ployee sp£ 

salaries, wa^ I fringe' 

• Emplo ^ho s[ 

)gs -fimittees must keep a monthly log of the percentage 

in connection with a federal election. Allocations of 

lefits are to be undertaken as follows: 

^d 25 percent or less of their compensated time in a given 

month on fmfiraki^ction activities must be paid either from the federal account 

or have their^^illocated as administrative costs; 

Employees mo spend more than 25 percent of their compensated time in a given 

month on federal election activities must be paid only from a federal account; and. 

Employees who spend none of their compensated time in a given month on 

federal election activities may be paid entirely with funds that comply with State 

law. 11 CFR§ 106.7(d)(1). 

' During SDDP's reconciliation, additional information was provided to the Audit staff for which 

adjustments were made to the misstated amounts in this report. 
Facts and Analysis 

A. Facts 

During fieldwork, the Audit staff reviewed disbursements for payroll. SDDP did not 

maintain any monthly logs or equivalent records to document the percentage of time each 

employee spent in connection with federal election activity. These logs are required to 

document the proper allocation of federal and non-federal funds used to pay employee 

salaries and wages. For 2009 and 2010, SDDP did not maintain logs for $60,143^ in 

payroll. This consisted of $42,SS7, reported as allocated between federal and non-federal 

funds; $15,187 that was paid from an exclusively non-federal account, and $2,399 that 

was paid from an exclusively non-federal account but also inclui mployees paid from 

a federal account during the same periods. ^ ^ 

Subsequent to audit notification, SDDP filed amended regp i^lendar year 2009 that 

moved all previously allocated salaries to Line 30b, Elec^^^ctivitv. The 

remaining payroll amount was immaterial. DuringJ^^frc, the A^i^taff asked 

SDDP representatives why SDDP made changes'^ its 2009 payroll di^ s. SDDP 

representatives said the following: > ^ 

These changes were made as the result of two tl^m The first is that due 

to the fact that allocation transf(^were never co^^t^d for these 

individuals' expense, these items reDorted?^|eondlv. with the 

knowledge of their roles, it is um eir tim^^^pent beyond 

25 percent on federal activity. 

The Audit staff ackno 

payroll obviates the^a^d for 

exclusively fed 

after notification of the 

B. Intel 

At the^it conference,' 

logs to ^^the amount 

that SDEM^^gsition is th 

100 percent i^^l. The 

reports that hadm all 

no further action ^ ra 

the chanf^made by^DDP in the reporting of its 

ily timesh«|s since the payroll was paid with 

irted as such^^^owever, since SDDP amended reports 

in this audit report. 

it Division Recommendation 

staf^^sfated the matter of maintaining monthly payroll 

ne si^^on federal election activity. SDDP Counsel stated 

lO payroll logs are required for activity reported and paid as 

rim Audit Report noted the verification of SDDP's amended 

ted payroll to Line 30b, Federal Election Activity, and that 

red. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation. Counsel reiterated previous 

comments regarding payroll and filed more amendments that reported 2010 payroll 

expenses on Line 30b. The Audit staff considers this matter resolved. 

^ Amounts are net of payroll taxes and benefits. This total does not include payroll for employees paid 

with 100 percent federal funds and reported as such. (See Part I, Background, Commission Guidance, 

Request for Early Consideration of a Legal Question, p. 1). For all future payroll, the Audit staff 

recommended that SDDP maintain payroll logs for all employees. 
Finding 3. Reporting of Coordinated Party Expenditures 

Summary 

The Audit staff found that SDDP made an apparent excessive in-kind contribution of 

$16,277 to a House candidate, resulting from coordinated expenditures made in excess of 

the coordinated party spending limitation. During the audit exit conference, SDDP 

officials stated that they had erroneously reported $19,529 for two direct mail pieces as 

Coordinated Party Expenditures on Schedule F, Line 25, when the expenditure was 

actually for Federal Election/Exempt activity, that SDDP should have reported on 

Schedule B, Line 30b. SDDP argued that the disbursements sh^^Kipt have been 

counted towards its coordinated party expenditure limit beca^^he disbursements 

qualify for the volunteer materials exemption but were no^^^^v disclosed on its 

reports. However, SDDP provided only limited evidenc^at i activity existed. 

In response to the Interim Audit Report reconunen^tions', SDDP ami 

disclose $19,529 as a volunteer exempt expens^md provi^d a signed 

this type of mailing was generally performed'py^ 

regarding the level of volunteer involvement needi 

exemption, as well as the amount of documentation 

exemption, the expenditures are no loi ng attribui 

expenditure limit. 

Legal Standard 

A. Coordinated 

committees may eaci 

general election ci 

11 CFR§ 109.32(b). 

reports to 

that 

iven the unc^^nty 

Ify^or the volufmer materials 

to support such an 

DDP's coordinated 

|i-!iiure. Nai 

nated part; 

f a ididate in 

part> w^..x..ttees and state party 

xpenditiu^s in connection with the 

^e who is affiliated with the party. 

B. Assii 

assign^^authority i 

com^^^^Such an asi 

authority^^gned, and bd' 

expenditure^pde pursui 

assigned autho^pip make 

assignment for at 

irty £]^enditure Limit. A political party may 

e c< jtej, party expenditures to another political party 

mt r^P^e made in writing, state the amount of the 

eived^y the assignee before any coordinated party 

to the assignment. The political party cormnittee that is 

ordinated party expenditures must maintain the written 

years. 11 CFR §§104.14 and 109.33(a) and (c). 

C. Exempt Activit^fThe payment by a state committee of a political party of the costs 

of campaign materials (such as pins, bumper stickers, handbills, brochures, posters, 

party tabloids or newsletters, and yard signs) used by such committee in connection 

with volunteer activities on behalf of any nominee(s) of such party is not a 

contribution, provided that the following conditions are met: 

• Such payment is not for cost incurred in connection with any broadcasting, 

newspaper, magazine, bill board, direct mail, or similar type of general public 

communication or political advertising. The term direct mail means any 

mailing(s) by a commercial vendor or any mailing(s) made from commercial lists; 
10 

The portion of the cost of such materials allocable to Federal candidates must be 

paid from contributions subject to the limitations and prohibitions of the Act; 

Such payment is not made from contributions designated by the donor to be spent 

on behalf of a particular candidate for federal office; 

Such materials are distributed by volunteers and not by commercial or for-profit 

operations; 

If made by a political committee such payments shall be reported by the political 

committee as a disbursement in accordance with 11 CFR §104.3 but need not be 

allocated to specific candidates in committee reports; and 

The exemption is not applicable to campaign materials purchased by the national 

party committees. 11 CFR §100.87 (a), (b), (c), (d), (e) "1^ and 11 CFR 

§100.147 (a), (b),(c),(d),(e) and (g). 

D. Coordinated Party Communication. A political 

coordinated with a candidate, a candidate's authorize^^i 

foregoing, when the communication satisfies the 

(1) The communication is paid for by a pdi 

(2) The communication satisfies at least one o 

ittee or its 

idards. ^ 

1 of defeat 11 CFR 

and is d 

(3) The commuim 

§109.21(d)^Jr 

and (h). 

Must expressly advocate a candidate'? 

§ 100.22(a) and (b). 

Involve the disseminat >n or 

campaign materials. 

Refers to a federal candid^ is d 'candidate's constituents 

dthin ce^^^me frai^^efore an election, 

es at least^e of the conduct standards in 11 CFR 

6), subject t| provisions of 11 CFR § 109.21 (e), (g). 

I tion of a candidate's 

ugh 

N^iict Vi I' diSd or distributed at the request of the 

;ent. 

^ial involvement" of the candidate. 

e< i^ributed after "substantial discussion" with the 

agents. 

nmon vendor in the creation, production or distribution of 

n. 11 CFR §109.37. 

Facts and Anal 

A. Facts 

The combined coordinated party expenditure limit for a 2010 candidate for the House of 

Representatives from South Dakota was $174,000, with an $87,000 limit for both SDDP 

and the National Party (Democratic National Committee (DNC)). SDDP reported 

coordinated expenditures of $164,229^ on Schedule F (Itemized Coordinated Party 

Expenditures) for Stephanie Herseth Sandlin, a candidate for the House of 

' Of the SI 64,229 reported on Schedule F, SDDP provided assignment letters disclosing that the DNC 

(through DCCC) designated it to make expenditures of SI 43,809 on behalf of the candidate. 
11 

Representatives. The Democratic Congressional Campaign Committee (DCCC) reported 

coordinated expenditures for the candidate of $26,048. The total reported coordinated 

expenditures by both the SDDP and the DCCC exceeded the coordinated expenditure 

limit by $16,277. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided a schedule of the coordinated 

expenditures subject to the limit and discussed them with SDDP representatives. During 

the discussion, SDDP representatives said that the SDDP had erroneously included a 

direct mail piece costing $19,529 in its Coordinated Expenses of $164,229 and that it 

should have reported this expenditure as volunteer exempt activit 

The Audit staff requested further documentation to support Jt^teporting of the direct 

mailers as exempt activity. In response, SDDP providedj^i€mn^if volunteers working 

on the direct mailers. It is also noted that the vendor &r^g two ^^mail pieces was 

the same as the vendor used for other direct mail p^^^ported as 1^ <(empt 

activity. 

Both mail pieces are brochures containing four pa{ 

One of the mail pieces emphasizes the words, "Rec! 

plans of the opposing political party'^^gressional 

message is that the candidate,".. .does^&^right for So 

goes on to discuss, primarily, MedicareW^l^didate's am 

and plans are provided. The final words m the 

candidate.^ 

...kg the back anS^front cover. 

Wrong" when discussing the 

te. The other mail piece's 

Seniors," and then 

^^pponent's viewpoints 

;e a no vote for the other 

The Commission < ssed tl plicability ^the volunteer materials exemption in the 

Final Audit Reports dl 

Tennessee Republican 

clarity exijls^l^^lkg the' 

Commh 

substa^kl volunteer 

was ne^^chieved. Sin 

volunteer ^^dals exempt 

needed to sura olunt 

atic Executi^gTommittee of Florida and the 

le Conunission recognized that a lack of 

itionSra^olunteer materials exemption. The 

to fSgtnulate a consensus policy regarding what constitutes 

lemr^^jfe purpose of applying the exemption,but this 

ck molarity exists concerning the application of the 

, it rollows that the type and amount of documentation 

ivolvement is also unclear. 

In view of the uni regarding the amount of volunteer involvement needed to 

qualify for the volur^r materials exemption and to document that involvement, the 

Interim Audit Report recommended that SDDP provide a more detailed statement" 

and further documentation regarding the volunteers' involvement for the two mailers. In 

addition, that SDDP should amend its reports in accordance with its earlier statements at 

the audit exit conference. Absent such further information, the disbursement might have 

Each mailer includes a statement, "Paid for by the South Dakota Democratic Party." 

Proposed Interim Enforcement Policy, Agenda document No. 10-16. 

" SDDP might want to consider providing a sworn statement which might be considered stronger evidence 

of volunteer involvement. 
12 

been considered a coordinated expenditure, resulting in SDDP exceeding the coordinated 

expenditure limit by $16,277. 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendations, SDDP amended its filing to 

show $19,529 as a volunteer exempt expense and provided a signed declaration that this 

type of mailing was generally performed by volunteers. 

Given the lack of clarity regarding the amount of volunteer involvement needed to 

qualify fpr the volunteer materials exemption, as well as the amoi^tof documentation 

required to support such an exemption, the expenditures for v^|mt^«SDDP claims as 

qualifying for a volunteer exempt activity are no longer bei^^^ibuted to SDDP's 

coordinated expenditure limit and this matter is conside 

Finding 4. Contributions from 

Organizations 

registered Po 

Summary ^ 

SDDP received contributions totaling 

that may not have used permissible fui 

of the $14,831, though it did so in an unf 

Tom unre: 

jfunded 

political organizations 

itions totaling $4,891 

In response to the Ini 

from contributors c 

SDDP provided dpi 

reimbursement from a 

adisgorgei for 

impermisS is 

5rt recS^endatic 5DDP provided signed letters 

Tiing^Hj^$3.140 we^from permissible sources. In addition, 

[tation^pporting thaM^OO was not a contribution but rather a 

littee r^^ed to a door hanger. SDDP also issued 

! U.S. Treasury for the balance of the 

A. Pa 

$10,000 per 

party commi 

§441a(a)(l)(C),(2 

dard 

nittee I A ^arty committee may not receive more than a total of 

m any^e individual. This limit is shared by state, district, & local 

U.S.#§ 30116a(a)(l)(C),(2)(C) and (f) (formerly 2 U.S.C. 

(f)); 11 CFR §§110.1(a) and (d) and 110.9(a). 

B. Handling Contributions that Appear Impermissible or Excessive. If a committee 

receives a contribution that appears to be impermissible or excessive, the committee must 

either: 

1. Return the questionable check to the donor; or 

2. Deposit the check into its federal account and: 

• Keep enough money in the account to cover all potential refunds; 

• Keep a written record explaining why the contribution may be illegal; 
13 

• Include this explanation on Schedule A if the contribution has to be itemized 

before its legality is established. 11 CFR § 103.3(b)(3), (4) and (S). 

C. Receipt of Contributions. Organizations that are political committees under the Act, 

other than national party committees shall establish a separate Federal account in a 

depository in accordance with 11 CFR part 103. Such account shall be treated as a 

separate Federal political committee that must comply with the requirements of the Act 

including the registration and reporting requirements of 11 CFR parts 102 and 104. Only 

funds subject to the prohibitions and limitations of the Act shall b^eoosited in such 

separate Federal account. 11 CFR § 102.S(a). 

Facts and Analysis 

A. Facts ^ 

During the 2010 audit cycle, SDDP deposited Ij^^tributions, totalii j83 X, from 

unregistered political organizations into its fejd^^ccounl -llowing the^^pimce of 

the audit notification letter, SDDP issued untimelW iing $4,891 ,i^DDP has 

taken no action with respect to the remaining $9,94( : Audit staff considers the 

contributions at issue impermissible & lesolved 

The Audit staff reviewed all documen 

contributions received from unregistered 

notations in SDDP rec( 

funds." However, they/ 

of those contributi 

found no attempt 6n 

political organizations' 

B. 

Duripi^udit fieldwoi 

respon^^^t one of thi 

for door h^^rs. not as a 

that an effort^^d be m; 

substantiate th^ 

lade stai 

found no 

ig notified 

DP to 

lining to 

In several instances, 

into the federal committee 

pt on tM[6 part of SDDP to make refunds 

audit. In addition, the Audit staff 

le permissibility of other unregistered 

Division Recommendation 

ted this matter to SDDP representatives. SDDP 

for $5,000 should have been reported as an offset 

jtribution. In addition, the SDDP representatives also said 

to contact the unregistered political organizations to 

from permissible sources. 

The Audit staff requ^Sied additional information concerning the door hangers and the 

results of SDDP's efforts to contact unregistered political committees to substantiate that 

the funds were from permissible sources, but received no further information. Absent 

such additional information, the Audit staff concluded that these items were 

impermissible contributions that needed to be refunded to the contributors or disgorged to 

the U.S. Treasury. 

" SDDP issued refund checks totaling S6,691 but only S4,89l has cleared SDDP's bank account. 
14 

The Interim Audit Report recommended that SDDP provide documentation that 

demonstrates $9,940 in questioned contributions were made with permissible funds or 

that they be refunded to the contributor or disgorged to the U.S Treasury. 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendations, SDDP provided eight signed 

letters from contributors confirming that $3,140 were from permissible sources. In 

addition, SDDP provided documentation supporting that $5,000 was not a contribution 

but rather a reimbursement from a non-federal committee related to a door hanger. 

SDDP also issued a disgorgement check for $1,800 payable to the U.S. Tre^ury for the 

balance of the impermissible contributions. 

I Finding 5. Disclosure of Occupation 

Summary 

The Audit staff reviewed individual contribu 

found that 78 contributions totaling $30,702 

and/or name of employer (OCC/NOE) information? 

of the audit, SDDP did not sufficiently document "bei 

submit contributor information. Afte%s^g notified of 

of the missing contributor information ^^^.amended 

which materially corrected the disclosur^f 

itemizatio jMuired, and 

isclosure of ^^ipation 

prior to the notification 

irts" to obtain, maintain, and 

idit, SDDP obtained some 

ir calendar year 2009, 

In the Interim Audit 

additional informati 

response to the ai 

reports to include pi 

contributio"" ^ 

idard 

ition req 

i an authori 

if it exc^ 00 per 

contributi* om the 

U.S.C §434i 

adit staff^^mmend^hat SDDP provide any 

relevant t%his matter. SDDP made no comment in 

, :ver, althou^njqt required, SDDP amended its 2010 

)CC^©E information for $10,206 in 

r Conmnutions from Individuals. A political committee 

mmmee must itemize any contribution from an individual 

dar year, either by itself or when combined with other 

e contributions. 52 U.S.C. § 30104(b)(3)(A) (formerly 2 

B. Required Infori^tion 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 calendar year-to-date total of all contributions fixim the same individual. 

11 CFR §§100.12 and 104.3(a)(4) and 52 U.S.C. § 30104(b)(3)(A) (formerly 

2 U.S.C §434(b)(3)(A)). 
15 

C. 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. 52 U.S.C. § 30102(h)(2)(i) (formerly 2 

U.S.C §432(h)(2)(i)). 

D. Definition of Best Efforts. The treasurer and the committee will be considered to 

have used "best efforts" with respect to contributions, if the committee satisfied all of 

the following criteria: 

• All written solicitations for contributions included: 

o A clear request for the contributors full name 'lingliddress, 

occupation, and name of employer; and 

o The statement that such reporting is req 

• Within 30 days after the receipt of the co: 

one effort to obtain the missing infoi 

documented oral request. 

• The treasurer reported any contribtl 

provide by the contributor, was obtaim 

contained in the committees' records or i 

filed during the same two^ ;. 11 

n, the 

either a 

Law. 

wer made at least 

quest or a 

Facts and Analysis 

that, althoi nitially 

ro^up communication or was 

' reports that the committee 

.7(b). 

A. Facts 

Using the most recen^'i, 

determined that 

percent of itemized cor 

of employer (QQC/NOE) 

"best ' "tbf 

^n. 

he audit p^od filed j^ior to the audit, the Audit staff 

-om individn^ totaling $30,702 (approximately 24 

lacked adeqi^^disclosure of occupation and/or name 

%e errors either disclosed a notation, 

the^SIS^ule A, Itemized Receipts, filed with the 

4 

After notE^tion of thi ^ an^ p. .or to audit fieldwork, SDDP provided the Audit staff 

with copie^^etters that ^^e sent to contributors to obtain OCC/NOE information. 

These letters ^^dated al^ SDDP was notified of the audit. Also, after notification of 

the audit, SDDP^^ Mndroed reports for 2009 that materially corrected the previously 

undisclosed OCC/hj^^mformation. Since SDDP took corrective action after 

notification of the aul^, this matter is included in this audit report. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the disclosure of OCC/NOE information with SDDP 

representatives at the exit conference and provided a schedule of the remaining errors. 

The Interim Audit Report recommended that SDDP provide any additional information it 

considered relevant to this matter. 
16 

C. Committee Response to the Interim Audit Report 

SDDP made no comment in response to the Interim Audit Report. However, although 

not required, SDDP amended its 2010 reports to include previously undisclosed 

OCC/NOE information for $10,206 in contributions from individuals.