FEDERAL ELECTION COMMISSION WASHINGTON, D.C. 20463

 

 March 7, 2019 

MEMORANDUM

TO: Patricia C. Orrock

 Chief Compliance Officer 

 

FROM: Neven F. Stipanovic 

 Acting Associate General Counsel 

Policy Division

 Lorenzo Holloway

 Assistant General Counsel

 Compliance Advice

Margaret J. Forman

Attorney

SUBJECT: Interim Audit Report on the South Dakota Democratic Party (LRA 1094) 

I. INTRODUCTION

The Office of the General Counsel has reviewed the Interim Audit Report (“Proposed 

IAR”) on the South Dakota Democratic Party (“Committee” or “SDDP”). The Proposed IAR 

contains three findings: (1) Misstatement of Financial Activity – Increased Activity; (2) 

Contributions from Unregistered Political Organizations; and (3) Reporting of Debts and 

Obligations.

1 We concur with the findings, and we comment on the recommendation for Finding 

2. If you have any questions, please contact Margaret Forman, the attorney assigned to this 

audit. 

 

1

 We recommend that the Commission consider this document in Executive Session because the Commission 

may eventually decide to pursue an investigation of matters contained in the proposed IAR. 11 C.F.R. §§ 2.4(a) and 

(b)(6).
IAR on South Dakota Democratic Party (LRA 1094)

Page 2 of 3 

II. FINDING 2 – CLARIFICATION OF HOW COMMITTEES MAY SHOW THAT 

CONTRIBUTIONS FROM UNREGISTERED POLITICAL ORGANIZATIONS ARE 

MADE WITH PERMISSIBLE FUNDS

 The Audit Division determined that SDDP received $67,182 in contributions from 

unregistered political organizations, and that these contributions may not have been made using 

funds permissible under the Federal Election Campaign Act (“Act”). The Audit Division 

includes a recommendation that SDDP provide evidence that the receipts were made from 

permissible funds. Proposed IAR at 6. 

We recommend that the Audit Division revise the recommendation to address the fact 

that some of the unregistered organizations that made the contributions were state committees 

that, under South Dakota law, may accept contributions from corporations and unions.2 

contributions from unregistered organizations are unless the audited committee can 

provide documentation from the unregistered organization attesting to the permissibility of the 

contributions. .

3

 11 C.F.R. § 103.3(b)(1). See id. However, if the 

unregistered political organization accepts funds that are not permissible under the Act, 

 the audited committee should include information on how it was 

determined that sufficient permissible funds were on hand when the contribution was made. 

. 

During the audit cycle at issue here, South Dakota law allowed candidate and party 

committees to accept contributions from these state committees (“state PACs”), see supra note 2, 

which may accept contributions from corporations and unions. S.D. Codified Laws (West) 

§§ 12-27-7, 12-27-9, 12-27-10 (2016); see 2017 SD Session Laws Ch. 222 (Initiated Measure 

22) §§12-27-7, 12-27-9, 12-27-10 (Westlaw).4 

 

2

 Under South Dakota state law, these state committees are referred to as political action committees, and are 

not federal committees. S.D. Codified Laws (West) § 12-27-1(17). No committees with the same names are 

registered with the Commission. 

3

 This documentation includes, but is not limited to, a written statement from the unregistered organization 

explaining why the contributed funds are legal, or a written statement by the audited committee’s treasurer 

memorializing an oral communication which explains why the contributed funds are legal. 11 C.F.R. § 103.3(b)(1). 

See e.g., . In past audits, including the 2010 audit cycle pertaining to this Committee, the 

Commission has permitted this to be accomplished by the committee producing a letter signed by the contributor, 

simply stating that the contributor certifies that the specific campaign contribution originated from federally 

permissible sources.

4

 In 2017, South Dakota law changed to allow contributions to candidates and party committees from 

corporations and unions, S.D. Codified Laws (West) §§ 12-27-7, 12-27-9, 12-27-10 (2017); see 2017 SD Session 

Laws Ch. 222 (Initiated Measure 22) §§12-27-7, 12-27-9, 12-27-10 (Westlaw); National Conference of State 

Legislatures, State Limits on Contributions to Candidates, 2015-2016 and 2017-2018 

(http://www.ncsl.org/Portals/1/documents/legismgt/elect/ContributionLimitstoCandidates2015-2016.pdf , 

http://www.ncsl.org/Portals/1/Documents/Elections/Contribution_Limits_to_Candidates_2017-2018_16465.pdf).
IAR on South Dakota Democratic Party (LRA 1094)

Page 3 of 3 

Three of the unregistered political organizations from whom SDDP received 

contributions appear to have been state PACs. Because these state PACs could have accepted 

corporate and union contributions under South Dakota law during the audit period, SDDP may 

have received impermissible contributions. 52 U.S.C. § 30118. We, therefore, recommend that 

the Audit Division revise the Proposed IAR to clarify that SDDP should include information on 

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

were made. .