Draft Final Audit Report of the 

Audit Division on the 

North Dakota Republican 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 mc 

the threshold ^ ' 

requirements for 

substantial complian. 

with the Act.* The a'!dit 

determinj^*' :)•" 

comn.'.i'i'j compile! 

the lif- iff.-: i<ns, 

prohibit • •:..< d 

disclosure w<\'i -•: ..-i ts 

of the Act. 

.4 

Future Action 

The Commission m ^ 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Committeej||||^ 

The North Dakota Republicanji^yM^ a state party committee 

headquartered in Bismarck^N ?:'>y^akota. For more 

information, see the chai^m the"^}:. ..littee Organization, p. 2. 

Financial Ao^i ^ (p. 2) * . . 

• Receipts V ^ ^ 

o Contrib •" •^^omjlijviduals $ 1,322,913 

o ContributioiSf: ••fPoUncal Committees 41,050 

o ^ Transfers from A.. . ates 175,358 

o ! .. - Received 10,325 

o i —.N".-:'" omNoi. ..-i'*" .-ifAccounts 114,818 

o d^e. 1 J.. •K.ceipts^ 61,906 

Total Miceyb * $1,726,370 

Disburseraents 

o Operati!l| Expenditures 

. TransferJIo Affiliates 

^- ! ^-i." 1^. payments Made 

0 Feaeral Election Activity 

. Other Disbursements 

tal Disbursements 

$ 1,424.962 

23,536 

51,646 

212,263 

5,075 

$ 1,717,482 

Findings .and Reconunendations (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Reporting of Debts and Obligations (Finding 2) 

' 2U.S.C.§438(b). 

^ Formerly known as the North Dakota State Republican Committee. 
Draft Final Audit Report of the 

Audit Division on the 

North Dakota Republican Party 

(January 1, 2009 - December 31, 2010) 
Table of Contents 

Part III. Summaries 

Findings and Recommendations < 

4-

, 'r 

^ • 

Page 

Part I. Backgromid 

Authority for Audit 1 

Scope of Audit 1 

Part 11. Overview of Committee 

Committee Organization " 2 

Overview of Financial Activity 2 

Part IV. Findings and RecommphdatiOi^s / 

Finding 1. Misstatementof Financial AcSvi; ,^ ^ ^ 

Finding 2. Reporting of Debts and Obligations' 7 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the North Dakota Republican Party (NDRP), 

undertaken by the Audit Division of the Federal Election Commission (the Conmiission) 

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 pol|Pial committee that is 

required to file a report under 2 U.S.C. §434. Prior to conducjjpi^an^udit under this 

subsection, the Commission must perform an internal revi^ 

committees to determine whether Uie reports filed by a pmcui 

threshold requirements for substantial compliance wi^tnlL^ct. 

Scope of Audit 

Following Commission-approved procedures^ :. 

factors and as a result, this audit examined: 

iCe wi||ktni 

filed by selected 

. -nittee meet the 

.^.C. §438(b). 

\ tlitstAevaluated variQajTrisk 

1. 

2. 

3. 

4. 

5. 

6. 

the disclosure of individual contr^"- . •' occupation ••^Miame of employer; 

the consistency between reported 1 • .: isi-.ii bank ic. iT?^; •» 

l^ns; pr' 

-:. -: ^(on 

consistency between reported 

the disclosure of disbursements, debli 

the disclosure of expenses allocated b%vee 

the disclosure of in('.: \' !iv-.t expendit 

thecompletenes-vij'!! i ".*: 

7. other committ|(B ..tions ..-.•cessary to 

ibn-federal accounts; 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration April 17.1972 

• Audit Coverage January 1,2009 - December 31,2010 

Headquarters Bismarck, North Da'^j^ ^ 

Bank Information y 

• Bank Depositories 

• Bank Accounts Nine Federal;lE^urN -. .'^eral 

Ireasurer 

• Treasurer When Audit Was Conducted Roberti farms ^ 

• Treasurer During Period Covered by 

Audit Robern 

ffpkach^l/09 - 7/12/• 

^:|BJ(Q9 - present> 

Management Information 

• Attended Commission Campaign 

Finance Seminar 

Yes 

Who Handled Accounting and 

Recordkeeping Tasks 

' HH P 

Overview of Fijbncial Activity 

(Audited iA^flnmts) 

Cash-on-hand|p^pMriisir> -^-^ $ 2,151 

Receipts Jr ^ 

o Q^bbutionsfromii^'' !du.-'* ^ 1,322.913 

o Conii|Hions from P(-'i' i il CoijpRiittees 41,050 

o TransfUj^m Affil: '.•<• 175,358 

o hoBus R&c^^^ W 10.325 

o Transfers frolii||pn-ylllral Accounts 114.818 

o Other Federal lC8|Ms 61.906 

Total Receipts r $1,726370 

Disbursements 

o Operating Expenditures 1.424.962 

o Transfers to Affiliates 23.536 

o Loan Repayments Made 51.646 

o Federal Election Activity 212,263 

o Other Disbursements 5.075 

Total Disbursements $1,717,482 

Cash-on-hand @ December 31,2010 $ 11,039 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork. a comparison of NDRP's reported financial activity with its bank 

records revealed a misstatement of the beginning cash-on-hand balance in 2009 and 

receipts and disbursements in 2009 and 2010. For 2009. NDRRg|k^ated its beginning 

cash-on-hand balance by $13,345 and understated receipts ai./. msbu^ments by $21,935 

and $17,282, respectively. In 2010. NDRP understated Teqgf\t'ii .d disbursements by 

$159,262 and $222,982, respectively 

In addition, NDRP filed original reports for 2009ZviO that were ^ally 

understated. Specifically, NDRP's original re - • under^ted disburs is' -bv 

$657,482 in 2009 and 2010. Amended report j-iior to i" e notificatic-s i-""€iis audit 

did not correct the misstated disbursement activit'- ' ^ ^ 

In response to the Interim Audit Rep8^: . /ommendatio :^. M )RP attempted to correct 

the public record by filing amended d -eports. H -'-.. ^ - . she amendments only 

materially corrected receipts for 2010. P • ' 09 and .: • irsements for 2009 and 

2010 remain misstated. \ f 

Regarding the undersyit-:. " ^i. ..isbursemca activity ^NDRP's original reports, 

NDRP did not subH^Aav coni. ..its on the i^ter^ (For more detail, see p. 4.) 

Finding^ngepoinSjBP^ Obligations 

Audit fi^WfflMntej d thaHDRP did not disclose debts and obligations for nine 

vend.* :otaling $23Sfrj i. onS^-." "« D (Debts and Obligations) of its disclosure 

rep* i • fjjjesponse to •"'.i' 1: "lerim -Ai-z.it Report recommendation, NDRP filed amended 

reports tofl^^" -se these dl » * and^ligations. (For more detail, see p. 7.) 
Part IV 

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork. a comparison of NDRP's reported financial activity with its bank 

records revealed a misstatement of the beginning cash-on-hand balance in 2009 and 

receipts and disbursements in 2009 and 2010. For 2009, NDRPjj|g|stated its beginning 

cash-on-hand balance by $13,345 and understated receipts J fT^bufStements by $21,935 

and $17,282, respectively. In 2010, NDRP understa . " . disbursements by 

$159,262 and $222,982, respectively .' ^ 

In addition, NDRP filed original reports for 2009^^ zulK) that were I'.o'.-ially 

understated. Specifically, NDRP's original n .-..i-. - underrated disbursefJ:.; 

$657,482 in 2009 and 2010. Amended report^:• a:; • or ti: ••.^ notificatii-.. o: mis audit 

did not correct the misstated disbursement activit) \ ^ 

In response to the Interim Audit RepS • .• jommendatic-" -s. M )RP attempted to correct 

the public record by filing amended d.-*-"'.> :eports. Hi-;4i e amendments only 

materially corrected receipts for 2010. U;.-. - '} » .r' . '^'^9 anc -.irsements for 2009 and 

2010 remain misstated. 

Regarding the undersfei'..: -• ••.•j^isbursemSt activity ^NDRP's original reports. 

NDRP did not sul^;, >\\ commits on the in^ter.^ 

Legal Standard - " 

Contents Q|||9Q|rl<>. Ta.!. •"•iprt ^.u^i J±&;;lose: 

• ^eamounl »''V.=»li oinmlat the beginning and end of the reporting period; 

• 'otal amouni o:'! .-jeiplBp^e reporting period and for the election cycle; 

• i ••• 'atal amount of \\ ^bursments for the reporting period and for the election 

cycflnd 

certain1B||)jsactions''' at require itemization on Schedule A (Itemized Receipts) or 

ScheduleWlemi^ Disbursements). 2 U.S.C. §434(b)(l). (2), (3), (4) and (5). 

^ On average, NDRP filed four amended reports per reporting period. There were seven reporting periods 

during 2010 in which NDRP filed six or more amendments for the reporting period. 
Facts and Analysis 

A. Misstatement of Financial Activity - 2009 and 2010 

1. Facts 

As part of this audit, the Audit staff reconciled NDRP's reported financial activity 

with its bank records for 2009 and 2010. The following charts outline the 

discrepancies between NDRP's disclosure reports and its bank records. 

Succeeding paragraphs explain why the discrepancies occurred. 

2009 Committee Activity ^ 

Reported Bank Records ^^"" ^ Discrepancy 

Beginning Cash-on-Hand 

@ January 1,2009 

Receipts 

$15,496 $2,151 $13,345 

Overstated 

Understated 

Disbursements $497,890 ^15.172 

f llnJlh. 

• ^ ($17,282) 

. l.-'derstated 

Ending Cash-on-Hand 

©December 31,2009 

$80,613 $8,692 

Overstated 

The overstatement of beginnin; .. ^. -: hand of^i'X • lively resulted from 

prior-period discrepancies. 

\ 

isun. 

The understateme"* ir 'pc^ipts resuff.»" ffom me '•pJ.Jwing. 

• Transfers fioi: •-Meral accoui^ not reposJEd* 

• Non-fed|H^ceipt?worted in errar^ 

• Receiptsnflh|prtedV| ^ 

• Unexplained ffln£pf^>>^ #^ 

NetJfpvrslMk-men|[iil Ki-a-ipls _ 

.. understati-i 

bits and chi 

rted disb 

• Ui!l|^^ned di: 

NetUndn^temjrt 

disiflhpfents resulted from the following, 

that cKe d the bank, not reported 

ents that did not clear bank accounts 

nee 

of Disbursements 

$ 94,500 

(85,230) 

12.811 

(146^ 

$ 21,935 

$ 25.492 

(8.629) 

419 

$ 17,282 

The misstatei^ts described above resulted in the overstatement of ending cashon-hand by $C692. 

* In July 2009, NDRP failed to disclose two transfers ($60,000 and $34,500) from its non-federal account 

to its fedoral account. 

^ These receipts consist of individual ($83,865) and PAC ($1,365) non-federal contributions that NDRP 

deposited into a non-federal account but mistakenly included in its disclosure reports. 
2010 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash-on-Hand 

@ January 1,2010 

$80,613 $71,921 $8,692 

overstated 

Receipts $982,166 $1,141,428 ($159,262) 

understated 

Disbursements $979,328 $1,202,310 ($222,982) 

understated 

Ending Cash-on-Hand 

@ December 31,2010 

$83,451 $11,039 ^ 

A 

. $72,412 

overstated 

The understatement in receipts resulted from the fitfowii -. 

• Transfers from non-federal account, not rCT||toelk 

• Republican National Committee transfgi^otreported 

• Non-federal political action conmiit^-.-. ontribu(^ns 

reported in error ^ 

• Bank interest received, not reported ^ 

• Unexplained difference 

Net Understatement of Re< 

The understatement in disbursemi 

Media and operating disburse: 

Transfers to 

Inter-acco 

In-kind 

Disbursemd 

lined 

Mfineif 

al accoum 

eported i 

t reported 

wice 

...".i".. .romthe 

reports 

owmg. 

$ 20,318 

79,400 

^ 236 

61.358 

$ 159,262 

$244,047 

20.475 

(37,151) 

7,448 

(7.936) 

(3.90n 

Isbursenvents 

jnisstatemei:'^ J.*«.scril\-i: 

onAid by $72,41 

$222,982 

i^|(^e resulted in the overstatement of ending cashInterim Aldit Rep A & Audit Division Recommendation 

The Audi?n|^i|^sed the misstatements for 2009 and 2010 with NDRP 

representativelUBring the exit conference and provided copies of relevant work 

papers detailii^the misstatements. The representatives asked questions and made 

comments regarding the reconciling adjustments presented and stated that the 

necessary amended reports would be filed in response to the Interim Audit Report. 

The Interim Audit Report recommended that NDRP amend its disclosure reports to 

correct the misstatements noted above and reconcile the cash-on-hand balance on 

its most recent report to identify any subsequent discrepancies that may have 

^ These disbursements consist of media ($109,722), operating ($124,511) and merchant fee ($9,814) 

payments that cleared the bank account but were not reported by NDRP in its disclosure reports. 

^ NDRP mistakenly included these inter-account transfers in its disclosure reports as operating 

expenditures. 
affected the recommended adjustments. Further, NDRP was to adjust the cash-onhand balance as necessary on its most recent report, noting that the adjustment was 

the result of prior-period audit adjustments. 

3. Committee Response to Interim Audit Report 

In response to the Interim Audit Report reconmiendation, NDRP filed amended 

disclosure reports for 2009 and 2010. However, these amendments did not 

materially correct the receipt or disbursement misstatements. To assist NDRP with 

correcting the public record, the Audit staff thoroughly discussed the adjustments 

needed to materially correct the reports for both years. NDRP filed a second set of 

amended reports. However, these reports only materially cjgrected receipts for 

2010. Receipts for 2009 and disbursements for 2009 and^M^emain misstated. 

As such. NDRP has not fully complied with the Inter!-. Audit Report 

recommendation. ^" 

1. Facts / - V • / 

In addition to examining NDRP's mosTr.. : • jpoi . ed prior to tl / ' dit 

notification, the Audit staff compared NDRi'S -i: -.-liial reports filed with bank 

records and discovered a $657^2 understateri '.• disbursements over the twoyear period (2009 and 2010)*. y ..' in the ch .> r-. ove. the latest amendments 

filed prior to this audit also inci i *• • ^ •.. i-.derstat("" x-v ij^*:' «'-ursements 

totaling $240,264 ($17,282 in 2oAi)l - '^i:.;.' .'-2 in 2(^1'j. Therefore, the latest 

amendments filed prior to this audi^dj^* «* - ri^of the understated 

disbursement actylB^- '-.e two-yeffl^iod. ^ 

2. Interim Ai^M|wor( ^- Ludit Divisimi l^commendation 

The Audit staff^B|||seA|MJj^ :.t of disbursements on its original 

repoi\' fiii-i- v. lib NMliVepi^^ the exit conference and provided 

ca|fi« y. :.-k-,^|^woilra|^s detailing the disbursements not reported. The 

fl^esentativesVrano spTM''i. t pmments at the time. 

jrim Audit ^Rort rd^mmended that NDRP submit any additional 

Hi;., or writtflcomments it considered relevant to this matter. 

3. Committee Udrafflue to the Interim Audit Report 

NDRP did noflKmit any additional information or written comments regarding 

this matter in ^ response to the Interim Audit Report recommendation. 

I Finding 2. Reporting of Debts and Obligations 

Summary 

Audit fieldwork indicated that NDRP did not disclose debts and obligations for nine 

vendors totaling $235,563 on Schedule D (Debts and Obligations) of its disclosure 

" This figure includes the $17,282 and $222,982 understatement of disbursements from 2009 and 2010, 

respectively, discussed in Section A (Misstatement of Financial Activity - 2009 and 2010). 
reports. In response to the Interim Audit Report recommendation, NDRP filed amended 

reports to disclose these debts and obligations. 

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. 

2 U.S.C. §434(b)(8) and 11 CFR §§104.3(d) and l(H.ll(a). 

B. Separate Schedules. A political committee must file separate schedules for debts 

owed by and to the committee with a statement explaining the circumstances and 

conditions under which each debt and obligation was incurred or extinguished. 

11 CFR §104.11(a). X 

jt 

C. Itemizing Debts and Obligations. 

• Once it has been outstanding 60 days from the dd .- incu. .-i'.. . debt of $500 or 

less must be reported on the next regularly sd^hyll^ reporl 

A debt exceeding $500 must be disclose 

which the debt was incurred. 11 CFR 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staf: 

reports for proper reporting of debts and^li 

audit period; however, the review identifi< 

vendors that NRDP shopRB^isclosed 

vendors provided maffliv telenHketing, print 

identified debts wdreV|||^r th^p$500, and all 

period in which they w( 

the report that co'. 

:i(b).V 

date on 

i! i-jsbursemehi^^rds and disclosure 

!> • N; )RP ijlported no debt during the 

^. •', >''35,563' owed to nine 

ohedule pTsased on the records, these 

and direct mail services. Most of the 

:ained outstanding during the reporting 

B. Inted^Audii 

At thegit conference!^ 

withffllMj|Lrepresentati^ 

required aH|||sure. Therl 

requirements^^: .".:bts, spc 

Audit staff ref( ~ 

it Division Recommendation 

iscussed the reporting of debts and obligations 

md prdpiSed a schedule detailing the transactions that 

psenratives asked general questions about the disclosure 

tically, when and how debts and obligations are disclosed, 

the regulations at 11 CFR §104.11(b) for guidance on 

itemizing debts anc 

instructions to NDI 

nions and subsequently forwarded copies of Schedule D and its 

;presentatives. 

The Interim Audit Report recommended that NDRP amend its reports to disclose debts 

and obligations of $235,563 on Schedule D. 

' Each debt in this amount was counted once even if it required disclosure over multiple periods. In order 

for NDRP to file amended reports correctly, the Audit staff provided schedules that included the amount 

of each debt required to be rqx)rted for each reporting period. 
C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendation, NDRP filed amended reports 

that correctly disclosed the debts and obligations. 

4- V 

4 

/ 

s 

>