FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 November 13,2013 

MEMORANDUM 

To: The Commission 

Through: 

From: 

Alec Palmer 

Staff Director 

Patricia C. Orrock 

Chief Compliance Officer 

Thomas E. Hintermister 

Assistant Staff Director 

Audit Division 

Kendrick Smith 

Audit Manager " 

Zuzanna Pacious 

Audit Manager 

By: 

Subject: 

Brenda Wheeler 

Lead Auditor 

Audit Division Reconmiendation Memorandum on the North Dakota 

Republican Party (NDRP) (Al 1-11) 

Pursuant to Commission Directive No. 70 (FEC Directive on Processing Audit Reports, 

the Audit staff presents its recommendations below and discusses the findings in the 

attached Draft Final Audit Report (DFAR). The Office of General Counsel has reviewed 

this memorandum and concurs with the recommendations. 

Finding 1. Misstatement of Financial Activity 

A. Misstatement of Financial Activitv - 2009 and 2010 

In response to the Interim Audit Report (lAR) recommendation, NDRP filed 

amended disclosure reports for 2009 and 2010. However, these amendments 

did not materially correct the receipt or disbursement misstatements in either of 

the years. Subsequently, NDRP filed a second set of amended disclosure 

reports that only materially corrected the misstatement of 2010 receipts. 

Receipts and disbursements for 2009 and disbursements for 2010 remain* 

misstated. 
In response to the DFAR, NDRP filed amended disclosure reports for 2009 and 

2010. These amendments materially complied with the lAR recommendation. 

The Audit staff recommends that the Commission find that NDRP misstated 

the beginning cash-on-hand balance in 2009 and receipts and disbursements in 

2009 and 2010 on the most recent reports filed as of audit notification. 

B. Misstatement of Financial Activitv - Increased Activitv 

NDRP did not submit any additional information or written comments 

regarding this matter in its response to the lAR recommendation or the DFAR. 

The Audit staff recommends that the Commission find that NDRP filed 

original disclosure reports for 2009 and 2010 that materially understated its 

disbursements. 

Finding 2. Reporting of Debts and Obligations 

In response to die lAR recommendation, NDRP filed amended reports that 

disclosed the debts and obligations. NDRP did not submit any additional 

information or written comments regarding this matter in response to the DFAR. 

The Audit staff recommends that the Commission find that NDRP failed to 

disclose debts and obligations totaling $235,563. 

The Committee did not request an audit hearing. 

If this memorandum is approved, a Proposed Final Audit Report will be prepared within 

30 days of the Commission's vote. 

hi case of an objection. Directive No. 70 states that the Audit Division Recommendation 

Memorandum will be placed on the next regularly scheduled open session agenda. 

Documents related to this audit report can be viewed in the Voting Ballot Matters folder. 

Should you have any questions, please contact Brenda Wheeler or Kendrick Smith at 

694-1200. 

Attachment: 

- Draft Final Audit Report of the Audit Division on the North Dakota Republican 

Party 

cc: Office of General Counsel 
Draft Final Audit Report of the 

Audit Division on the 

North Dakota Republican Party 

(January 1, 2009 - December 31. 2010) 

met, 

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 me] 

the threshold 

requirements for 

substantial compliancc 

with the Ar* ^ Th-r-v-'it " 

determinj^' * :: j 

comn '. \'ecompliei. ::: 

thejufl-.: r.! ^ns, 

prohibit .^"/^ i.i 

disclosure . : jnts 

of the Act. 

4 

0 

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 Committee p.: 

The North Dakota Republicaii 1%ty* a state party committee 

headquartered in Bismarc^j^t-: '.! Dakota. For more 

information, see the ch.t;:. tht (.t^i ,:nittee Organization, p. 2. 

Financial Ap^it^* (p. 2) 

• Receipts V / 

o Contrif' • t lj||fromJ^yiduals ^ 

o Contribution!!^.''..-^oiihcal Committees 

o^Transfers from A: •:'lates 

o I Received 

o 1! -"omNon •.•€: 

o Ol|p. 1 wi'w-.'r • K.-ceipt^ 

Total 

1 

Accounts 

$ 1,322,913 

41,050 

175,358 

10,325 

114,818 

61,906 

$ 1,726,370 

Disbursei^nts 

o Operatin:: Fxpenditures 

Transfer * Affiliates 

payments Made 

Fed^al Election Activity 

ther Disbursements 

Disbursements 

$ 1,424,962 

23,536 

51,646 

212,263 

5,075 

$ 1,717«482 

Findings and Recommendations (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) 

A 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Part II. Overview of Committee 

Committee Organization ^ 2 

Overviewof Financial Activity " ^ 2 

4 

Part III. Smmnaries 

Findings and Recommendations ^ ^ 3 

Part IV. Findings and Recommendations ^ 

Finding 1. Misstatement of Financial Acuv , ^ ^ 4 

Finding 2. Reportingof Debts and Obligations ^ 7 
Parti 

Background 

Authority for Audit 

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

undert^en 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 2 U.S.C. §438(b), which permits the 

Commission to conduct audits and field investigations of any pc' .'' ^ committee that is 

required to file a report under 2 U.S.C. §434. Prior to condui • ny^udit under this 

subsection, the Conmiission must perform an internal revie^c': j;*orts filed by selected 

committees to determine whether the reports filed by a pncu. - . :i jnittee meet the 

threshold requirements for substantial compliance wit^S^ct. .M'.s.C §438(b). 

Scope of Audit %. ^ 

Following Commission-approved procedures^. • \ .lit -i..' f evaluated vj: iivOrrisk 

factors and as a result, this audit examined: ^ ^ 

1. the disclosure of individual contr*^ • -. - * occupation :M :.' game of employer; 

2. the consistency between reported bankrecoId^^ 

3. the disclosure of disbursements, deDii|and*®l.-:'' ons; ^ 

4. the disclosure of expenses allocated bl||«^(-.-' ''. T - - on-federal accounts; 

5. the disclosure of ini!ji!jr:du:i! expenditU'**r 

6. the completeness^:-1Lvonl^^d %^ 

7. other committ^inlBrationsn;essary to ^ review. 
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^gpik^ 

Bank Information 

• Bank Depositories 

"^^ ^ j# " ' 

• Bank Accounts Nine Federd;H|ur N»-., jral 

Treasurer 

• Treasurer When Audit Was Conducted Rob^plarins ^ ^ 

• Treasurer During Period Covered by 

Audit 

Tl^pdC. l.)kach\l/l/09-7/12/(^; 

Rober !!.•:• - •"wJ09 - presenter 

Management Information ^' 

• Attended Commission Campaign *^ 

Finance Seminar 

Yes 

# 

• Who Handled Accounting and 

Recordkeeping Tasks 

Overview of Fimnciid Activity 

^ (Audited iili|0unts) 

Cash-on-hand 4-' Junnsir\ 1,1!|fi9 $2,151 

Receipts 

0 C^Kbutions from 1 ...vid .. / 1,322,913 

o ConHfri-. "i "IS from l=i ".' COK- 'ittees 41,050 

o Trans..-*." qmAffiliauHl 

0 Loans Receij|\ :\: m 

175,358 

o Transfers fr( -:. Non-£^ral Accounts 114,818 

o Other Federal ReHpts 61.906 

Total Receipts r $1,726370 

Disbursements 

o Operating Expenditures 1.424,962 

o Transfers to Aftiliates 23,536 

0 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, NDRPj^j^tated its beginning 

cash-on-hand balance by $13,345 and understated receipts ai li msbi^ments by $21,935 

and $17,282. respectively. In 2010, NDRP understated re^:^ ..- d disbursements by 

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

In addition, NDRP filed original reports for 2009^uto that were •-. .:i ially 

understated. Specifically, NDRP's original re-^'^under^ated disbursciiu'iii^ i*y 

$657,482 in 2009 and 2010. Amended reports .-Iv-.lior tn '! e notificatiofi oi' ihis audit 

did not correct the misstated disbursement activ 

In response to the Interim Audit RepS^l jvu)nunendati-- ^. Ni^RP attempted to correct 

the public record by filing amended di «w.o>t" ^ :. ports. Hi • .-. iie amendments only 

materially corrected receipts for 2010. %tj.:'"* .ui J'- ant j^:-"-,irsements for 2009 and 

2010 remain misstated. 

Regarding the under- »: .iisbursemeit activity on NDRP's onginal reports, 

NDRP did not sulj^: -..v con :-i.-:its on the rwter, (For more detail, see p. 4.) 

Finding 2. Reporting of l8|||^(^d Obligations 

Audit fiQ]^i>:k iiidk.iicJ th: -. NDKP did not disclose debts and obligations for nine 

vendcii N, iotaling $275.50':*. on w D (Debts and Obligations) of its disclosure 

rep^^. Ir- response to ihc Irieri! ! A -.! t Report recommendation, NDRP filed amended 

reports U'\!.«i ^!se these dei^'^ 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, NDRPj^|||gtated its beginning 

cash-on-hand balance by $13,345 and understated receipts arnl iHsbuilbments by $21,935 

and $17,282, respectively. In 2010, NDRP understated reqg^i • a .d disbursements by 

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

In addition, NDRP filed original reports for 2009^ 2uK) that weretall y 

understated. Specifically, NDRP's original rer.- -i underrated disburs. :. 

$657,482 in 2009 and 2010. Amended reponl. ." ; • ior • ".e notificatios'. of '-lis audit 

did not correct the misstated disbursement activ ';• ^ ^ 

In response to the Interim Audit Repoi-: rw"v:ommendati M )RP attempted to correct 

the public record by filing amended CI^^-'OMIU: n^orts. He' JV^ . -jhe amendments only 

materially corrected receipts for 2010. i-ifi!.^ 2('()9 an(= i: ^ - irsements for 2009 and 

2010 remain misstated. '„ ^ ^ 

Regarding the unders|^- -isbursemdlk activity NDRP's original reports, 

NDRP did not s ' « ..: " con its on the n%ter^ 

Legal Standard f 

Contentsj||dl|iifiris. I Lac : w-<.i t musnmiose: 

• i:1eamo !ii n:' ».v-. or:'.!;: r. .it the beginning and end of the reporting period; 

liic ::otal amou- '." -.-ceii ».pJ^e reporting period and for the election cycle; 

iho :ii:al amount c' .-:sburs(' .mts for the reporting period and for the election 

cyc'.j; and | g 

certaiii'iiui^action^at require itemization on Schedule A (Itemized Receipts) or 

Schedule li.Oicini/Ed Disbursements). 2 U.S.C. §434(b)(l), (2), (3). (4) and (5). 

3 On average. NDRP filed four amended reports per rq)orting period. There were seven reporting periods 

during 2010 in which NDRP filed six or more amendments for die reporting poiod. 
Facts and Analjrsis 

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 foUowmg 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 • v- ^Discrepancy 

Begiiming Cash-on-Hand 

©January 1,2009 

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

Overstated 

Receipts $563,007 $5«^'*»2 ($21,935) 

, Understated 

Disbursements $497,890 ^15.172 ($17,282) 

I r*. erstated 

Ending Cash-on-Hand 

@ December 31,2009 

$80,613 JT $8,692 

Overstated 

The overstatement of beginnin;- * . hand of J^i J. •• likely resulted from 

prior-period discrepancies. ' ^ 

The understateme"* ir 'vceipts resut^fy^m • -».vmg. 

• Transfers frfitf • »\ .Aijral accoultfnotrepoi*^^ $ 94,500 

(85,230) 

12,811 

(146) 

$ 21,935 

• Non-fed.-:.; .eceip * .i-vorted in ei 

• Receipt!^ = orted 

• Unexplainei! ti..j,„ • 

Net LnckTsisiivmeiii.iil Ki-u-ipis _ 

'I'lic understi.iL'.T.-j •. i di^ • jfents resulted from the following. 

•, I>jliits and ch. .iJkthat c^' . jd the bank, not reported 

• M{;!;K*rced disburnients that did not clear bank accounts 

• Ur.i;.\" . .ned difBence 

Net Uniii-i-MsitemjR of Disbursements $ 17,282 

The misstatei^kM-.'.s described above resulted in the overstatement of ending cashon-hand by $8,692. 

$ 25,492 

(8,629) 

419 

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

to its federal account. 

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

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

Reported Bank Records Discrepancy 

Begiiming 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 ^ • $72,412 

overstated 

2. 

The understatement in receipts resulted from the £^owi 

• Transfers from non-federal account, not T&jfgM 

• Republican National Conmiittee transfgi^otreported 

• Non-federal political action commit:.-

reported in error ^ 

• Bank interest received, not reported 

• Unexplained difference 

Net Understatement of Recd|ils 

ntribu^ns 

The understatement in disbursemi 

Media and operating disburseniSgts, 

Transfers to • o-! .".'.\-al accoimti 

Inter-accoijji . - ^.T- -eported in' 

In-kind^.»\ . » tion-.--ot reported 

Disbursemi - ^ - oi ••.ijtwice 

l':.j\:;'.*:".i.edd •'^ 

rncliTsliiU-iiieiil ul IHsburseinents 

nm th^^'Lcwmg 

$ 20,318 

79,400 

r.'o50) 

^ 236 

61.358 

$ 159,262 

$ 244,047 

20,475 

(37,151) 

7,448 

(7,936) 

(3.90n 

misstatemcii!^ .Jk-^cri .-

a::.! by $72,41:. 

} 

$ 222,982 

^l^e resulted in the overstatement of ending cashInterim .\m\\i Repiii't & Audit Division Recommendation 

The Audi! iLdiK-'.sed the misstatements for 2009 and 2010 with NDRP 

representativnpring 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 die Interim Audit Report. 

The Interim Audit Report recoixmiended 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 recommendation, 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 cgprected receipts for 

2010. Receipts for 2009 and disbursements for 2009 andd^m^emain misstated. 

As such, NDRP has not fully complied with the Inter.^i: Audit Report 

reconmiendation. ^ 

B. Misstatement of Financial Activity - Increas^ vity 

1. Facts ^ 

In addition to examining NDRP's mosT: /. j " : .-j - •.•> 'Jted prior to t .. liit 

notification, the Audit staff compared NDRl" -1» reports filed with bank 

records and discovered a $657^2 understatent:' disbursements over the twoyear period (2009 and 2010)^. IS^a iiiMed in the cht - ."•••.ive, the latest amendments 

filed prior to this audit also inclifilcd •J\\vi niider-. . t*f disbursements 

totaling $240,264 ($17,282 m 20dim!'i^ si: : •. ^2 in 2^). Therefore, the latest 

amendments filed prior to this audi^dj^'- «. : r^i :i^of the understated 

disbursem.- . i*"**^"" le two-yeS^riod. 

2. Interim Audil livport \ Vudit DivisiSi Rjecommendation 

The Audit staff -. i^ . j .- statei:j-. ..t of disbursements on its original 

repoi I > filed l^ il . \DKi' .. i-.-during the exit conference and provided 

cg||S,"* I-:" lo'icv.'..- wo. i j'.\-.-'S detaHmg the disbursements not reported. The 

ssentative.-' .. ..o sp.-.' .jmments atthetime. 

Tl.j hiterim Audit !.<.:;-ort r^mmended that NDRP submit any additional 

infonir i : or writ .•. comments it considered relevant to this matter. 

3. CommittegM||^e to the Interim Audit Report 

NDRP did noffibmit any additional information or written comments regarding 

this matter in its 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 104.11(a). 

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

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

conditions under which each debt and obligation was incurred or fj^iinguished. 

llCFR§104.11(a). ^ S, 

C. Itemizing Debts and Obligations. 

• Once it has been outstanding 60 days from the^aia incurless must be reported on die next regularly smt^pi report. 

• A debt exceeding $500 must be disclosejjyfffthe report that co\ 

which the debt was incurred. 11 CFR ?". •'•: 11(b). \ , 

Facts and Analsrsis ^ 

lebtof$500or 

date on 

A. Facts 

During audit fieldwork, the Audit stai 

reports for proper reporting of debts and 

audit period; however, the review identifi 

vendors that NRDP si.'!pi>. . ^-disclosed 

vendors provided n .• teL»«':k.ting, prmi 

identified debts w^.- -- j: . jr ths:.> "^SOO, and 

period in which they ^ . :.:!:. 

sburseme- )rds and disclosure 

NPRP ^l^orted no debt during die 

" .Bp€35,563^ owed to nine 

chedule pTBased on the records, these 

and direct mail services. Most of the 

; aained outstanding during die reporting 

B. Inteij^Audil-i^piirt \- Audit Division Recommendation 

At dij||fc conference. IIK. \U(. - J'-, --ed the reporting of debts and obligations 

wittm^i' :epresentati\ »id pii.-.-'..id a schedule detailing die transactions that 

required ihsclo^ure. The i ..-liesen^ves asked general questions about die disclosure 

requiremeiu^ -. jbts, spdBically, when and how debts and obligations are disclosed. 

Audit staff refc.: ^.mPRmb die regulations at 11 CFR §104.11(b) for guidance on 

itemizing debts ai t< .-' ..^ions and subsequently forwarded copies of Schedule D and its 

instructions to NDRy,-.-presentatives. 

The Interim Audit Report recommended diat 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 reported 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 die debts and obligations. 

r 

T 

r