August 7, 2019

MEMORANDUM

To: The Commission

Through: Alec Palmer

Staff Director

From: Patricia C. Orrock

Chief Compliance Officer

Dayna C. Brown

Acting Assistant Staff Director 

Audit Division

Martin L. Favin

Audit Manager 

By: Ryan S. Krogen

Lead Auditor 

Subject: Audit Division Recommendation Memorandum on the 

South Dakota Democratic Party (A17-21) 

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

the Audit staff presented the Draft Final Audit Report (DFAR) to the South Dakota 

Democratic Party (SDDP) on July 1, 2019 (see attachment). SDDP did not request an 

audit hearing.

This memorandum provides the Audit staff’s recommendation for each finding outlined in 

the DFAR.

On July 19, 2019, SDDP provided additional documentation and information in 

response to the DFAR, resulting in a change in the amount in violation for Finding 2: 

Contributions from Unregistered Organizations, as noted below. 
2

Finding 1. Misstatement of Financial Activity – Increased Activity

In response to the DFAR, SDDP reiterated that there was no intent to understate 

disbursements on the original reports filed. 

The Audit staff recommends that the Commission find that SDDP understated 

disbursements by $2,500,147 on the original reports filed over the two year period 

ending December 31, 2016.

Finding 2. Contributions from Unregistered Organizations

In response to the DFAR, SDDP submitted additional documentation demonstrating 

permissibility from unregistered organizations, as follows:

Contributions for which permissibility was demonstrated for unregistered 

organizations ($24,165)

Statements were provided from 17 unregistered organizations attesting to the 

permissibility of 61 contributions, totaling $24,165. 

Contributions for which sufficient permissibility documentation was not 

provided for state PACs ($11,500)

Statements were provided from two state PACs attesting to the permissibility 

for six contributions, totaling $11,500. However, these statements continue 

to lack information on how it was determined that sufficient permissible 

funds were on hand when the contributions were made.

Contributions for which no documentation or additional information was 

provided in response to the Draft Final Audit Report

• 23 contributions, totaling $11,652, from unregistered organizations

• Two contributions, totaling $675, from state PACs

Thus, the amount of contributions from impermissible sources noted in the DFAR 

totaling $47,992 would be reduced by $24,165, to $23,827.

1

SDDP also stated in its response to the DFAR that contributions for which no 

permissibility statements were provided will be refunded to the donor organizations 

and disclosed on its reports as refunds or debts owed. To date, no evidence of such 

action has been demonstrated.

The Audit staff recommends that the Commission find that SDDP received 

impermissible contributions totaling $23,827.

2

 1 $23,827 = $47,992 (see DFAR, page 7) - $24,165. 2 $23,827 = $11,500 + $11,652 + $675.
3

Finding 3. Reporting of Debts and Obligations

In response to the DFAR, SDDP stated that it had filed amended disclosure reports 

to correct debts and obligations. However, to date, the Audit staff, in consultation 

with the Reports Analysis Division, determined that no such amended reports were 

filed.3

The Audit staff recommends that the Commission find that SDDP failed to disclose 

debts and obligations to vendors totaling $46,097.

The Office of General Counsel has reviewed this memorandum and concurs with the 

recommendations.

If this memorandum is approved, the Proposed Final Audit Report will be prepared and 

circulated within 30 days of the Commission’s approval.

In case of an objection, Directive No. 70 states that the Audit Division 

Recommendation Memorandum matter 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 Ryan Krogen or Marty Favin at 694-1200.

Attachment:

- Draft Final Audit Report of the Audit Division on the South Dakota Democratic 

Party

cc: Office of General Counsel

 3 The Audit staff also informed SDDP via email and telephone correspondence that no amended reports had 

been filed with the FEC.
Draft Final Audit Report of the 

Audit Division on the South 

Dakota Democratic Party 

(January 1, 2015 - December 31, 2016) 

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 compliance 

with the Act.1

 The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act.

Future Action

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report.

About the Committee (p. 2)

The South Dakota Democratic Party is a state party committee 

headquartered in Sioux Falls, South Dakota. For more 

information, see the chart on the Committee organization, p. 2. 

Financial Activity (p. 2)

• Receipts

o Contributions from Individuals

o Contributions from Political

Committees

o Transfers from Affiliated

Committees

o Transfers from Non-Federal

Account

o Other Receipts

Total Receipts

$ 391,785 

136,576 

2,691,498 

2,275 

16,598 

 $ 3,238,732 

• Disbursements

o Operating Expenditures

o Transfers to Affiliated

Committees

o Federal Election Activity

o Other Disbursements

Total Disbursements

$ 329,937 

2,494,343 

371,481 

 19,360 

$ 3,215,121 

Findings and Recommendations (p. 3)

• Misstatement of Financial Activity – Increased Activity

(Finding 1)

• Contributions from Unregistered Organizations (Finding 2)

• Reporting of Debts and Obligations (Finding 3)

1

 52 U.S.C. §30111(b).

SDDP responded to the July 1, 2019 DFAR on July 19, 2019, resulting in a 

change to the amount in violation for Finding 2, as enumerated in the ADRM.
Draft Final Audit Report of the 

Audit Division on the 

South Dakota Democratic Party 

(January 1, 2015 - December 31, 2016) 
Table of Contents 

Page

Part I. Background

Authority for Audit 1 

Scope of Audit 1 

Part II. Overview of Committee

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Findings and Recommendations 3 

Part IV. Findings and Recommendations

Finding 1. Misstatement of Financial Activity – Increased Activity 4

Finding 2. Contributions from Unregistered Organizations 5

Finding 3. Reporting of Debts and Obligations 7
1

Part I

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), which permits 

the Commission to conduct audits and field investigations of any political committee that 

is required to file a report under 52 U.S.C. §30104. Prior to conducting any audit under 

this subsection, the Commission must perform an internal review of reports filed by 

selected committees to determine if the reports filed by a particular committee meet the 

threshold requirements for substantial compliance with the Act. 52 U.S.C. §30111(b). 

Scope of Audit

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined:

1. the receipt of excessive contributions;

2. the receipt of contributions from prohibited sources;

3. the disclosure of contributions received;

4. the disclosure of individual contributors’ occupation and name of employer;

5. the disclosure of disbursements, debts and obligations;

6. the disclosure of expenses allocated between federal and non-federal accounts;

7. the consistency between reported figures and bank records;

8. the completeness of records; and

9. other committee operations necessary to the review.
2

Part II

Overview of Committee 

Committee Organization 

Overview of Financial Activity 

(Audited Amounts)

Cash on hand @ January 1, 2015 $ 21,496

Receipts

o Contributions from Individuals 391,785

o Contributions from Political Committees 136,576

o Transfers from Affiliated Committees 2,691,498

o Transfers from Non-Federal Account 2,275

o Other Receipts 16,598

Total Receipts $ 3,238,732

Disbursements

o Operating Expenditures 329,937

o Transfers to Affiliated Committees 2,494,343

o Federal Election Activity 371,481

o Other Disbursements 19,360

Total Disbursements $ 3,215,121

Cash on hand @ December 31, 2016 $ 45,107

Important Dates

• Date of Registration April 24, 1982

• Audit Coverage January 1, 2015 - December 31, 2016

Headquarters Sioux Falls, South Dakota

Bank Information

• Bank Depositories Two

• Bank Accounts Two Federal, One Non-Federal

Treasurer

• Treasurer When Audit Was Conducted Bill Nibbelink

• Treasurer During Period Covered by Audit Bill Nibbelink (7/15/00 - Present)

Management Information

• Attended FEC Campaign Finance Seminar No

• Who Handled Accounting and

Recordkeeping Tasks

Paid Staff
3

Part III

Summaries

Findings and Recommendations

Finding 1. Misstatement of Financial Activity - Increased 

Activity

A comparison of SDDP’s bank activity with its original reports filed with the 

Commission revealed that disbursements were understated by $2,500,147 for calendar 

years 2015 and 2016. In response to the Interim Audit Report recommendation, SDDP 

stated it overlooked filing procedures, required better training on reporting to the 

Commission and there was no intent to understate disbursements on the original reports 

filed.

(For more detail, see p. 4.) 

Finding 2. Contributions from Unregistered Organizations

During audit fieldwork, the Audit staff identified 144 contributions from unregistered 

organizations totaling $67,182 that may have been made with impermissible funds. In 

response to the Interim Audit Report recommendation, SDDP submitted statements from

the unregistered organizations attesting to the permissibility of 52 contributions, totaling 

$19,190. As a result, 92 contributions, totaling $47,992, remain impermissible. 

(For more detail, see p. 5.) 

Finding 3. Reporting of Debts and Obligations

During audit fieldwork, the Audit staff noted that SDDP failed to disclose debts and 

obligations to nine vendors, totaling $46,097. In response to the Interim Audit Report 

recommendation, SDDP filed amended disclosure reports to disclose these debts and 

obligations, however, these transactions were disclosed incorrectly. 

(For more detail, see p. 7.) 
4

Part IV

Findings and Recommendations

Finding 1. Misstatement of Financial Activity – Increased 

Activity

Summary

A comparison of SDDP’s bank activity with its original reports filed with the 

Commission revealed that disbursements were understated by $2,500,147 for calendar 

years 2015 and 2016. In response to the Interim Audit Report recommendation, SDDP 

stated it overlooked filing procedures, required better training on reporting to the 

Commission and there was no intent to understate disbursements on the original reports 

filed. 

Legal Standard

Contents of Federal Reports. Each report must disclose: 

• the amount of cash on hand at the beginning and end of the reporting period;

• the total amount of receipts for the reporting period and for the calendar year;

• the total amount of disbursements for the reporting period and for the calendar

year; and

• certain transactions that require itemization on Schedule B (Itemized

Disbursements). 52 U.S.C. 30104 (b) (4) and (5).

Facts and Analysis

A. Facts

During audit fieldwork, in addition to examining SDDP’s most recent reports filed prior

to audit notification, the Audit staff also compared its originally filed reports with its

bank records. The purpose of this additional reconciliation was to identify the degree to

which SDDP had misstated its original filings.

The Audit staff calculated that SDDP understated disbursements by $2,500,147 on the 

original reports filed over the two year period ending December 31, 2016. Most of the 

disbursements that were understated ($2,494,000) related to transfers to the Democratic 

National Committee which were not disclosed on the originally filed reports. 

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with the SDDP representative during the exit

conference and provided the relevant work paper. In response to the exit conference,

SDDP stated that the increased activity was due to reporting changes.

The Interim Audit Report recommended that SDDP provide any comments it deemed

relevant to this matter.
5

C. Committee Response to the Interim Audit Report

In response to the Interim Audit Report recommendation, SDDP stated it overlooked

filing procedures and required better training on reporting to the Commission. SDDP

added that there was no intent to understate disbursements on the original reports filed.

Finding 2. Contributions from Unregistered Organizations

Summary

During audit fieldwork, the Audit staff identified 144 contributions from unregistered 

organizations totaling $67,182 that may have been made with impermissible funds. In 

response to the Interim Audit Report recommendation, SDDP submitted statements from 

the unregistered organizations attesting to the permissibility of 52 contributions, totaling 

$19,190. As a result, 92 contributions, totaling $47,992, remain impermissible. 

Legal Standard

A. Party Committee Limits. A party committee may not receive more than a total of

$10,000 per year from any one individual. This limit is shared by the state, district,

and local party committees. 52 U.S.C. §30116(a)(1)(D) and 11 CFR §110.9.

B. Organizations Not Registered With the Commission. Any organization that makes

contributions and expenditures, but that does not qualify as a political committee

under 11 CFR §100.5, must keep records of receipts and disbursements and, upon

request, must make such records available for examination by the Commission. The

organization must demonstrate through a reasonable accounting method that,

whenever such an organization makes a contribution or expenditure, the organization

has received sufficient funds subject to the limitations and prohibitions of the Act to

make such contribution or expenditure. 11 CFR §102.5(b).

C. Questionable Contributions. It is the Treasurer’s responsibility to ensure that all

contributions are lawful. 11 CFR §103.3(b). If a committee receives a contribution 

that appears to be prohibited (a questionable contribution), it must follow the 

procedures below: 

1. within 10 days after the treasurer receives the questionable contribution, the

committee must either:

• Return the contribution to the contributor without depositing it; or

• Deposit the contribution (and follow steps below). 11 CFR §103.3(b)(1).

2. if the committee deposits the questionable contribution, it may not spend the

funds and must be prepared to refund them. It must therefore maintain

sufficient funds to make the refunds or establish a separate account in a

campaign depository for possibly illegal contributions. 11 CFR §103.3 (b)(4).

3. the committee must keep a written record explaining why the contribution

may be prohibited and must include this information when reporting the

receipt of the contribution. 11 CFR §103.3(b)(5).
6

4. within 30 days of the treasurer’s receipt of the questionable contribution, the

committee must make at least one written or oral request for evidence that the

contribution is legal. Evidence of legality includes, for example, a written

statement from the contributor explaining why the contribution is legal or

an oral explanation that is recorded by the committee in a memorandum.

11 CFR §103.3(b)(1).

5. within these 30 days, the committee must either:

• confirm the legality of the contribution; or

• refund the contribution to the contributor and note the refund on the report

covering the period in which the refund was made. 11 CFR §103.3(b)(1).

Facts and Analysis

A. Facts

During audit fieldwork, the Audit staff identified 144 receipts, totaling $67,182, from

unregistered organizations, which SDDP reported as follows:

• 129 receipts, totaling $62,062, on Line 11 (Contributions) of Schedule A

(Itemized Receipts) from individuals and political committees;

• 14 receipts, totaling $3,620, that were not itemized on Schedule A; and

• 1 receipt, in the amount of $1,500, on Line 17 (Other Federal Receipts) of

Schedule A.

SDDP received eight contributions, noted above, totaling $12,175 from three 

unregistered political organizations which appear to be state political action committees 

(state PACs). These state PACs could have accepted corporate and union contributions 

under South Dakota state law which may have been federally impermissible. 

The Audit staff considered the receipts noted above to be contributions. SDDP did not 

have any records available to show that these contributions from unregistered 

organizations were made with permissible funds or other evidence to show they were not 

contributions. To date, none of these contributions have been refunded to the 

contributors. 

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed this matter with the SDDP representative during the exit

conference and provided a schedule of the receipts noted above. In response to the exit

conference, SDDP stated it was in the process of collecting letters from the contributors

regarding the permissibility of the funds.

The Interim Audit Report recommended that SDDP: 

• Provide evidence that the 144 receipts in question were made from permissible

funds, including information on how it was determined that sufficient permissible

funds were on hand when eight contributions from three state PACs were made;

or
7

• Provide evidence to show the receipts were not contributions; or

• Refund the impermissible funds and provide evidence of such refunds (copies of

front and back of the refund check); or

• Transfer the impermissible funds to the non-federal account; or

• Disgorge the impermissible funds to a governmental entity (federal, state or local)

or to a qualified charitable organization described in 26 U.S.C. §170© and

provide evidence of such disgorgement; or

• If funds were not available to make the necessary refunds or disgorgement,

disclose the contributions requiring refunds on Schedule D (Debts and

Obligations) until funds become available to make such refunds.

C. Committee Response to the Interim Audit Report

In response to the Interim Audit Report recommendation, SDDP submitted the following

documentation:

Contributions for which permissibility was demonstrated for unregistered 

organizations ($19,190) 

Statements were provided from 26 unregistered organizations attesting to the 

permissibility of 52 contributions, totaling $19,190. 

Contributions for which sufficient permissibility documentation was not provided

for state PACs ($11,500) 

Statements were provided from two state PACs attesting to the permissibility for six 

contributions, totaling $11,500. However, these statements did not include information on 

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

were made. 

Contributions for which documentation was not provided in response to the Interim 

Audit Report

• 84 contributions, totaling $35,817, from unregistered organizations

• Two contributions, totaling $675, from state PACs

As a result, SDDP did not demonstrate that 92 contributions, totaling $47,992, were made 

from permissible funds.2

Finding 3. Reporting of Debts and Obligations

Summary

During audit fieldwork, the Audit staff noted that SDDP failed to disclose debts and 

obligations to nine vendors, totaling $46,097. In response to the Interim Audit Report 

recommendation, SDDP filed amended disclosure reports to disclose these debts and 

obligations, however, these transactions were disclosed incorrectly. 

2

 ($11,500 + $35,817 + $675). 
8

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.

52 U.S.C. §30104(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 the committee and debts owed to the committee, together with a statement

explaining the circumstances and conditions under which each debt and obligation

was incurred or extinguished. 11 CFR §104.11(a).

C. Itemizing Debts and Obligations

• A debt of $500 or less must be reported once it has been outstanding 60 days from

the date incurred (the date of the transaction); the committee reports it on the next

regularly scheduled report.

• A debt exceeding $500 must be disclosed in the report that covers the date on

which the debt was incurred. 11 CFR §104.11(b).

Facts and Analysis

A. Facts

During audit fieldwork, the Audit staff reviewed SDDP’s disbursement records and

disclosure reports for proper reporting of debts and obligations. This review identified

debts owed to nine vendors, totaling $46,097,3 which SDDP failed to report on Schedule

D during the audit period. Based on a review of the records, these vendors mainly

provided printing and catering services. SDDP reported no debts during the audit period.

The Audit staff calculated the debts owed to the vendors based on the invoice date and 

the subsequent payment date. Debts were outstanding for periods ranging from 9 days to 

187 days.

B. Interim Audit Report & Audit Division Recommendation

The Audit staff discussed the reporting of debts and obligations with the SDDP

representative at the exit conference and provided a schedule of transactions not disclosed

on Schedule D. In response to the exit conference, SDDP stated that it reported debts

incorrectly and will amend its disclosure reports.

The Interim Audit Report recommended that SDDP provide documentation 

demonstrating that these transactions were not obligations which required reporting on 

Schedule D. Absent such documentation, the Interim Audit Report further recommended

that SDDP amend its reports or file a Form 994 to correctly disclose these debts and 

obligations. 

3

 Each debt in this amount was counted only once, even if it was required to be disclosed over multiple 

periods. 4

 SDDP was advised by the Audit staff that if it chose to file a Form 99, instead of amending its disclosure 

reports, the form must contain all pertinent information that is required on each schedule.
9

C. Committee Response to the Interim Audit Report

In response to the Interim Audit Report recommendation, SDDP filed amended Schedule

D’s for 2015 and 2016 in an attempt to properly disclose the debts and obligations

discussed above. However, these transactions were not disclosed correctly. All debts

and obligations contained inadequate purposes and were not disclosed in the correct

reporting periods through extinguishment.