FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

January 5,2011 

MEMORANDUM 

To: The Commission 

Through: Alec Palmer 

Acting Staff Durector 

From: Patricia Carmona 

Chief Compliance Officer 

Joseph F. Stoltz 

Assistant Staff Director 

Audit Division 

Martin L. Favin 

Audit Manager 

By: Terrence O'Brien 

Lead Auditor 

Subject: Audit Division Recommendation Memorandum on the Republican Party of 

Minnesota (A08-01) 

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

Reports), the Audit Division recommends the Commission approve the finding as 

presented in the attached Draft Final Audit Report (DFAR). The Office of General 

Counsel has reviewed this memorandum and concurs with the recommendation. The 

Committee did not request an audit hearing. 

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

withm 30 days of the Conmiission's vote. 

Should an objection be received. 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 on Voting Ballot Matters. 

Should you have any questions, please contact Terry O'Brien or Marty Favin at 694-1200. 

Attachment: 

DFAR of the Audit Division on the Republican Party of Minnesota 

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

Audit Division on the Republican 

Party of Minnesota 

January 1, 2007 - December 31, 2008 

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 

(die Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for ^ 

substantial compliance 

with die Act.* TTie audii 

deteriniiiON ulieTlTor ilic 

commij^c complied u i& 

die liiniiaiions, 

prohibition^ und 

disclosure requirements 

of the Act. 

Future Action 

THe Commission m^ r 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Committee (page 2) 

The Republican Party of Minne^ffil^a, state party conunittee 

headquartered in St. Paul, Miimesota. For more information, see 

chart on Committee Organkaiicin. page 2. 

Financial Actb 

• Receipts 

t^Tpage3) 

o Individumlpntributions 

o Political Comiiiitt^^iGjndributions 

o Transfers from^^ates 

o ^-pans Received^ k 

o OITscis 10 Operatinjpixpenditures 

o Traiisferlllrom Nonfediral^Accounts 

o Ot%r Rcccipi> ^ 

Total Ri-ceiplN 

Disbursemfnts 

o Operatiil^&^penditures 

Federal HKtion Activity 

o-^^^^^^to Affiliates 

Contributions to Federal Candidates 

Independent Expenditures 

Coordinated Expenditures 

Loan Repayments 

Contribution Refunds 

Other Disbursements 

Total Disbursements 

O 

O 

$ 7,089,954 

132,390 

6,297,089 

511,101 

164,596 

1,235,414 

356,761 

$ 15,78735 

$4,319,592 

8,551,821 

1,262,473 

3,850 

335,266 

80,000 

417,994 

19,810 

419,223 

$ 15,410,029 

Finding and Recommendation (page 4) 

• Misstatement of Financial Activity 

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

Audit Division on the 

Republican Party of Minnesota 

January 1, 2007 - December 31, 2008 

4 
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 ' 3 

Part III. Summary ' ^\ 

Finding and Recommendation - 4 

Part IV. Finding and Recommendation 

Misstatement of Financial Activity 
Parti 

Background 

Authority for Audit 

This report is based on an audit of the Republican Party of Minnesota (RPM), 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 die audit pursuant to 2 U.S.C. §438(b), which permits die 

Commission to conduct audits and field investigations of any polMg|l committee that is 

required to file a report under 2 U.S.C. §434. Prior to condu^^a^audit under diis 

subsection, the Commission must perform an intemal revi^^^ta)orts filed by selected 

committees to determine if the reports filed by a particul^^mm^i^ meet the threshold 

requirements for substantial compliance with the Act. 2 ^S.C. §4:; ~" 

Scope of Audit ^ 

Following Commission approved procedures, \\w .-Xiulii siiiff evaluated variuiiN risk 

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

1. The disclosure of individual contributors' occupai ion and name of employer; 

2. The disclosure of disbursements, l^^an d obligations^^ 

3. The disclosure of expenses allocate^K!^v\ecn federal andftonfederal accounts; 

4. The consistency between reported f^res and bank rccord|>' 

5. The completeness of records; and, 

6. Other committee opcral ioiis necessary ti^M review. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates Republican Party pf Minnesota 

• Date of Registration August 8,1975 

• Audit Coverage January 1,20Qg,^ December 31,2008 

Headquarters St. Paul, MinnesoW#s\ 

Bank Information 

• Bank Depositories ^ 

• Bank Accounts Ei^iK r 

Treasurer 

• Treasurer When Audit Was Conducted .\ndiony Sult^g^9/07 - 7/9/09) 

«;D:avld E. Stun^^7/10/09 - Present) 

• Treasurer During Period Covered by Audife I®®».aubenfcger (1/1/07- 3/18/07) 

iti^dio^Witon (3/19/07 - 7/9/09) 

A - - ^ 

Management Infomig^^^ • Attended FEC Campa^Hinaiicc ^Sjpminar 

• Used Commonh .\\ aila^ Cinipaiiin 

Managenoye^I Sofivvai^^ack.i.iii" ^ 

^es 

• Who B^le d AccoiSng and ^ 

RecQ^Bccping Tasks 

Paid Staff 
Overview of Financial Activity 

(Audited Amounts) 

Cash on hand @ January 1,2007 $65 

o Individual Contributions 7,089,954 

o Political Committee Contributions 132,390 

o Transfers from Affiliates 6,297,089 

o Loans Received ,.^11,101 

o Offsets to Operating Expenditures A 104,596 

o Odier Receipts , ^ 356,761 

o Transfers from Nonfederal Accounts M ^235,414 

Total Receipts $15^^305 

o Operating Expenditures ' 4,3 im 2 

o Federal Election Activity M ^ 8,551,8ll 

o Transfers to Affiliates ^ ^ 1,262,473 

o Contributions to Federal Candidates r 3,850^ 

o Independent Expenditures ^ 335,266 

o Coordinated Expenditures ^ 80,000 

o Loan Repayments _ ^417,994 

o Contribution Refunds % siw F 19,810 

o Other Disbursements % ^ ^ 419,223 

Total Disbursements , ¥ $ 15,410,029 

Cash on hand @ Deceiig^er 31, ^ 1 $377,341 

> 
Part III 

Summary 

Finding and Recommendation 

Misstatement of Financial Activity 

A comparison of RPM's reported financial activity to its bank records revealed an 

understatement of receipts in 2007 by $75,267, an understatem^^l^isbursements in 

2007 by $71,446 and an understatement of ending cash on hand at December 31,2008 of 

$174,238. Most of the reporting errors resulted from unre^riedj^sfers between 

RPM's federal and nonfederal accounts. Prior to the issu^ce o^^^nterim audit report, 

RPM filed amended reports correcting most of the niisMaiSments m\ci\ above. The 

Audit staff recommended that RPM file amendedjisclosure reports lo correct the 

remainder of the misstatements. As a result of aHamendii^nts filed, RI'M niaiccially 

corrected the misstatements. (For more detarf, sec page 5) 
Part IV 

Finding and Recommendation 

I Misstatement of Financial Activity 

Summary 

A comparison of RPM's reported financial activity to its bank records revealed an 

understatement of receipts in 2007 by $75,267, an understatement disbursements in 

2007 by $71,446 and an understatement of ending cash on han^i^t I^cember 31,2008 of 

$174,238. Most of the reporting errors resulted from unrepocfeS^ansfers between 

RPM's federal and nonfederal accounts. Prior to the issu^ce o^the interim audit report, 

RPM filed amended reports correcting most of die m^it^^ents'i^^above. The Audit 

staff recommended that RPM file amended disclosi^^pprts to corf^^e remainder of 

the misstatements. As a result of all amendments tiled, RPM materiall^^raected die 

misstatements. ^ 

Legal Standard 

Contents of Reports. Each report m^tdisclose: ^ 

• The amount of cash on hand at th^^inning and end of ^e reporting period; 

• The total amount of receipts for the reportintz period and ibr the calendar year; and 

• The total amount of disbursements fowe reponiii|^ period and for the calendar year; 

• Certain transactions dial require itemizaM^^n Schcilnles A (Itemized Receipts), 

Schedules B (Itemized Dishiiisements), ^ledules H3 (Transfers from Nonfederal 

Accounts for Allocated Fedi-ial/Nonfederai^ctivity), or Schedules H4 (Disbursements 

for Allocated piedeiiri- Nonk-deral Activity). 1 D.S.C. §434(b)(l), (2), (3), (4), and (5). 

Facts an4l^^|!»is ^ v 

The Aijrfstaff rec^^^RPM^reported financial activity to its bank records for 2007 

and^j^^^Below are ^^i,that ^^n € the discrepancies in bodi years followed by 

explanation^ of the missta1enients,^f known. 

2007 Activil>^ 

. • 

Reported Bank Records Discrepancy 

Beginning Cash Bllance 

©January 1,2067 

($28,325) $65 $28,390 

Understated 

Receipts $3,556,121 $3,631,388 $75,267 

Understated 

Disbursements $3,185,395 $3,256,841 $71,446 

Understated 

Ending Cash Balance 

@ December 31,2007 

$342,401 $374,612 $32,211 

Understated 
The understatement of receipts resulted from the following: 

• Three unreported transfers from nonfederal accounts 

• Unexplained difference 

Understatement of Receipts 

The understatement of disbursements resulted from the following: 

• Unreported transfer to nonfederal account 

• Unreported Bank Fees 

• Unexplained difference 

Understatement of Disbursements 

$50,853 

24,414 

$75,267 

$50,000 

1,115 

20,331 

$71,446 

RPM transferred $50,000 from a federal account to a nonfederal account on October 18, 

2007. On October 24, 2007, RPM transferred $50,000 b^^to ilic same federal account. 

These transfers were not reported. 

7 ^ 

Reported Rnnk Records DiiErepancy 

Opening Cash Balance 

@ January 1,2008 

$342,401 $374,612 ^ $32,211 

Understated 

Receipts $12,003,907 $11,155,917 $152,010 

Understated 

Disbursements $12,m205 

\ M 

M2,l|f,188 $3,983 

Understated 

Ending Cash Balance $203,M^ 

@ December 31. 2()()8 % 

#"$377,341 $174,238 

Understated 

On December 31,2008, the cash balance was understated mostly as a result of a 2008 

beginning cash iinderstatcmeni and unrep()^^receipts. 

The niaiter was presenicd to die RP.M counsel during the exit conference. The RPM 

counsel acknowledged the discrepancies in the reports and indicated that the corrections 

would be iiKulc as recommended by the auditors. 

Interim Audit Report Recommendation and Committee Response 

The Audit staiT recomii^ded that RPM amend its reports to correct the misstatements; 

amend its most recency filed report to correct the cash on hand balance with an 

explanation that the change resulted from a prior period audit adjustment; and reconcile 

the cash balance of its most recent report to identify any subsequent discrepancies that 

may impact the $174,238 adjustment recommended by the Audit staff. 

^ RPM's beginning cash on its September Monthly 2008 report was $6,000 greater than its reported ending 

cash on the previous report. As a result of this discrepancy, the amounts in the "Reported" column do not 

total correctly. 
In its response, RPM correctly noted that five transfers from a nonfederal account, 

treated as unreported in the interim audit report, were actually reported prior to 

notification of the audit. The Audit staff incorrecdy concluded that tiiese transfers were 

not reported because they were erroneously reported on Schedules A instead of on 

Schedules H3 and dius not located as reported entries in the review. Appropriate 

adjustments to this finding have been made for these items. 

RPM pointed out in its response that amended reports correcting the misstatements were 

filed prior to its receipt of the interim audit report. The Audit staff notes that RPM also 

filed additional amendments m response to the interim audit report and that as a result of 

all amendments filed, RPM materially corrected die misstatem^is. These amendments 

also corrected reported cash on hand. ^ 

^ These transfers totaled $176,527 and all occurred in March 2008.