Final Audit Report of the 

Commission on the South 

Dakota Democratic 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 met 

the threshold 

requirements for 

substantial compliance 

with the Act.^ 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 $ 180,424 

o Contributions from Political 

Party and Other Political 

Committees 133,843 

o Transfers from Affiliated/Other 

Party Committees 593,756 

o All Other Receipts 13,042 

Total Receipts $ 921,065 

Disbursements 

o Operating Expenditures $ 574,603 

o Coordinated Expenditures Made 

by Party Committees 144,700 

o Federal Election Activity 184,970 

o All Other Disbursements 88,966 

Total Disbursements $ 993,239 

Commission Findings (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Recordkeeping for Employees (Finding 2) 

• Reporting of Coordinated Party Expenditures (Finding 3) 

• Contributions from Unregistered Political Organizations 

(Finding 4) 

• Disclosure of Occupation/Name of Employer (Finding S) 

Additional Issue (p. S) 

• Recordkeeping for Employees 

' On September 1,2014, the Federal Election Campaign Act of 1971, as amended C'the Act"), was 

transferred from Titie 2 of the United States Code to the new Title S2 of the United States Code. 

^ 52 U.S.C.§ 30111(b). 
Pinal Audit Report of the 

on the South Dakota 

Democratic Party 

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

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Commission Guidance 1 

Audit Hearing 2 

Part II. Overview of Committee 

Committee Organization 3 

Overview of Financial Activity 3 

Part III. Summaries 

Commission Findings 4 

Additional Issue S 

Part IV. Commission Findings 

Finding 1. Misstatement of Financial Activity 7 

Finding 2. Recordkeeping for Employees 9 

Findings. Reporting of Coordinated Party Expenditures 11 

Finding 4. Contributions from Unregister^ Political Organizations 15 

Findings. Disclosure of Occupation/Name of Employer 17 

Part V. Additional Issue 

Recordkeeping for Employees 20 
Parti 

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 conunittee 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 whefter 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 contributions from prohibited sources; 

2. the disclosure of individual contributors' occupation and name of employer; 

3. the disclosure of disbursements, debts and obligations; 

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

5. the consistency between reported figures and bank records; 

6. the disclosure of independent and coordinated expenditures; 

7. the completeness of records; and 

8. other committee operations necessary to the review. 

Commission Guidance 

Request for Early Commission Consideration of a Legal Question 

Pursuant to the "Policy Statement Establishing a Program for Requesting Consideration 

of Legal Questions by the Commission," SDDP requested early consideration of a legal 

question raised during the audit. SDDP questioned whether the monthly time logs 

required under 11 C.F.R. §106.7(d)(l) applied to employees paid with 100 percent 

federal funds. (See Finding 2.) 

The Commission concluded, by a vote of 5-1, that 11 C.F.R. §106.7(d)(l) does require 

committees to keep a monthly log for employees paid exclusively with federal funds. 

Exercising its prosecutorial discretion, however, the Commission decided it vdll not 

pursue recordkeeping violations for the failure to keep time logs or to provide affidavits 

to account for employee salaries paid with 100 percent federal funds and reported as 

such. Accordingly, Finding 2, Recordkeeping for Employees, of this audit report does 

not include a recommendation to pursue a recordkeeping violation for employees paid 

with 100 percent federal funds and reported as such. 
Audit Hearing 

SDDP declined the opportunity for a hearing before the Commission on the matters 

presented in this report. 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration April 24,1982 

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

Headquarters Sioux Falls, South Dakota 

Bank Information 

• Bank Depositories Two 

• Bank Accounts Four Federal and Three Non-federal 

Treasurer 

• Treasurer When Audit Was Conducted BillNibbelink 

• Treasurer During Period Covered by Audit BillNibbelink 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash-on-hand January 1,2009 S 93,826 

Receipts 

o Contributions from Individuals 180,424 

o Contributions from Political Party and Other 

Political Committees 133,843 

o Transfers from Affiliated/Other Party 

Committees 593,756 

o All Other Receipts 13,042 

Total Receipts S 921,065 

Disbursements • 

o Operating Expenditures 574,603 

o Coordinated Expenditures Made by Party 

Committees 144,700 

o Federal Election Activity 184,970 

o All Other Disbursements 88,966 

Total Disbursements S 993,239 

Cash-on-hand @ December 31,2010 S 21,652 
Part III 

Summaries 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

During audit iieldwork, a comparison of SDDP's reported financial activity with its bank 

records revealed misstatements for calendar years 2009 and 2010. For 2009, SDDP 

understated disbursements by $1S,1SS. For 2010, SDDP understated receipts by $26,721. 

Subsequent to audit notification, SDDP amended its reports, which corrected the 

misstatement for 2009. In response to the Interim Audit Report recommendation, SDDP 

amended its 2010 reports to materially correct its remaining misstatements. 

The Commission approved a finding that SDDP misstated its financial activity for the 

calendar years 2009 and 2010. (For more detail, see p. 7.) 

Finding 2. Recordkeeping for Employees 

During audit fieldwork, the Audit staff determined that SDDP did not maintain any 

monthly payroll logs, as required, to document the percentage of time each employee 

spent on federal election activity. For 2009 and 2010, the Audit staff identified payments 

to SDDP employees totaling $60,143, for which monthly payroll logs were not 

maintained. This consisted of $42,557, reported as allocated between federal and nonfederal funds; $15,187 that was paid from an exclusively non-federal account in a given 

month; and $2,399 that was paid from an exclusively non-federal account during periods 

in which the same employee was also paid from a federal account. Subsequent to being 

notified of the audit, SDDP filed amended reports for 2009 disclosing all edlocated 

payroll on Line 30b (Federal Election Activity) as paid with 100 percent federal funds. 

In response to the Interim Audit Report recommendation. Counsel said SDDP moved all 

payroll expenses on their reports to Federal Election Activity. The Audit staff considers 

this matter resolved. 

The Commission approved a finding that SDDP failed to maintain monthly time logs for 

$42,557 in payroll allocated between federal and non-federal funds and also for $2,399 in 

payroll that was paid from an exclusively non-federal account during periods in which 

the same employee was also paid from a federal account. The Commission did not 

approve that portion of the finding for $ 15,187 in payroll that was paid exclusively vnth 

non-federal flinds in a given month; as such, these expenses are presented as an 

"Additional Issue." (For more detail, see p. 9.) 

Finding 3. Reporting of Coordinated Party Expenditures 

The Audit staff found that SDDP made an apparent excessive in-kind contribution of 

$16,277 to a House candidate, resulting from coordinated expenditures made in excess of 

the coordinated party spending limitation. During the audit exit conference, SDDP 

officials stated that they had erroneously reported $19,529 for two direct mail pieces as 
Coordinated Party Expenditures on Schedule F, Line 25, when the expenditure was 

actually for Federal Election/Exempt activity, that SDDP ^ould have reported on 

Schedule B, Line 30b. SDDP argued that the disbursements should not We been 

counted towards its coordinated party expenditure limit because the disbursements 

qualify for the volunteer materials exemption but were not properly disclosed on its 

reports. However, SDDP provided only limited evidence that volunteer activity existed. 

In response to the Interim Audit Report recommendations, SDDP amended its reports to 

disclose the $19,529 as a volunteer exempt expense and provided a signed declaration 

that this type of mailing was generally performed by volunteers. Given the imcertainty 

regarding ^e level of volunteer involvement needed to qualify for the volunteer materials 

exemption, as well as the amount of documentation required to support such an 

exemption, the expenditures are no longer being attributed to SDDP's coordinated 

expenditure limit. 

The Commission approved a finding that expenditures totaling $19,529 should not be 

attributed towards SDDP's coordinated expenditure limitation and that SDDP did not 

exceed the 2010 coordinated expenditure limit. (For more detail, see p. 11.) 

Finding 4. Contributions from Unregistered Political 

Organizations 

SDDP received contributions totaling $14,831 from unregistered political organizations 

that may not have used permissible funds. SDDP refunded contributions totaling $4,891 

of the $14,831, though it did so in an untimely manner. 

In response to the Interim Audit Report recommendations, SDDP provided signed letters 

from contributors confirming that $3,140 were from permissible sources. In addition, 

SDDP provided documentation supporting that $5,000 was not a contribution but rather a 

reimbursement fhim a non-federal committee related to a door hanger. SDDP also issued 

a disgorgement check for $1,800 payable to the U.S. Treasury for the balance of the 

impermissible contributions. 

The Commission approved a finding that SDDP received impermissible contributions 

from unregistered political organizations totaling $6,691. (For more detail, see p. 15.) 

Finding 5. Disclosure of Occupation/Name of Employer 

The Audit staff reviewed individual contributions, for which itemization is required, and 

found that 78 contributions totaling $30,702 lacked adequate disclosure of occupation 

and/or name of employer (OCC/NOE) information. Furthermore, prior to the notification 

of the audit, SDDP did not sufficiently document "best efforts" to obtain, maintain, and 

submit contributor information. After being notified of the audit, SDDP obtained some 

of the missing contributor information and filed amended reports for calendar year 2009, 

which materially corrected the disclosure of OCC/NOE. 

In the Interim Audit Report, the Audit staff recommended that SDDP provide any 

additional information it considers relevant to this matter. SDDP made no comment in 
response to the audit report. Hov^ever, although not required, SDDP amended its 2010 

reports to include previously undisclosed OCC/NOE information for $10,206 in 

contributions from individuals. 

The Commission approved a finding that SDDP failed to disclose OCC/NOE information 

for individuals totaling $30,702 and did not timely demonstrate "best efforts" to obtain, 

maintain, and submit disclosure information >vith respect to these contributions. (For 

more detail, see p. 17.) 

Additional Issue 

Recordkeeping for Employees 

As stated in the Finding 2 (Recordkeeping for Employees), SDDP did not maintain any 

monthly payroll logs, as required, to document the percentage of time each employee 

spent on federal election activity. For 2009 and 2010, the Audit staff identified payments 

to SDDP employees totaling $60,143, for which monthly payroll logs were not 

maintained. This consisted of $42,557, reported as allocated between federal and nonfederal fimds; $15,187 that was paid from an exclusively non-federal account in a given 

month; and $2,399 that was paid from an exclusively non-federal account during periods 

in which the same employee was also paid from a federal account. 

In response to the Interim Audit Report recommendation. Counsel said SDDP moved all 

payroll expenses on their reports to Federal Election Activity. 

The Commission did not approve, by the required four votes, the portion of the Audit 

staffs reconunended finding that SDDP failed to maintain monthly payroll logs for the 

$15,187 in payroll paid from an exclusively non-federal account in a given month. 

Pursuant to Commission Directive 70,^ these expenses are discussed in the "Additional 

Issue" section, and the payroll expenditures of $15,187 are not included in Finding 2. 

(For more detail, see p.20.) 

' Available at http;//www.fec.gov/directives/directive_70.pdf. 
Part IV 

Commission Findings 

I Finding 1. Mtestatement of Financial Activity J 

Summary . 

During audit fieldwork, a comparison of SDDP's reported financial activity with its bank 

records revealed misstatements for calendar years 2009 and 2010. For 2009, SDDP 

understated disbursements by $1S,1SS. For 2010, SDDP understated receipts by $26,721. 

Subsequent to audit notification, SDDP amended its reports, which corrected the 

misstatement for 2009. In response to the Interim Audit Report recommendation, SDDP 

amended its 2010 reports to materially correct its remaining misstatements. 

The Commission approved a finding that SDDP misstated its financial activity for the 

calendar years 2009 and 2010. 

Legal Standard 

Contents of 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 A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 52 U.S.C. § 30104(b)(l),(2),(3),(4) and 

(5). 

Facts and Analysis 

A. Facts 

The Audit staff reconciled reported activity with bank records for calendar years 2009 

and 2010. The following charts outline the discrepancies for the beginning cash 

balances, receipts, disbursements and ending cash balances for each year. Succeeding 

paragraphs address the reasons for the misstatements. 

2009 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

® January 1,2009 

$94,626 $93,826 $ 800 

Overstated 

Receipts $194,044 $197,026 $ 2,982 

Understated 

Disbursements $261,047 $276,202 $15,155 

Understated 

Ending Cash Balance @ 

December 31,2009 

$11,645" $14,650 $3,005 

Understated 

* SDDP did not cany the convct ending cash balance to the subsequent report's beginning cash balance 

from the July 2009 Monthly report through the Year End 2009 report. As a result of these 

discrepancies, the amounts in the "Reported" column do not total correctly. 
The understatement of disbursements resulted trom the following: 

• Disbursements not reported $ 18,938 

• Disbursement reported but not supported by a check or debit (3,390) 

• Unexplained difference (3931 

Net Understatement of Disbursements % IS.ISS 

Unreported disbursements of $18,938 consist primarily of payments for salaries and a 

loan payment. 

The $3,005 understatement of the ending cash balance oh December 31,2009 resulted 

from the misstatements described above, as well as discrepancies in the beginning cash 

balance and receipts. 

Subsequent to audit notification, SDDP amended its reports for calendar year 2009, 

which corrected the misstatements noted above. 

2010 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

^January 1,2010 

$11,655' $14,650 $2,995 

Understated 

Receipts $697,318 $724,039 $26,721 

Understated 

Disbursements $707,313 $717,037 $9,724 

Understated 

Ending Ca.sh Balance @ 

December 31,2010 

$21,191" $21,652 $461 

Understated 

The understatement of receipts resulted from the following: 

• Receipts from political committees not reported 

• In-kind receipt reported twice 

• Unexplained difference 

Net Understatement of Receipts 

$ 28,534 

(2,026) 

m 

iS 26-721 

The $461 understatement of the ending cash balance on December 31,2010, resulted 

from the misstatements described above, as well as discrepancies in the beginning cash 

balance on January 1,2010, and disbursements. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed the misstatements with SDDP 

representatives and provided copies of relevant schedules. SDDP filed amendments 

collecting the misstatements for 2009 and said that it would file corrective amendments 

for 2010. 

^ The beginning cash balance was not carried forward coirectly from the previous period. 

' This column does not total due to discrepancies throughout 2010 between reported amounts for ending 

cash and the subsequent period's beginning cash balance. 
The Interim Audit Report recommended that SDDP amend its reports to correct the 

misstatements noted above for calendar year 2010 and amend its most recently filed 

report to correct the cash-on-hand balance with an explanation that the change resulted 

from a prior period audit adjustment. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendations, SDDP reconciled its accounts 

and filed amended reports for 2010 that materially corrected its misstatements.^ 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that SDDP amended its reports and 

materially corrected the misstatement of financial activity. 

E. Committee Response to the Draft Final Audit Report 

Counsel responded to the Draft Final Audit Report and said that SDDP had no additional 

comments. 

Commission Conclusion 

On March 10,201S, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Conunission adopt a finding that SDDP misstated its financial activity for the calendar 

years 2009 and 2010. 

The Commission approved the Audit staffs recommendation. 

[Finding 2. Recordkeeping for Employees 

Summary 

During audit fieldwork, the Audit staff determined that SDDP did not maintain any 

monthly payroll logs, as required, to document the percentage of time each employee 

spent on federal election activity. For 2009 and 2010, the Audit staff identified payments 

to SDDP employees totaling $60,143, for which monthly payroll logs were not 

maintained. This consisted of $42,557, reported as allocated between federal and nonfederal funds; $15,187 that was paid from an exclusively non-federal account in a given 

month; and $2,399 that was paid from an exclusively non-federal account during periods 

in which the same employee was also paid from a fi^eral account. Subsequent to being 

notified of the audit, SDDP filed amended reports for 2009 disclosing all rilocated 

payroll on Line 30b (Federal Election Activity) as paid with 100 percent federal funds. 

In response to the Interim Audit Report recommendation. Counsel said SDDP moved all 

payroll expenses on their reports to Federal Election Activity. The Audit staff considers 

this matter resolved. 

The Commission approved a finding that SDDP failed to maintain monthly time logs for 

$42,557 in payroll allocated between federal and non-federal funds and also for $2,399 in 

payroll that was paid from an exclusively non-federal account during periods in which 

the same employee was also paid from a federal account. The Conunission did not 

^ During SDDP's reconciliation, additional information was provided to the Audit staff for which 

adjustments were made to the misstated amounts in this report. 
10 

approve that portion of the finding for $15,187 in payroll that was paid exclusively with 

non-federal fiinds in a given month; as such, these expenses are presented as an 

"Additional Issue." 

Legal Standard 

Maintenance of Monthly Logs. Committees must keep a monthly log of the percentage 

of time each employee spends in connection with a federal election. Allocations of 

salaries, wages, and fnnge benefits are to be undertaken as follows: 

• Employees who spend 25 percent or less of their compensated time in a given 

month on federal election activities must be paid either from the federal account 

or have their pay allocated as administrative costs; 

• Employees who spend more than 25 percent of their compensated time in a given 

month on federal election activities must be paid only from a federal account; and, 

• Employees who spend none of their compensated time in a given month on 

federal election activities may be paid entirely with funds that comply with State 

law. 11 CFR§106.7(d)(l). 

Facts and Analysis 

A. Facts 

During fieldwork, the Audit staff reviewed disbursements for payroll. SDDP did not 

maintain any monthly logs or equivalent records to document the percentage of time each 

employee spent in connection with federal election activity. These logs are required to 

document the proper allocation of federal and non-federal funds used to pay employee 

salaries and wages. For 2009 and 2010, SDDP did not maintain logs for $60,143' in 

payroll. This consisted of $42,557, reported as allocated between federal and non-federal 

funds; $15,187 that was paid from an exclusively non-federal account in a given month, 

and $2,399 that was paid from an exclusively non-federal account but also included 

employees paid from a federal account during the same periods. 

Subsequent to audit notification, SDDP filed amended reports for calendar year 2009 that 

moved all previously allocated salaries to Line 30b, Federal Election Activity. The 

remaining payroll amount was immaterial. During fieldwork, the Audit staff asked 

SDDP representatives why SDDP made changes for its 2009 payroll disclosures. SDDP 

representatives said the following: 

These changes were made as the result of two things. The first is that due 

to the fact that allocation transfers were never completed for these 

individuals' expense, these items were mis-reported. Secondly, with the 

knowledge of their roles, it is understood that their time was spent beyond 

25 percent on federal activity. 

The Audit staff acknowledges that the changes made by SDDP in the reporting of its 

payroll obviates the need for monthly timesheets since the payroll was paid with 

' Amounts are net of payroll taxes and benefits. This total does not include payroll for employees paid 

with 100 percent federal funds and reported as such. (See Part I, Background, Commission Guidance, 

Request for Early Consideration of a Legal Question, p. 1). For all future payroll, the Audit staff 

recommended that SDDP maintain payroll logs for all employees. 
11 

exclusively federal funds and reported as such. However, since SDDP amended reports 

after notification of the audit, this matter is included in this audit report. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference. Audit staff presented the matter of maintaining monthly payroll 

logs to track the amount of time spent on federal election activity. SDDP Counsel stated 

that SDDP's position is that no payroll logs are required for activity reported and paid as 

100 percent federal. The Interim Audit Report noted the verification of SDDP's amended 

reports that had moved allocated payroll to Line 30b, Federal Election Activity, and that 

no further action was required. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation. Counsel reiterated previous 

comments regarding payroll and filed more amendments that reported 2010 payroll 

expenses on Line 30b. The Audit staff considers this matter resolved. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that SDDP resolved the matter of 

recordkeeping for employees. 

E. Committee Response to the Draft Final Audit Report 

SDDP's response to the Draft Final Audit Report provided no additional comments. 

Commission Conclusion 

On March 10,201S, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission adopt a fmding that SDDP failed to maintain monthly time logs to document 

the time employees spent on federal election activity totaling $60,143. 

The Commission approved a finding that SDDP failed to maintain monthly time logs for 

$42,357 in payroll allocated between federal and non-federal funds and also for $2,399 in 

payroll that was paid from an exclusively non-federal account during periods in which 

the same employee was also paid fi-om a federal account. The Commission did not 

approve that portion of the finding for $15,187 in payroll that was paid exclusively with 

non-federal flinds in a given month; as such, these expenses are presented as an 

"Additional Issue." 

I Finding 3. Reporting of Coordinated Party Expenditures | 

Summary 

The Audit staff found that SDDP made an apparent excessive in-kind contribution of 

$16,277 to a House candidate, resulting from coordinated expenditures made in excess of 

the coordinated party spending limitation. During the audit exit conference, SDDP 

officials stated that they had erroneously reported $19,529 for two direct mail pieces as 

Coordinated Party Expenditures on Schedule F, Line 25, when the expenditure was 

actually for Federal Election/Exempt activity, that SDDP should have reported on 

Schedule B, Line 30b. SDDP argued that the disbursements should not have been 
12 

counted towards its coordinated party expenditure limit because the disbursements 

qualify for the volunteer materials exemption but were not properly disclosed on its 

reports. However, SDDP provided only limited evidence that volunteer activity existed. 

In response to the Interim Audit Report recommendations, SDDP amended its reports to 

disclose the $19,529 as a volunteer exempt expense and provided a signed declaration 

that this type of mailing was generally p^ormed by volunteers. Given the uncertainty 

regarding the level of volunteer involvement needed to qualify for the volunteer materials 

exemption, as well as the amount of documentation required to support such an 

exemption, the expenditures are no longer being attributed to SDDP's coordinated 

expenditure limit. 

The Commission approved a finding that expenditures totaling $19,529 should not be 

attributed towards SDDP's coordinated expenditure limitation and that SDDP did not 

exceed the 2010 coordinated expenditure limit. 

Legal Standard 

A. Coordinated Party Expenditure. National party committees and state party 

committees may each make coordinated party expenditures in connection with the 

general election campaign of a candidate in diat state who is affiliated with the party. 

11 CFR § 109.32(b). 

B. Assignment of Coordinated Party Expenditure Limit. A political party may 

assign its authority to make coordinated party expenditures to another politick party 

committee. Such an assignment must be made in writing, state the amount of the 

authority assigned, and be received by the assignee before any coordinated party 

expenditure is made pursuant to the assignment. The political party committee that is 

assigned authority to make coordinated party expenditures must maintain the written 

assignment for at least three years. 11 CFR §§104.14 and 109.33(a) and (c). 

C. Exempt Activity. The payment by a state committee of a political party of the costs 

of campaign materials (such as pins, bumper stickers, handbills, brochures, posters, 

party tabloids or newsletters, and yard signs) used by such coiiunittee in connection 

with volunteer activities on behalf of any nominee(s) of such party is not a 

contribution, provided that the following conditions are met: 

• Such payment is not for cost incurred in connection with any broadcasting, 

newspaper, magazine, bill board, direct mail, or similar type of general public 

communication or political advertising. The term direct mail means any 

mailing(s) by a commercial vendor or any mailing(s) made from commercial lists; 

• The portion of the cost of such materials allocable to Federal candidates must be 

paid from contributions subject to the limitations and prohibitions of the Act; 

• Such payment is not made from contributions designated by the donor to be spent 

on behalf of a particular candidate for federal ofGce; 

• Such materials are distributed by volunteers and not by commercial or for-profit 

operations; 
13 

• If made by a political committee such payments shall be reported by the political 

committee as a disbursement in accordance with 11 CFR §104.3 but need not be 

allocated to specific candidates in committee reports; and 

• The exemption is not applicable to campaign materials purchased by the national 

party committees. 11 CFR §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR 

§100.147 (a). (b).(c),(d).(e) and (g). 

D. Coordinated Party Communication. A political party communication is 

coordinated with a candidate, a candidate's authorized committee, or agent of any of the 

foregoing, when the communication satisfies the following conditions: 

(1) The communication is paid for by a political party committee or its agent. 

(2) The communication satisfies at least one of the content standards. 

o Must expressly advocate a candidate's election of defeat 11 CFR 

§ 100.22(a) and (b). 

o Involve the dissemination, distribution or republication of a candidate's 

campaign materials, 

o Refers to a federal candidate, is directed to the candidate's constituents 

and is distributed within certain time frame before an election. 

(3) The communication satisfies at least one of the conduct standards in 11 CFR 

§109.21(d)(l) through (d)(6), subject to the provisions of 11 CFR §109.21(e), (g), 

and (h). 

o Must have been created, produced or distributed at the request of the 

candidate or its' agent, 

o Developed with a "material involvement" of the candidate, 

o Created, produced or distributed after "substantial discussion" with the 

candidate or his agents, 

o The use of a common vendor in the creation, production or distribution of 

a communication. 11 CFR §109.37. 

Pacts and Analysis 

A. Facts 

The combined coordinated party expenditure limit for a 2010 candidate for the House of 

Representatives from South Dakota was $174,000, with an $87,000 limit for both SDDP 

and the National Party (Democratic National Committee (DNC)). SDDP reported 

coordinated expenditures of $164,229^ on Schedule F (Itemized Coordinated Party 

Expenditures) for Stephanie Herseth Sandlin, a candidate for the House of 

Representatives. The Democratic Congressional Campaign Committee (DCCC) reported 

coordinated expenditures for the candidate of $26,048. The total reported coordinated 

expenditures by both the SDDP and the DCCC exceeded the coordinated expenditure 

limit by $16,277. 

' Of the S164,229 reported on Schedule F, SDDP provided assignment letters disclosing that the DNC 

(through DCCC) designated it to make expenditures of $145,809 on behalf of the candidate. 
14 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided a schedule of the coordinated 

expenditures subject to the limit and discussed them with SDDP representatives. During 

the discussion, SDDP representatives said that the SDDP had erroneously included direct 

mail pieces costing SI9,529 in its Coordinated Expenses of $164,229 and that it should 

have reported this expenditure as volunteer exempt activity. 

The Audit staff requested further documentation to support the reporting of the direct 

mailers as exempt activity. In response, SDDP provided pictures of volunteers working 

on the direct mailers. It is also noted that the vendor for Ae two direct mail pieces was 

the same as the vendor used for other direct mail pieces reported as having exempt 

activity. 

Both mail pieces are brochures containing four pages, including the back and front cover. 

One of the mail pieces emphasizes the words, "Reckless and Wrong" when discussing the 

plans of the opposing political party's congressional candidate. The other mail piece's 

message is that the candidate,".. .does what's right for South Dakota Seniors," and then 

goes on to discuss, primarily. Medicare. The candidate's and the opponent's viewpoints 

and plans are provided. The final words on the inside cover urge a no vote for the other 

candidate.'" 

The Commission addressed the applicability of the volunteer materials exemption in the 

Final Audit Reports of the Democratic Executive Committee of Florida and Ae 

Tennessee Republican Party. In these reports, the Commission recognized that a lack of 

clarity exists regarding the application of the volunteer materials exemption. The 

Commission had attempted to formulate a consensus policy regarding what constitutes 

substantial volunteer involvement for the purpose of applying the exemption," but this 

was never achieved. Since a lack of clarity exists concerning the application of the 

volunteer materials exemption, it follows that the type and amount of documentation 

needed to support volunteer involvement is also unclear. 

In view of the uncertainty regarding the amount of volunteer involvement needed to 

qualify for the volunteer materials exemption and to document that involvement, the 

Interim Audit Report recommended that SDDP provide a more detailed statement'^ 

and further documentation regarding the volunteers' involvement for the two mailers. In 

addition, that SDDP should amend its reports in accordance with its earlier statements at 

the audit exit conference. Absent such further information, the disbursement might have 

been considered a coordinated expenditure, resulting in SDDP exceeding the coordinated 

expenditure limit by $16,277. 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendations, SDDP amended its filing to 

show $ 19,529 as a volunteer exempt expense and provided a signed declaration that this 

type of mailing was generally performed by volunteers. 

Each mailer includes a statement, "Paid for by the South Dakota Democratic Party." 

" Proposed Interim Enforcement Policy, Agenda document No. 10-16. 

SDDP might want to consider providing a sworn statement which might be considered stronger evidence 

of volunteer involvement. 
15 

Given the lack of clarity regarding the amount of volunteer involvement needed to 

qualify for the volunteer materials exemption, as well as the amount of documentation 

required to support such an exemption, the expenditures for which the SDDP claims as 

qualifying for a volunteer exempt activity are no longer being attributed to SDDP's 

coordinated expenditure limit and this matter is considered resolved. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that SDDP resolved the matter for reporting 

of coordinated party expenditures. 

E. Committee Response to the Draft Finai Audit Report 

SDDP's response to the Draft Final Audit Report provided no additional comments. 

Commission Conclusion 

On March 10,2015, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission adopt a finding that expenditures totaling $19,529 should not be attributed 

towards SDDP's coordinated expenditure limitation and that SDDP did not exceed the 

2010 coordinated expenditure limit. 

The Commission approved the Audit staffs recommendation. 

Finding 4. Contributions from Unregistered Political 

Organizations 

Summary 

SDDP received contributions totaling $14,831 from unregistered political organizations 

that may not have used permissible funds. SDDP refunded contributions totaling $4,891 

of the $14,831, though it did so in an untimely manner. 

In response to the Interim Audit Report recommendations, SDDP provided signed letters 

from contributors confirming that $3,140 were from permissible sources. In addition, 

SDDP provided documentation supporting that $5,000 was not a contribution but rather a 

reimbursement from a non-federal committee related to a door hanger. SDDP also issued 

a disgorgement check for $1,800 payable to the U.S. Treasury for the balance of the 

impermissible contributions. 

The Commission approved a finding that SDDP received impeimissible contributions 

from unregistered political organizations totaling $6,691. 

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 state, district, & local 

party committees. 52 U.S.C. § 30116a(a)(l)(C),(2)(C) and (f) and 11 CFR §§110.1(a) and 

(d) and 110.9(a). 
16 

B. Handling Contributions that Appear Impermissible or Excessive. If a committee 

receives a contribution that appears to be impermissible or excessive, the committee must 

either: 

1. Return the questionable check to the donor; or 

2. Deposit the check into its federal account and: 

• Keep enough money in the account to cover all potential refimds; 

• Keep a written record explaining why the contribution may be illegal; 

• Include this explanation on Schedule A if the contribution has to be itemized 

before its legality is established. 11 CFR § 103.3(b)(3), (4) and (5). 

C. Receipt of Contributions. Organizations that are political conunittees under the Act, 

other than national party committees shall establish a separate Federal account in a 

depository in accordance with 11 CFR part 103. Such account shall be treated as a 

separate Federal political committee that must comply with the requirements of the Act 

including the registration and reporting requirements of 11 CFR parts 102 and 104. Only 

funds subject to the prohibitions and limitations of the Act shall be deposited in such 

separate Federal account. 11 CFR §102.S(a). 

Facts and Analysis 

A. Facts 

During the 2010 audit cycle, SDDP deposited 16 contributions, totaling $14,831, from 

unregistered political organizations into its federal account. Following the issuance of 

the audit notification letter, SDDP issued untimely refunds totaling $4,891.'^ SDDP has 

taken no action with respect to the remaining $9,940 and the Audit staff considered the 

contributions at issue impermissible and unresolved. 

The Audit staff reviewed all documentation provided by SDDP pertaining to 

contributions received from unregistered political organizations. In several instances, 

notations in SDDP records were made stating, "mis-deposited into the federal committee 

funds." However, the Audit staff found no attempt on the part of SDDP to make refunds 

of those contributions prior to being notified of the audit. In addition, the Audit staff 

found no attempt on the part of SDDP to ascertain the permissibility of other unregistered 

political organizations' contributions. 

B. Interim Audit Report & Audit Division Recommendation 

During audit fieldwork. Audit staff presented this matter to SDDP representatives. SDDP 

responded that one of the contributions for $S,000 should have been reported as an offset 

for door hangers, not as a contribution. In addition, the SDDP representatives also said 

that an effort would be made to contact the unregistered political organizations to 

substantiate that funds were from permissible sources. 

The Audit staff requested additional information concerning the door hangers and the 

results of SDDP's efforts to contact unregistered political committees to substantiate that 

SDDP issued refund checks totaling S6,691 but only S4,891 has cleared SDDP's bank account. 
17 

the funds were from permissible sources, but received no further information. Absent 

such additional information, the Audit staff concluded that these items were 

impermissible contributions that needed to be refimded to the contributors or disgorged to 

the U.S. Treasury. 

The Interim Audit Report recommended that SDDP provide documentation that 

demonstrates $9,940 in questioned contributions were made with permissible funds or 

that they be refunded to the contributor or disgorged to the U.S Treasury. 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendations, SDDP provided eight signed 

letters from contributors confirming that $3,140 were from permissible sources. In 

addition, SDDP provided documentation supporting that $5,000 was not a contribution 

but rather a reimbursement from a non-federal committee related to a door hanger. 

SDDP also issued a disgorgement check for $1,800 payable to the U.S. Treasury for the 

balance of the impermissible contributions. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that SDDP had disgorged the remaining 

balance of impermissible contributions to the U.S. Treasury and therefore the finding was 

resolved. 

E. Committee Response to the Draft Final Audit Report 

SDDP's response to the Draft Final Audit Report provided no additional comments. 

Commission Conclusion 

On March 10,2015, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission adopt a finding that SDDP received impermissible contributions totaling 

$6,691 from unregistered political organizations. 

The Commission approved the Audit staffs recommendation. 

Finding 5. Disclosure of Occupation/Name of Employer 

Summary 

The Audit staff reviewed individual contributions, for which itemization is required, and 

found that 78 contributions totaling $30,702 lacked adequate disclosure of occupation 

and/or name of employer (OCC/NOE) information. Fuitheimore, prior to the notification 

of the audit, SDDP did not sufficiently document "best efforts" to obtain, maintain, and 

submit contributor information. After being notified of the audit, SDDP obtained some 

of the missing contributor information and filed amended reports for calendar year 2009, ^ 

which materially conected the disclosure of OCC/NOE. 

In the Interim Audit Report, the Audit staff recommended that SDDP provide any 

additioiuil information it considers relevant to this matter. SDDP made no comment in 

response to the audit report. However, although not required, SDDP amended its 2010 

reports to include previously undisclosed OCC/NOE information for $10,206 in 

contributions from individuals. 
18 

The Commission approved a finding that SDDP failed to disclose OCC/NOE information 

for individuals totaling $30,702 and did not timely demonstrate "best efforts" to obtain, 

maintain, and submit disclosure information with respect to these contributions. 

Legal Standard 

A. Itemization required for Contributions from Individuals. A political committee 

other than an authorized committee must itemize any contribution from an individual 

if it exceeds $200 per calendar year, either by itself or when combined with other 

contributions from the same contributions. 52 U.S.C. § 30104(b)(3)(A). 

B. Required Information for Contributions from Individuals. For each itemized 

contribution from an individual, the committee must provide the following 

information: 

• The contributor's full name and address (including zip code); 

• The contributor's occupation and the name of his or her employer; 

• The date of receipt (the date the committee received the contribution); 

• The amount of the contribution; and 

• The calendar year-to-date total of all contributions from the same individual. 

11 CFR §§100.12 and 104.3(a)(4) and 52 U.S.C. § 30104(b)(3)(A). 

C. Best Efforts Ensures Compliance. When the treasurer of a political committee 

shows that the committee used best efforts (see below) to obtain, maintain, and 

submit the information required by the Act, the committee's reports and records will 

be considered in compliance with the Act. 52 U.S.C. § 30102(h)(2)(i). 

D. Definition of Best Efforts. The treasurer and the committee will be considered to 

have used "best efforts" with respect to contributions, if the conunittee satisfied all of 

the following criteria: 

• All written solicitations for contributions included: 

o A clear request for the contributors full name, mailing address, 

occupation, and name of employer; and 

o The statement that such reporting is required by Federal Law. 

• Within 30 days after the receipt of the contribution, the treasurer made at least 

one effort to obtain the missing information, in either a written request or a 

documented oral request. 

• The treasurer reported any contributor information that, although not initially 

provide by the contributor, was obtained in a follow-up communication or was 

contained in the committees' records or in prior reports that the committee 

filed during the same two-year cycle. 11 CFR § 104.7(b). 

Facts and Analsrsis 

A. Facts 

Using the most recent reports for the audit period filed prior to the audit, the Audit staff 

determined that 78 contributions from individuals totaling $30,702 (approximately 24 
19 

percent of itemized contributions) lacked adequate disclosure of occupation and/or name 

of employer (OCC/NOE) information. Most of the errors either disclosed a notation, 

"best efforts" or were left blank on the Schedule A, Itemized Receipts, filed with the 

Commission. 

After notification of the audit and prior to audit fieldwork, SDDP provided the Audit staff 

with copies of letters that were sent to contributors to obtain OCC^OE information. 

These letters were dated after SDDP was notified of the audit. Also, after notification of 

the audit, SDDP filed amended reports for 2009 that materially corrected the previously 

undisclosed OCC/NOE information. Since SDDP took corrective action after 

notification of the audit, this matter is included in this audit report. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed the disclosure of OCC/NOE information with SDDP 

representatives at the exit conference and provided a schedule of the remaining errors. 

The Interim Audit Report recommended that SDDP provide any additional information it 

considered relevant to this matter. 

C. Committee Response to the Interim Audit Report 

SDDP made no comment in response to the Interim Audit Report. However, although 

not required, SDDP amended its 2010 reports to include previously undisclosed 

OCC/NOE information for $10,206 in contributions from individuals. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that SDDP resolved the reporting of 

OCC/NOE information. 

E. Committee Response to the Draft Final Audit Report 

SDDP's response to the Draft Final Audit Report provided no additional comments. 

Commission Conclusion 

On March 10,2015, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit staff recommended that the 

Commission adopt a finding that SDDP failed to disclose OCC/NOE information for 

individuals totaling $30,702 and did not timely demonstrate "best efforts" to obtain, 

maintain, and submit disclosure information with respect to these contributions. 

The Commission approved the Audit staffs recommendation. 
20 

Part V 

Additional Issue 

[Recordkeeping for Employees 

Summary 

As stated in the Finding 2 (Recordkeeping for Employees), SDDP did not maintain any 

monthly payroll logs, as required, to document the percentage of time each employee 

spent on federal election activity. For 2009 and 2010, the Audit staff identified payments 

to SDDP employees totaling $60,143, for which monthly payroll logs were not 

maintained. This consisted of $42,557, reported as allocated between federal and nonfederal firnds; $15,187 that was paid from an exclusively non-federal account in a given 

month; and $2,399 that was paid from an exclusively non-federal account during periods 

in which the same employee was also paid from a federal account. 

In response to the Interim Audit Report recommendation. Counsel said SDDP moved all 

payroll expenses on their reports to Federal Election Activity. 

The Commission did not approve, by the required four votes, the portion of the Audit 

staffs recommended finding that SDDP failed to maintain monthly payroll logs for the 

$15,187 in payroll paid from an exclusively non-federal account in a given month. 

Pursuant to Commission Directive 70,'* these expenses are discussed in the "Additional 

Issue" section, and the payroll expenditures of $15,187 are not included in Finding 2. 

Legal Standard 

The legal standard in Finding 2 above is incorporated herein. 

Facts and Analysis 

A. Facts 

During fieldwork, the Audit staff reviewed disbursements for payroll. SDDP did not 

maintain any monthly logs or equivalent records to document the percentage of time each 

employee spent in connection with federal election activity. These logs are required to 

document the proper allocation of federal and non-federal funds used to pay employee 

salaries and wages. For 2009 and 2010, SDDP did not maintain logs for $60,143'^ in 

payroll. This consisted of $42,557, reported as allocated between federal and non-federal 

fimds; $15,187 that was paid fiom an exclusively non-federal account in a given month, 

and $2,399 that was paid from an exclusively non-federal account but also included 

employees paid from a federal account during the same periods. 

Available at http://www.fec.gov/directivcs/directive_70.pdf. 

Amounts are net of payroll taxes and benefits. This total does not include payroll for employees paid 

with 100 percent federal funds and reported as such. (See Part I, Background, Commission Guidance, 

Request for Early Consideration of a Legal Question, p. 1). 
21 

Subsequent to audit notification, SDDP filed amended reports for calendar year 2009 that 

moved all previously allocated salaries to Line 30b, Federal Election Activity. The 

remaining payroll amount was imihaterial. During fieldwork, the Audit staff asked 

SDDP representatives why SDDP made changes for its 2009 payroll disclosures. SDDP 

representatives said the following: 

These changes were made as the result of two things. The first is that due 

to the fact that allocation transfers were never completed for these 

individuals' expense, these items were mis-reported. Secondly, with the 

knowledge of their roles, it is understood that their time was spent beyond 

25 percent on federal activity. 

The Audit staff acknowledges that the changes made by SDDP in the reporting of its 

payroll obviates the need for monthly timesheets since the payroll was paid with 

exclusively federal funds and report^ as such. However, since SDDP amended reports 

after notification of the audit, this matter is included in this audit report. 

B. Interim Audit Report & Audit Division Recommendation 

At the exit conference. Audit staff presented the matter of maintaining monthly payroll 

logs to track the amount of time spent on federal election activity. SDDP Counsel stated 

that SDDP's position is that no payroll logs are required for activity reported and paid as 

100 percent federal. The Interim Audit Report noted the verification of SDDP's amended 

reports that had moved allocated payroll to Line 30b, Federal Election Activity, and that 

no further action was required. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, Counsel reiterated previous 

comments regarding payroll and filed more amendments that reported 2010 payroll 

expenses on Line 30b. The Audit staff considers this matter resolved. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that SDDP resolved the matter of 

recordkeeping for employees. 

E. Committee Response to the Draft Final Audit Report 

SDDP's response to the Draft Final Audit Report provided no additional comments. 

Commission Conclusion 

On March 10,2015, the Commission considered the Audit Division 

Recommendation Memorandum in which the Audit Division recommended that the 

Commission find that SDDP failed to maintain monthly time logs to document the time 

employees spent on federal election activity totaling $60,143. 
22 

The Commission did not approve, by the required four votes, the portion of the Audit 

staffs recommended finding that SDDP failed to maintain monthly payroll logs for the 

$15,187 in payroll paid from an exclusively non-federal account in a given month. 

Some Commissioners voted to approve the Audit staffs recommendation. Others did 

not, and had previously cited the position of three Commissioners in the Final Audit 

Report of the Commission on the Georgia Federal Elections Committee, in support of the 

proposition that the Commission lacks jurisdiction to impose recordkeeping and 

documentation requirements on exclusively non-federal activity. Pursuant to 

Commission Directive 70,'® these expenses are discussed in the "Additional Issue" 

section. 

" Available at http:/Avww.fec.gov/directives/directive_70.pdf.