San Francisco Ethics Commission Audit Report: John Avalos for Mayor 2011, FPPC ID #1338378

I. Introduction

This Audit Report summarizes the audit results of the committee, John Avalos for Mayor 2011, Identification Number 1338378 (“the Committee”), for the period from January 1, 2011 through December 31, 2011. The audit was conducted to determine whether the Committee materially complied with the requirements of the Political Reform Act (“the Act”) (California Government Code section 81000, et seq.) and San Francisco’s Campaign Finance Reform Ordinance (“CFRO”) (San Francisco Campaign and Governmental Conduct Code section 1.100, et seq).

II. Audit Authority

San Francisco Charter section C3.699-11 authorizes the Ethics Commission (“the Commission”) to audit campaign statements that are filed with the Commission along with other relevant documents to determine whether a committee complied with applicable requirements of State and local laws. Section 1.150(a) of the CFRO requires the Commission to audit all candidates who receive public financing.

III. Audit Scope and Procedures

This audit was performed in accordance with generally accepted auditing standards. The audit involved a review of the Committee’s records for the period covered by the audit. This review was conducted to determine:

Compliance with all disclosure requirements pertaining to contributions, expenditures, accrued expenditures, and loans, including itemization when required;
Compliance with applicable filing deadlines;
Compliance with restrictions on contributions, loans, and expenditures;
Accuracy of total reported receipts, disbursements, and cash balances as compared to bank records;
Compliance with all record-keeping requirements;
Compliance with all provisions related to the Commission’s public financing program; and
Any unexpended public funds that must be returned to the City up to the amount of public funds received by the candidate.

The Commission posts audit reports to its web site and, in cases of apparent violations of law, forwards them to the appropriate enforcement agency.

IV. Committee Information

The Committee qualified as a committee on April 18, 2011 to support the election of John Avalos for Mayor in the November 8, 2011 election. Sarah Warren served as the treasurer. The Committee has not terminated as of the date of this report.

V. Audit Findings

For the period covered by the audit, the Committee received $232,605 in contributions (including non-monetary contributions of $2,278) and $461,479 in public funds and incurred $656,777 in campaign expenditures. The CFRO provides that any candidate who receives public funds must return unexpended campaign funds to the City up to the amount of public funds received by the candidate (San Francisco Campaign and Governmental Conduct Code (S.F. C&GC Code) § 1.148(d)). The Committee had $46,966.18 in unexpended funds, which it has returned to the City.

The Commission determined that there were two material findings with respect to the audit of the Committee: 1) the Committee failed to maintain complete campaign records for contributions received totaling $26,506, or 11 percent of total contributions received, in violation of Government Code section 84104 and S.F. C&GC Code sections 1.106 and 1.109; and 2) the Committee failed to maintain complete campaign records for expenditures made totaling $391,594, or 60 percent of total expenditures made, in violation of Government Code section 84104 and S.F. C&GC Code sections 1.106 and 1.109.

Government Code Section 84104 and Campaign and Governmental Conduct Code Section 1.106: Recordkeeping Regarding Contributions Received

Government Code section 84104 provides that it is the duty of each candidate, treasurer and elected officer to maintain detailed accounts, records, bills and receipts that are necessary to prepare campaign statements, and to retain the documents for a period of four years following the date the appropriate campaign statement is filed. Section 84104 is incorporated into the Campaign Finance Reform Ordinance at S.F. C&GC Code section 1.106.

The Committee did not maintain complete records for contributions received. The Committee failed to maintain supporting documentation for contributions totaling $26,506 (including $2,278 in non-monetary contributions), or 11 percent of total contributions. The contributions for which there was a lack of supporting documents were received over four reporting periods: 1/1-6/30/11; 7/1-9/24/11; 9/25-10/22/11; and 10/23-12/31/11. See Attachment A to Audit Report.

Government Code Section 84104 and Campaign and Governmental Conduct Code Section 1.106: Recordkeeping Regarding Expenditures Made

The Committee did not maintain complete records for expenditures made. The Committee failed to maintain supporting documentation for expenditures totaling $391,594, or 60 percent of total expenditures. These expenditures were made over four reporting periods: 1/1-6/30/11; 7/1-9/24/11; 9/25-10/22/11; and 10/23-12/31/11.

The Commission was unable to fully verify whether the $391,594 in payments were appropriate campaign expenditures. Of the $391,594 in payments that lacked supporting documentation, the Commission was unable to match approximately $137,471 to expenditures reported on the campaign statements (FPPC Form 460). See Attachment B to Audit Report. In addition, the Committee reported approximately $138,155 in expenditures on the campaign statements (FPPC Form 460) that could not be matched to the payments listed on the bank statements and thus the recipients could not be verified. See Attachment C to Audit Report. There may be an overlap in these two groups of expenditures that cannot be verified due to the lack of documentation.

VI. Committee’s Response to Findings

The Committee’s comments are attached to this report. See Attachment D to Audit Report.