SAN FRANCISCO ETHICS COMMISSION
COMMITTEE FOR HONEST ELECTIONS
This Audit Report contains information pertaining to the audit of the Committee for Honest Elections, Identification Number 971476 ("the Committee") for the period from January 1, 1997 through June 30, 1998. The audit was conducted to determine whether the Committee materially complied with the requirements and prohibitions imposed by the Political Reform Act ("the Act") (Government Code Section 81000, et seq.) and San Francisco’s Campaign Finance Reform Ordinance ("the CFRO") (S.F. Admin. Code Section 16.501, et seq.).
During the period covered by the audit, the Committee reported total contributions of $6,973 and total expenditures of $4,565(1). This audit revealed one material finding: The Committee failed to disclose an accrued expense of $2,890, and a contribution in the same amount resulting from the forgiveness of the accrued expense, in violation of Government Code Section 84211(j).
II. Committee Information
On September 15, 1997, the Committee filed a Statement of Organization with the Commission indicating that it had not yet qualified as a committee. On October 7, 1997, the Committee filed an amended Statement of Organization, indicating that it had qualified on that date. The Committee was primarily formed to support the passage of Proposition G, the Regulation of Campaign Consultants Ordinance, in the November 4, 1997 general election. The Committee qualified as a "committee" because it received contributions totaling $1,000 or more in a calendar year. On July 23, 1998, the Committee filed a Recipient Committee Statement of Termination indicating that its filing obligations were completed on July 23, 1998. The Committee’s treasurer was Marc Norton.
III. Audit Authority
The Commission is mandated by San Francisco Charter Section C3.699-11(4) to audit campaign statements and other relevant documents to determine whether campaign committees comply with applicable requirements and prohibitions imposed by State and local law.
IV. Audit Scope and Procedures
This audit was performed in accordance with generally accepted auditing standards. The audit involved a thorough review of the Committee’s records for the time period covered by the audit. This review was conducted to determine:
1. Compliance with all disclosure requirements, pertaining to contributions, expenditures, accrued expenditures, and loans, including itemization when required;
2. Compliance with applicable filing deadlines;
3. Compliance with restrictions on contributions, loans and expenditures;
4. Accuracy of total reported receipts, disbursements and cash balances as compared to bank records; and
5. Compliance with all record-keeping requirements.
V. Summary of Applicable Law
Government Code Section 84211(j) requires that costs incurred by a committee, but not paid during the reporting period, must be reported as "accrued expenditures." Committees must report the name and address of each creditor owed $100 or more, a written description of the goods or services purchased, and the amount owed. In addition, for accrued expenses that are reduced or forgiven, a committee must report the amount reduced or forgiven as a non-monetary contribution.(2)
VI. Material Findings
Section 84211: Failure to Report an Accrued Expense and the Reduction of that Expense
The Committee failed to report an accrued expense of $2,890, the amount payable for services provided by a campaign consultant (‘the Consultant"). The Committee had entered into an agreement to pay for campaign consulting services in the amount of $7,000 (‘the Agreement"). A detailed review of the Committee’s campaign statements and other records showed that the Consultant was paid only $4,110 of the amount agreed upon.(3) Committee treasurer Marc Norton confirmed that the Consultant provided the services as listed in the Agreement. He explained that the Consultant was aware that the Committee might not raise enough funds to pay for his services, and had not requested to be fully reimbursed. When the Committee determined that it did not have funds to pay for this accrued expense, it should have reduced the accrued expense, indicating that it was forgiven, and reported it as a non-monetary contribution received from the Consultant.
The total dollar amount of the services provided by the Consultant but not accounted for on the Committee’s campaign statements ($2,890) represents approximately 39 percent of the total expenditures made by the Committee.(4) The Ethics Commission concluded that the Committee failed to comply with its disclosure requirements with respect to reporting an accrued expense and the forgiveness of such an expense. (Government Code Section 84211(j)).
Through the examination of the Committee’s records and campaign disclosure statements, the Auditor verified that the Committee maintained the necessary documentation regarding contributions and expenditures. The Committee reported expenditures totaling $4,565 and receipt of contributions totaling $6,973. However, the Committee failed to report an accrued expense of $2,890, and a contribution in the same amount resulting from the forgiveness of the accrued expense, in violation of Section 84211(j) of the Act.
Shaista Shaikh Date
Campaign Finance Auditor
Ginny Vida Date