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San Francisco Ethics Commission Audit Report: San Franciscans for Clean and Reliable Water, FPPC ID #971396



I. Introduction

This Audit Report contains information pertaining to the audit of the committee San Franciscans for Clean and Reliable Water, Identification Number 971396 ("the Committee") for the period from January 1, 1997 through December 31,1997. 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 ("CFRO") S.F. Administrative Code Section 16.501, et seq.

During the period covered by the audit, the Committee reported total contributions of $55,890 and total expenditures of $46,229. This audit revealed one material finding: The Committee failed to maintain copies of major donor notifications in violation of Government Code Section 84104.

II. Committee Information

The Committee filed a Statement of Organization with the Commission on September 4, 1997, indicating that it had qualified as a committee on August 26, 1997. The Committee was primarily formed to support the passage of Propositions A and B, the Water System Facilities Bonds and Drinking Water Bonds, in the November 4, 1997 general election. On February 1, 1999 the Committee filed a Recipient Committee Statement of Termination, indicating that its filing obligations were completed on December 31, 1998. The Committee’s treasurer was H. Welton Flynn.

III. Audit Authority

San Francisco Charter Section C3.699-11(4) mandates that the Commission 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

Individuals and entities that contribute more than $10,000 to any committee in a calendar year must file "major donor" statements. Government Code Sections 82013(c) and 84211(v). The Act requires committee treasurers to notify donors who contributed $5,000 or more in a calendar year that the contributor is required to file a "major donor" statement if the $10,000 threshold is met. Government Code Section 84105. Treasurers must send the major donor notification within two weeks of receipt of the contributions. Government Code Section 84105.

In addition, the Act requires that committee treasurers maintain detailed accounts, records, bills and receipts that are necessary to prepare campaign statements and comply with the campaign disclosure provisions of the Act. Government Code Section 84104. The detailed accounts, records, bills and receipts are to be retained by the filer for a period of four years. Information Manual D, page 71, Fair Political Practices Commission ("FPPC").

VI. Material Findings

Section 84104: Failure to Maintain Records of Major Donor Notification

The Committee received three contributions of $5,000 each. The Committee’s records did not contain copies of notices sent to these potential major donors. The Committee’s representative reported that she is not certain whether the Committee neglected to send the major donor notices or if records of the notices simply were not kept. In examining the computer and paper files she was not able to locate copies of any major donor notices that may have been sent although all other files seemed to be in order and complete.

In determining whether a Committee violated the requirement to notify potential major donors, the FPPC and the Political Reform Audit Division of the Franchise Tax Board ("FTB") consider two factors: 1) the total number of potential major donors not notified; and 2) whether those potential major donors filed major donor statements in any event. As noted above, the Committee’s records were missing only three notices to potential major donors. In addition, the Auditor determined that two of the three donors did file major donor statements with the Department of Elections. It is unknown whether the third donor reached the $10,000 threshold requiring the filing of a major donor statement. In view of these findings, the Auditor determined that the failure to notify potential major donors was not material.

In the above circumstances, the FPPC and FTB would not consider material the Committee’s failure to notify potential donors. These agencies would consider material the Committee’s failure to maintain records of such notices. Accordingly, the Auditor identified as a material finding the Committee’s failure to comply with its record-keeping requirements with respect to maintaining notifications of possible major donor obligations. Government Code Section 84104.

VII. Conclusion

Through the examination of the Committee’s records and campaign disclosure statements, the Auditor verified that the Committee accurately and timely disclosed all contributions received and expenditures made. The Auditor found a material violation of the Act in the Committee’s failure to maintain records of major donor notifications. Government Code Section 84104.

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Shaista Shaikh                                                             Date
Campaign Finance Auditor

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Ginny Vida                                                                   Date
Executive Director

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