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San Francisco Ethics Commission Audit Report: The .Com Good Government Committee, FPPC ID #992231




I. Introduction

This Audit Report contains information pertaining to the audit of The .Com Good Government Committee, Identification Number 992231 ("the Committee") for the period from January 1, 1999 through December 31, 1999. The audit was conducted to determine whether the Committee materially complied with the requirements and prohibitions imposed by the Political Reform Act ("the Act") (California Government Code Section 81000, et seq.) and San Francisco's Campaign Finance Reform Ordinance ("CFRO") and Electronic Filing Ordinance (S.F. Campaign and Governmental Conduct Code Sections 1.100, et seq., and 1.300, et seq., formerly S.F. Administrative Code Sections 16.501, et seq., and 16.535, et seq.).(1)

For the period covered by the audit, the Committee received total contributions of $126,000 and incurred expenditures of $136,370(2). There were two material findings with respect to this Audit Report: 1) the Committee failed to disclose two accrued expenditures in violation of Government Code Section 84211(k); and 2) the Committee filed an electronic campaign statement 452 days late in violation of Campaign and Governmental Conduct Code Section 1.310.

II. Committee Information

The Committee was formed in December 1999 to provide independent expenditures in support of Willie L. Brown, Jr. in the December 14, 1999 mayoral run-off election. The Committee filed its initial Statement of Organization on December 7, 1999, indicating that it had not yet qualified as a committee. On December 8, 1999 the Committee amended its Statement of Organization, indicating that it had qualified on December 6, 1999. The Committee filed its Statement of Termination on July 31, 2000, indicating that its filing obligations were completed on June 30, 2000. Jim Gonzalez was the Committee's treasurer.

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

Government Code Section 84211(k): Reported of Accrued Expenditures

Government Code Section 84211(k) 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.

Campaign and Governmental Conduct Code Section 1.310: Filing of Electronic Campaign Statements

The Electronic Filing Ordinance requires that whenever an elected City and County officer, candidate or committee is required by the Act to file campaign statements with the Ethics Commission, such elected officer, candidate or committee must file at the same time a copy of the report on a computer diskette, or other electronic media, in a format prescribed by the Ethics Commission if such committee receives contributions or makes independent expenditures totaling $5,000 or more in a calendar year. (Campaign and Governmental Conduct Code Section 1.310). This regulation also provides that campaign statements required in electronic form be filed by the same filing dates as set forth in the Act (Government Code Section 81000, et seq.).

VI. Material Findings

Government Code Section 84211(k): Failure to Report Accrued Expenditures

The Committee failed to report two accrued expenses totaling $36,442, which represents 27 percent of the total dollar amount of expenditures incurred by the Committee. The two expenses consisted of: 1) a $5,000 management fee to Howard Agency for production of campaign literature; and 2) a $31,442 payment to Autumn Press for printing of campaign literature. The Committee was required to report these expenditures as accrued expenditures on its semi-annual campaign statement for the period ending December 31, 1999. Instead, the Committee reported these expenditures on the campaign statement of the subsequent reporting period, as though the expenditures were incurred during that later period.

The Committee's attorney stated that the Committee's failure to report the above-referenced expenditures on the semi-annual campaign statement for the period ending December 31, 1999 was inadvertent. He noted that with respect to the $5,000 management fee paid to Howard Agency, the Committee had not received an invoice until January 2000 (the invoice was dated 1/26/00), at which time the Committee promptly made payment. In regards to the $31,442 Autumn Press payment, the attorney noted that: 1) the Committee received an invoice in December 1999 (total amount of the invoice was $72,730); 2) paid a portion of the invoice at that time ($41,288 was paid); and 3) the portion that was paid, $41,288, was reported in a timely manner on the semi-annual campaign statement for the period ending December 31, 1999. He stated that the Committee provided pertinent information to the public by disclosing the vendor, the purpose of, and 4/7 of the amount of the expenditure prior to the election (on a Late Independent Expenditure Report).

Campaign and Governmental Conduct Code Section 1.310: Failure to file timely Electronic Campaign Statement

The Committee was required to file by January 31, 2000, an electronic copy of its campaign statement covering the period January 1, 1999 through December 31, 1999. However, the electronic copy of the campaign statement covering this period was not filed until April 27, 2001. As a result, the Committee's campaign statement was filed 452 days late.

The Committee's attorney reported that campaign statements were prepared by a person located in Los Angeles, California, who was not specifically familiar with the electronic filing requirements of San Francisco. He explained that initially the Committee was contemplated to be a statewide general-purpose committee that would not be required to file electronically in San Francisco. However, the nature of the Committee changed, and the requirement to file electronically was overlooked inadvertently. The attorney noted that information about the Committee's activity was available for public disclosure since the Committee filed the paper copy of its campaign statements in a timely manner. He added that other committees had to submit electronic copies of campaign statements on computer disks because the Ethics Commission experienced substantial technical difficulty in getting electronic statements filed. He stated that the Commission did not notify the Committee of its failure to file electronically until a year later; thus, he claims that the Committee should not be penalized, particularly as it filed within the five-day grace period provided by the Commission.

Statement from Ethics Commission staff: It is difficult to determine whether the Committee would have encountered difficulties with the Commission's On Line Filing System ("OLFS"), inasmuch as it did not attempt to use it prior to the filing deadline. For the January 31, 2000 filing deadline, 73 other committees successfully filed electronic statements using OLFS. Filers using OLFS do not have the capacity to generate computer disks. Therefore, the Committee's comments concerning committees submitting disks can only refer to committees using third party vendor software, over which the Commission has no control.

With respect to the "five-day grace period," after canvassing the electronic filing database, staff contacted committees that had not filed electronic campaign statements and asked them to file such statements. Staff informed the delinquent committees that the purpose of the canvass was not to raise fine revenues but to ensure the integrity of the electronic database. Staff advised committees that they could request waivers for any fine. Staff also conveyed to committees that their cooperation in bringing the Commission's files up to date would be considered favorably in any waiver request. At no time did staff represent that it had the authority to waive fines.

VII. Conclusion

Through the examination of the Committee's records and campaign disclosure statements, the Auditor found the following material findings: 1) the Committee failed to disclose two accrued expenditures in violation of Government Code Section 84211(k); and 2) the Committee filed an electronic campaign statement 452 days late in violation of Campaign and Governmental Conduct Code Section 1.310.

Audit reports are posted to the Commission's web site and are forwarded to the Members of the Ethics Commission and, in cases of a violation of law, to the appropriate enforcement agency.

Date:  December 17, 2001

1 During the period covered by the audit, the sections of law were codified in the Administrative Code at Sections 16.501, et seq., and 16.535, et seq. However, the sections have since been recodified in the Campaign and Governmental Conduct Code at Section 1.100, et seq., and 1.300, et seq.

2 Please note that expenditures exceed contributions because on December 31, 1999, two payments totaling $36,442 were outstanding, i.e., these expenditures had been incurred but were unpaid as of December 31, 1999.

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