City and County of San Francisco
Ethics Commission

English

San Francisco Ethics Commission
30 Van Ness Avenue, Suite 3900                          
San Francisco CA   94102
Phone 581-2300 Fax 581-2317

SAN FRANCISCO  ETHICS COMMISSION AUDIT REPORT:

ANDREW LEE FOR SUPERVISOR

I.           Introduction

This Audit Report summarizes the results of the audit of the committee, Andrew Lee for Supervisor, Identification Number 1243359 (“the Committee”), for the period from January 1, 2002 through December 31, 2002.  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”) and Electronic Filing Ordinance (S.F. Campaign and Governmental Conduct Code Sections 1.100, et seq., and 1.300, et seq., respectively).

For the period covered by the audit, the Committee received $263,352 in contributions and incurred expenditures of $256,444.   There were five material findings with respect to this Audit:

(1) the Committee failed to file Late Contribution Reports, in violation of Government Code section 84203; (2) the Committee failed to obtain and disclose contributor information for 18 contributions in violation of San Francisco Campaign and Governmental Conduct Code section 1.114(e); (3) the Committee accepted contributions from two contributors that exceeded the contribution limits in violation of San Francisco Campaign and Governmental Conduct Code section 1.114 (a); (4) the Committee failed to provide supplemental reporting in violation of S.F. Campaign and Governmental Conduct Code section 1.152(a)(3); and (5) the Committee failed to report accrued expenses in violation of Government Code section 84211.

II.         Committee Information

The Committee was formed in March 2002 to support the election of Andrew Lee to Member, Board of Supervisors, District 4, in the November 5, 2002 general election.  The candidate declined to participate in the public financing program for candidates for the Board of Supervisors.  John Barry was the Committee’s treasurer.

III.       Audit Authority

San Francisco Charter Section C3.699-11 authorizes the Ethics Commission to audit campaign statements that are filed with the Commission and other relevant documents to determine whether the candidate complied with applicable requirements of State and local law.  The Ethics Commission, by a random process, selected the Committee for audit.

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:

• 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; and
• Compliance with all record-keeping requirements.

V.         Summary of Applicable Law

Government Code Section 84203: Filing of Late Contribution Reports (Form 497)

“Late contribution” means any contribution, including a loan, which totals in the aggregate $1,000 or more that is made or received by a candidate, a controlled committee, or a committee formed or existing primarily to support or oppose a candidate or measure before the date of the election at which the candidate or measure is to be voted on but after the closing date of the last campaign statement required to be filed before the election. (Government Code Section 82036).  The combined activities of affiliated entities shall be used to determine whether the $1,000 threshold is met or exceeded. (California Code of Regulations, Section 18428).

Late contributions must be reported within 24 hours of receipt by facsimile transmission, telegram, guaranteed overnight mail through the United States Postal Service or personal delivery. (Government Code Section 84203(b)).  A candidate or committee that receives a late contribution must include on the Late Contribution Report: 1) its full name and street address;

2) the date and amount of the late contribution; and 3) the contributor’s name, street address, occupation, and employer, or if self-employed, the name of the business.  Late Contribution Reports must be filed with each office with which the candidate or committee is regularly required to file campaign statements. (Government Code Section 84203(a)).

S. F. Campaign and Governmental Conduct Code Section 1.114(e): Requirement to Obtain and Disclose Contributor Information[1]

S. F. Campaign and Governmental Conduct Code (“S.F. C&GCC”) Section 1.114(e) states that if the cumulative amount of contributions received from a contributor is $100 or more, the committee treasurer must not deposit the contribution unless the committee treasurer has the following information: the contributor’s full name; the contributor's street address; the contributor’s occupation, and the name of the contributor’s employer or, if the contributor is self-employed, the name of the contributor’s business.  Contributions that are deposited without obtaining the required contributor information must be forfeited to the City.

S.F. Campaign and Governmental Conduct Code Section 1.114 (a) and (f): Limits on Contributions to Candidates in the General Election and Forfeiture of Unlawful Contributions[2]

S.F. C&GCC Section 1.114 (a) prohibits any candidate or campaign treasurer from soliciting or accepting any contribution that will cause the total amount contributed by any person to such candidate to exceed $500 in the general election.   Contributions received in excess of the allowable contribution limit must be forfeited to the City.  (S.F. C&GCC Section 1.114(f)).  “Contribution” shall be defined as set forth in Government Code of the State of California (commencing at Section 81000); provided, however, that “contribution” shall include loans of any kind or nature.  (S.F. C&GCC Section 1.104(e)).

Former S.F. Campaign and Governmental Conduct Code Section 1.152(a)(3): Supplemental Reporting by Candidates Who Do Not Receive Public Funds in Elections for Board of Supervisors[3]

Candidates who declined to participate in the public financing program or who received notice of ineligibility to participate were required to notify the Ethics Commission within 24 hours of receiving contributions, making expenditures or having funds in their campaign trust account that exceeded 75 percent of the applicable expenditure ceiling.  Thereafter, nonparticipating candidates were required to file a supplemental statement with the Ethics Commission within 24 hours of receiving contributions or making expenditures or having funds in their trust account that equaled or exceeded 100 percent of the applicable expenditure ceiling.

Government Code Section 84211(k): Reporting Accrued Expenses

Government Code Section 84211(k) requires that costs incurred by a committee, but not paid during the reporting period, 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, committees must report the amount reduced or forgiven as a non-monetary contribution.

VI.        Material Findings

Government Code Section 84203: Failure to Report Late Contributions for the General Election.

During the late reporting period for the November 5, 2002 election, the Committee received six contributions totaling $58,000 from the candidate.  The Committee was required to file a Form 497 Late Contribution Report for each of the six contributions.  The six contributions are as follows:

$   8,000                       received on 10/26/02

$   5,000                       received on 10/28/02

$14,000                        received on 10/29/02

$15,000                        received on 10/30/02

$   6,000                       received on 11/01/02

$10,000                        received on 11/04/02

Total    $58,000

The Committee did not file Late Contribution Reports for any of the above-referenced contributions.

S. F. Campaign and Governmental Conduct Code Section 1.114(e): Failure to Obtain and Disclose Contributor Information

A review of the Committee’s campaign statements indicated that the Committee itemized 241 contributions.   Of the 241 itemized contribution entries, contributor information was not fully or properly disclosed for 18 contributions.  The missing information related to contributors’ street addresses and occupation and employer information. 

As explained above, under S.F. C&GCC §1.114(e) contributions that are deposited without the required contributor information must be forfeited to the City, in addition to any other penalties.   The amount that is subject to forfeiture is the amount that exceeds the first $99.99 of a contributor’s contribution; i.e., on a $100 contribution that lacks the required contributor information, the amount subject to forfeiture is one cent.  With respect to the above-referenced 18 contributions, the Committee must forfeit $4,800.18. 

S.F. Campaign and Governmental Conduct Code Section 1.114 (a) and (f): Limits on Contributions to Candidates in the General Election and Forfeiture of unlawful contributions

The Committee received $500 from Hao Hai Gong on 4/2/02  and another $50 on 6/27/02.  A review of the contribution checks indicated that Hao Hai Gong contributed $550 in total, which is $50 more than the contribution limit.  The Committee also reported having received $3,092.50 in loans from First Financial Services.  Because loans are considered to be contributions, they are subject to the contribution limit.  The $3,092.50 loan from First Financial Services exceeded the $500 contribution limit by $2,592.50.  The Committee violated the contribution limits by depositing the above-referenced contributions. 

S.F. Campaign and Governmental Conduct Code Section 1.152(a)(3): Failure to file Supplemental Reports

The candidate indicated that he declined to participate in the public financing program on the Statement of Participation or Non-participation in the Public Financing Program by Candidates for Board of Supervisors, which he filed on August 9, 2002.   Thus, the candidate was required to notify the Ethics Commission within 24 hours of receiving contributions, making expenditures, or having funds that exceeded 75% of the expenditure ceiling, by filing Reporting Notice B.  Thereafter, the candidate was required to file Reporting Notice B again when his campaign activity reached 100 percent of the expenditure ceiling.  The candidate did not file Reporting Notice B when he received contributions exceeding 75 percent or 100 percent of the $75,000 expenditure ceiling. 

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

The Committee incurred $67,152 in expenditures that were not paid during the reporting periods in which they were incurred.   The Committee reported the $67,152 in expenses on the campaign statements of the reporting periods during which they were paid.  As explained above, expenditures incurred but not paid during the same reporting period must be reported as accrued expenses on the campaign statements of the period during which the expenses were incurred.  Of the $67,152 in expenses that the Committee failed to report, $23,562 was required to be reported as accrued expenses on the campaign statements that were due prior to the date of the election.

VII.      Conclusion

Through the examination of the Committee’s records and campaign disclosure statements, the Auditor found that: (1) the Committee failed to file Late Contribution Reports, in violation of Government Code section 84203; (2) the Committee failed to obtain and disclose contributor information for 18 contributions in violation of San Francisco Campaign and Governmental Conduct Code section 1.114(e); (3) the Committee accepted contributions from two contributors that exceeded the contribution limits in violation of San Francisco Campaign and Governmental Conduct Code section 1.114 (a); (4) the Committee failed to provide supplemental reporting in violation of S.F. Campaign and Governmental Conduct Code section 1.152(a)(3); and (5) the Committee failed to report accrued expenses in violation of Government Code section 84211.

With respect to the above-referenced findings, the Committee provided the following comments:

“Any errors we made were innocent ones, or ones based on incorrect advice from our advisors.   We had no intent to deceive, defraud, or deny anyone, including the City.” 

The treasurer, Mr. Barry, noted that he was a first-time treasurer.

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

Date:  April 23, 2004

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