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San Francisco Ethics Commission Audit Report: Friends of Nick Waugh, FPPC ID #1266025


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



I.         Introduction

This Audit Report summarizes the results of the audit of the committee, Friends of Nick Waugh, Identification Number 1266025 (“the Committee”), for the period from January 1, 2004 through December 31, 2005.  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”) (S.F. Campaign and Government Conduct Code Sections 1.100, et seq.).

II.        Audit Findings

For the period covered by the audit, the Committee received $43,873 in contributions, $35,644 in public funds, and incurred expenditures of $77,139.  The CFRO provides that any candidate who receives public funds must return unexpended campaign funds to the City for deposit into the Election Campaign Fund up to the amount of public funds received by the candidate.  The Committee does not have any unexpended funds.  In addition, section 1.150(b) of the S.F. C&GC Code requires any candidate who receives payments for public funds from the Election Campaign Fund to repay any amount of payments that the candidate was not entitled to receive or that was used for improper expenditures.  Under section 1.150(b), the Committee is required to return $350 to the City. 

There were three material findings with respect to this Audit: 1) the Committee failed to obtain and disclose contributor information for some contributions in violation of San Francisco Campaign and Governmental Conduct Code section 1.114(d)  ; 2) the Committee used $1,003 in campaign funds to reimburse the candidate for campaign-related expenditures made from the candidate’s personal funds, in violation of Government Code section 85201; and 3) the Committee failed to file itemized disclosure statements for four mass mailings, in violation of S.F. Campaign and Governmental Conduct Code section 1.161.

III.      Committee Information

The Committee was formed in May 2004 to support the election of Nick Waugh to Member, Board of Supervisors District 5 in the November 2, 2004 general election.  The Committee’s treasurer was Whitney Huston from May to September 2004.  Matt Garlinghouse served as the Committee’s treasurer from October to December 2004.  Nick Waugh is the current treasurer.  The Committee received public funds for Nick Waugh’s 2004 supervisorial election campaign.

IV.      Audit Authority

San Francisco Charter Section C3.699-11 authorizes the Ethics Commission to audit campaign statements that are filed with the Commission.  Section 1.150(a) of the CFRO requires the Commission to audit all candidates who receive public financing.  Audits of publicly financed candidates include a review of campaign statements and other relevant documents to determine whether the candidate complied with applicable requirements of State and local law.

V.        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;
  • Compliance with all record-keeping requirements; and
  • Compliance with all provisions related to the Commission’s public financing program.

VI.      Summary of Applicable Law

S. F. Campaign and Governmental Conduct Code Section 1.114(d): Contributor Information Required

S. F. C&GC Code section 1.114(d) 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.  A committee will be deemed not to have had the required contributor information at the time the contribution was deposited if the required contributor information is not reported on the first campaign statement on which the contribution is required to be reported.  Contributions that are deposited without the required contributor information must be forfeited to the City, in addition to any other penalties.  C&GCC § 1.114(e)

Governmental Code Section 85201: Requirement to Deposit Personal Funds in the Campaign Bank Account Prior to Expenditure

Government Code Section 85201 requires candidates to deposit personal funds in the campaign bank account and make expenditures from that account instead of spending personal funds on campaign expenses and later seeking reimbursement from campaign funds.  If a candidate makes a payment from personal funds for allowable campaign-related expenditures, the payment is considered to be an in-kind contribution from the candidate to his or her campaign committee. 

S.F. Campaign and Governmental Conduct Code Section 1.161: Filing of Itemized Disclosure Statement for Mass Mailings

The Political Reform Act defines mass mailings as 200 substantially similar pieces of mail sent within a calendar month.  Section 1.161 of the CFRO requires any candidate for City elective office who pays for a mass mailing that advocates for or against candidates for City elective office to include on the mailing the statement “paid for by ______(insert candidate’s name and street address)” in not less than 14-point type and in a color or print which contrasts with the background so as to be easily legible.  The candidate must also file with the Ethics Commission a clearly legible original or copy of the mass mailing and an itemized disclosure statement within five working days after the date of the mailing.

VII.     Material Findings

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

The Committee was required to provide complete contributor information for contributions totaling $100 or more.  The Committee received 158 contributions that required detailed disclosure.  Of the 158 contributions, contributor information was not fully or properly disclosed for 15 contributions. 

As explained above, under S.F. C&GCC sections 1.114(d) and 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.  The Committee is required to forfeit $3,150.15 in contributions.  Please refer to attachment 1 for a list of contributions that are subject to forfeiture.

Governmental Code Section 85201: Requirement to Deposit Personal Funds in the Campaign Bank Account Prior to Expenditure

The Committee reimbursed the candidate $1,003 for campaign-related expenses that the candidate made from personal funds.  As explained above, if the candidate wanted to use his personal funds to pay for campaign expenditures, he was required to deposit his personal funds into the campaign bank account first.  In other words, the candidate was not permitted to receive reimbursement from the campaign bank account.

S.F. Campaign and Governmental Conduct Code Section 1.161: Failure to File Itemized Disclosure Statements for Mass Mailings

The Committee incurred costs for producing five mass mailings.  The Committee filed the Itemized Disclosure Statement for only one mass mailing but did not file the Itemized Disclosure Statement for four other mass mailings, as follows:

Date of Mailing Description of Mailing  Total Cost of Mailing  Number mailed
10/1/2004 Absentee GOTV  $  8,115.97   11,341
10/20/2004 Informational letters  $  7,701.08   14,471
10/21/2004 Informational letters  $  7,279.46   13,406
10/31/2004 Postcards, GOTV  $  5,233.99   19,200

VIII.   Committee’s Response to Findings

The Committee was provided with an opportunity to comment on this audit report. 

The candidate, Mr. Waugh, provided the following comments:

The committee is happy to see that the records were so complete.  Of the 15 contributions that were identified as possible forfeiture candidates, 12 of them turn out to be non candidates in that the required information was on hand on the deposit date in question.  We will agree to forfeit the funds for the forfeiture candidates whose information was not on hand at the deposit date. 

The committee has indicated to audit staff its intention to request further review of the matter regarding contributor information for 12 of the 15 contributors.

The committee’s reimbursement of $1,003 to the candidate was made under the belief that such a transaction was allowed under campaign law. The decision to reimburse reflects a misunderstanding by the committee Treasurer. This transaction was transparently reported in good faith by the committee in public documents. 

IX.      Disclosure

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

_________________________________                                          __________________

            Grace Chau                                                                                         Date

            Campaign Finance Auditor

______________________________________                                __________________

            John St. Croix                                                                                     Date

Executive Director                           

S:\AUDIT\2004 Public Finance Candidates\Report-Nick Waugh.doc

Attachment 1               List of Contributions that are Subject to Forfeiture

Reporting Period Entity Last Name First Name Street Address Contributor’s Employer Contributor’s Occupation Self-employed Contribution Amount Forfeiture
2 COM Democracy for America PO Box 8313 n $500.00 $400.01
2 IND Abuzaid Joe * Flags & Things President n $100.00 $0.01
1 IND Babb Marcia 755 Cambridge Ave.   Carnegie Foundation y $250.00 $150.01
2 IND Benton Mary Ann PO Box 1990 Retired n $500.00 $400.01
2 IND Edelstein Alex 2877 Paradise Rd. #1602 Developer Self Employed y $100.00 $0.01
4 IND Farmer Michael * Laurel Company Partner n $250.00 $150.01
4 IND fisher doris *     n $500.00 $400.01
4 IND Fisher Donald *     n $500.00 $400.01
1 IND Kantor Lisa 7563 Caloma Cir. Business for Social Responsibility   n $100.00 $0.01
2 IND Light Ronald 1104 Rosa Ave Requested Requested y $500.00 $400.01
2 IND Loeb Bonnie * Elliott Management Corporation Executive Assistant n $500.00 $400.01
4 IND Nelson Robert * Lieff, Cabraser, Heimann and Bernstein Attorney n $150.00 $50.01
2 IND Singer Gordon Flat 11, 23 Hyde Park Sq. Requested Requested n $500.00 $400.01
2 IND Waugh Charles Box 278 Self Attorney y $100.00 $0.01
1 IND Vitkoski Sam $100.00 0.01
$4,650.00 $3,150.15

During the period covering by the audit, Article 1, Chapter 3 of the S.F. Campaign and Governmental Conduct Code codified the Electronic Filing Ordinance.  As a result of recent amendments to the CFRO, the provisions of the Electronic Filing Ordinance are now contained in S.F. C&GC Code section 1.112.

The expenditure amount of $77,139 includes $1,003 that was reimbursed to the candidate for campaign expenditures (see the section regarding material findings).

Unexpended funds are calculated by subtracting any unpaid bills, on-going qualified campaign expenditures and forfeitures from the amount of cash that the Committee had on hand on the 30th day following the election in which the candidate was elected or defeated.

The $350 represents the excess amount of public funds granted to the candidate.

Former section 1.114(e), which was applicable during the period covered by the audit, is now codified as section 1.114(d).

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