Ethics Commission
City and County of San Francisco

San Francisco Ethics Commission Final Audit Report: Yes on Proposition V, San Franciscans United to Reduce Diabetes in Children by Imposing a 1 Cent Per Ounce Tax on the Distribution of Sugary Drinks with Major Funding by Michael Bloomberg and Action Now Initiative; FPPC ID #1377697

December 6, 2019

I. Introduction

This Audit Report summarizes the audit results of the committee, Yes on Proposition V, San Franciscans United to Reduce Diabetes in Children by Imposing a 1 Cent Per Ounce Tax on the Distribution of Sugary Drinks with Major Funding by Michael Bloomberg and Action Now Initiative, FPPC Identification Number 1377697 (“the Committee”), for the period from January 1, 2015 through December 31, 2016. The Committee was selected for audit using an objective criteria method pursuant to San Francisco Campaign and Governmental Conduct Code (“Code”) section 1.150(a) and the Commission’s authority under San Francisco Charter Section C3-699-11(4) from a pool of eligible committees active in elections during the 2016 calendar year. The audit was conducted by Ethics Commission Staff following the 2016 City election as part of the Commission’s 2016 audit cycle 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 (“the Code”)(San Francsico Campaign & Government Conduct Code section 1.100, et seq).

II. Audit Authority

San Francisco Charter section C3.699-11 authorizes the Ethics Commission to audit campaign statements filed with the Commission along with other relevant documents to determine whether a committee materially complied with applicable requirements of State and local laws. Code section 1.150(a) requires the Commission to audit all candidates who receive public financing and authorizes audits of other committees to be initiated irrespective of whether the committee received any public funds.

III. Audit Scope and Procedures

This audit was performed in accordance with generally accepted auditing standards. The audit is based on documentation provided by the Committee and involved a review of the Committee’s filings and records for the period covered by the audit. This review was conducted to determine, among other things:

  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 any applicable 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.

The Commission posts to its web-site all Audit Reports. The Audit Division forwards Audit Reports to the Commission’s Enforcement Division, or other appropriate agency with jurisdiction, to enforce findings of non-compliance with the law. The scope of an audit is not exhaustive of all conduct by a committee during the audit period. Conduct by a committee not identified as a material finding in an Audit Report may nevertheless be subject to investigation and possible enforcement by the Ethics Commission or another agency with jurisdiction to enforce applicable campaign finance laws, and a committee may be found to be in violation of such laws.

IV. Committee Information

The Committee filed an initial Form 410, Statement of Organization, on June 1, 2015. On September 29, 2015, the Committee qualified as a primarily-formed committee to support Proposition V in the City and County of San Francisco in connection with the November 8, 2016 election. Proposition V appeared on the November 2016 ballot as a measure to establish a tax on the distribution of sugar-sweetened beverages in San Francisco. The Committee received major funding from Michael Bloomberg (FPPC Major Donor Entity ID 1293303) and Action Now Initiative (FPPC ID 1384702).

From the beginning of the audit period through September 27, 2015, Stacy Owens served as the treasurer, Anthony Barr served as the assistant treasurer and Robin Dean served as the principal officer for the Committee. From September 28, 2015 through September 9, 2016, James Sutton served as the treasurer, Nicholas Sanders served as the assistant treasurer and Ben Lilienthal served as the principal officer. From September 9, 2016, Rebecca Olson has served as the treasurer and Ben Lilienthal remained the principal officer. The Committee remains active as of the date of this report.

For the period covered by the audit, the Committee received $2,675,023 in monetary contributions, $9,454,559 in non-monetary contributions and $50 in loans. The Committee incurred $2,623,474 in campaign expenditures and $9,454,559 of in-kind expenses.

V. Audit Findings

Auditors concluded there were five findings with respect to the Committee.

Finding 1

The Committee did not maintain sufficient supporting documentation for all contributions reported on the campaign statements (CA Gov’t Code § 84104 and S.F. C.&G.C.C. § 1.109).

Government Code Section 84104 provides that it is the duty of each treasurer and principal officer to maintain detailed accounts, records, bills and receipts necessary to prepare campaign statements, and to retain the documents for a period of four years following the date the appropriate campaign statement is filed.

The Committee failed to maintain supporting documentation for monetary contributions totaling $163,350 or 6% of total monetary contributions reported on the campaign statements.

Table 1.1 lists the reported monetary contributions for which the Committee failed to maintain complete supporting documentation.

Table 1.1: Contributions Lacking Supporting Documentation
Contribution DateContributor (last name) per Form 460Contributor (first name) per Form 460Contribution Amount
07/22/16AMERICAN HEART ASSOCIATION$5,000
08/05/16BENGIERGARY & CYNTHIA$5,000
04/15/16BLOOMBERGMICHAEL$150,000
04/07/16CAMPBELLKATHLEEN$100
02/25/16DORFMANLORI$100
02/18/16ETELSONERICA$300
07/25/16MALIA COHEN FOR DCCC 2016$500
07/16/16MAYNELINDA$500
08/05/16PACIFIC PARK MANAGEMENT INC.$1,000
08/02/16SUTTON LAW FIRM$500
Total$163,000

Finding 2

The Committee did not maintain supporting documentation for expenditures reported on the campaign statements (CA Gov’t Code § 84104 and S.F. C.&G.C.C. § 1.109).

It is the duty of each candidate, treasurer and elected officer to maintain detailed accounts, records, bills and receipts that are necessary to prepare campaign statements, and to retain the documents for a period of four years following the date the appropriate campaign statement is filed. The maintenance of these documents and records is essential to supporting and authenticating the information disclosed in campaign statements.

The Committee failed to demonstrate that sufficient supporting documentation was maintained evidencing expenditures reported in campaign statements. As a result, Auditors could not independently verify that these expenditures occurred as reported or were for legitimate campaign purposes. The reported expenditures missing supporting documentation totaled $126,850, which amounted to 4.8% of total expenditures reported. Table 2.1 lists the reported expenditures for which Committee failed to maintain complete supporting documentation.

Table 2.1: Expenditures Lacking Supporting Documentation
Expenditure Date Per Campaign StatementPayee (Last, First) Per Campaign StatementExpenditure Description per Campaign StatementAmount
07/12/2016A. Maciel PrintingCampaign Paraphernalia$143
07/25/2016Annie Eagan ConsultingFundraising Events$10,500
08/09/2016Annie Eagan ConsultingFundraising Events$10,500
05/09/2016Arno Petition ConsultantsPetition Circulation$2,615
07/12/2016Arno Petition ConsultantsPetition Circulation$857
10/29/2016Camegla, JeffreyTravel Expense$172
05/02/2016Chinchilla, MonicaCampaign Consultants$3,500
07/14/2016Chinchilla, MonicaOffice Expenses$247
07/14/2016Chinchilla, MonicaMeetings$317
08/31/2016Chinchilla, MonicaMeetings$171
08/31/2016Chinchilla, MonicaTravel Expense$401
08/31/2016Chinchilla, MonicaBallot Measure Argument Fee$452
08/31/2016Chinchilla, MonicaPress Conference Expense$917
11/07/2016Chinchilla, MonicaElection Day Volunteer Gifts$3,700
09/16/2016Dudek, BenjaminTravel Expense$344
10/29/2016Dudek, BenjaminTravel Expense$172
11/07/2016Dudek, BenjaminElection Day Volunteer Gifts$3,700
07/12/2016Fall Line AnalyticsPolling And Survey Research$1,500
04/20/2016Ganthavorn, JoyceReimbursed Expenses$274
09/16/2016Ganthavorn, JoyceTravel Expense$172
10/29/2016Ganthavorn, JoyceTravel Expense$172
11/07/2016Garcia, ChristianElection Day Volunteer Gifts$3,700
04/06/2016Gomez, DesireePetition Circulation$1,500
07/18/2016Heatley, SterlingRent$32,000
04/06/2016Lizarde, ManuelPetition Circulation$1,500
11/07/2016Monach, JuneElection Day Volunteer Gifts$3,700
08/09/2016Ramirez, Maria D.Office Expenses$465
08/09/2016Ramirez, Maria D.Travel Expenses$587
08/26/2016Ramirez, Maria D.Campaign Website$119
08/26/2016Ramirez, Maria D.Meetings$154
08/26/2016Ramirez, Maria D.Travel Expense$240
08/31/2016Ramirez, Maria D.Phone Banks$346
07/12/2016Robin Dean And AssociatesCampaign Consultants$5,000
04/06/2016Rodriguez-Martinez, EvelynPetition Circulation$1,500
08/19/2016San Francisco Department of ElectionsBallot Argument$2,698
07/12/2016State Compensation Insurance FundOffice Expenses$261
08/31/2016State Compensation Insurance FundOffice Expense$628
08/31/2016Sutton Law FirmProfessional Services$18,127
07/27/2016Sweet And Baker InsuranceOffice Expenses$974
07/12/2016The Henry Levy GroupProfessional Services$157
07/12/2016The Henry Levy GroupProfessional Services$1,182
04/12/2016The Monaco GroupPetition Circulation$815
11/07/2016Tramutola, LarryElection Day Volunteer Gifts$6,000
11/07/2016Trenado, AdrianaElection Night Volunteer Gifts$3,700
08/31/2016Umbrella ShirtsCampaign Paraphernalia$671
Total$126,850

In addition to the expenditures noted above, Auditors identified that the Committee paid one of its vendors twice for the same invoice totaling $44,521.79, referencing invoice number 9067. Without further supporting documentation, Auditors are unable to determine the purpose of these payments. Committees are required to retain documentation to substantiate that its spending was in furtherance of the campaign. As the Committee’s records contained no additional documentation regarding services received from the vendor for the second payment made, Auditors were unable to verify if the expenditure was in furtherance of the campaign.

Table 2.2 lists the information of the invoice and the duplicate payments for this invoice made by the Committee.

Table 2.2: Duplicate Payment and Corresponding Check Numbers
Committee Check NumberCheck DateInvoice NumberInvoice DateServices Provided per Vendor Invoice
1109611/08/2016906711/03/2016$44,521.79 for film, printing and delivery services for 190,000 walk cards
1110311/15/2016906711/03/2016$44,521.79 for film, printing and delivery services for 190,000 walk cards

Finding 3

The Committee did not provide sufficient notice to potential major donors of possible filing obligations (CA Gov’t Code § 84105 and 2 C.C.R. § 18427.1(d)).

Committees are required to send written notification of potential filing obligations to any person who makes a contribution of $5,000 or more in a calendar year. This notification must be sent within two weeks of receiving such contribution. For contributions of $10,000 or more received during the late reporting period, this notification must be sent within one week. If a notification has previously been sent to the contributor within the same calendar year, or if the contributor has been issued a recipient committee identification number by the Secretary of State, this notification is not required. This notification is required to assist contributors with meeting all disclosure and filing requirements under California and San Francisco campaign finance laws.

The Committee failed to demonstrate sufficient written notification of potential filing obligations was timely sent to four contributors who made contributions of $5,000 or more. Table 3.1 summarizes these contributors and when filing notifications were required:

Table 3.1: Potential Major Donors to Whom the Committee Did Not to Provide Sufficient Notice
Contributor per Campaign StatmentContribution AmountContribution DateNotification Due DateRecord of Notification Letter
American Heart Association5,00007/22/1608/05/16Not sent or copy not provided.
Bengier, Gary & Cynthia5,00008/05/1608/19/16Not sent or copy not provided.
Bloomberg, Michael150,00004/15/1604/29/16Not sent or copy not provided.
Lilienthal, Benjamin10,00009/29/1510/13/15Notification letter sent late on 10/20/15.

Finding 4

The Committee did not maintain sufficient records necessary to demonstrate that proper disclaimer language was included in all communications paid for by the Committee (CA Gov’t Code § 84104 and S.F. C.&G.C.C. § 1.109).

California Government Code Section 84503 requires that disclaimers are included on mailings and other advertisements made by ballot measure committees. A disclaimer is a message that identifies the committee that paid for and authorized the communication. Government Code Section 84104 and Code section 1.109 provide that committees must maintain detailed accounts, records, bills and receipts as necessary to prepare any required campaign statements. Committees must also maintain records and samples of any communications (e.g. direct mailers, scripts for advertisements and telephone calls) paid for by the committee to substantiate compliance with applicable disclaimer and disclosure requirements.

The Committee paid for various types of communications including: direct mass mailers, digital media, radio spots and walk cards. For each type of communication, the Committee was required to submit a copy of the communication as evidence of its compliance with applicable requirements. Auditors received some samples of communications distributed by the Committee but did not receive samples of all communications identified by Auditors through Committee records.

Invoices provided to Auditors at the outset of the audit indicated digital media (running 10/21 to 11/08/2016), window signs ( 17” x 22”), remit envelopes, letterhead (8.5” x 11”), banners and posters were purchased by the Committee.

Finding 5

The Committee failed to include required language in disclaimer notices included in committee communications (S.F. C.&G.C.C. § 1.161(a)(2))

Under state law, any advertisement, mailing, or other political communication paid for by a committee must include a disclaimer notice which clearly identifies the full name of the committee paying for the communication as well as identify top contributors that have donated to the committee. San Francisco City law also requires additional text to be included in disclaimer notices that directs the public to the Ethics Commission’s web-site for additional campaign finance information.

Of the copies of communications provided by the Committee, Auditors identified two communications, postcard mailings that did not include the requried disclaimer text “Financial disclosures available at sfethics.org.”

VI. Committee’s Response to Findings

The Committee provided the following response on November 14, 2019, to the findings contained in this audit report:

“We are still in contact with the other firms that may have a few of the additional missing records, but have not heard from them yet. If we do in the next day or so, we will pass them along.”

Auditor Comment

The Committee has since provided no additional records to address the audit findings detailed above.

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