Selection for an Ethics Commission Audit
- Who is subject to an Ethics Commission audit?
- What is the purpose of an Ethics Commission audit?
- Will the Ethics Commission notify me if my committee has been selected for audit?
- If my committee is selected for audit, when can I expect the audit to begin?
- Where do the audits take place?
- What documents are needed for the audit?
- How long does an audit take to complete?
- What are the steps in the audit process?
- What is a finding?
- Will I have an opportunity to communicate with the Ethics Commission staff?
- What happens after the Final Audit Report is prepared?
Who is subject to an Ethics Commission audit?
Candidate and ballot measure committees chosen through a random selection process. During every odd numbered year, the Ethics Commission schedules a random drawing of committees involved in the prior election cycle at a meeting open to the public. At the random drawing, the Commission selects 75% of all candidate and ballot measure committees that raised over $100,000, and 50% of all candidate and ballot measure committees that raised between $10,000 and $99,000. Committees that raised less than $10,000 are not included in the audit pools.
In addition to the committees chosen in the random selection process, the Commission may audit committees as a result of a complaint that results in a formal investigation.
What is the purpose of an Ethics Commission audit?
Audits are conducted to determine whether the committees complied with the various provisions of the City's campaign laws, and whether the information disclosed to the public was accurate and complete. Significant violations are included as material findings in a final audit report, and could result in enforcement action by the Commission (see additional information below). Final audit reports are posted on the Commission's website because they serve as an important educational tool for candidates and treasurers.
It is important to remember that audits are generally conducted for the purpose of determining whether a committee materially complied with the City's campaign laws. Audits are not conducted for the purpose of identifying one minor mistake based on human error. For example, if a candidate committee accidentally accepts one contribution drawn off a business checking account (contributions from organizations are prohibited under City law), and this is its only mistake out of hundreds of contributions, the violation will not be identified as a "material finding" in the final audit report.
Will the Ethics Commission notify me if my committee has been selected for audit?
Yes, the Ethics Commission staff will send a letter notifying each committee selected for audit.
If my committee is selected for audit, when can I expect the audit to begin?
After committees have been selected in the random audit drawing, the Commission staff determines the order in which they will be audited based on a number of factors. These factors include:
- Whether the committee is a candidate committee or ballot measure committee
- Whether the committee prevailed in the election
- Whether the election was highly contested
- The amount of money raised and spent by the committee
- Whether the committee is the subject of an ongoing investigation
The factors described above are not all-inclusive, and other factors may be considered in the context of specific information or circumstances unique to each committee. Each committee is notified in writing approximately three weeks before its audit will begin. The Commission has only one Auditor on its staff. As a result, the audits take place over an eighteen month period following the random drawing.
Where do the audits take place?
Audits are generally conducted at either the Ethics Commission's office or at the office of the committee's treasurer. If a committee requests a location other than the Ethics Commission's office for the audit, the committee will need to provide the auditor with the following:
- access to the committee's documents
- adequate work space
- access to a telephone, photocopier, and electrical outlet
What documents are needed for the audit?
Prior to the commencement of an audit, the committee will be provided with a list of requested documents in accordance with the recordkeeping requirements set forth in state and local law. In order to help you organize your committee's documents in preparation for an audit, the Ethics Commission has prepared Guidelines for Organizing Your Materials.
Remember that all candidate and ballot measure committees are required to maintain their records for a period of four years.
How long does an audit take to complete?
The Commission staff will generally complete a draft audit report within thirty days, although some audits will take longer due to the condition or quality of the records, missing items, number and scope of findings, and the committee's responsiveness during the audit. As a general rule, the better organized the records, the sooner the audit is completed. With the release of the final audit report, the audit is considered finished.
What are the steps in the audit process?
The audit process and procedures are detailed in the Ethics Commission's Audit Manual. The steps in the process are as follows:
- Audit Notification
- Preliminary Work
- Initial Meeting and Evaluation of Internal Controls
- Audit Testing (Auditor reviews records)
- Draft Audit Report
- Post-Audit Conference
- Final Audit Report
What is a finding?
A finding is a specific issue or discrepancy noted during the audit. A "material finding" means an issue having significant importance. Factors that may be considered in determining materiality are: (1) significance of dollar amounts; (2) significance of percentages; (3) importance of item to purposes of State or local law; (4) frequency of occurrence; and (5) nature of transaction. Material findings are identified in the draft audit report and should be addressed by the committee at the post-audit conference. Findings that are deemed to be "immaterial" are discussed with the committee representatives, but are not included in the final audit report.
Will I have an opportunity to communicate with the Ethics Commission staff?
Yes, you will have an opportunity to communicate with the Commission's Auditor throughout the audit process. During the audit, the Commission's Auditor will keep the committee treasurer and/or candidate apprised of any potential findings that have been identified, and will give them an opportunity to provide additional documentation or information regarding those potential findings. Once the draft audit report has been completed, it will be provided to the candidate and treasurer for comment.
The committee will typically be allowed two weeks to review the draft report, followed by an opportunity to respond to any material findings at a post-audit conference. The Auditor will carefully consider any relevant information and/or documents provided at the post-audit conference. After receiving the committee's response, the Auditor will re-examine each issue to determine whether a finding is material and should remain in the audit report. Thereafter, the audit report will be finalized.
What happens after the Final Audit Report is prepared?
If the final audit report contains no material findings, it will be presented to the Ethics Commission during the open session portion of a Commission meeting, at which time the Commission will vote on whether to accept the report. If the final audit report contains material findings, it will be presented to the Ethics Commission during the closed session portion of a Commission meeting, at which time the Commission will decide whether to accept the report without any enforcement action, or whether to pursue an enforcement action including an administrative fine.
Once a final audit report is accepted by the Commission, it is posted on the Commission's website.