Audit of Board of Ethics Lobbyist Registration

The Office of Inspector General (OIG) conducted an audit of the Board of Ethics’s (BOE) lobbyist regulation practices, including how well BOE monitored lobbyist activity and whether it levied fines against late-registering lobbyists. The ordinance pertaining to the regulation of lobbying activity is codified in the Municipal Code of Chicago (MCC) § 2-156—also known as the Governmental Ethics Ordinance (Ethics Ordinance). BOE is responsible for administering and enforcing the Ethics Ordinance.

The Ethics Ordinance defines a lobbyist, in part, as “any person who, on behalf of any person other than himself, or as any part of his duties as an employee of another, undertakes to influence any legislative or administrative action.”[1] Effective administration of lobbyist registration promotes transparency, accountability and integrity in City government by allowing the public to see which individuals and interests are attempting to influence City officials and policies. Reliable accounting for lobbyist activity is also critical to the enforcement of other legal prohibitions, such as the limitations on campaign contributions by lobbyists and the two-year restriction on lobbying by former City officials and employees. According to BOE, there were 583 lobbyists registered with the Board as of October 2015.

The objectives of the audit were to determine if BOE provided reasonable assurance[2] that all those required to register as a lobbyist had done so, maintained complete and accurate records of lobbyist activity, and identified late-registering lobbyists in accordance with the Ethics Ordinance.

OIG found that,

  1. BOE did not attempt to ensure that everyone required to register as a lobbyist did so or to confirm the veracity of lobbyist disclosures. BOE explained that this was because the Ethics Ordinance did not require BOE to provide reasonable assurance as to the completeness and accuracy of lobbyist disclosures. Instead, BOE relied on public complaints to alert it to any lobbyists who did not comply with the Ethics Ordinance. Other jurisdictions use additional quality assurance practices that, if adopted in Chicago, could mitigate the risk of lobbyists failing to register at all or submitting inaccurate disclosures.
  2. During the period audited, BOE accepted both electronic and hardcopy lobbyist filings. OIG identified process gaps and clerical errors that hindered BOE’s ability to determine the timeliness of hardcopy filings. These problems did not exist in electronic filings.
  3. A sample of lobbyists required to file annual registrations by January 20, 2014, revealed 45 late-registering lobbyists against whom BOE could have imposed fines totaling $197,000 but instead actually imposed fines against only two.[3] BOE cited confidentiality in declining OIG’s request to disclose the names of or fines imposed on those two lobbyists. Overall in 2014, BOE fined a total of ten late-registering lobbyists (two in our sample and eight outside our sample) a total of $58,000.[4] The Ethics Ordinance grants the Executive Director authority to impose an “appropriate fine” for violations, which it construes as conferring upon the Executive Director discretion to reduce or waive a fine where the lobbyist provides a “suitable explanation” for late filing. However, BOE has no established guidelines or criteria for waiving or reducing a fine. Lacking such guidelines and transparency regarding which lobbyists have fines reduced or waived and the basis for its actions (or non-actions), BOE risks and cannot dispel appearances of inconsistent or selective application of the Ethics Ordinance. In addition, without clear criteria to determine whether to reduce fines against lobbyists and by how much, the City may be foregoing revenue.

OIG concluded that small steps could lead to major gains in the completeness, accuracy, and integrity of lobbyist registration and disclosure. OIG recommends that BOE exercise its authority to implement more robust quality assurance best practices or, to the extent it deems necessary, to work with City Council to write such procedures into law. OIG also recommends that BOE implement an electronic-only filing system, clarify its process for fining late-registering lobbyists, and levy the full amount of fines against those individuals.

In response to our audit findings and recommendations, BOE stated that it would,

  • give further consideration to the quality assurance practices that OIG identified in other jurisdictions;
  • consult with the Department of Law about referencing the penalty for providing a false statement on lobbyist disclosures;
  • pursue an electronic-only filing system for lobbyist annual registration and quarterly reports;
  • propose an amendment to the MCC regarding the timing of the imposition of fines for late annual registrations; and
  • amend its rules to clarify what constitutes a suitable explanation for lobbyists who file late annual registrations or quarterly reports.

[1] There are exceptions for non-profits. See Appendix A for the complete MCC definition of “lobbyist.”

[2] It would be unreasonable to expect BOE to prevent or detect every instance of falsified data or unregistered lobbying. However, it can engage in practices to mitigate the risk of infractions and, in so doing, provide “reasonable assurance” that lobbyists comply with the Ethics Ordinance. Reasonable assurance in this context means that the City has taken adequate steps to mitigate the risks of unidentified or unregistered individuals seeking to influence public officials or policy.

[3] At the time of audit testing, BOE considered the names of noncompliant lobbyists confidential (see Methodology section of this report for a discussion of why BOE considered the names confidential). Due to this, we had to conduct our analysis using a sample of publicly available lobbyist data. Our sample consisted of lobbyists who registered in both 2013 and 2014. Our sample is not intended to be, and cannot be, extrapolated to the entire population of lobbyists.

[4] BOE and OIG agreed that there were at least 45 late filers in 2014. Our calculation of potential fines was based on the $1,000.00 per diem fine for every day these 45 lobbyists were in violation. Yet, because BOE would not share the names of late filers with OIG, we could not determine how much of the $58,000 was levied against the 45 lobbyists in our sample.