Financial Management of EMBs

A key responsibility of the EMB is dealing with the financing and cost aspects of electoral processes. Costs affect every part of the EMB’s work. Proper budgets need to be prepared and the authority responsible for meeting the costs advised of the likely outcome. The electoral law will lay down to a substantial degree the processes to be followed in terms of the way the electoral activity is conducted. The EMB, of course, should still ensure that all work is carried out in the most cost effective manner in accordance with the law. Elections, voter registration, and the other aspects of elections are a worldwide activity. There is plenty of scope for comparing cost and seeking out the most effective use of resources. To look critically at each stage of the electoral process and assess the EMB spending could be a very effective cost saving method. Can any of the EMB activities be outsourced - for example, the delivery of equipment to polling sites or the input of data into an automated system - in ways that would save money in the long term? An EMB is responsible to ensure the tasks are carried out on a cost effective and professional manner - not necessarily carry out every task from its own resources.

Common EMB Financing Issues

Elections are complex and costly events and have to compete with vital national services such as transportation, health, and education which may yield greater immediate political returns. Inadequate or untimely funding of electoral processes may be because governments are not able to appropriate sufficient funds or to ensure the timely disbursements of approved funds.

EMB funding needs are dependent on electoral cycles (see the picture, click to enlarge) and will vary hugely between election and non-election years. Other significant factors include the nature of the EMB, the electoral procedures in place, and the frequency of elections. EMBs have been regularly accused of procuring expensive goods and services, such as high-technology equipment, which is not put to effective use. Some EMBs have also been accused of printing more ballot materials and recruiting more election staff than necessary. The independence of some models of EMBs from the executive branch of government may lead to perceptions that they are not subject to the controls on spending applied to government agencies.

EMBs such as those in Afghanistan, Cambodia, Haiti, Indonesia, Iraq, and Liberia have relied on international donors for substantial amounts of budgetary support, as well as technical assistance. Apart from the sustainability issues raised, the conflicting conditions which different donor agencies impose on the EMBs, added to the requirements from their own government, may make it difficult for EMBs to account properly and within a reasonable time for the totality of funding they receive.

EMBs have had to deal with whether and how to fund new technologies, particularly for voter registration, voting, and vote-counting. The increased emphasis on access issues – such as the provision of mobile polling stations, absentee voting facilities in-country or in other countries, facilities for voters with disabilities, and providing electoral information effective in increasingly multilingual societies – has also had financing implications. In many established democracies, government policies of slimming down public sectors have led to less certainty of funding for EMBs, particularly for staff costs.

What Electoral Costs Need to be Financed?

Electoral finance refers to the electoral budget or the costs that a country incurs as a result of the various activities undertaken by the EMB and other agencies to organize and conduct an electoral process. Some electoral costs may be easily identifiable EMB costs; others may be difficult to quantify, contained within general services budgets of other government agencies. Electoral cost comparisons between countries have proven difficult, largely due to the different items that are able to be identified and quantified as electoral costs in different electoral environments, using different models of EMB. The UNDP- and IFES-sponsored Cost of Registration and Elections (CORE) Project divides electoral costs into three categories:

• core costs (or direct costs): are those costs routinely associated with implementing an electoral process in a stable electoral environment;
• diffuse costs (or indirect costs): are those costs for electoral-related services that cannot be disentangled from the general budgets of agencies that assist with the implementation of an electoral process; and
• integrity costs: are those costs, over and above the core costs, that are necessary to provide safety, integrity, political neutrality, and a level playing field for an electoral process.

See table on “Attributes of Electoral Core, Diffuse and Integrity Costs” for further information and examples of these costs.

Integrity costs are often largely sponsored outside the EMB and mainly by the donor community; recent examples are the sophisticated internationally funded electoral register data processing and voter list production activities in the transitional elections of Afghanistan and Iraq. Such additional costs may not be included in analyses of EMB budgets, though they relate to functions within the EMB’s mandate. According to the CORE Project, core costs are proportionally highest in stable democracies, as progress towards democratic consolidation tends to lead to a decrease in integrity costs and an increase in core costs. The increase in the core costs results from demands to foster increased participation through more widely accessible electoral operations, and the use of high technology to expedite voter registration, voting, and the transmission of election results.

The CORE Project further shows that diffuse costs tend to be higher in stable democracies, especially in Western Europe, where electoral processes are more likely to be implemented by Governmental or Mixed Model EMBs which may use several government agencies to implement electoral services. Where, for example, a national civil registration agency is responsible for providing electoral register data, as in Hungary and Norway, it incurs electoral-related costs which may be difficult to separate from overall civil registration costs. Even where governments have a policy of ‘cost recovery’ for governmental agency electoral services, the true cost may not be charged.

Independent Model EMBs are more likely to have sole responsibility for electoral functions, and thus have a higher level of readily identifiable direct costs, and a lower level of diffuse costs than Governmental or Mixed Model EMBs. A higher level of readily identifiable costs may give a false impression of higher actual costs.

Attributes and Examples of Electoral Core, Diffuse and Integrity Costs

Who Finances EMBs and How?

Some EMBs receive funds and donations in kind from large corporations, the business community, and philanthropists. For example, the South African and Namibian EMBs collaborate with the local business community to set up and manage their election results centres, while the Botswana EMB cooperates with the corporate sector to conduct voter information campaigns. EMBs need to be careful that the manner of raising funds from the corporate sector does not affect perceptions of EMB financial probity, impartiality, or credibility.

Some EMBs, such as in Australia, raise some funds through the administration of elections on behalf of bodies such as professional associations or trade unions. Others, as in Hungary and Zambia, charge a fee to recover the costs of printing copies of the voters register which are distributed to political parties and other stakeholders, and in some cases charge for other publications.

Method of Disbursing State Funding

Funding for many Independent Model EMBs, for example in Costa Rica, Ghana, and Namibia, is a separate line item in the national budget, released directly to the EMB by the Treasury. For others, the EMB budget is released through a government ministry, for example, the Ministry of Home Affairs in South Africa and the Ministry of Laws in India.

Budgets for Governmental Model EMBs are usually a part of the budget of the government ministry responsible for implementing electoral processes, as in Denmark and Singapore. A Mixed Model EMB’s budget may be channelled through a line ministry, such as the Ministry of the Interior in Spain. In Senegal, the monitoring component of the EMB is funded directly from the legislature, while electoral implementation by the Directorate of Elections in the Ministry of the Interior is funded through that ministry.

Approval of EMB Budget Proposals

It is common for EMBs to submit their budget proposals to Treasury for preliminary approval, although some submit their budget proposals directly to the legislature or a committee of the legislature (such as the UK Electoral Commission). In some countries, such as Costa Rica, the legislature has no power to alter or reject any part of the EMB’s proposed budget. In others, as in Nigeria and the Seychelles, specified parts of the EMB’s proposed budget dealing with EMB members’ salaries and allowances cannot be altered by the executive or its agencies.

In Canada, the EMB’s budget has two parts, the recurrent budget, which covers costs such as permanent staff and related material support, and the elections budget, which covers additional expenses directly related to an election or referendum. The recurrent budget may be altered by the government, while the elections budget may not. The EMB provides an annual estimate of its elections budget to the government, but is allowed to spend more than this estimate. Following the election, the EMB accounts for these expenditures to a committee of the legislature.

Integrated or Distributed Electoral Budgets

An electoral budget may be a single integrated item in the national budget, or may consist of many components which are spread across the budgets of various government agencies. National, regional, and local governments’ budgets may each provide funds to the EMB. In the unitary state of Indonesia, the national budget totally funds the EMB to conduct presidential elections and national and regional legislative elections. However, regional and local authorities provide most of the funding for elections for provincial governors and local mayors. Such arrangements are more common in federal states. Funding for the EMB in Bosnia and Herzegovina is provided by all four levels of government: their respective shares vary according to the type of elections held. In India and Mexico, the national government funds the EMB to conduct national elections, but regional governments contribute funds when their elections coincide with national ones. In the UK, the budget for elections is funded by local authorities, with some costs being reimbursed by central government according to fixed scales.

Donor Funding

Some countries emerging from conflict have relied on donor assistance, through the UN or other agencies, to fund the whole or a significant part of their electoral budget. Examples include Cambodia (1993), Mozambique (1994), Bosnia and Herzegovina (1996), East Timor (2000), Sierra Leone (2002), Afghanistan (2004), and Iraq and Liberia (2005). In post-conflict elections, donor assistance can be essential, especially if breakdown of the institutions of the state has destroyed their ability to collect revenue.Donor assistance from, for example, the UN, the European Commission, and the United States Agency for International Development (USAID) has made a significant contribution to funding electoral processes in many other countries. There is a growing pattern of regional donor assistance: for example, South Africa and other Southern Africa Development Community (SADC) countries offer electoral support to EMBs of other SADC member countries; the Organisation of American States (OAS) has provided regional assistance in countries such as Haiti.

In emerging democracies such as Albania, Indonesia, Lesotho, and Palestine, assistance may be necessary to implement electoral processes that meet international standards. Assistance may also be necessary to enable fledgling opposition parties to contest elections in a comparatively competitive manner. In countries wishing to upgrade electoral services, such as Papua New Guinea, general institutional capacities and awareness may not yet have developed sufficiently to deal with the ‘intangibles’ in electoral costs – such as training and education. Even in relatively consolidated democracies, ‘flagship’ projects in fields such as data processing and communications may require donor assistance. Some emerging democracies are relying heavily on foreign donor assistance to fund their core election budget.

Donors’ funding availability will be affected by their own funding cycles, which may be difficult to coordinate with the timing of EMB needs. Donor assistance is usually channelled either directly to the EMB or through a government ministry. Direct channelling to the EMB has the advantage that it facilitates easier disbursement and has a direct line of accountability. In Cambodia and Yemen, the EMB has a special account in the National Treasury established for electoral management funding from all sources. Different accounting requirements from multiple donors may complicate the EMBs financial reporting mechanisms. On the other hand, exposure to different donors’ accounting requirements can encourage EMBs to review and improve their own financial accountability systems.

Control of donor funds can be a contentious issue. Channelling donor funds through government ministries may lead to delays or diversions in the disbursement of funds due to government bureaucracy or corruption, but host countries may insist on this to ensure that their, rather then the donors’, funding priorities are followed. Steering committee mechanisms, involving representatives of all donors, the EMB, and possibly the government, can be an effective solution, and prevent duplication of funding. Formal or informal use of an agency such as the United Nations Development Programme (UNDP) to coordinate all donor funding for the EMB can also be effective. In Indonesia in 2004, a significant proportion of multiple donors’ electoral assistance funds were disbursed through a UNDP Trust Fund under priorities established by the EMB.

EMBs need to be careful that donor assistance meets the EMB’s priorities, and is not driven by the interests of donor-provided consultants or equipment providers from the donor country. Technical assistance provided by donors needs to include components for training and skills transfer to EMB counterpart staff, so that the EMB can assume full ownership of future electoral processes. Donors may prefer to directly contract suppliers of products or services for the EMB, which can raise public questions about foreign interference. Donors may require that systems, equipment, and other tangible items they provide be purchased from their home country suppliers. Experience shows externally driven equipment solutions, such as for voter registration in East Timor in 2000, may be inappropriate for the environment.

Some Key Advantages and Disadvantages of International Donor Funding for Electoral Processes

Other Sources of EMB Funding

Some EMBs receive funds and donations in kind from large corporations, the business community, and philanthropists. For example, the South African and Namibian EMBs collaborate with the local business community to set up and manage their election results centres, while the Botswana EMB cooperates with the corporate sector to conduct voter information campaigns. EMBs need to be careful that the manner of raising funds from the corporate sector does not affect perceptions of EMB financial probity, impartiality, or credibility.

Some EMBs, such as in Australia, raise some funds through the administration of elections on behalf of bodies such as professional associations or trade unions. Others, as in Hungary and Zambia, charge a fee to recover the costs of printing copies of the voters register which are distributed to political parties and other stakeholders, and in some cases charge for other publications.

Budget Formulation Methods for EMBs

There are two main approaches to the formulation of an EMB budget: baseline (or incremental) and zero base (or zero-based) budgeting:

• baseline budgeting - takes as its basis the last funding period’s funding allocation and adjusts that for the next period. It is a budgeting tool suited to relatively static environments, rather then the dynamic electoral environment. For example, using baseline budgeting methods, it may be difficult to estimate what funds a permanent EMB might really need in a year following an election year.
• zero base budgeting - recognises that circumstances change from funding period to funding period and treats each funding period as a clean slate, and estimates funds required to achieve the strategic plan’s outcomes for that period. Past funding levels are not the relevant factor: instead, budgets are linked to the strategic plan by separately estimating and justifying the funds required to achieve each of the outcomes for the funding period defined in the EMB’s strategic and operational plans.
  
  

The decision on which budgeting system an EMB uses may be taken at governmental level if the EMB operates under government rules and regulations, or by the EMB itself if its legal framework allows it to determine its own rules and procedures for financial administration. An EMB’s approach to budgeting often tends to reflect that of the public sector in its country, especially if it is a Governmental or Supervisory EMB bound by general civil service financial rules.

Many EMBs still use baseline budgeting to prepare their election budget. There are a number of factors that make this approach less effective or even inappropriate for EMBs:

• as an EMB’s tasks may vary greatly from one year to another, depending on the electoral cycle, the resources needed for one funding period’s tasks tend not to be adequately predicted by the preceding funding period;
• attempting to estimate budgets for a current year election based on those for an election three, four, or even five years earlier runs risks of not adequately considering the effects of environmental, technological, or inflationary changes that occur over longer periods;
• the changing nature of electoral processes creates new tasks and new costs which may not be able to be estimated on the basis of past needs;
• there are likely to be substantial cost variations from year to year due to the increasing use of new technology for EMB tasks such as voter registration, information communication and management systems, voting, and the transmission of election results. As increasing use of technology changes EMBs’ working methods, costs in some areas may rise and in others may fall.
  
  

If the EMB uses a baseline budgeting approach, it will find it more difficult to meet the increasing demands for good governance, accountability, and sustainability. EMBs need to justify what will be achieved by the use of the funds requested, and why the level of funding requested is necessary.

Zero base budgeting encourages a ‘programme’ or ‘performance’ approach to budgets, whereby EMB activities are separately costed, and budgets are linked to specific output targets and outcomes, as is done by the Australian EMB. Thus, instead of having EMB-wide, generic budget categories of ‘staffing’, ‘forms printing’, ‘transport’, ‘security’, ‘regional office costs’ and the like, which makes it difficult to determine the cost of any EMB service or product, relevant costs are budgeted and attributed to a specific programme or project – such as ballot paper printing and distribution, staff training, or information programmes for political parties.

Zero base budgeting greatly improves the accountability of the EMB for its use of public and other funds, and assists the EMB to focus on providing cost-effective service delivery. It requires that all divisions within the EMB have individual work plans tailored to the EMB’s strategic goals, which identify the required outcomes, contain performance objectives based on measurable output targets, and specify verifiable indicators that these targets are being achieved. Each work plan aims to achieve a particular objective which contributes to the EMB’s overall strategic goals, and has a specific budget structure. Linking the budget to the strategic plan in this way makes it easier to determine how effectively funds have been expended to reach each objective, and to determine where and to what extent funding requests may be cut, or need to be increased.

The Process for Budget Formulation and Approval

Construction of a zero base budget starts with each EMB division preparing a budget proposal for its workplans. This budget proposal states the division’s funding and other resource needs, how its activities meet the output objectives of the strategic plan, and performance indicators. Once activities have been agreed upon at division level, these divisional budgets are reviewed, often by a committee of senior divisional managers chaired by the head of the secretariat or the chief accounting officer of the EMB, to ensure that proposed divisional budgets are realistic and fit a common understanding and prioritization of the EMB’s strategic objectives. The head of the EMB’s secretariat then amalgamates and finalizes the overall EMB budget estimate, which in some EMBs then has to be approved by the members (or Chair) of the EMB. In Governmental Model EMBs, this whole process may be undertaken by the Ministry within which the EMB is located.

The next step is generally for the head of the secretariat or chair of the EMB to forward the budget to the relevant ministry. In countries where this ministry is required to approve the EMB budget proposal, a formal budget hearing may be scheduled. The South African EMB submits its budget to the legislature via the Department of Home Affairs, but the latter does not have the power to alter the EMB budget. However, the Department of Finance may reduce the EMB budget proposal - as happened in 1999, resulting in the resignation of the EMB chair in protest. EMBs whose budget proposals may not be altered by either the executive or the legislature include Cost Rica and Ghana. It is common practice for the Ministry of Finance to incorporate the EMB’s budget into the national budget for tabling before the legislature for approval. It may be presented by a member of the legislature, often a minister of the department which represents the EMB.

Availability of Budget Funds

The practice in many countries is for the Treasury to release the funds to the EMB in a lump sum after legislative approval has been secured. This applies where the EMB has autonomy over its finances, and often its own banking account, as in The Gambia and Macedonia. For Governmental Model and Mixed Model EMBs, funds for electoral processes may be released through the treasury or to the host ministry, and disbursed through that ministry’s or the treasury’s bank accounts. In some cases, EMB funds are kept and managed by the Ministry of Finance, with the EMB making requisitions for the Ministry to pay its creditors and staff, mainly by cheque. EMBs in this category include Botswana and Namibia.

In Russia, the CEC may obtain a loan from the private sector if there are delays in receiving state budget funding. The Georgian EMB has a procedure to ensure timely disbursement of funds by the Government: it can bring a claim before the Supreme Court if funds are not disbursed in a timely manner. Charging the EMB’s budget directly to the consolidated fund occurs in countries such as Barbados. There may be significant legal and administrative barriers to be dealt with before such an approach can be implemented in other countries.

EMBs are more likely to use cheques and bank transfers for significant payments, though cash transactions are still used extensively for payment of temporary staff and in general in post conflict environments where the banking system has broken down, as in the Democratic Republic of Congo. In Cambodia, salaries are paid in cash while other transactions are made through bank transfer or by cheque. Other EMBs, such as in Australia, limit cash transactions to small petty cash amounts under strict controls.

Control of EMB Funding

Emerging democracies often fail to fund major election processes in an adequate and timely manner. Where the EMB’s expenditure processes and cash flow are controlled by a government ministry and subject to government rules and procedures, there may be delays in critical disbursements of funds. For Governmental Model EMBs and for the implementation arm of Mixed Model EMBs, this may be the ministry that houses the EMB. For other EMBs without financial autonomy, it may be the Ministry of Finance.

Delayed disbursement of funds can create major problems in electoral administration. Late disbursement of funds to the EMB can mean that vital decisions are delayed, or that insufficient time is left for the EMB to use high probity tender processes or organize the supply of acceptable quality goods for electoral purposes. Late payment to suppliers can cause disruptions to supply in the time-critical election environment. Late payments to staff, as has happened in Cameroon, can also threaten electoral processes. It may be to the advantage of both the EMB and the government to conclude a memorandum of understanding governing the funding disbursement arrangements.

Having a Ministry control EMB payments may raise EMB credibility-threatening perceptions that the EMB’s activities are being controlled by the government. Even where an EMB is constitutionally independent of the government, linking it to the government financial payments system can limit its autonomy.

Giving EMBs control of their own payments procedures and systems enhances their credibility as being independent of the government, and may lead to faster payment processes. It also places an additional workload and a significantly higher burden of control on the EMB to ensure that all payments are made correctly, on time, and to the highest standards of probity. Before assigning control of payments to an EMB, there needs to be certainty that the EMB has sufficient resources, skills, and control systems in place to be able to manage its own payments. Robust accountability systems - internally through internal audit, and externally through external audit and reporting to stakeholders such as a committee of the legislature – are essential.

EMB Financial Control Measures

There are four standard levels of control on EMB financial management: purchase and expenditure approvals processes, internal monitoring, internal review, and external review or evaluation. These controls are necessary to ensure that errors are corrected and corrupt or illegal practices are prevented.

The basic level of control is in the EMB’s procedures for approvals for purchasing and for authorizing expenditure. Approvals of expenditure up to defined financial limits may often be effectively delegated to secretariat staff with appropriate seniority (e.g., Chief of Operations). The important factor is some diffusion of control, for example by requiring transaction approvals from each of

• the operational area which requests the financial commitment, and
• the finance control area which checks that the commitment is in line with EMB strategic directions and financial policies, and
• the finance disbursement area which authorizes payment for the transaction.
  
  

Internal monitoring is applied by the EMB staff who are responsible for managing the EMB’s financial resources at all levels. This includes the heads of division who are responsible for monitoring and reviewing staff performance, and managing their divisional budgets. Overall financial monitoring is the responsibility of the division, usually the finance division, which is responsible for managing EMB expenses and financial transactions through accounting records such as general ledgers, journals, and suspense accounts. This division would usually also control the entire budget and produce regular financial reports including cash projections. Some EMBs have a special members' subcommittee on financial matters, which advises the secretariat on financial issues and may also have the mandate to approve the proposed EMB budget and appoint the EMB’s external auditors. For example, some of these tasks are undertaken by the Finance, Planning, and Logistics Committee of the Kenyan EMB, which includes both EMB members and secretariat staff.

The EMB may also have an internal auditor, a member of the secretariat whose objective is to ensure financial regularity and the alignment of the EMB budget and staff performance with the strategic direction of the EMB. To maintain the independence of internal audit, it usually reports directly to a member of the EMB or the head of the secretariat, rather than through a division of the secretariat. While a primary function of internal audit is to provide assurance to the EMB of the accuracy and integrity of its financial management, it can also play a wide internal development and evaluation role within the EMB. It can advise on the audit requirements of systems, especially those based on new technology, and can lead change advocacy through undertaking internal evaluations of the EMB’s operational processes.

The financial control process also includes external audit. External audits are usually required at least annually and often after significant electoral events. Audits of electoral processes in Governmental Model EMBs and the implementation component of Mixed Model EMBs may not be separate audits, but part of the external audit of the host department. External audits may be done by a government audit agency (if this exists) or by a private contractor, which examines the EMB’s financial transactions for the relevant period and reports to the government on whether they were free of irregularities, and also identifies areas of financial management where improvement is required.

The final stage of financial control includes public submission, often to the legislature, as in Guyana and Nigeria, of the EMB’s election or annual reports and audited financial statements. Accountability mechanisms for EMBs are discussed in detail in Performance and Financial Accountability.

Asset Management

EMB assets are public property, so the EMB has a responsibility to protect their value, through controlling all assets – equipment, materials, and other assets such as software - after purchase. Responsibilities for asset management need to be clearly identified in the EMB’s structure and staff job descriptions. Donors may also wish to ensure that an EMB has the capacity to take over the management of assets they provide.

Basic controls on an EMB’s assets include placing an EMB identification number on each asset, maintaining comprehensive and up-to-date asset registers, ensuring there are audit trails for transfers of assets, implementing regular stocktakes of assets, and investigating and enforcing appropriate sanctions over any discrepancies found. Stocktakes need to be conducted at least annually. Asset registers need to record all relevant data, including asset name, serial and ID numbers, purchase date and cost, current location and location history, depreciation data, current value, current condition, last stocktake date, and disposal information.

When purchasing assets, EMBs need to have a clear concept of their life cycle. Timing of asset purchases is critical for ensuring both efficient use of funds and availability of assets for electoral events, and needs to consider issues such as production lead times, storage costs, and distribution facilities. For example, in Canada, the EMB ensures that it always has sufficient special paper stocks on hand to print ballot papers for one national election, as in Canada elections may be called at any time.

Principles for EMB Financial Management

The requirements for key EMB financial processes, such as budgeting, procurement, expenditure authorizations, financial reporting, and auditing, may be contained in law, accounting and financial reporting codes, or EMB or government regulations. A clear legal framework for the management of EMB finances ensures certainty, regularity, and consistency and fosters good governance within the EMB. As well as the legal framework, there are fundamental principles which are the basis of good practice EMB financial policies and procedures.

Transparency

Financial transparency raises stakeholder and public awareness of the EMB’s structures and programmes, financial policies, and challenges and can foster stakeholders’ confidence in the EMB’s capacities. Financial transparency promotes good governance and serves as a strong deterrent to corruption and fraud within the EMB. When there are allegations of bad or dishonest practices, the EMB can better protect its credibility by rigorously exposing, rather than seeking to hide, such practices, including ensuring whistle-blowers are protected.

Transparency in the preparation, justification, and approval of an electoral budget builds public confidence in the EMB’s management. Rigorous public scrutiny and accountability through the legislature provide the EMB with the opportunity to show publicly its commitment to financial integrity. It is good practice for the EMB to be transparent in its procurement practices, especially where fast-track methods have to be used to meet electoral deadlines.

Prompt public disclosure of the results of audits of the EMB’s financial accounts and of reports on the awarding of procurement contracts guards against financial irregularity and corruption or patronage in contracting. The most fundamental way the EMB can promote financial transparency is by publishing its annual performance reports, including audited financial statements, and submitting these reports to the legislature and other stakeholders, including political parties and the general public.

Efficiency and effectiveness

As a guardian of public funds, the EMB has an obligation to expend these responsibly and to be efficient and effective in the management of its financial, human, and material resources. An outcome-based approach to the EMB’s budgets, regular monitoring of staff performance, and regular auditing of financial records assist in promoting efficiency and effectiveness in the use of an EMB’s funds. This can contribute to enhanced public confidence in the EMB’s management of electoral processes.

Integrity

The commitment of all EMB members and staff to integrity in their conduct underlies the organisational integrity of the EMB. Integrity in financial management covers not only monetary transactions, but includes issues such as respect for intellectual property. Development of integrated financial management systems with clear audit trails enables breaches of financial integrity standards to be discovered and reported. Strong codes of conduct and policies on conflicts of interest promote integrity. A strict regime of sanctions for breaches if integrity requirements, and fearlessness in using them, will enhance public confidence in the EMB.

Audit and Evaluation

Audit and program evaluation are widely used analytical tools to assist EMBs to improve their accountability. The boundaries between auditing and program evaluation are blurred. Both provide independent, objective analyses of how the EMB uses its resources and assist EMB management to improve service delivery. An audit will generally concentrate on the economy, efficiency, and effectiveness of the EMB’s performance in relation to the objectives of its activities, as stated in its strategic plan or other legal and operational framework documents, while a program evaluation will systematically analyze how well a program, such as an election, is working. It will generally start from the basis of questioning whether the objectives determined by the EMB, or its framework, meet the needs of the EMB’s stakeholders.

Summary: Financial Management of EMBs

• New technologies and demands for high integrity and widely accessible elections are placing new demands on election funding, and reliance on donor funding in some emerging democracies. EMB funding needs vary significantly between years, requiring accurate budget estimations based on resource needs for planned strategic outcomes.
• The UNDP- and IFES-sponsored Cost of Registration and Elections (CORE) Project divides electoral costs into three categories:
  • Core (or direct) costs - ‘normal’ directly attributable electoral costs;
  • Diffuse (or indirect) costs – support costs hidden in budgets of organisations other than the EMB; and
  • Integrity costs – additional costs required to secure integrity of fragile electoral processes.
• Election costs are measured with different levels of comprehensiveness and under different circumstances in various countries, making cost-effectiveness comparisons difficult.
• State budget funding for elections may be from a single source or multiple sources and for a single institution or proposed by the EMB, they must in most cases be approved by the legislature, and disbursed to the EMB through a government ministry, though this may affect perceptions of the EMB’s ability to act independently and in a timely manner.
• Especially in emerging democracies, a large proportion of electoral funding may come from donor agencies. While donor assistance can have a positive impact on election technical standards and integrity, it needs to be carefully targeted at the EMB’s priorities, coordinated between donors and the receiving country, promote sustainability rather than donor dependence, and subject to controls appropriate to allow the EMB to make effective use of the funds.
• EMBs variously use baseline budgeting (based on historic funds allocations) or zero base budgeting (based on future activity required to meet strategic objectives) for electoral budgets. Zero based budgeting may initially require more skill and effort, but more effectively allocates resources, and more accountably ties EMB activities and performance to the EMB’s strategic plan outcomes.
• Having an EMB control its own expenditure processes and cash flows enhances its credibility and may assist in the timely disbursement of electoral funds. However, EMBs must then have sufficiently rigorous controls on expenditure and payments to prevent error and fraud.
• In some complex purchasing environments, it may be preferable for the EMB to use a public sector-wide procurement agency. In most cases, however, the EMB can better meet the tight deadlines for electoral procurement by managing its purchasing independently, subject to the EMB having sufficient resources, skills, and internal controls to ensure integrity and value for money in procurement. Necessary controls include enforceable conflict of interest polices and codes of conduct, and measures to ensure purchases are not vendor driven.
• EMBs need to institute graduated levels of financial controls, such as diffused approvals of procurement and disbursements, work unit and EMB-wide internal financial monitoring, and regular internal and external financial audits.
• EMBs hold public assets and are accountable for their use, safekeeping, and appropriate archiving or disposal at the end of their useful life. Professional asset management systems – including regularly checked asset registers - are necessary.
• EMBs' financial management needs to follow the principles of transparency, efficiency, effectiveness, integrity, and sustainability.