Depending on the country, campaign finance regulations may be contained in the constitution, and/or elaborated in a specific law on campaign finance or in broader laws on elections or political parties. Additionally, criminal legislation, such as the penal code, as well as legislation governing anti-corruption measures, auditing, media, gender equality or taxes, may also contain provisions about campaign finance. Relevant constitutional/ judicial case-law may also clarify some legal provisions on campaign finance. Most campaign finance laws allow the oversight body to provide further clarification of campaign finance regulation through the publication of instructions. 

Practice varies throughout the world, with different institutions tasked with the supervision of campaign finance regulations. Institutions may include an Election Management Body (EMB), a specialized body, a Ministry, a Court, or a government/ auditing institution. Of the countries with oversight bodies responsible for enforcing campaign finance rules, the most common institution taking over this supervision task is the election management body (47% of the cases).  This Focus On is limited to countries in which the electoral management body is responsible for campaign finance regulation, which means that most case studies will address specific aspects of campaign finance regulation in countries where the EMB is responsible for campaign finance monitoring. 

Figure 2: Different types of campaign finance enforcing bodies[1]

The EMB is considered in many countries as the best suited institution to enforce campaign finance legislation since it is generally a permanent state body which is supervising and managing the whole electoral process. On the other hand, the EMB might not have the specialized personnel, sufficient institutional and financial resources, or enough time to carry out such a task. In addition, in instances where the EMB has some representatives from different political parties, it might be seen as partial or susceptible to take political-biased decisions.

 For ease of understanding, and in order to review the existing methodologies and approaches to regulation of campaign finance, the three sets of regulations mentioned above - i.e. regulation of income, regulation of spending, and regulation of control mechanisms - will be considered in greater detail.

Sources of financing

Most countries around the world use a mixed campaign finance system that allows for both public financing, allocated by the State, and private financing, given by individual and/or legal entities. Both types of financing allow for monetary and in-kind contributions.[2]

Public campaign financing

Public funding is a widespread practice of campaign finance regulation,3] and a common aim is to contribute towards a landscape where parties and candidates can compete equally. A potential upside is that it may encourage compliance with campaign finance rules because of the threat to withhold public funds if electoral contestants fail to abide by them. Public financing also implies the need for transparency regarding the use of these funds, since the public is the ultimate source of these funds and should be allowed the possibility of meaningful scrutiny. The level of public funding disbursed is also another critical factor to take into account. If there is too little money or if the number of eligible recipients is too important, the allocation of public funding will have a limited impact, if any at all, and could be seen as a waste of taxpayer money or will make no difference to political parties which will be granted a fairly small amount of public funds. On the other hand, in instances where the level of public financing is high and constitutes the dominant funding source, there is a risk that electoral contestants become increasingly dependent on public funding  and lack grass-roots support bringing about the weakening of the link between political parties/ candidates and their electorate.

Public campaign financing can be both direct and indirect. Direct financing refers to monetary contributions in the form of both annual subsidies covering parties’ routine functioning, as well as electoral campaign subsidies granted to candidates and political parties for the purpose of contributing to campaign and election costs. Indirect financing includes non-monetary contributions, which can range from providing candidates and/or political parties with services for free or at a reduced rate – such as access to public media or use of billboards in order to display the electoral materials – to allowing the use of state property for the purpose of campaigning, to printing of electoral materials, or to tax relief based on campaign contributions.

Public financing can either be allocated before the election or after in the form of reimbursement of electoral expenditures once electoral actors have complied with reporting requirements. It is typically based on objective criteria, such as parliamentary representation, percentage of votes cast for the party or the candidate, the number of candidates put forward by the party in an election, or a combination of these criteria. Most countries use some kind of threshold for receiving public funding which is often lower than the electoral threshold for the allocation of a mandate in parliament.         

The allocation of public funding can be made contingent on compliance with requirements for women’s participation.4] According to International IDEA’s political finance database, 27 out of the 180 countries listed have adopted reforms that directly target gender equality.5] One approach is to create financial incentives in the form of additional public funding for political parties meeting legal criteria such as including a certain number or percentage of either sex on their candidate lists or reimbursing for example, some specific expenditure related to childcare services. Another approach is to reduce, deny or withdraw public funding for political parties which do not include a certain number or percentage of women candidates.  The last approach is to earmark a certain share of the public funding to activities related to gender equality within the party, such as the training of women candidates or the support of women’s wings.

Figure 3: Examples of approaches to connect campaign finance with gender equality

Private campaign financing

Private funding includes contributions6] from individuals or legal persons, self-financing and in some instances, loans taken out by political parties and candidates to finance their campaign, depending on the states’ legislation. Private campaign financing is a form of political participation and it is important that all individuals have the right to freely express their support of a political party or a candidate of their choice through financial and in-kind contributions. Private funding can be limited by amount (quantitative limitations) and/or by source (qualitative limitations), as private financing can distort the political process in favour of wealthy interests.

Quantitative limitations, which cap the monetary amount of campaign-related contributions people can make to a candidate or a political party, aim to minimize the possibility of corruption and the purchasing of political influence. However, contribution limits have to be balanced with the legitimate need to protect freedom of expression. Caps on the contribution amounts may be seen as an infringement of freedom of expression since they limit financial and in-kind support from individuals. Two contradictory principles are at stake here: the need for parties and candidates to raise enough funds to campaign effectively, and the right of people to express themselves by giving money. In some countries, money is speech and freedom of expression trumps other principles, such as the principle of fair elections, while in some others, the use of money is limited in order to create the conditions for an even level playing field.

According to International IDEA’s political finance database, 38 % of countries cap the amount that individuals and/or legal entities can contribute to a political party in relation to an election, while 30% of countries limit the amount a donor can contribute to a candidate.

Qualitative limitations, which restrict the sources of contributions, aim to limit the ability of particular groups or wealthy contributors to gain political influence on candidates or political parties. These restrictions often apply to non-citizens, companies, unions, government contractors, and anonymous persons. The graphic below (figure 4) shows the different types of contribution bans to electoral contestants in relation to election campaigns.7]

Figure 4:Contribution bans

Besides private contributions, electoral contestants are also permitted to finance campaigns by taking out loans to equalize access to private funding among candidates regardless of individual wealth. This source of financing is considered private campaign financing. When loans are allowed, electoral contestants can take out loans from financial institutions (banks, credit card companies), and sometimes from legal entities or individuals. For transparency, legislation should require that all bank loans and loan details be reported and disclosed, including: identity of the lender, total amount of loan, interest rate, repayment period, and any contingency which may impact the initial conditions agreed for the loan in question.   

Campaigning

Campaign spending regulations usually aim at restricting the amount of money that can be spent and the kinds of expenditures that political parties and/or candidates can incur for electoral purposes. This common form of regulation consists of setting a ceiling on the permissible electoral expenditures that individual candidates can incur and/ or the total amount spent by a political party during a campaign and/ or setting out rules prohibiting the use of administrative resources for electoral purposes.

Spending limits

The rationale behind a ceiling on expenditures is twofold: levelling the playing field by ensuring that candidates with more financial means are not unfairly advantaged, and keeping the total campaign costs at a moderate level, and thus minimizing the need for additional fundraising and subsequent political dependence on donors. The spending limit has to be realistic enough to allow candidates and political parties to effectively campaign and reach out to voters. The spending limit is usually determined by factors such as the voting population, the geographic size of constituencies, the length of the campaign period, and other factors such as the cost of inflation. Whether electoral contestants are provided with free media time by law is another important factor in setting spending limits, given the high cost of paid advertising.

However, setting a ceiling on expenditures can be undermined if third parties such as interest groups, trade unions, corporations, associations, or individuals spend money on behalf of or in opposition to a particular political party or candidate and do not have to abide by the spending limit. Most countries have no regulations on third-party spending,8] which remains an area of concern, and “gives interest groups a significant role in political spending, although campaign spending by parties and candidates is subject to statutory limits.”[9]   

To make the spending limit effective, it is important for regulations to define two things: electoral expenditure and the campaign period. These inform electoral contestants of both the types of expenditure that must be reported in the financial reports and the timeframe, respectively.

The definition of electoral expenditures must encompass both monetary and in-kind expenditures. In-kind expenditures, such as use of the candidate’s personal car or the supply of personnel by the political party for electoral purposes, should count towards the spending limit according to their market value to prevent circumvention of spending limits. The definition of electoral expenditures should also take into account the issue of illegal expenditures (such as vote buying10]) which have to be reported in financial reports but cannot be financed through legal sources. Indeed, while those expenditures are illicit by nature, they are nevertheless incurred to get electors’ votes. In this regard, they have to be counted against the spending limit when such a limit does exist.

Besides capping electoral expenditures, some campaign finance systems also limit or ban certain types of expenditure; most notably on paid political advertising.

Paid political advertising is statutorily forbidden in a significant number of Western European countries such as: Belgium, Denmark, France, Germany, Ireland, Malta, Norway, Portugal, Switzerland, and the UK and in some central and Eastern Europe, such as the Czech Republic and Romania. In these countries, electoral contestants are usually granted free airtime, generally on public service broadcasters, to present their programs.    Other countries, such as Australia, Argentina, Canada, or South Africa, do not have a blanket ban, but have restrictions regarding the use, content and amount of political advertising (either the amount of money spent on political advertising or the number of advertisements).

The rationale behind this ban is to constrain growth of campaign spending and to prevent the domination of public debate and electoral campaigns by wealthy parties and to maintain the presentation of balanced views. In addition, it is believed that bans on paid advertising safeguard the quality of political debate. With bans on more expensive and financially intensive campaigns, less expensive means – such as social networks, door-to-door campaigning, and campaigning through networks of volunteers – become more popular.

However, a ban on political advertising may make it more difficult for new parties and candidates to make their views known to voters. The key issue regarding potential limitations or bans on paid political advertising during the campaign period is to assess whether or not political parties and candidates are able to get their messages to voters and whether voters have full access to receiving political and electoral information.

Abuse of administrative/ state resources

The misuse of administrative resources refers to the use of state (or public) legal, institutional, financial, and coercive resources for campaign purposes when these are not provided by law. The misuse of administrative resources during electoral processes, including in countries with a long-standing tradition of democratic elections, is a widespread phenomenon and represents one of the most crucial and recurrent challenges as regards campaign finance regulation enforcement.11] The misuse of public resources is particularly damaging because it typically benefits the incumbent party.

If misuse of state resources is mostly addressed through formal regulations civil society and the media must be vigilant in monitoring compliance to ensure that the state institutions involved in administering and regulating the electoral campaign treat all parties and candidates equally, impartially, and fairly. The political will of the state authorities remains a key factor to ensure free and fair elections and effectively implement measures to prevent the misuse of administrative resources.

 Administrative resources can be classified in four main categories:12]

The misuse of administrative resources during electoral processes may threaten some of the basic requirements of free and fair elections, i.e. equality of opportunity between electoral contestants, transparency of the campaign, and freedom of expression of opposition parties/ candidates. Legislation pertaining to the use of administrative resources varies considerably throughout the world. Different ways of regulating the issue may be considered; from banning civil servants from actively participating in campaign activities, to requiring public servants to resign from their position before running in an election. Whatever the regulations, the principle of neutrality that guarantees a level playing field for all political contestants and that entails impartial behaviour by civil servants and authorities at all levels should prevail throughout the election campaign period.

Enforcement/ sanctions/ disclosure

To maintain the integrity of the electoral process, strengthen public confidence in political actors, and hold both political parties and candidates accountable, proper enforcement of laws and regulations on campaign finance is critical. To do so, the oversight body needs to have at its disposal an array of sanctions which are deterrent, effective and proportionate to the gravity of the violation. Campaign finance reporting and disclosure are important measures to inform the public of the financial support given to electoral contestants, thereby promoting transparency in the campaign finance system.

Reporting

Campaign finance reporting is the main policy instrument for achieving transparency in campaign finance regulation and refers to the timely submission of information about contributions received by parties and candidates (and third-parties when applicable), as well as their expenditures. A common requirement for political parties and candidates is to appoint a financial agent who is responsible for all campaign finance aspects of the campaign, such as collecting contributions, paying expenditures through a campaign-specific bank account opened for this purpose, and keeping an accurate and detailed account of all transactions made for electoral purposes. This rule aims to increase the transparency of a campaign’s sources of financing, to enhance the comprehensiveness of financial transactions reported in the financial report, and to ease the supervision task of the oversight body.

The OSCE/ODIHR Handbook for the Observation of Campaign Finance recommends that “It is good practice for authorities to introduce a standard template and guidance for reporting, which enables timely analysis and meaningful comparison between different parties and candidates. (…) Reporting formats should include the itemization of all contributions and expenditures into standardized categories as defined by the regulations. Itemized reporting should include the date and amount of each transaction, as well as copies of proof of the transaction.”[13] Although reporting rules are crucial to ensure that all political actors comply with campaign finance legislation, maintain the required records, and report on all direct and in-kind contributions and campaign expenditures, they should not be burdensome for political actors. This is why some countries (such as Canada, USA or Australia) use thresholds under which resources and expenditures do not have to be reported.

The frequency of financial reporting depends upon each state’s legislation. Only a few countries require electoral contestants to report on their assets and liabilities at the start of the campaign or during the campaign (such as Armenia, Belarus, Croatia, Russia, Uruguay or the USA). The deadline to submit (final) financial reports to the oversight body should be precisely defined in the law in order to allow electoral contestants to gather all supporting documents within the legal allocated time. It is also critical that the timeframe for the oversight body to issue its decisions is sufficient to allow for a thorough and comprehensive audit of financial reports.

Disclosure

The United Nations Convention against Corruption (Article 7-3) calls on State Parties “to enhance transparency in the funding of candidatures for elected public office and, where applicable, the funding of political parties.” Disclosure is the key principle allowing the dissemination of information about electoral contestants’ finances and enabling public scrutiny regarding the sources of financing and campaign spending, thereby promoting accountability of electoral actors and transparency of the whole campaign finance system. Disclosure rules should clearly define:

• what has to be disclosed (reports including sources of financing and notably the identity of donors and types of expenditure along with the decisions of the oversight body);
• when it has to be disclosed (the timeframe);
• how it must be disclosed (on the internet, in media outlets);
• who has to disclose (political parties, candidates, or both);
• and to whom electoral contestants, and third-parties, must disclose (to the oversight body and/or to the public).

Moreover, in countries where political finance regulation is used to promote gender equality, disclosure mechanisms can help assess whether measures—such as electoral quota enforcement and earmarked funds for female candidates—are being adequately implemented. Indeed, the publication of political parties’ financial reports allows other electoral contestants, civil society organizations and citizens to check whether funds earmarked for gender-equality initiatives have been used for that purpose. Gender disaggregated reports are important tools to assess the effect of financing regulations on women’s participation in electoral contests, to determine how women’s fundraising and spending compares to that of men and whether party funds are equally allocated to male and female candidates.

It is noteworthy to underline that financing disclosure rules differ throughout the world. In some countries, data and information included in electoral contestants’ financial reports are not published either by the candidates and the political parties themselves or by the oversight body, while in some other countries, disclosure rules require the publication of information contained in the financial reports. Some oversight bodies have developed very interesting detailed databases to allow for public scrutiny (Australia,14] Canada,15] and the USA16]).    

The question of the disclosure of donors’ identity is dealt with in different manners the world over. In some countries, the identity of donors is not made public as this is seen as a violation of privacy or because of the risk of intimidation or physical threat. In some other states, disclosure of donors’ identity is required above a certain threshold. Finally, in some countries, all information relating to the donor’s name and address is made public. In the last two instances, the rationale is to enhance transparency of financing sources and to allow for public scrutiny. 

Supervision and enforcement

To ensure impartial enforcement of and compliance with campaign finance regulations, it is crucial that the oversight body is independent of political influence. Moreover, it must have the authority to detect and investigate infringements, as well as to apply sanctions. The oversight body must also have the necessary financial and staff resources to carry out its duties. The members of the oversight body should be appointed on the basis of neutral, objective and non-partisan criteria and given the security of tenure.

Regarding the mandate of the oversight body, the OSCE/ODIHR Handbook for the Observation of Campaign Finance has underlined that “Responsibilities should be clearly defined in the law and may include: providing guidance on how to comply with requirements and informing other electoral stakeholders of the rules; establishing reporting forms and reporting procedures; receiving, auditing and publishing financial reports; initiating inspections and public investigations; handling and adjudicating complaints; imposing sanctions; and publishing decisions on adjudicated complaints.” Besides enforcing campaign finance rules, the oversight body should also play a supporting and advisory role by providing guidance on how to comply with reporting requirements, holding trainings for electoral contestants, publishing compliance guidelines, and establishing financial report templates to help parties and candidates comply with the regulations. In order to help electoral contestants understand the rules they have to abide by, some oversight bodies have developed some guidance policies.

Civil Society Organizations (CSOs) can also play a very important role in monitoring campaign finance and estimating campaign costs (such as the costs of billboards, political/ electoral advertising, and of renting campaign venues or cars) to assess whether a candidate or party has reported accurately and has complied with campaign finance rules.

Sanctions

To maintain the integrity of the campaign finance system, strengthen public confidence in the political sphere, and hold both political parties and candidates accountable, proper enforcement of campaign finance regulations is critical. Indeed, the best conceived system is of little value unless it is implemented and enforced effectively, and a full range of legal sanctions serves little purpose if the oversight body is not endowed with sufficient powers to apply them.17] To support campaign finance regulations, the oversight body needs to have at its disposal a range of sanctions. These sanctions may be administrative, financial, electoral or criminal and have varying degrees of severity. Sanctions must be objective, enforceable, effective and proportionate to their specific purpose. 

While regulatory authorities can determine sanctions, there should be an opportunity for a party to request that the final decision regarding sanctions should be made by the appropriate judicial body, in accordance with judicial principles. In any case, the principles of effective remedy and due process must be strictly respected.