Elements
Regulation of campaign (and more general
political) financing encompasses a number of different elements such as those
in the list that follows, wherein each next element is commonly added to those
which precede it as the system grows in scope and complexity:
- Disclosure and reporting of
financial contributions on a periodic basis, including after an election;
- Disclosure and reporting of
financial contributions during the campaign and before the election;
- Publication of periodic and
final financial reports;
- Disclosure and reporting of
non-cash contributions – such as donations of goods and services – based on
their economic value;
- Prohibitions on sources of
contributions (such as from government agencies, State-owned enterprises,
foreign individuals or organizations or the like);
- Ceiling on contributions by
individual persons and organizations;
- Ceiling on overall
contributions and expenditures;
- Establishment of special
electoral campaign fund;
- Retention of financial
manager with legal responsibility for compliance with regulations and
authorization of transactions;
- Submission of audited
financial reports, including related records;
- Review of financial reports
and records by electoral or other authorities;
- Forensic examination of
accuracy of financial reports based on internal inconsistencies or other
evidence (including observed level of campaign activity or other evidence of
contribution or spending violations or mis-reporting.
The basic
principle underlying the disclosure, reporting and publication of campaign
finance is to enable voters to obtain information about the sources of
political parties’ (and/or candidates’) funding in relation to the election and
the relative amount of resources each party can devote to its campaign. This purpose can only be achieved if
information received from the parties is published before and after the election.
Information technology has greatly simplified
the publication of political party financial reports, on the internet, so they
are accessible to the public. Even in
difficult post-conflict situations it has proven possible to provide for
submission of financial reports by election contestants and the publication of reports
on an ongoing basis by electoral authorities.[1]
The problem with financial reporting by election
contestants is accuracy and completeness. While many systems of financial regulation
are complete in themselves, they rely on the parties for information and do not
provide for any external (or “forensic”) auditing of the reports that are
submitted. Often the authorities merely cross-check the records
(receipts, vouchers and the like) that they receive against entries in the
account-book of a special campaign fund.[2] It is difficult or impossible to determine if
a party’s finances exceed the reported level since relevant information (such
as applicable media rates for advertising, donations of equipment, supplies and
services or gifts by third parties to voters or their communities) cannot
easily be tracked. Thus
non-reported contributions and expenditures regularly evade inspection.
A number of legal obstacles often
apply to financial reporting, restrictions and prohibitions. Sometimes the authorities (including
electoral and State registration bodies) take the position that contributions
to a political party or for its campaign are not reportable unless they are
made pursuant to a legal agreement between the contributor and the party.
General Issues
Viewed from a more general
perspective, there are six main ways of regulating political finance:
- bans on funding from
certain sources
- limits on contribution amounts
- expenditure bans
- expenditure limits
- public funding/subsidies
- campaign time limits
- full and public disclosure[3]
The first four of these
involve election integrity questions.
Bans on funding from
certain sources.
Political finance laws generally prohibit certain persons or
organizations from donating to candidates, political parties or other
electoral participants. Most commonly, foreign governments, organizations
or individuals are prohibited from making contributions to electoral
participants or spending funds on their behalf. Also, it is generally
forbidden to accept funding from domestic government sources, including
state-owned enterprises, or to use government facilities, personnel, materiel
or other resources for political purposes. Some countries ban donations to
electoral participants by corporations and unions, or tax-exempt charities
and other non-profit organizations.
Some of the prohibitions are more understandable than others, and easily
defensible as a matter of public policy. The political impact and fairness becomes more uncertain with more prohibitions.
Limits on contribution amounts.
Political finance laws often limit the amount
of funds or the value of non-monetary (in-kind) resources that a donor may
contribute to a particular electoral participant. The laws may set different
limits for different types of donor – whether individuals, businesses and other
legal entities, or independent political committees. The restrictions and the
distinctions between types of donor are often politically contentious, posing
difficult questions of equity and fairness. For example, low contribution
limits may place new candidates or anyone challenging an incumbent at a
disadvantage since they may lack a broad network of supporters that established
candidates or incumbents have to help in fundraising. The imbalance is
particularly acute if wealthy candidates are permitted to spend their own funds
without limitation, while their opponents need to raise numerous small
donations.
Expenditure bans
Political finance laws
also ban certain types of expenditures, including gift giving (usually
above a set amount), all cases of vote buying, and other forms of
electoral fraud such as bribing election officers. It is critical that
these regulations be well defined. If enforced, such prohibitions can be
an effective way to promote electoral integrity.
Expenditure limits
Political finance laws sometimes impose
spending caps—that is, limits on the total amount of spending by an electoral
participant during the election campaign or another period. The intent is
usually to prevent one electoral participant from financially overwhelming the
competition. Again, such restrictions have political consequences and may give
certain electoral participants an advantage. In addition, very low spending
limits may make it difficult for new or “challenger” candidates to raise their
profile in a contest with an incumbent, who has the advantage of name
recognition and can draw on the perquisites of an office holder.
Thus, although the intention
may be simply to reduce corruption and level the playing field, these methods
of regulating private political funding are not neutral in their political effects.
Moreover, restrictions on the sources and amounts of political donations—and
especially expenditure limits—could lead to evasion and cheating.
The restrictions on receiving
and spending funds require effective mechanisms for law enforcement, and these
in turn require effective mechanisms for financial reporting, disclosure and
transparency. Without such mechanisms, electoral participants who obey the
restrictions are playing by a different set of rules from those who disregard
the restrictions with impunity.
Finally, in political
environments where election and/or judicial authorities are fundamentally
biased and dishonest, legal restrictions on political finance may be
arbitrarily enforced against opposition candidates.
Election integrity issues also
arise with the use of public
funding/subsidies for political parties, candidates and other
electoral participants -- whether the funding is in addition to or in lieu of
private sources. The values of fairness, equity, accountability and
transparency assume particular importance when electoral participants are to be
allocated public funding or other benefits, such as free broadcast time:
- Fairness and equity are
crucial in deciding thresholds and requirements for eligibility, standards
for the amount of subsidy (if the amount differs for each recipient),
conditions on the use of funds or particular other forms of support, and
timing of receipt of the subsidy or other benefit.
- Accountability and
transparency are critical to maintaining election integrity standards in
the way that public subsidies or other benefits are distributed and used.
Fortunately, public funding (or rather the threat of losing public
funding) provides substantial leverage in stimulating eligible electoral
participants to meet higher standards of financial reporting and internal
accountability controls.
Campaign
time limits
often are intended to limit the amount of money spent in a campaign. However,
political parties and candidates can evade such limits by claiming that their
pre-election efforts, such as identifying and selecting candidates, are merely
organizational, and therefore non-political. Further, this approach may
actually encourage more spending overall by allowing money to be spent without
any limit outside the campaign period. [4]
Finally, full and public
disclosure is a fundamental public control mechanism.
[1] See, e.g., Republic of Liberia, National Election Commission, Campaign Finance Regulations
for Political Parties and Candidates (Monrovia, 30 May 2005).
[2] E.g., in FYR Macedonia, where financial reporting is based on establishment of a
special “gyro” (i.e., current)
campaign account. See OSCE/ODIHR, EOM Report,
Macedonia
Parliamentary Elections 2008, p. 11.
Similar issues have recently been observed elsewhere in the OSCE area,
for example in Armenia
and Croatia.
[3] See Money in Politics Handbook: A Guide to
Increasing Transparency in Emerging Democracies, Washington, D.C.:
US Agency for International Development, 2003, p. 13–18.
