Without effective oversight of
the financial activity of candidates and parties, the political finance
regulator (PFR) cannot successfully enforce the political finance laws.
Oversight enables the PFR to determine whether electoral participants are
complying with political finance laws, including restrictions on the size and
source of contributions, and limits on expenditures. Oversight also helps the
PFR to ensure that the funds are spent only for legitimate, election-related
purposes.
There are three primary
mechanisms for political finance oversight:
- financial disclosure and reporting;
- audits of regulated
candidates and parties; and
- investigations into
suspected political finance irregularities and violations.
Disclosure
The most basic method of
oversight is financial disclosure. The electoral law should set forth clear
political finance disclosure and reporting requirements. It should call for
comprehensive disclosure of the financial activities of regulated entities,
specifying all transactions that must be reported. For disclosure to be
meaningful, electoral participants should produce contemporaneous financial
records that substantiate their reporting and offer an audit trail allowing
review of their financial activity. Useful
documentation includes:
- contribution
documentation, such as copies of cheques, money orders and credit card
records, or contribution verification cards for cash and non-monetary
(in-kind) contributions; and
- expenditure documentation,
such as bills, invoices, and/or receipts for goods and services purchased,
plus copies of the cheques or credit card receipts used to pay for these
goods and services.
Audit
Another important oversight
method is the financial audit. This is a formal analysis of the financial
records of an electoral participant to verify the financial reporting and
determine whether the electoral participant is following the political finance
laws. There is a direct relation between the reliability of the disclosure
provided by parties and candidates, as well as their compliance with the law,
and the actual and deterrent effect of audits.
An increasing number of
jurisdictions recognize that audits are essential to political finance
enforcement. However, different jurisdictions have audit practices that vary
widely in terms of the identity of the auditor and the scope and technique of
the audit.
Investigation
By developing an independent
investigative capacity, the PFR need not rely on cooperation from other government
entities. Instead the regulator can itself identify and examine suspected
political finance violations, and collect evidence of such violations for use
in enforcement proceedings.
An investigation may be
launched in response to the PFR’s internal review and audit of a
party/candidate, or it may have an external source, such as an outside
complaint or press report. Many jurisdictions have a complaints procedure that
allows citizens to report political finance problems or suspected legal
violations on the part of political parties, candidates or other electoral
participants. External investigations may also be initiated as a result of
information unearthed by the media and non-governmental organizations.
