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.