Disclosure is critical to any political finance program and its enforcement system. With full and timely disclosure, the public can find out during the election cycle who contributes to a particular campaign and how the campaign spends its funds. Disclosure enables the political finance regulator (PFR) to determine whether the campaign is complying with political finance laws. In public financing systems, disclosure allows the PFR to calculate the amount of public funds, if any, the campaign is due, and to ensure that the campaign spends its funds only for legitimate, campaign-related purposes.
To help the PFR detect and penalize violations of political finance disclosure requirements, a number of provisions can be included in the electoral law:
Committee and Officer Responsible for Finances
The law could require each electoral participant to authorize a particular committee and designate an individual (who serves as the financial officer, or treasurer) to be responsible for all receipts and expenditures. For all financial transactions, the committee and treasurer should use only one bank account, which is fully disclosed to the PFR. This principle was upheld in Costa Rica in May 2003, when the constitutional court ruled that bank secrecy privileges do not apply to political party assets and that information on accounts held by parties must be made available to the general public.[1]
Electoral participants’ committees should be prohibited from using funds or accounts other than the designated, reported account. By permitting only one financial conduit for each electoral participant, the law enables the PFR to track political finance activity more effectively.
Comprehensive Disclosure
The law should require comprehensive disclosure of all financial activity and specify the financial transactions that must be reported.
The law could also require comprehensive disclosure of the assets of a political party and/or individual candidate by the committee, particularly in countries where no other records exist to identify these assets.
Records
Electoral participants could be required to maintain contemporaneous financial records that substantiate their reporting, and to produce these when requested by the PFR. With accurate and contemporaneous financial records sufficient to establish an audit trail, the PFR will be able to verify the electoral participant’s financial activity and compliance with the law. The PFR cannot effectively audit financial reporting by an electoral participant without this documentation. As a result, public confidence in the integrity of political finance regulation will be undermined, and participants complying with the law will not be guaranteed equal treatment.
Ideally, the law would require electoral participants to maintain records documenting every contribution received. This would include copies of cheques, money orders and credit card records of actual contributions; in the case of a cash or non-monetary (in-kind) contribution, the donor should sign a contribution verification receipt to provide the necessary record. Similarly, loan documentation should be maintained, including written loan agreements plus copies of the cheques, money orders or other documentation connected with the receipt and repayment of funds. For expenditures, electoral participants should maintain:
If these requirements are in force, the PFR would receive sufficient documentation to perform comprehensive audits. However, in countries with no documentation requirements or in cases of non-compliance with existing requirements, the PFR must also have the power of compelling electoral participants to produce financial records so that it can verify the reported information.
Some countries (e.g., Canada, Israel) require public access to the records kept by parties.[2] If that is not the case, the PFR may need the power to issue subpoenas compelling candidates and party officials to provide testimony, and to produce campaign documents and computerized records.
The PFR may also have authority to physically enter the offices of reporting entities and access their information, in order to audit original records and verify the existence of property/services purchased with public funds. For example, Britain’s Electoral Commission is empowered to require an authorized political party official to produce books, documents or records relating to the party, and also has the right to enter the premises of a party to examine its books.[3] To prevent this kind of access from becoming harassment, consideration should be given to requiring a judicial warrant (or subpoena) to enter party premises and inspect or even seize records.[4]
Public Release
Public release of the financial disclosure provided to the PFR by candidates, parties or other electoral participants serves an important public education function. Unfortunately, a recent survey of 118 countries found that as of January 1, 2000, 17 percent of them did not make party/candidate financial reporting available to the public, instead following a policy of “hidden disclosure.”[5]
The best practice is to collect the information reported by electoral participants and integrate it into clear and comprehensible public reports, to be disseminated through the media, posted on the PFR’s Web site or made available in print form. In Germany, for instance, the parties’ financial reports are comprehensive and organized according to a common format prescribed by law, which facilitates review and comparison.[6]
Disclosure Without Democracy
Finally, it should be recognized that full disclosure poses a particular challenge in countries with non-democratic regimes because the information reported by opposition parties may enable the ruling party to harass and threaten opposition supporters. In the 1999 presidential election in Ukraine, contributors to the campaign of opposition candidate Oleksander Moroz suffered government harassment, and were required to report to tax inspection branches and explain the sources of their money.[7]
[1] Transparency International, Global Corruption Report 2004, p. 28
[2] International Institute for Democracy and Electoral Assistance, Funding of Political Parties and Election Campaigns, 2003, p. 150
[3] Transparency International, Global Corruption Report 2004, p. 54
[4] (See example cited below, from the 1999 Ukraine presidential election.)
[5] Ibid., p. 46 (citing USAID, Money in Politics Handbook: A Guide to Increasing Transparency in Emerging Democracies, Washington DC, 2003), op. cit.
[6] International IDEA, Funding of Political Parties and Election Campaigns, op. cit.,p. 149
[7] Transparency International, Global Corruption Report 2004, op. cit., p. 41