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.
- Receipts: The committee
should disclose the amount and nature of each contribution (whether
cheque, cash or non-monetary, i.e. in-kind), and the identity, address and
employer/business of each contributor.
- Expenditures: The
committee should disclose all spending, including the date and amount of
each expenditure and its recipient, and all debts and liabilities
incurred.
- Loans: The committee
should disclose all loans and advances received, including the lender’s
identity and business/employment, the date and amount of the original loan
or advance, and the date when the loan or advance was repaid.
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:
- copies of all bills,
invoices and receipts for the goods/services purchased;
- copies of the cheques
used to pay for these goods and services;
- for payment of wages and
salaries, detailed records documenting what services were provided and at
what cost;
- for each purchase using
the reporting entity’s credit/debit card, card billing statements and
receipts that help identify the vendor.
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
