Constantine Palicarsky

Support to the Permanent Electoral Authority (PEA) and local public administration in Romania to implement best practices in electoral processes management Constantine Palicarsky

General approach: • Cap on spending • Cap on donations • Transparency

General findings • Detailed, high quality legislation • Isolated issues that are don’t necessarily have impact on political corruption • Company donations • Number of controls/checks • Annual audit • Accounting standards • Regulation, transparency and compliance

Cap on spending • Transparency of limits: PEA to express caps and limits in absolute figures

Cap on Donations • Company (legal persons) donations • Third persons issue and in-kind donations • Transparency of limits: PEA to express caps and limits in absolute figures

Transparency • Annual audit – benefits and opportunities • Discipline • Transparency • Could be used by PEA to simplify control mechanisms • Report on campaign spending • Loans and unpaid bills problem • Monthly statement the subsidy is used • Third persons issue: how is third person support taken into consideration?

Methodological norms issues

Transparency • Prepare a list of criteria for evaluating donations to determine if they are limiting the independence of political parties, based on a checklist. • that they are not involved in public procurement. • PEA may compare at the end of the year the list of the donors of the parties with the list of the companies that have received public procurement contracts. • EU Funds recipients.

Accounts of the political parties • Need to include the reference to the Accountancy law • PEA should be responsible for checking on the accountancy law. • -it is important to relate this to the new regime on auditing the political party accounts on annual basis. Sanctions could be imposed as a result of the checks.

Donations • Donations regime: the mentioning of the civil code may need to be abolished – in particular to the specific form. • Delete mentioning of “hand gifts” • Specific regime: cash could be donated with a simple transition (bank transfer) or in cash. • Problem with the legacies: the legacies may be taken out as they are not used. • Procedure: for cash donations up to … … RON the donors sign a tally sheet with integrated declaration that they personally or companies they control directly or indirectly are not involved in public procurement in the last 12 months and will not be involved in Public procurement in the next election period. For the donations made through bank transfers – separate declaration should be signed and mailed to the party-recipient.

Loans and debts • How will a political party open an account if it is indebted and all its accounts are blocked by creditors?This effectively blocks the work of the party. • Parties should pay all their bills in brief period of time after the end of the campaign (week)

COMBINED ELECTIONS • Combined elections – control over the election expenditures. • Separate accounts for the elections? Should the accounts be opened at county level or lower? • PEA may have problems verifying thousands of bank accounts.

Other points • SANCTIONING OF THE POLITICAL PARTIES: APPROACH • Obligation (time limit) on the imposition of a sanction (one week after the submission of the inspection report) • Transparency of the auditing report • SELECTION OF THE AUDITOR: • The political party shall select the auditor according to its own procedures. All audit reports shall be public and open.

Addressing political corruption • Many contributions not public: control may not address these • Need to cooperate with the Prosecution service, National Integrity agency and other relevant institutions.

PEA • Monitoring reports from NGOs could be used in the campaign monitoring process • Need for clear authority to control also the “public element” of the party budgets (now within the CoA remit) • Media to be obliged to submit info on the party spending (media ads) in the course of the campaign (could be submitted to the media council) • Control over the political campaign instead of the annual control, including weekly/daily controls over the party advertising; cost of advertisement (reported by the media) could be compared to reported value by parties.

Thank you! Constantine Palicarsky palicarsky@gmail.com

International organizations’ recommendations on Romanian party funding and campaign finance Jurij Toplak Bucharest 2011

Recommendations made by Greco – Group of States Against Corruption (Council of Europe) OSCE ODIHR

all entities under the control of political parties and county branches of political parties should keep proper books and accounts Party hq should instruct internal branches on book-keeping Party hq or accountants should he held responsible Can be regulated by legislation or not

to clarify how the financial activity of the various types of structures related to political parties is to be accounted for in the accounts of political parties • All internal parts (women organizations, youth organizations, etc.) included in financial statements • If separate legal entities: • may stay separate and not included • Treated as third parties in elections

to increase the transparency of “third parties” (independent speech, independent expenditures) Put spending ceiling on independent speech Third parties (big spenders) need to register and report income, spending Treat as in-kind donations unless the party declares that they are not related and requests them to stop

to require that all donations be recorded and included in the accounts of political parties and campaign participants

all donations above a certain threshold should be made through the banking system No cash donations Cash donations up to certain amount (40 or 80 Eur) and they are recorded

all donations above a certain threshold should be made through the banking system Where to transfer anonymous and illegal donations: Return to the donor Transfer to the budget Transfer to a humanitarian organization of party’s choice

to ensure that in-kind donations are properly identified and accounted for at their market value, as donations How to evaluate market value? Should there be receipts for in-kind donations? Should non-paid goods and services be considered in-kind donations? Should value be published in donations register?

to provide clarification as to the permissible funding generated by “internal services” and the organisation of events, and as to how the income generated hereby is to be accounted for If goods are sold market value If goods are sold above market value Either fully treated as donations or treated as donation above the market value Either we can deal with just with big amounts or also small ones

to clarify the legal situation of loans Prohibit loans Allow bank loans & disclosure & reporting Allow loans up to the donation limit & disclosure & reporting

to include a requirement of periodic reporting on campaign expenditures during the campaign and before election day One or two interim reports (monthly) Continuous reporting (online)

improve campaign financial statements presentation to the PEA so that all legitimate claims and debts are adequately followed-up by the PEA – how to deal with negative balance Debt means dependency, vulnerability Unpaid bills may be way of avoiding donation limits Parties wait and try to pay debt in other favors

improve campaign financial statements presentation to the PEA so that all legitimate claims and debts are adequately followed-up by the PEA – how to deal with negative balance all debts need to be sorted out immediately all debts need to be paid by time of submission with postponement of the date of submission allowing negative balances but regular reporting is needed

to require political parties to present their consolidated accounts to the PEA and to make an adequate summary available to the public

introduce independent auditing of party accounts external, internal auditing Large parties (UK) or all (Germany) Auditor may not be a party member, employee, candidate

to give PEA more monitoring responsibilities, more control powers, and more human and other resources

to strengthen the cooperation and coordination of efforts between the PEA, Court of Accounts, tax administration and National Integrity Agency formalised (agreement among them) non-formalised (regular communication)

to provide in law that the PEA report suspicions of criminal offences to the competent criminal law bodies Legislative amendment Also stresses that CC applies to political finance

to increase the penalties • all infringements should be punishable • effective, proportionate and dissuasive sanctions • sanctions for parties and individuals and donors • Misdem. and criminal (Spain 8, Latvia 6, UK 1yr) • always have a responsible individual (treasurer) • Possible sanctions also: • removal from office, (Belgium, UK, India, etc.) • ending of state funding, • loss of illegal funds, • ending of campaign

to extend the statute of limitation Currently 6 months 2 to 4 years after the date of the commission at least 1 year after the financial statements become public Illegal funds collected in 10 years (Germany) PEA could be empowered to check past financial activity of parties

Which parties should receive state funding? Currently parliamentary parties only OSCE ODIHR and some countries: funding of non-parliamentary parties improves democracy

Constantine Palicarsky