Political Parties Financing - Legislation and Practices in the Balkans - by CDT Crna Gora

POLITICAL PARTIES FINANCING - LEGISLATION AND PRACTICES IN THE BALKANS -

Opinions expressed in this publication do not necessarily represent those of the Balkan Trust for Democracy, the German Marshall Fund of the United States, or the Ministry of Foreign Affairs of Norway

impressum Publication Political Parties Financing - Legislation and Practices in the Balkans Publisher Center for Democratic Transition (CDT) VII Omladinske b.b. 81 000 Podgorica, Montenegro Tel: +382 20 207 070, 207 071 Tel/Fax: +382 20 207 072 E-mail: cdtmn@t-com.me www.cdtmn.org For the Publisher Dragan Koprivica Authors Milica Kovačević, Anđelija Lučić, Ivana Korajlić, Aleksandar Marićević, Zlatko Dimitrioski, Samir Reka Graphic Design Bojan Tešić Printing Golbi print Circulation 300 copies Podgorica 2013.

Citing and using the material and information contained therein for not-for-profit publications or in public media, while for the purpose of informing the citizens, as well as the use thereof for other non-commercial purposes, shall be allowed upon a mandatory stating the source thereof and the copyright owner. The use of the material for any other purpose shall not be allowed without a previous approval by the copyright owner (Center for Democratic Transition). CDT shall not be held liable for any subsequent interpretation of the information published herein.

table of contents EDITORIAL........................................................................................................................05 I. SOURCES OF FINANCING OF POLITICAL SUBJECTS 1.1 Percentage of the national budget and budgets of local governments allocated for the financing of regular work of political parties.........................07 1.2 Representation of political parties in the public broadcasting services...........10 1.3 Share of public income in the annual funding of political parties....................13 1.4 The importance of membership fees in political party financing......................17 1.5 Who the private donors are?......................................................................................19 1.6 Influence of corporate donations..............................................................................21 1.7 Expenditures limits.....................................................................................................23 II REPORTING 2.1 Reporting on private donations (transparency vs. protection of personal data)......................................................25 2.2 Reporting on in-kind contributions........................................................................27 2.3 Quality of the reports.................................................................................................29 2.4 Publishing of the reports...........................................................................................33 2.5 Accounts of associated entities.................................................................................35 III ROLE AND AUTHORITY OF ENFORCEMENT INSTITUTIONS 3.1 Which institutions are responsible for the control, monitoring and audit?....................................................................37 3.2 Which institution is responsible for initiating court proceedings?...................40 IV THE SYSTEM OF SANCTIONS 4.1 Misdemeanour sanctions...........................................................................................43 4.2 Criminal sanctions......................................................................................................47 4.3 Administrative measures...........................................................................................48 4.4 Practice..........................................................................................................................50

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editorial

Editorial

Dear readers,

he publication in front of you Political Parties Financing â&#x20AC;&#x201C; Legislation and Practices in the Balkans is outcome of a research conducted in Bosnia and Herzegovina, Montenegro, Kosovo, Macedonia and Serbia. The aim of the research was to give comprehensive review of the current situation in the area of political parties financing, to point out issues of concern, and good practices. The publication is divided into four thematic chapters. The first contains data and information on the sources and methods of political parties financing, including analysis of financial reports. The next chapter examines political parties reporting systems, while the third tackles with the role of relevant institutions. The fourth chapter analyzes sanctioning system in each country and presents examples from the practice. The research results showed that public funds are the main source of political parties financing whereas the incomes from membership fees, natural persons and legal entities have a small share in financing of political parties. In each country during the election campaign parties are provided with free of charge presentation and advertising in the public broadcasting services, which makes additional type of the state assistance. Although mechanisms of control and reporting systems for political parties are established in all countries, the practice shows that parties often do not adhere to the prescribed rules of reporting, accounting, and data publishing. The role of enforcement institutions, as well as a range of sanctions vary from country to country. The publication contains data on noticed irregularities regarding political parties reporting and financial operation as well as information on actions undertaken by the relevant institutions. The research was conducted as a part of the regional project Money and Politics in the Western Balkans which Center for Democratic Transition carries out in partnership with Transparency International Bosnia and Herzegovina, Centre for Development of Serbia, Initiative for Progress â&#x20AC;&#x201C; Kosovo, and Citizens Association MOST - Macedonia. The project is implemented with the financial support of the Balkan Trust for Democracy, a project of the German Marshall Fund of the United States and Ministry of Foreign Affairs of Norway. Research methodology was developed in cooperation with project partners by CDT research center.

Sources of financing of political subjects

I. Sources of financing of political subjects

1.1

Percentage of the national budget and budgets of local governments allocated for the financing of regular work of political parties

Law on Financing of Political Parties (LFPP) Bosnia and Herzegovina regulates the issue of budgetary donations to political parties or groups participating in the Parliament of B&H (the House of Representatives and House of Peoples). The total resources allocated to parties do not exceed 0.2% of the budget. The law provides that all political parties represented in the Parliamentary Assembly of Bosnia and Herzegovina shall have equal contribution in the amount of 30% of the approved budget; 60% of the resources are allocated depending on the number of seats each parliamentary party has at the time of allocation of resources, while 10% of the total amount is allocated to parliamentary groups in proportion to the number of seats belonging to the less represented gender. CEC B&H determines which gender is under-represented according to the results of the election.

Bosnia and Herzegovina

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At the level of Republika Srpska, the Law on Research has shown that Financing of Political Parties from the budgets of only the Law on Financing Republika, cities and municipalities regulates a of Political Parties of Bosnia part of financing of political parties and coalitions and Herzegovina contains that have representatives or councillors in the provisions, i.e. measures of parliament, independent members and councillors affirmative action for political (including MP/councillor committees and groups), as well as of parties, coalitions and independent empowerment of women. candidates with confirmed candidate lists. The law, therefore, makes a distinction between regular financing and financing during the election campaign. Regular funding ensures a minimum of 0.2% of the budget resources, which are distributed in the amount of 20% to all parties represented in the parliament/board and independent MPs, while the remaining 80% is distributed according to the number of seats in the parliament/board. The provision defining allocation of min. 0.2% of the budget is controversial because it leaves room for manipulation with resources. At the level of Federation of Bosnia and Herzegovina, there is no law that regulates the allocation of resources for political parties from the budgets of entities, cantons and municipalities. That SluĹžbeni glasnik BiH,95/12

is why there are situations whereon certain levels the parties are paid more resources than planned in the budget. As for Brčko District of B&H, the Law on Financing of Political Parties from the budget of Brčko in force since 2004 for the regular financing of the parties provides for an allocation of 0.1% or 200,000 KM from the budget, whichever is less, following the principle that 30% is distributed equally to all parties represented in the Parliament and 70% in proportion to the number of seats. Funding of political parties in Montenegro is regulated by the Law on Financing of Political Parties , which regulates the acquisition and provision of financial resources for the work and election campaign, as well as the manner of control of funding and financial operations of political parties.

Montenegro

Budget funds for financing regular work of parliamentary parties in the Parliament of Montenegro amounts to 0.5 % of the total planned budget resources, net of assets of the capital budget and budgets of state funds. Budget funds for the regular work of parliamentary parties in municipal assemblies range from 1% to 3% of the total budget, net of assets of the capital budget - planned current budget for the year for which the budget of the municipality is enacted. Funds in the amount of 20% shall be distributed in equal amounts to parliamentary parties in the Parliament and municipal assemblies, and the remaining 80% of funds shall be distributed in proportion to the total number of MPs and councillors’ seats at the time of the distribution. In Kosovo the Law on Financing Political Parties No. 03/L-174, as amended by the Law No. 04/L-05, regulates the financing of political parties. The law regulates the financial and material donations and grants to which political parties are entitled to, the types of contributions, financial support and incomes for the political parties and their initiatives, and defines the principles of their usage and allocation. In addition, the law determines the total amount of public funds distributed to political parties.

Kosovo

The law specifies that amount of public funding for political parties cannot exceed 0.34 % of the state budget. Before the amendment of the current law, this percentage was equivalent to 0.17% of Kosovo’s budget. The law also regulates distribution of public funds to political parties according to the number of seats in the Assembly. According to the Law on Financing of Political Parties (LFPP, 2004), the total funds for annual financing of the political parties are set at 0,06% of the state budget. Of this amount, 30% are distributed equally among all the political parties which have won at least 1% of the total number of votes in the latest parliamentary or local elections. The remaining 70% of the funds are distributed to the parliamentary political parties,

Macedonia

Sl. list Crne Gore, 49/08; 49/10 40/11; 42/11; 60/11; 01/12

Sources of financing of political subjects

as well as political parties whose candidates have been elected as Members of Council in the municipal councils. These funds are distributed proportionally, depending on the number of MPs or Members of Council which political parties have. Pursuant to the Law on Financing of Political Activities political entities include parties, coalitions and citizensâ&#x20AC;&#x2122; groups, which can be funded from public Serbia political and private sources. Public funds for financing political activities consist of financial assets, goods and services provided by the Republic of Serbia, autonomous provinces and local governments, their bodies and organizations established by them. Public funds provided for the regular work of political entities whose candidates have been elected MPs or councillors are set at the level of 0.15% of the Republic of Serbia budgetary expenditure, autonomous province budgetary expenditure and/or local government budgetary expenditure. Funds are allocated to political entities who have won seats in representative bodies in proportion to the number of votes. The number of votes of a political entity taken as basis for allocation of funds is calculated by multiplying the number of votes of all voters up to 5% of valid votes with coefficient 1.5, and the number of votes over 5% of valid votes of all voters with coefficient 1. These funds granted to a political entity participating in elections as a coalition are divided pursuant to the coalition agreement.

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In terms of financing the costs of election campaign from public sources, the Law on Financing of Political Activities in Serbia has introduced an innovation relating to the election bond. Political entity that declared that it intends to use public funds to cover the costs of election campaign shall lay election bond in the amount of 20% (for those who submitted proclaimed election lists) and 50% of the funds (for proponents of the candidates) allocated to this political entity. Election bond includes depositing cash, bank guarantee, government bonds or placing a mortgage covering the amount of bond on real property of the persons giving the bond. Election bond shall be returned to the political entity if winning at elections a minimum of 1% of valid ballots and/or minimum 0.2% of valid ballots, if the political entity is representing interests of a national minority, within 30 days from the date of declaring final election results. A political entity failing to win the specified number of votes is required to return the funds for which it gave an election bond within 30 days from the date of proclaiming final election results. If a political entity fails to return the funds received, the Republic of Serbia,autonomous province or local government shall collect such funds from the election bond. Sl. Glasnik RS, 43/2011

of political parties 1.2 Representation in the public broadcasting services Rules on media coverage of political subjects in the period from the date of announcement of elections to the day of elections regulate direct addressing of election candidates in a manner providing each subject with at least three minutes of direct address, provided that all candidates have equal time and that the order of addressing is pre-determined by a draw.

Bosnia and Herzegovina

Broadcast of direct addressing is mandatory for public broadcasters, and these rules apply to them and the private media only if they decide to broadcast candidates’ addressing. Furthermore, the media are obliged to broadcast direct addressing in the period when “it is probable that it will be available to the majority of the public”. This is the only form of free media advertising. In practice, candidates often misuse their position in certain institutions to promote the party for free by appearing in the media, but also through supposedly paid promotion of institutions, the aim of which is in fact to promote the party. Law on Election of Councillors and MPs regulates the operation of local and regional public broadcasters during election campaigns, ensuring both free and paid broadcast time on the occasion of the campaign under the same conditions for all election participants. Regulatory framework relating to the media coverage of elections is also based on the Law on Electronic Media and Law on Public Broadcasting Services of Montenegro .

Montenegro

During the election campaign, the Montenegrin Television and Radio of Montenegro shall provide, during their advertising slots whose visibility and audibility is provided throughout the territory of Montenegro, equal daily free broadcasting space to the submitters of confirmed electoral lists to broadcast: - TV clips and audio clips of political marketing during all the political marketing slots, not less than 200 seconds per day, depending on the planned number of political marketing advertising slots; - 3-minute reports from the promotional rally, twice a day, immediately after the central evening news programs on TV and radio. Election law prohibits government officials from participating in campaign activities during working hours, however, the distinction between their institutional role and appearances on behalf of the party was not always made clear to the audience. Sl. list Crne Gore, 4/98 of 18 February 1998, 05/98 of 25 February 1998, 17/98 of 20 May 1998, 14/00 of 17 March 2000, 18/00 of 31 March 2000, 09/01 of 22 February 2001, (SRJ) 09/01 of 2 March 2001, 41/02 of 2 August 2002, 46/02 of 10 September 2002, 45/04 of 2 July 2004, 48/06 of 28 July 2006, 56/06 of 7 September 2006, 46/11 of 16 September 2011 Sl. list Crne Gore, 46/10 of 6 August 2010, 40/11 of 8 August 2011, 53/11 of 11 November 2011 Sl. list Crne Gore, 79/08 The Law on Election of Councillors and MPs, Art. 53a The Law on Election of Councillors and MPs, Art. 50a Report of the Limited OSCE/ODIHR Election Observation Mission, Montenegro - Early Parliamentary Elections, 14 October

Sources of financing of political subjects

Article 49 of the Law on Political Party Financing prescribes General Rules for Political Advertising on Radio and Television. 49.1 Political advertising spots shall be no longer than 2 minutes (120 seconds). 49.2 Broadcasters which choose to air paid political advertising are required to offer a minimum number of minutes of free airtime to each certified political entity during the campaign period as following: a) 20 minutes for private Kosovo-wide television broadcasters; b) 40 minutes for the Public Service Television Broadcaster; c) 15 minutes for private Kosovo-wide radio stations; d) 30 minutes for each of the two Public Service Radio channels; e) 15 minutes for all other television stations; f) 10 minutes for all other radio stations. 49.3 This free airtime may be provided, at the discretion of individual broadcasters, in the form of participation in debates, discussion shows, interviews outside regularly scheduled news programs, or as free political advertising spots. 49.4 Coverage in regularly scheduled news programs shall not be counted as free airtime.

Kosovo

According to the Election Code, during elections, while the election campaign is running, the public broadcaster is required to broadcast freeof-charge political presentation of the participants in the elections. According to the Rulebook on Equitable Access to Media Presentation During Election Campaign, the private broadcasters may also broadcast free-of-charge political presentation.

Macedonia

According to the Rulebook, the time dedicated to each of the participants shall be distributed as follows: equally, to all candidates in presidential elections and elections for mayor, and proportionally to the candidates in parliamentary elections and elections for municipal councils, depending on the number of confirmed candidates lists. Local media have to distribute equal time to all candidates in the elections for municipal councils in their municipality. Law on Advertising10 stipulates that advertising of political organizations and advertising at a polling station is performed in the manner and under the conditions prescribed by the Law on Election of MPs.11 The submitters of electoral lists shall have the right to inform the citizens of their programs and activities, as well as of the nominated candidates, while organizations which broadcast radio and television program, and are founded by the Republic of Serbia shall, from the day of calling of the elections, in their political-informative programs which can be seen or heard throughout the territory of the Republic, ensure the presentation of the submitters of electoral lists and of the candidates from the electoral lists, as well as the exposition and explanation of electoral programs of the submitters of said lists.12 Two representatives of each - the public organization broadcasting radio and television program founded by the Republic of Serbia, Government of the Republic of Serbia and political parties which have their representatives in the National Parliament of the Republic of Serbia, shall mutually agree on the number and duration of broadcasts for the presentation of political parties, political organizations, or groups of citizens which intend to take part in the elections. The agreement shall

Serbia

2012,http://www.osce.org/odihr/elections/96396 10 Art. 84, Sl. Glasnik RS, 79/2005 11 Sl. Glasnik RS, 35/2000, 57/2003 –decision of CCRS, 72/2003 –oth.law, 75/2003 – correction of oth. law,18/2004, 101/2005 –oth. law, 85/2005 – oth.law, 28/2011 – decision of CC and 36/2011 and 104/2009 – oth. law 12 Art. 48 and 49 of the Law on Election of MPs

“

be reached no later than five days after the day of making the decision on During the election campaign calling of elections and shall be made political actors in Serbia mostly public without delay. The mass media together with the representatives of used electronic media (TV, radio both the founders and submitters of the and the Internet) and print media. electoral lists shall determine further At all levels of elections, dominant regulations for the presentation of the means of promotion of political submitters of electoral lists, electoral programs and electoral platforms programs and candidates from electoral lists.13 Law on Broadcasting prohibits in the media was television - from all advertising of political organizations 76.6% to 94.5%. outside election campaigns, while during an election campaign, registered parties, coalitions and candidates may advertise on the basis of equal representation and without discrimination.14 General binding instructions15govern the conduct of broadcasters when the competent authority schedules elections for deputies to the National Parliament or the parliament of an autonomous province, the President, local self-government deputies and elections for national councils of national minorities. Television broadcasts during which election participants or members and representatives of the political parties, coalitions and associations of citizens participating in the elections and presidential candidates appear, must be specially designated with a clear sign “election programme”, while in the radio programme this must be clearly indicated at the beginning and at the end of the broadcast, as well as after each 5 minutes of broadcast duration. A broadcaster is not obliged to broadcast paid election programme; if the broadcaster decides to broadcast paid election programme, it shall provide all interested candidates and lists of candidates with equal broadcasting opportunities. A broadcaster shall set in advance the airtime intended for broadcasting paid election programme in its programme schedule and may not change it arbitrarily during the election campaign. Paid election programme shall be aired without interruption and no longer than 30 minutes, while maximum 90 minutes of paid election programme may be aired per day. In the event of broadcasting paid election programme, the broadcaster shall provide airtime to all lists of candidates and/or presidential candidates and/or lists of candidates for the national councils under equal conditions with the duration of up to 5 minutes once per day. State agencies and organizations, territorial autonomy agencies and local self-governments may advertise in radio and television programmes activities and measures important for the citizens, while it is prohibited to use images, voice or personal property of state officials in such advertising. During the election campaign, organizations that have the status of public service broadcasters are obliged to ensure free and equal airtime, without discrimination, for the promotion of political parties, coalitions and candidates with confirmed electoral lists. These organizations cannot broadcast paid election programme, however, they can broadcast political marketing videos. 13 Art. 51 of the Law on Election of MPs 14 Art. 106 of the Law on Broadcasting (Sl. glasnik RS, 42/2002, 97/2004, 76/2005 – oth. law, 62/2006,85/2006, 86/2006 – correction and 41/2009) 15 Sl. glasnik RS, 18/2012

Sources of financing of political subjects

of public income in 1.3 Share the annual funding of political parties

Law on Financing of Political Parties, Art. 3, para 1, item e, stipulates that political parties may be funded from the budget of B&H, entity budgets, canton budgets, Brčko District budget and budgets of other units of local governments in accordance with the law.

Bosnia and Herzegovina

According to financial reports data, in 2012 political parties received funding from the following sources: membership fees 1,521,753.43 KM - 6.1%, contributions from natural persons 2,301,102.90 KM - 9.4%, contributions from legal persons 680,503.59 KM - 2.8%, income from political parties’ property 767,799.57 KM - 3.1%, income from gifts and services that the party was not obliged to pay 137,954.77 KM - 0.6%, income from the budget 18,960,646.48 KM - 77.1%, other income 231,796.85 KM - 0.9%. Data from previous years also indicate that the percentage of budget funds in the total income of the parties is around 80%.

2012 Political Parties Sources of Funding in Bosnia and Herzegovina

Law on the Budget of Montenegro for 201216allocated 3,030,000 € for operations of the parliamentary parties. Law on Amendments to the Law on Budget for 201217reduced this amount to 2,981,000 €.

Montenegro

The analysis of annual reports of the parliamentary parties18 conducted by CDT showed that in 16 Sl. list Crne Gore, 66/2011 17 Sl. list Crne Gore br. 29/2012 18 The analysis covered political parties currently holding seats in the Parliament of Montenegro: Democratic Party of Socialists (DPS), Democratic Front (New Serbian Democracy - NOVA/Citizens Group Milan Knežević, Movement for Change, Democratic Party of Unity), Socialist People’s Party, Social Democratic Party of Montenegro, Positive Montenegro, Bosniak Party, FORCA, Democratic Party, Croatian Civic Initiative, Liberal Party of Montenegro.

2012 the parties generated a total of 4,789,688.33 € income, including income based on campaign financing, of which: • 62.8% income from the state budget • 28.5% income from local governments • 4.9% income from membership fees • 1.2% income from contributions from natural persons • 1.7% income from contributions from legal persons19 • 0.3% income from activities • 0.6% income from assets

2012 Political Parties Sources of Funding in Montenegro

As regards campaign financing for early parliamentary elections held in October 2012, as well as for municipal assembly elections held in Kotor, Nikšić and Budva, the parties have received budget funds in the amount of 1,490,088.89 €. The State Audit Institution found that the submitters of electoral lists20 for the elections held in October 2012 raised funds in the amount of 1,726,559.48€, of which: • funds from public sources amounted to 1,518,623.23 € (87.96% of total assets), of which the funds from the budget of Montenegro amounted to 1,490,088.83 € and funds from the municipalities’ budgets amounted to 28,534.00 €; • funds from private sources amounted to 207,938.25 € (12.04% of total assets). Although the Kosovo has made a substantial progress in reforming and regulating political finance their implementation remains weak. The main barrier to transparent party financing remains the lack of proactive monitoring of the law enforcement, and sanctioning for its violations. While the legislation obligates the CEC to publish all public documents, the law does not specify

Kosovo

1998.6% of total income from contributions from legal entities constitutes Positive Montenegro’s credit. 20 Submitters of electoral lists: Coalition for European Montenegro - Milo Đukanović, Democratic Front - Miodrag Lekić, Socialist People’s Party – a word and deed, Positive Montenegro - Darko Pajović, Bosniak Party - Rafet Husović, Croatian Civic Initiative - Decidedly, Democratic Union of Albanians, Serbian National Alliance - Ranko Kadić, Coalition “Together”, Albanian Coalition - Democratic League in Montenegro, FORCA for Unity, Albanian Youth Alliance, Serbian Unity Coalition, and Liberal Party and Social-Democratic Party of Montenegro which participated independently in the local elections in Kotor.

Sources of financing of political subjects

an exact timeframe and the publication channels. Benefiting from legislative loopholes, the CEC does not proactively publish financial and audit reports of political parties. Most of political parties do not publish their annual or campaign financial reports either. The channels through which the public can get information on campaign finances are ambiguous to the citizens because it is unclear where and to whom to direct the requests. The CEC has only published the Annual Audit Report for 2010, and the Campaign Audit Report for elections in Kaçanik and Ferizaj in 2012.21 The Policy Report by the Group for Legal and Political Studies Financing of Political Parties in Kosovo - can controllability and transparency help?22 analyzes the reports of four of the largest political parties: PDK (Democratic Party of Kosovo), LDK (Democratic League of Kosovo), AAK (Alliance for the Future of Kosovo), and AKR (New Kosovo Alliance) and the figures show that in 2011 PDK had income of 4,59% from public fund, LDK had 92,64%, AAK 100% and AKR 34,87 %. According to the annual financial reports for 2012, the total annual income of all political parties amounts to 1.800.000 €. These funds were gained from the following sources: • Budget funds – 31,2% • Membership fees – 14% • Donations – 27,9% • Assets’ income – 5% • Other income – 13,5% As it is expected, the public funding is more important for the minor parties than for the major ones. The ruling parties, VMRO-DPMNE23 and DUI24 had a share of public funding of 20,7% and 25,4% respectively. The largest opposition party SDSM25 had a share of 48%. However, the figures for the amount of public funds received from VMRO-DPMNE have to be taken with a reserve because they are less than those of SDSM and DUI. Having in mind that the amount of these funds depends on the number of MPs and municipal councillors which the party has, VMRO-DPMNE should have received the highest amount of public funds since it has the highest number of MPs and municipal councillors. For the minor parties the share of the public funding is above 2/3 of the annual funding, while in one case it amounts to almost 100% of the party’s finances.

Macedonia

2012 Political Parties Sources of Funding in Macedonia

5,00%

13,50% Budget funds

31,20%

Membership fees Dona ons Assets' income

27,90%

Other income

14,00%

21 Untangling Political Finance, Kosova Democratic Institute (KDI)/ Transparency International Kosova (TIK), http://www.kdikosova.org/publications/crinis2013en.pdf 22 The policy report is avilable at http://legalpoliticalstudies.org/download/Policy%20Report%2005%202013.pdf 23 Vnatrešna makedonska revolucionerna organizacija – Demokratska partija za makedonsko nacionalno edinstvo 24 Demokratska unija za integracija 25 Socijaldemokratski sojuz na Makedonija

Taking into account the overall income and expenditures for 2012 (income and expenditures for regular work and income and expenditures for the election campaign) according to the Annual Financial Report of the Anti-corruption Agency26, political entities had total income of just under 31.8 million € (at exchange rate 115 RSD for 1 €) and total expenditures in the amount of more than 40.5 million €. Viewed as a whole, political subjects’ expenditures exceeded their income by more than 8.6 million €.

Serbia

Political subjects were required to include the amount and composition of their income in the annual financial report for 2012: Almost four-fifths or 77.7% of total income are from public sources. Slightly less than one-fifth of total income are contributions from natural (12%) and legal persons (6%), while 2.8% or less than 1 million € of total income of parties and other political entities are membership fees. Within the distributed public sources, only five political actors on the basis of the actual election results received nearly three-quarters of total assets, i.e. 18.4 million €, namely: Democratic Party 6.6 million €, Serbian Progressive Party 6 million €, Socialist Party of Serbia 2.4 million €, Democratic Party of Serbia 1.9 million € and G17 Plus 1.5 million €.

2012 Political Parties Sources of Funding in Serbia 2,80%

12,00%

6,00%

Membership fees Contribu ons from natural persons Contribu ons from legal persons

77,00% Public sources income

26 Control of financing of political subjects - the annual financial reports for 2012, Tatjana Babić, Vladan Joksimović, Anti-corruption Agency, Belgrade, 2013

Sources of financing of political subjects

importance of membership fees 1.4 The in political party financing

Although in the past period reported membership fees amounted to only 5-6% of total reported income, and hence the importance of this segment of the financing was much smaller than of other sources of income, 2012 amendments to the Law on Financing of Political Parties introduced a provision which stipulates that during one year a party member may donate an amount not higher than 15.000 KM (including a membership fee) to a political party, which opens the possibility for manipulation as parties may falsely report greater number of members to ensure a larger scale of allowed donations.

Bosnia and Herzegovina

Membership fee represents an amount regularly paid by a party member in a manner and under the conditions stipulated by the statute or other act of a political party, which annually may not exceed 10% of total income.27

Montenegro

Income from membership fees has a major role in the financing of political parties. Conducting individual analysis of the reports of parliamentary parties in 2012, CDT found that the following parties did not have income from membership fees: NOVA, Movement for Change, Democratic Party of Unity, Socialist People’s Party, FORCA, Democratic Party and Liberal Party of Montenegro. As for other political parties, income from membership fees in 2012 accounts for 10% of Democratic Party of Socialist’s total income, 5.64% of Social-Democratic Party’s total income, 0.56% of income of Positive Montenegro, 1.06% of Bosniak Party’s income and 0.04% Croatian Civic Initiative’s total income. Political parties can impose membership fees on their members in an amount not exceeding 12 Euros per member28 per calendar year. On the other hand, political parties are allowed to receive contributions from natural persons (not exceeding 2,000 € per year) and from legal entities (not exceeding 10,000 € per year)29. In the data avilable in the report Financing of Political Parties in Kosovo - can controllability and transparency help?30 only PDK reported membership fees in 2011 (4,16%), 2010 (11,89%) and in 2009 (8,76%).31

Kosovo

27 The Law on Financing of Political Parties, Art. 3 28 Rule No 01/2008 on Registration and Operation of Political Parties, Section 15: Political Party Members, para 29 Law No. 03/L 174 on Financing Political Parties, Article 5: Contributions for political subjects. 30 The policy report is avilable at http://legalpoliticalstudies.org/download/Policy%20Report%2005%202013.pdf 31 http://www.kqz-ks.org/sq/raportet-financiare-auditimet

According to the Law on Financing of Political Parties, the annual amount of the membership fee must not exceed amount of an average salary, which is approximately 350â&#x201A;Ź.

Macedonia

From the financial reports it seems that the membership fees are not very significant for the party finances, with 2 parties reporting no funds from membership fee, 2 parties having a share of the membership fee in the annual funding of less than 1%, while only the Liberal Party and VMRO-DPMNE had a share of the membership fee higher than 1% - 3,5% for both parties. One party even does not require its members to pay membership fee. The fact that the membership fee is not a great contributor to the party budget is further supported by the common practice of donations by prominent party members which may account for the less funds received from membership fee. The amount of membership fee is more significant only for SDSM, for which it represents 34,4% of the annual funding and for the Democratic Party of the Turks in Macedonia which is almost exclusively financed by it. Membership fees are the pecuniary amount paid regularly by a member of a political party in the manner and under conditions set forth by the statute or other general act of the political party. A member of a political party is required to effect payment of a membership fee only from his/her current account, with an exception of membership fees not exceeding 1,000 RSD on annual level, which may be paid in cash or by postal/bank order, when an authorised officer is required to issue a receipt to the member for received fee and pay membership fees received in cash into the account of the political party within seven days from the day of issuing the receipt.32

Serbia

In the previous year Serbian Progressive Party collected 1.3 million RSD of membership fees, Democratic Party 71.5 million RSD, Democratic Party of Serbia 18.8 million RSD, Party of United Pensioners of Serbia 2.3 million RSD, G17 Plus 13.3 million RSD, Serbian Radical Party 9,1 million RSD and League of Social Democrats of Vojvodina 1.5 million RSD. As mentioned above, 2.8% of total revenues are from membership fees, although according to analystsâ&#x20AC;&#x2122; estimates, as many as 10% to 13% of adult citizens of Serbia are members of some political party.

32 The Law on Financing of Political Activities, Art.8

Sources of financing of political subjects

1.5 Who the private donors are? Bosnia and Herzegovina donors.

Given the fact that the names of donors are not published, it is very difficult to obtain information about the

For the regular work and electoral campaign parliamentary parties can raise funds amounting to 100% of the related budget funds from private sources, excluding revenue from membership fees. Despite that, the percentage of political party financing from private sources is modest. During 2012 parliamentary elections, in order to fund the election campaign the parties reported income from contributions from natural persons in the amount of 206,836.00 €, i.e. 11.98% of total income, of which 189,050.00 € or 91.4% are revenues from natural persons’ contributions reported by DPS.33 DPS donors list includes mostly officials and members of the party and its coalition partner - Social Democratic Party.

Montenegro

“

In 2011 the State Election Commission (SEC) published a list of natural persons, DPS donors, which caused considerable public suspicion that the ruling party laundered money in such manner. According to a published document, about two thousand people paid 654,190.00 Euros in 2010 for the work of DPS. Some persons whose names and identification numbers were on the list publicly denied donating the money, stating that their data had been misused. The list was withdrawn for violation of the Law on the Protection of Personal Data. Identification numbers of the donors are no longer published.

Kosovo

Most of the private contributors as shown in the audit reports are senior members of the party or members that are close to the head of the party.34

As it was previously mentioned, the parties rely in great extent on donations from prominent party members who are usually either in public services or have established businesses i.e. party members who can afford to donate larger sums of money. This can be applied for both financing of a party regular work and financing of election campaigns.

Macedonia

33 Data obtained by analyzing Summary Report of the State Election Commission on the audit of funds raised and spent in the election campaign in 2012. 34 http://www.kqz-ks.org/sq/raportet-financiare-auditimet

Law on Financing of Political Activities prescribes maximum value of donations of natural and legal persons to political parties. Maximum value of donations for natural persons is set at 20, and for legal entities at 200 average monthly salaries excluding taxes and contributions. In the year of elections these amounts can be doubled.

Serbia

In terms of income from contributions, while examining reports on the costs of electoral campaigns of political subjects it was noted that individuals and legal entities appear as donors of both financial and in-kind contributions. Official data on private donations, structure and amount of contributions from natural and legal persons as a provided “logistical support” indicate that the reported revenues from private sources were extremely scarce, with the exception of the coalition around the Socialist Party of Serbia (118 million RSD) and United Regions of Serbia (57 million RSD) and part of the coalition around Serbian Progressive Party (46 million RSD), Democratic Party (31 million RSD) and Liberal Democratic Party (20 million RSD).

“

Regarding the contributions from individuals, during the examination of reports of political parties on the election campaign costs conducted by the Anti-corruption Agency it was noted that donors were also users of various forms of welfare. Certain welfare users’ contributions exceed 50% of the total annual welfare amount or equal that amount. This creates doubts about the accuracy of the donors data in the reports of political subjects, i.e. doubt that the persons identified in the reports as donors actually “donated” money that the political entity collected illegally (e.g. cash) or served as a cover for hidden donors, which constitues a criminal offense under the Law on Financing of Political Activities. Another possibility, which cannot be excluded, is that these donors actually have a much higher income acquired in an illegal manner or that they misrepresented their income when applying for welfare.

Sources of financing of political subjects

1.6 Influence of corporate donations According to the amounts that parties report, the percentage of donations by legal entities is extremely low. However, it is assumed that the parties do not report all donations, especially those generated through illicit profits, as demonstrated in individual cases where public enterprises and institutions are used to promote the party, or donations of certain legal entities are presented as loans, etc. Also, recent amendments to the Law on Financing of Political Parties significantly raised the limit on donations from legal persons, so it is expected that their share will also grow in practice.

Bosnia and Herzegovina

Montenegro

The percentage of donations from legal entities to political parties in Montenegro is almost negligible.

During the parliamentary elections, the share of corporate donations in the financing of election campaigns accounted for only 0.05%, which is unusual because it is almost unknown in practice that companies and business entities are not interested to invest in political parties. Montenegrin public is not familiar with the extent to which capital affects the decision-making processes, as these data lead to the suspicion that the parties either want to hide how much money then have or companies that help them. In the latest audit reports there were no corporate donations, but there is a suspicion that the money goes to the individuals in the party who then declare it as a donation to a party. In addition, the law does not prohibit donations from legal entities that provide goods or services to the public administration, allowing a â&#x20AC;&#x153;paybackâ&#x20AC;? phenomenon to happen. An investigation by the Zeri daily revealed that companies that were sponsoring political parties during their election campaign were the most likely to win government tenders. The newspaperâ&#x20AC;&#x2122;s investigation showed that a single company that was major sponsor of the ruling PDK had been favored by the party in public procurement contracts.35

Kosovo

The influence of corporate donations is not very large, at least from the officially reported data. However, regarding financing of elections, the parties often state incomes from other sources, or transfer from the general party account by which the source of the money cannot be located. For the local elections in 2013, all the parties relied heavily on donations from party members. Only VMRO-DPMNE had larger share of corporate donations than other parties, almost all being donations from media for advertising space. However, the majority of the funds this party received is from donations from natural persons, mainly party members currently in public services or then-candidates for the local elections.

Macedonia

35 Nations in Transit 2013, Freedom House http://www.freedomhouse.org/report/nations-transit/2013/kosovo#_edn72

Contributions of legal persons for presidential elections amounted to 0.6%, 7.1% for parliamentary elections, 5.9% for provincial election and 10.7% for elections for municipal assemblies.

Serbia

Control of the reports of political subjects conducted by the Anti-corruption Agency shows that in some cases legal entities and entrepreneurs, who donate to political subjects or perform certain activities for them during the election campaign, are recorded immediately before, during or even after the election campaign. Some of them are quickly removed from the register after the elections and submission of financial reports, which also points to the possibility that by paying through these entities third legal entities avoid provisions of the law that define limits on the amount of funds a legal entity can donate to a political subject. A certain number of entities that donate to political subjects have turnover and revenues that are less than or close to the donation given to the political subject, which raises suspicion about the motives of the donor, i.e. the manner of acquiring the funds for donation to a political subject.

Sources of financing of political subjects

1.7 Expenditures limits Election law of B&H prescribes rules on the maximum allowable amount for financing an election campaign. The main criterion is the number of registered voters in a particular constituency (this information is published by B&H Central Election Commission). A maximum of 30 pfennigs can be spent for municipal elections on the number of voters specified in that manner in a particular constituency, 20 pfennigs for canton assemblies and 30 pfennigs for all other election levels (for entity assemblies, Parliamentary Assembly of B&H, B&H Presidency members and President and Vice President of Republika Srpska) per voter.

Bosnia and Herzegovina

Montenegrin regulations do not impose a limit on the spending but on revenues of political subjects. The upper limit of expenditures of a political entity is the maximum amount of allowed revenue from public and private sources. As previously stated, for the regular work in the Parliament of Montenegro parliamentary parties receive 0.5% of the current budget and from 1% to 3% for the work in municipal assemblies. Of these funds 20% are allocated in equal amounts, and the remaining 80% is distributed in proportion to the number of MPs and councillors of political parties. The total amount of private funds that parliamentary parties can receive must not exceed 100% of the amount of public funds (Article 8 LFPP), not counting funds from membership fees. Non-parliamentary parties are not allowed to raise funds from private sources higher than 10% of total public funds allocated for the financing of parliamentary parties (Article 8 LFPP). For the purpose of election campaigns, the submitters of electoral lists receive 20% of the public funds allocated for this purpose, while the remaining 80% are allocated in proportion to the number of seats won by political parties (Article 10 LFPP). The amount of funds from private sources must not exceed twenty times the amount of the above-mentioned 20% (Article 13 in conjunction with Article 10(2) LFPP).

Montenegro

CEC under regulation No 12/2013 has specified the spending limit in the amount of 0.5 € per register voter for both general and local elections, except for the municipalities with less than 5000 voters for which the spending limit is set at 0.7€ per voter

Kosovo

According to the Electoral Code, the spending limit for the election campaign is set at 3€ �� per voter. Since there are 1.750.000 voters the total limit for campaign spending is 5 �� million €. It is obvious that the limit is set very high and impossible to exceed, thus being irrelevant. The previous limit was set at 1€ per voter which is much closer to reality.

Macedonia

One of the important amendments to the Law on Financing of Political Activities of 2011 is the abolition of restrictions concerning the spending limits of political parties. Previous legal framework contained very strict restrictions on the spending of political subjects, although these restrictions were related to the maximum amount of income that the political parties could collect.36

Serbia

36 http://www.idea.int/political-finance/country.cfm?id=190

Reporting

II Reporting

2.1

Reporting on private donations (transparency vs. protection of personal data)

According to the Law on Financing of Political Parties, the parties are required to report all donations of natural and legal persons to CEC, citing the names of donors, the amounts of donations and donorsâ&#x20AC;&#x2122; identification number. However, due to the protection of personal data, these parts of the reports are not published and complete insight into the reports can be obtained only at the premises of B&H CEC. In fact, this information (on the CEC site, on private donations) is available only in cases of violation of the rules prescribed by law. In these cases, the Audit Office within CEC states the amount of donations and names of natural or legal persons who have violated the rules, and then this data can be found in the Report on the audit of political parties. However, this is only a part of the funds and donations, so therefore one cannot have the complete picture.

Bosnia and Herzegovina

According to the Guidelines on the contents of the report on contributions of natural and legal persons to political parties during the election campaign, political parties shall submit a report on the contributions of natural and legal persons in a special form to the State Election Commission (SEC) biweekly during the election campaign. The form includes the name of the donor, date of the donation, its description (cash or in-kind) and the amount of donation.

Montenegro

Instructions on the form of the report on origin, amount and structure of funds collected and spent for the election campaign and the Rulebook on the form of the annual report on income, assets and expenditure of political parties stipulate that the contributions of individuals are reported in a special form which contains the following information: full name of a donor, personal identification number, home address, date of donation and form and value of donation. Identification numbers of donors are not published on the SEC website in accordance with the Law on Personal Data Protection. During 2012 the main political parties reported their finances according to the Law. The law requires political parties to keep detailed record on each contribution, which should include: the value of each given contribution for political subject, the date when the contribution was given; and full name, address and personal number of passport or drivers license of the contributor (Article 15.3 of the Law on Financing Political Parties)

Kosovo

The most of the contributions in 2012 were made by senior members of the parties, and including few companies. According to the Law on Financing of Political Parties, the political parties are obliged to maintain Register of Donations which contains the following information: the name of each donor, the type and the amount of the donation and the date when the donation was received. Regarding the financing of election campaigns, the Election Code contains the same provisions about private donations. Since only the name and the surname of the donor is shown, in almost all cases, without more data, it is impossible to know who the actual donor is. However, having in mind that almost all of the parties rely on donations from prominent party members, they can be easily recognized by their names and surnames.

Macedonia

Political entity maintains records of all donations received from individuals and legal entities or international political associations for financing both the regular work and election campaign. Records are kept by providers of contributions, types of contributions (cash contributions, gift, services provided without compensation or under conditions that differ from the market) and chronologically. Discharge of the debt is also recorded as cash contribution. Records of contributions (cash and in-kind) are kept in chronological order, based on accurate and reliable documentation, such as: reports on account balance, bank accounts and record books, inventory lists, contracts, invoices, handover records, confirmation of receipts, calculations, donors’ written statements, service providers’ written statements, etc. These records are maintained in electronic and written form, which must be identical and cover the period from 1 January to 31 December.

Serbia

Data on contributions of individuals include donor’s full name, place of residence, address, personal identification number, total amount of the contribution including the total amount of a membership fee if the donor is a member of the political party, total amount of cash contributions and the sum of cash contributions and membership fees, total amount of in-kind contributions, total value of the contribution, its purpose and remarks. Data on contributions of individuals related to their address, personal identification number, total amount of a membership fee and total amount of cash contributions if a donor is the political party member shall be used exclusively for the needs of control of annual financial statement and shall not be published on the website of a political party nor in the Official Gazette of the Republic of Serbia (Službeni glasnik Republike Srbije).

Reporting

2.2 Reporting on in-kind contributions Parties are also required to report each favour donation and any discounts which are then regarded as a favour donation. However, like other donations, this information is not available to the public, and reports on the audit of political parties indicate that the parties often do not report these donations (e.g. political parties used the premises of the municipality for free for years, without any compensation, which they were required to report as a favour donation, but failed to do so, and thus such donation represented an illegal source of funding because it was a donation of public institutions; the use of premises of the municipality was later legalized by amendments to the Law). As regards discounts by media outlets, according to the Rules on media coverage of political parties in the period from the date of announcement of elections to election day, the cost of advertising must be the same for all political subjects, and there are rules for the media on how to determine schedule and time of broadcast. However, some representatives of political parties in B&H are at the same time owners of media outlets, which provides them with an opportunity to practically donate to themselves in this form.

Bosnia and Herzegovina

In early 2012 the State Election Commission adopted the Rules on the method of calculation of and reporting on in-kind contributions to political parties. Political parties calculate in-kind contributions as the difference between the price paid for the product or service to legal entities and individuals and the market value of that product or service on the day of payment for the product or service in line with data provided by an

Montenegro

â&#x20AC;&#x153;

During 2012 parliamentary elections CDT conducted monitoring of the cost of media campaigns of political parties, which showed that the current Rules on the method of calculation of and reporting on in-kind contributions allowed the parties to hide close to 250,000 Euros as 30% of the amount spent on commercial TV stations and newspapers. Pursuant to Article 53a of the Law on Election of Councillors and MPs, Radio-Television of Montenegro (RTCG) is obliged to provide equal daily free airtime to the submitters of confirmed lists of candidates. If the duration of advertising of political parties during parliamentary elections on public radio and television is multiplied by the official price of this media outlet, we come to a figure of 568,090 Euros. Pursuant to Article 3 of the Law on Financing of Political Parties, this amount is an in-kind contribution calculated at market value and reported as income, which was not the case in practice. 27

authority in charge of statistics, if the difference is at least 30% greater. If there is no data of the authority responsible for statistics, the market price is calculated based on the average price of three different providers of the product or service at the time of payment. Political parties report to SEC about in-kind contributions through the annual report on income, assets and expenses and report on the contributions of legal and natural persons in the electoral campaign, submitted in accordance with Articles 27 and 28 of the Law on Financing of Political Parties. Current legal solution leaves room for abuse and allows political parties to realize discounts of up to 30% without having an obligation to report it.

Kosovo

There is no evidence of in-kind contributions in 2012 reports. In addition, assets of the political parties are not evidenced in the report.

In the reports from the elections in 2011 there were differences between the reports of the parties and the reports of the media. Namely, while in the reports from the parties the services of the media were reported as donations, the reports from the media treated them as regular sale of advertising space, and reported them as services for which the parties should pay. As for the recent local elections such inconsistency was registered in only one financial report for only one media. From media reports regarding the recent elections, it is clear that they were more inclined to give discounts to the ruling party, which may indicate a disregard for the right to equitable access to paid political presentation, guaranteed by the Election Code.

Macedonia

The value of contributions given in the form of service provided without compensation or as a gift (in-kind contributions) is presented as the market value of the service rendered or gift received.

Serbia

The value of contributions given in the form of services provided under conditions that deviate from the market is estimated with respect to deviation from the usual price, deadline and place of completion of services. In case of deviation, this must be indicated in the contract of service or of a gift or on the receipt issued for the service, and the value of the contribution in this case is measured as the difference between the market and agreed value of the service rendered. In the event that the service is provided under conditions that deviate from the market and by a natural person who is not registered with the authorities to provide such services, it shall be recorded as the service provided free of charge. After examining reports on electoral campaign expenditures, it has been observed that natural and legal persons appear as donors of both financial and in-kind contributions. In-kind contributions included the assignment of office space, preparation of newspaper ads, rental of billboard advertising space, printing of election materials, making of video clips, television advertising, food donations, organized stage performances, own vehicle transport, as well as office supplies.

Reporting

2.3 Quality of the reports Political parties are required to submit a financial report for each calendar year (financial year) to the Central Election Commission of B&H. CEC is authorized to ask political parties for additional reports that political parties must submit to CEC.

Bosnia and Herzegovina

Law on Financing of Political Parties and the Rulebook on annual financial reports of political parties envisage submission of reports in predefined forms, which requires updated records of all items, including: • Overview of operations on all transaction accounts of political parties; • Total income of political parties - membership fees; • Contributions of natural persons exceeding 100 KM, as well as contributions of legal entities exceeding 100 KM; • Income of political parties from the assets; • Profit of legal entities owned by political parties; • In-kind donations and invoices that a political party was not obliged to pay; • Income from the budget; • Other income; • Expenses of political parties; • Borrowings, loans and debts. Article 15.1 of the Election Law governs the submission of special reports of political parties, coalitions, lists of independent candidates and independent candidates participating in the elections to the Central Election Commission. There are two types of reports: financial report for the period that begins three months before the date of submission of the application to participate in the elections, and the report for the period from the date of submission of the application until the certification of election results. These reports include cash at hand, all revenues and expenditures home and abroad including in-kind contributions, identities of persons who made a donation in the amount exceeding 100 KM, cost of political campaigns, as well as all the debts and obligations of both the applicants and third parties with whom the applicant made transactions. Rulebook on pre-election and post-election financial reports of political subjects defines a much more relaxed approach to the preparation of pre-election and post-election reports of political subjects that are not parties or part of them. It is characteristic that independent political entities and candidates lack accounting reports that can be the basis for the verification of claims in the submitted reports. However, the practice and the reports on the audit of financial reports indicate a number of violations of the prescribed rules: omission of favour donations, non-recording of lease, nonrecording of debt relief and overheads and other expenses, unpaid rent, etc.

Political parties in Montenegro are required to keep and submit: • annual report on income, assets and expenses; • annual balance sheet; • a report on the expenditure of funds for election campaigns.

Montenegro

Form for an annual report on income, assets and expenses (GIPIR form) includes: • Information about a political party; • Information on assets of a political party (mobile37, immobile38 and other39); • Income of a political party; • Expenditures of a political party; • Bank accounts balance and loan burden; • Summary report of income. Annual financial report of a political party contains information about the political party, balance sheet and income statement. In addition to reports on operations, political party must also submit, as supporting documents, financial reports and reports on the assets of all legal entities and companies founded by it or in which it has an ownership interest. Submitter of electoral list shall file a report on the origin, amount and structure of funds raised and spent in the election campaign with accompanying documentation to the State Audit Institution. Political parties, along with the reports, shall also submit bank statements showing all income and expenses from these accounts, from their opening until the date of filing the report with the documentation. The reports are submitted to the State Election Commission, which publishes them and makes sure that they are delivered within the legal deadline, but does not control their quality and accuracy. State Audit Institution audits annual financial statements of political parties and reports on the origin, amount and structure of funds raised and spent in the election campaign. Previous audit reports have pointed to a number of irregularities in the reporting of political parties, the most common of which have been frequent cash withdrawals based on unreliable financial documents, tax evasion and inappropriate use of resources.

Kosovo assets.

The law and the CEC Rule No. 01/2008 on Registration and Activities of political Parties require political parties to keep books on income, expenditures and

Besides annual reporting the CEC Rule No. 12/2009 On Campaign Spending Limits and Financial Reporting (Article 3.3) requires political parties to submit Campaign Financial Disclosure Report 37 For registered real estate it is necessary to specify the data from public records, and for unregistered - legal basis for acquisition (contracts, decision on inheritance and other grounds) 38 Real property - ownership rights over movable property (vehicles, vessels, aircraft, pictures and values above 50 €, etc.) that needs to be registered with the competent authorities (Article 14 of the Law on Prevention of Conflict of Interest, Službeni list CG, 1/09, 41/11 and 47/11). 39 Other mobile assets - deposits in financial institutions at home and abroad, cash and securities worth more than 50 €, etc.

Reporting

which should include: a) the Income of the Political Entity during the reporting period, including the source and date of all cash Contributions; b) all Expenditures, including Campaign Expenditures, made by the Political Entity during the reporting period; c) and a balance sheet showing the Assets, Liabilities and Equity of the Political Entity as of the first and last day of the reporting period. d) a certified Political Entity shall ensure that each of its branches or constituent parts complete a Financial Information Report. The format for Financial Information Report is provided by the CEC and the Law has specified that all political parties have to report no later than 1st of March. The analysis of annual 2012 report shows that the reports are out date, not completed, and not all subject have a registered accountant in the party.40 According to the Law on Financing of Political Parties, the political parties are obliged to prepare, submit and publish the annual financial report and the annual financial statement. The annual financial report has to contain the following types of income: • Income from public funding sources; • Income from membership fees; • Income from monetary gifts; • Income from monetary donations; • Income from sale of goods and provision of services; • Income from sale of promotional material and tickets; • Income from copyright; • Income from interest; • Income from rent; • Surplus of income from the previous year.

Macedonia

The annual report also has to contain several types of expenses. From the prescribed types of incomes and expenses it is evident that content of the report is not adapted to the types of income the political parties are entitled to receive and the nature of activities they perform. Regarding the financing of the election campaigns, the political parties are required to submit three financial reports: one for the first half of the campaign, one for the second half of the campaign and the final report for the entire election campaign. The political parties have to specify what kind of income they have received, while the same types of expenses are used as in the case of the general funding. Additionally, there is no information about date of each expense, the amount or the name of the vendor, just the total amount of the performed expense is indicated. For example, communication services – the total amount, expenses for advertising – the total amount.41 40 See CEC report http://kqz-ks.org/Uploads/Documents/Raporti%20i%20KQZ%20FINAL%202011_wkwflayngl.pdf 41 Buying Influence: Money and Politics in the Republic of Macedonia, Crinis Research Project Shining a light on money in politics, Transparency International Macedonia

The SAO has registered inaccuracies in the annual financial reports for 2011 and the financial reports for the elections in 2011 but it did not initiate proceedings against the responsible subjects. Political entities represented in elected bodies and registered political parties are obliged to submit their annual financial report and report on contributions and assets to the Anti-corruption Agency, with the prior opinion of an authorized auditor licensed in accordance with the accounting and auditing regulations.

Serbia

Regarding the report on the costs of election campaign, political parties engaged in the electoral campaign shall submit a report to the Anti-corruption Agency containing information on the origin, amount and structure of funds raised and spent from public and private sources. A report on the costs of election campaign refers to the period from the date of announcement of elections to the date of publication of final election results. Reports filed by political entities to the Anti-corruption Agency are: 1. Annual financial report; 2. Report on the costs of election campaigns. Control of the quality and accuracy of financial reports of political entities is conducted by the Anti-corruption Agency, which stems from the authorities regulated by the Law on Financing of Political Activities. The Agency may submit a request to the State Audit Institution to audit these reports in accordance with the law governing the competence of the State Audit Institution.

Reporting

2.4 Publishing of the reports Political parties have no obligation to publish their financial annual, pre-election or post-election reports. Instead, as noted above, these reports are submitted to CEC, which then announces on its website which parties have submitted the reports and publishes summary reports for individual parties.

Bosnia and Herzegovina

Hence, CEC website contains only the information on aggregate income (Form no. 3), and it only reveals the total amounts of: collected membership fees, contributions of individuals and party members, contributions of legal persons, income from partyâ&#x20AC;&#x2122;s assets, income from the company owned by the party, income from gifts or services that the party did not have to pay, income from the budget and finally the amount of total income of the party. However, data regarding donorsâ&#x20AC;&#x2122; identities, individual amounts, type of individual contributions, etc., are not available. This is also prescribed by the Rulebook on annual financial reports of political parties, in the part relating to the method of publicâ&#x20AC;&#x2122;s access to information contained in the audit report and financial reports of political parties. Political party shall submit its annual final statement and annual report on income, assets and expenditure for the previous year to the State Election Commission no later than 31 March. SEC is required to publish these reports on its website within seven days of the receipt.

Montenegro

State Audit Institution publishes audit reports on its website within seven days of the adoption of final audit report. When it comes to reporting on the expenditure of funds for election campaign, the submitters of electoral list shall report to the State Audit Institution, with supporting documentation, within 30 days from the date of the election. If joint campaign is conducted for multiple elections held on the same day, political party submits a unified report on the origin, amount and structure of funds raised and spent to SAI within 30 days from the date of the elections. SEC is required to publish the reports on its website within seven days of their receipt.

Kosovo

According to Law on financing political parties article 15, CEC is responsible to publish all reports on its website.42

The political parties are required to submit their annual report on donations to the State Audit Office -SAO and the Public Revenue Office which are obliged to post it on their web pages. However, this obligation is respected only by the SAO.

Macedonia

42 http://www.kqz-ks.org/sq/raportet-financiare-auditimet

The parties are required to publish the annual financial report and the annual financial statement on their web pages. The register of donations has to be published every six months. Only one party has published these three documents, while the other two (the one being SDSM) published only their financial reports together with the register of donations for 2012, but not for the first six months of 2013. It has to be noted that the obligation for publishing the report in the Official Gazette has been abandoned, so the publishing of the report on the web page is the only way in which the public could be informed about the party finances. Political entities represented in elected bodies and registered political parties are obliged to submit the annual financial report and report on contributions and assets to the Anti-corruption Agency, with the prior opinion of an authorized auditor licensed in accordance with the accounting and auditing regulation, no later than 15 April of the current year for the previous year. Also, within eight days from the submission of the annual financial report to the Agency the political entity shall publish the report on its website and submit it for publication to the Official Gazette of the Republic of Serbia.

Serbia

Regarding the report on the costs of election campaigns, political party engaged in the electoral campaign shall submit the report to the Anti-corruption Agency within 30 days from the date of publication of the final election results. Report on the election campaign costs shall be published on the website of the Anti-corruption Agency.

Reporting

2.5 Accounts of associated entities There is no information about the accounts of associated political party entities in Bosnia and Herzegovina, Kosovo, Macedonia and Serbia. In Montenegro, in addition to the annual report on income, assets and expenses, Article 27 LFPP obliges political parties to also submit to SEC, as supporting documents, the reports on assets of all legal entities and companies established by them or in which they hold a stake.

â&#x20AC;&#x153;

According to available data, there is only one political party in Montenegro that founded a company. In 2007 DPS founded the company Prominent MN. According to the report of the company for 2012, total company capital is 170,024 Euros, it has 184 square meters of office space and the company employes only one person. The cost of salaries and benefits (gross) in 2012 amounted to 3,566 Euros, which is half the amount from 2011, which was 7,085 Euros.

Role and authority of enforcement institutions

III Role and authority of enforcement institutions

3.1

Which institutions are responsible for the control, monitoring and audit?

Law on Financing of Political Parties stipulates that the Central Election Commission of Bosnia and Herzegovina (B&H CEC), i.e. the Financial Operations Auditing Office in its composition, is exclusively authorized to control the funding of political parties, both during elections and when elections are not held. Therefore, B&H CEC and its Financial Operations Auditing Office are responsible for the control of annual, pre-election and post-election financial reports.

Bosnia and Herzegovina

As noted above, the Financial Operations Auditing Office has been established within the Central Election Commission, whose jurisdiction is to receive, examine and confirm financial reports of political parties submitted to CEC. CEC is authorized to investigate cases in violation of the rules relating to the obligation of political parties to submit financial reports, it can order third parties to answer to CEC’s questions submitted in writing, collect evidence and may initiate an investigation on its knowledge or upon the report of third parties. One of the major disadvantages of audit of political party financing in B&H is the fact that CEC is not responsible for the audit of parties’ expenditures, but mainly audits the revenue part of financing, which is particularly problematic considering that about 80% of parties’ income comes from the budget and there is no adequate audit of the process of expenditure of public funds. In addition, the capacity of CEC and its Financial Operations Auditing Office is extremely low compared to the number of parties whose reports need to be audited. Supervision over the implementation of the Law on Financing of Political Parties is divided between the State Election Commission and State Audit Institution. Also, the Ministry of Finance is responsible for the part concerning the transfer of funds. The law stipulates State Election Commission’s competence with regard to transparency of political party funding through the obligation to publish decisions on the amount of membership fees for the current year, annual balance sheet, report on the origin, amount and structure of funds raised and spent in the election campaign, annual report on income, assets and expenditures and report on contributions of natural and legal persons during the election campaign.

Montenegro

Efficient system and control mechanisms for reports of political parties in Montenegro have not been established because SEC keeps a record of whether the reports are submitted within the legal deadline and publishes them without controlling their quality and content. State Audit Institution is responsible for audit of financial reports of political parties.

Law No. 04/L-212 On Amending and Supplementing the Law No. 03/ L-174 on the Financing of Political Parties, Amended and Supplemented by Law No. 04/L-058 CEC states: Article 19 Financial control

Kosovo

1. Annual Financial Reports and Financial Declaration Reports of Campaign which are submitted by political entities to CEC, shall be audited in accordance with accounting standards applicable in Kosovo by auditors to be elected by the Assembly of the Republic of Kosovo through the Committee for the Oversight of Public Finances through an open public invitation for application. 2. For the implementation of obligation deriving from paragraph 1 of this article, the Assembly of the Republic of Kosovo through the Committee for the Oversight of Public Finances selects, in January of every year, at least ten (10) licensed auditors through a public announcement who will audit the Annual Financial Reports and Financial Declaration Reports of the Campaign of political parties. Following the selection of the list of auditors who will carry out the audit the Committee for the Oversight of Public Finances of the Assembly of the Republic of Kosovo will define by draw the auditors who will be responsible for the audit of the reports of the political entities. An auditor cannot audit the financial reports twice consecutively to a political entity. CEC is obliged to submit by 30 June of the following year, annual financial reports of political parties together with annual audit report of political parties, and no later than six (6) months after the day of elections the financial campaign report of political entities together with the final report of the audit of political entities to the Anti-Corruption Agency, which in accordance with its mandate may examine these reports. CEC prepares the annual report for the Assembly of Republic of Kosovo regarding distribution and expenditures from the Fund. Regarding the general funding, the annual financial report is submitted to the SAO. The report on donations is submitted to the SAO and the Public Revenue Office, while the annual financial statement, besides to the aforementioned institutions, is also submitted to the Central Register.

Macedonia

Regarding the financing of the election campaigns, the political parties are required to submit three financial reports: one for the first half of the campaign, one for the second half of the campaign and final report for the entire election campaign. The interim reports are submitted to the State Election Commission, SAO and the State Commission for Prevention of Corruption, while the final report is also submitted to the Assembly of the RM. In case of local elections it is also submitted to the municipal council. The SAO is the competent body to perform audit. However, the audit on the annual financial reports is not obligatory, it is left to the SAO to decide whether it will perform an audit on the financial reports of the parties. The latest audits of the annual financial reports were in 2011. As for the financing of the election campaigns, according to the amendments to the Election Code from 2012, the SAO is now required to perform an audit of the final report for the election campaign within 60 days of its submission.

Role and authority of enforcement institutions

Law on Financing of Political Activities regulates the sources and methods of financing, records and control of funding of political activities of political parties, coalitions and citizensâ&#x20AC;&#x2122; groups (political subjects), as well as the powers of the Anti-corruption Agency in controlling of political subjects. Law on the Anti-corruption Agency regulates the establishment, competences, organization and operation of the Agency as an autonomous and independent state authority.

Serbia

In the performance of its duties the Anti-corruption Agency shall have the right to direct and unhindered access to accounting records and documentation and financial reports of political subject, as well as to engage appropriate experts and institutions. The Agency shall also be entitled to direct and unhindered access to accounting records and documentation of endowments or foundations established by the political party. At the request of the Agency, bodies of the Republic of Serbia, autonomous provinces and local self-governments, banks, as well as legal and natural persons who finance political subjects or who provided certain services in their name and on their behalf shall provide all the information required by the Agency to perform its duties prescribed by law. Upon completion of the control of financial reports of a political entity, the Agency may submit a request to the State Audit Institution to audit these reports in accordance with the law governing the competence of the State Audit Institution. The State Audit Institution shall audit the financial reports in order to collect sufficient, adequate and reliable evidence to express an opinion whether auditeeâ&#x20AC;&#x2122;s financial reports provide true and fair review of its financial condition, results of operations and cash flows in accordance with generally accepted accounting principles and standards. Also, the State Audit Institution revises partyâ&#x20AC;&#x2122;s operations based on the evidence of opinion on the regularity and effectiveness of operations of public funds users, audits the operations in order to determine whether the financial transactions have been carried out in accordance with the law and other regulations, given authorizations and for planned purposes and revises operations expediency which involves an examination of spending of budget funds and other public funds in order to determine whether the means have been used in accordance with the principles of economy, efficiency and in accordance with the planned objectives.

3.2

Which institution is responsible for initiating court proceedings?

On the basis of decisions of B&H CEC, political parties can appeal to the Appellate Division of the Court of B&H, which often reverses decisions on sanctions imposed against parties.

Bosnia and Herzegovina

All interested citizens may file charges with CEC, but shall not be considered a party to the proceedings. Also, if it finds that political parties and their representatives committed serious abuse or criminal acts, CEC itself may file charges with the competent prosecutor who then decides whether to initiate an investigation on that basis. Initiation of misdemeanour proceedings is governed by the Law on Misdemeanours43. Misdemeanour proceedings (Article 111) may be initiated upon the request of the authorized body, the injured party or the defendant. Competent authorities for initiating criminal proceedings are public administration bodies, local government bodies, authorized inspectors, the state prosecutor and other agencies and organizations exercising public authority in charge of direct execution and supervision of the execution of laws prescribing misdemeanour offences.

Montenegro

With regard to LFPP, the State Election Commission launches misdemeanour proceedings in cases of late submission and publication of decisions on the amount of membership fees for the current year, annual balance sheet, report on the origin, amount and structure of funds raised and spent in the election campaign, annual report on income, assets and expenditures and report on contributions of natural and legal persons during the election campaign.

Kosovo

The court proceeding in Kosovo is imitated by the Central Election Commission.

The competence to initiate court proceedings is given to the SAO. However, when noting irregularities SAO only issues so called â&#x20AC;&#x153;an opinion with reserve about the veracity and objectivity of the financial reportsâ&#x20AC;? but it does not initiate a misdemeanour procedure even though it is required to do this. For example, it withheld to express an opinion for the financial reports of five parties in the elections in 2011 and only informed the Public Prosecutor about this. The Public Prosecutor did not initiate criminal proceedings.

Macedonia

Sl. list RCG, 1/11, 6/11 and 39/11

Role and authority of enforcement institutions

From the above mentioned it is obvious that this is the weakest chain of the control of party financing, i.e. noting irregularities but not acting upon the same which of course decreases the level of legal certainty and gives impression to the offenders that they can break the law without being punished. The State Audit Institution is required to submit without delay a request for instituting misdemeanour proceedings or criminal charges to the competent body if during the audit it uncovers materially significant actions indicating the existence of the elements of a misdemeanour or criminal offence. The Institution is required to notify the public attorney of cases where damages were done to public property by an action of the subject of audit or a legal entity doing business with the subject of audit.

Serbia

The Anti-corruption Agency shall initiate ex officio the procedure to establish whether there has been a violation of the Law on Financing of Political Activities and order measures in accordance with the law. The procedure may also be initiated based on charges filed by a natural or legal person. The Agency shall notify a political entity on initiation of the procedure. The Agency may summon the authorized person, as well as the person who filed charges initiating the procedure in order to collect information, and request that they submit the necessary data, with the aim of establishing whether there has been a violation of the law.

The system of sanctions

IV The system of sanctions

4.1

Misdemeanour sanctions

The Law on Financing of Political Parties prescribes the following sanctions: Financial penalty in the amount from 500 KM to 5,000 KM shall be pronounced for a misdemeanour offence to a political party which: a) used the funds contrary to law, b) failed to keep records on received membership fees and contributions and failed to issue a receipt on received fees and contributions in accordance with this Law c) is financed by taking loans from banks in which the share of state founding capital exceeds 25%.

Bosnia and Herzegovina

Financial penalty up to the triple amount of received funds shall be pronounced for a misdemeanour offence: a) to a political party which received funds in the amount exceeding the highest prescribed annual income or exceeding the highest prescribed amount of contributions or in a manner prohibited by Article 8 of this Law, b) to a political party, list of independent candidates and a candidate failing to report and to pay to the state budget the amount of contributions exceeding the amount set by this Law, as well as likely payments of contributions by anonymous sources, c) to a political party, list of independent candidates and a candidate failing to report payment received from prohibited sources and failing to transfer received funds to the state budget, in accordance with this Law. The Law on Financing of Political Parties prescribes fines ranging from 200 to 20,000 â&#x201A;Ź for legal entities, political parties, responsible person in the State Election Commission, political parties, legal entities and in state authorities, as well as for individuals, i.e. donors.

Montenegro

Fines ranging from 5,000 to 20,000 â&#x201A;Ź are provided for the legal entity paying funds to a political party or for election campaign exceeding the amount prescribed by law. Also, the responsible person of the legal entity is sentenced to a fine of 500 to 2,000 â&#x201A;Ź. The same range of fines is provided for political parties which fail to transfer excess funds to finance election campaigns from private sources to a regular party bank account, fail to repay the funds in the budget of Montenegro, i.e. budgets of local governments, fail to appoint a person responsible for spending and filing reports and fail to inform SEC about that or fail to depose

the responsible person’s signature at the institution authorized for payment transactions. Same fines are provided if a political party fails to regulate by its statute the manner of carrying out internal control of financial operations and the manner of obtaining insight into the operations, or if the statute does not define the person responsible for financial operations. Fines for those responsible in a political party have also been prescribed, in the amount of 500 to 2,000 €. Fines ranging from 10,000 to 20,000 € are provided for political parties which fail to make a decision on the membership fee for the current year in accordance with the law or fail to submit it to SEC, fail to properly keep all prescribed accounting records or fail to submit all reports and documents provided by law within the statutory deadline. Fines are also provided for inaccurate and incomplete reports. The same fines are prescribed for the political parties if they fail to open a separate bank account for the purpose of collecting funds or if that bank account is used in violation of the law, if they receive illegal material, financial assistance, financial and in-kind donations, or if they pressure legal entities, companies or individuals. Fines from 500 to 2,000 € are envisaged for the responsible person in the State Election Commission if he/she fails to publish the reports and documents submitted by parties within seven days of the receipt. Responsible persons in a state agency or local government shall be punished by a fine of 200 to 2,000 € if they fail to allocate and transfer funds provided for political parties in accordance with the law. The same fines are envisaged for responsible persons in a state agency or local government in case of: • advertising of state authorities and local governments, public enterprises, public institutions and state funds in the period from the date of announcement of elections to election day; • use of an official car after working hours, except for official purposes, in the period from the date of announcement of elections to election day; • public advertising and employment of persons in state bodies, state government, local governments, public enterprises, public institutions and state funds for a specific time and employment on service contracts in the period from the date of announcement of elections to election day. Fines for individuals range from 500 to 2,000 € and are imposed if they donate funds to parties in the amount exceeding the amount envisaged by law. A fine for an entrepreneur ranging from 200 to 4,000 € is provided for the same offense. The Law on Political Parties Financing defines the following misdemeanour sanctions for political entities and for the candidates for mayor, parliament, councillor or independent candidates.

Kosovo

If political entity does not submit reports and document on time it can be punished with a fine ranging from one thousand (1,000) to five thousand (5,000) €. If political entity accepts, receives and executes a contribution from natural persons in the

The system of sanctions

amount exceeding two thousand (2,000)€ per calendar year or from legal entities in the amount exceeding ten thousand (10,000)€ shall be fined twice of the value received. Political entity which cannot prove the origin of the received and executed incomes over twenty thousand (20,000) Euros shall be fined three times that amount. Political entity shall be fined with basic fine of five thousand (5,000)€ for keeping active, two or more bank accounts. The same fine is prescribed if political entity fails to inform CEC in a due time for the funds received in contradiction with the law while the candidate for a mayor, candidate for the member of the parliament, municipal councillor and independent candidate shall be fined with the same amount received. General party financing The political party shall be fined with 1.000-2.000 € if it does not publish its register of donations on its web page. For failure to submit the annual financial report, the annual financial statement and the report on donations to the competent bodies the party shall be fined with 5,000-10,000€. The same fine is prescribed if the party does not publish its annual financial report and its annual financial statement on its web page.

Macedonia

Financing of election campaigns The political party shall be fined with 4,000-5,000€ if it does not submit the final financial report for the election campaign, if it finances its campaign from sources which are not allowed, or if it exceeds the spending limit. A fine of 500-1.000€ shall be imposed to the responsible person of that political party for these offences. The Anti-corruption Agency shall pronounce a measure of warning against a political entity if it finds deficiencies during the control that may be remedied. If a political entity does not comply with the said measure by the specified deadline, the Agency shall submit a request for initiation of misdemeanour proceedings.

Serbia

The Law on Financing of Political Activities envisages sanctions for committing a misdemeanour offense or a criminal offense.44 A political party shall be fined from 200,000 to 2,000,000 RSD for a misdemeanour, while the responsible person of a political party or other political entity shall be fined from 50,000 to 150,000 RSD for the same misdemeanour if under certain conditions he/she/it: a) fails to issue a receipt about the paid membership fee or fails to deposit the fee on the account of the party, b) fails to publish a donation on its website the value of which on an annual basis is higher than an average monthly salary, c) acts contrary to the provisions governing the acquisition of assets and income from assets owned by a political party, d) acts contrary to the prohibition of financing of a political entity by a natural or legal person who carries out activities of general interest, e) unlawfully collects funds by pressuring natural and legal persons in collecting the funds, f) receives income from promotional or commercial activities, g) fails to pay funds or fails to return funds to individuals or legal entities from whom he/she/it received the funds but who is prohibited from funding political entities, h) opens multiple accounts contrary to the provisions stipulating that a political party can have more than one account only under 44 For detailed conditions for the imposition of sanctions for committed offenses see the Law on Financing of Political Activities.

the same tax identification number, as well as the foreign currency account, through which the transfer of funds allocated for regular work is performed, i) uses funds contrary to the provisions regulating the use of funds for financing regular work of a political entity and the use of funds to finance political activities during the election campaign; j) fails to open a separate account for the financing of election campaigns, k) fails to keep records and accounting books of all income and expenses as provided by law, l) fails to submit annual financial report for the previous year to the Anti-corruption Agency by 15th of April of the current year, m) fails to publish its financial report on the website or fails to submit it to the Official Gazette of the Republic of Serbia for publication within the prescribed time limit, n) fails to submit a report on the election campaign costs within 30 days of the announcement of the final election results, o) fails to pay to the budget the funds from public sources which a political subject did not spend during the election campaign prior to the submission of reports, as well as any funds from private sources not spent during the election campaign, p) fails to appoint an authorized person who is responsible for financial reports and records relating to the financing of political subject or to report a replacement of an authorized person, q) fails to allow access to the Anti-corruption Agency to accounting records, documents and financial reports, as well as to accounting records and documentation related to endowments or foundations established by a political party, r) fails to submit documents, information and data to the Anti-corruption Agency within a deadline determined by the Agency and fails to comply with the imposed warning measure by the deadline defined in the Agencyâ&#x20AC;&#x2122;s decision. In addition to political entity and responsible person, a fine from 200,000 to 2,000,000 RSD shall be imposed against a legal entity as a donor of funds, if it: a) gives a donation to a political entity contrary to the provisions governing the manner of donating and amount of contributions, b) fails to ensure access to the Anti-corruption Agency to accounting records, documents and financial statements, c) fails to submit data to the Agency for services rendered on behalf of a political entity. The responsible person of a legal entity shall also be fined for specified misdemeanour offences with 50,000 to 150,000 RSD, while an entrepreneur shall be fined with 100,000 to 500,000 RSD. A natural person shall be fined with 50,000 to 150,000 RSD. Funds obtained through contributions contrary to the provisions of the Law on Financing of Political Activities shall be confiscated.

The system of sanctions

4.2

Criminal sanctions

The laws governing the financing of political parties in Bosnia and Herzegovina, Montenegro and Kosovo do not include criminal sanctions. When an organizer of an election campaign does not report the source of finances, obstructs the supervision upon the spending of the funds, does not submit the financial report for the election campaign, exceeds the spending limit, or uses sources of funding which are not allowed he/she will be sentenced to five years in prison. The same sentence shall be applied to the responsible person of a legal person which does not report donations or other funds for financing of the election campaign, obstructs the supervision upon the spending of the funds, does not submit the financial report for the election campaign or gives false and incomplete data, exceeds the spending limit, or provides funds from sources which are not allowed.

Macedonia

The person who will donate funds anonymously in an amount which exceeds the legal limit shall be fined or sentenced to three years in prison. If the offence is committed by a legal person only a fine will be imposed. For all the above mentioned offences the court shall issue a prohibition on conducting profession, activity or duty and a ban on using funds for financing of political parties. The Law on Financing of Political Activities stipulates that whoever gives and/or provides for and on behalf of a political entity, funds for financing of the political entity contrary to the provisions of this Law with the intent to conceal the source of financing or amount of collected funds of the political entity, shall be punished with imprisonment from three months to three years. If the said offence involved giving or receiving more than 1,500,000 RSD, the offender shall be punished with imprisonment from six months to five years. In these cases, in addition to sanctions that may be imposed against offenders, the funds shall also be confiscated.

Serbia

Also, the Law prescribes that whoever commits violence or threatens with violence, places in disadvantageous position or denies a right or interest based on law to a natural person or legal entity based on a donation to a political entity, shall be punished by imprisonment of three months to three years.

4.3

Administrative measures

CEC B&H has the authority to impose the following sanctions if political parties, coalitions and independent candidates violate the rules of conduct prescribed in Chapter 7 of the Election Law or the rules of campaign financing, as described in Chapter 15 of the Election Law of B&H: • a fine of up to 10,000 KM; • removal of candidate’s name from the candidate list; • cancellation of certification of a political party, coalition, list of independent candidates or independent candidate(s); • prohibition to engage an individual at a polling station, voter registration centre, municipal or other electoral commission.

Bosnia and Herzegovina

The competent authority for appeals against decisions of the Central Election Commission on the enforcement of above sanctions is the Appellate Division of the Court of B&H. Current LFPP does not prescribe explicit administrative measures, however, Article 7, paragraph 7 states that the Ministry or the local authority shall suspend the payment of funds to a parliamentary party if it fails to submit its final financial statement for the previous year within statutory deadline.

Montenegro

According to the Article 21.2 of the Law on Political Parties Financing: A political subject, that does not submit the annual financial report to the CEC within the term defined by this law, shall loose the right to receive benefits from the fund for the next year.

Kosovo

General party financing A suspension on the payment of budget funds for regular annual financing shall be issued if the political party does not submit the annual financial report, the annual financial statement or the report on donations to the relevant institutions, if it does not publish the Register of Donations on its web page and if it does not return the donations, which exceed the limit, to the donator or in the Budget of the RM. However, it must be noted that the by-law which should regulate the form of the Register of Donations still has not been adopted, even though this provision dates back from the adoption of the law in 2004.

Macedonia

The suspension decision shall be in force until the fulfilment of the relevant obligations. The suspension decision shall be issued by the Minister of Justice upon proposal from the State Audit Office. Against the decision an administrative dispute may be initiated. If the political party does not publish its annual financial report on its web page it loses the right of regular public financing for three months. The decision shall be issued by the Minister of Justice upon proposal from the State Audit Office. Against the decision an administrative dispute may be initiated.

The system of sanctions

Financing of election campaigns There are three kinds of administrative sanctions for irregularities in the financing of the election campaign: • partial loss of compensation of expenses for the election campaign; • complete loss of compensation of expenses for the election campaign; • suspension of compensation payment of expenses for the election campaign. Partial loss of compensation of expenses for the election campaign shall be imposed to an organizer of an election campaign in case when the spending limit is exceeded and it consists of reduction of the amount for compensation of expenses for the election campaign for the amount exceeding the spending limit. If the amount of funds exceeding the spending limit is higher than the amount for compensation of expenses for the election campaign, then a complete loss of the right of compensation of expenses for the election campaign shall be imposed. Having in mind that the spending limit is set too high, these provisions are not very much relevant. Suspension of payment of expenses for the election campaign shall be imposed to the organizer of election campaign in the cases when they do not submit the financial reports for the election campaign in the determined time framework and content. The suspension shall last until the proper fulfilment of this obligation. The decision for partial or complete loss of compensation of expenses for the election campaign and the decision for suspension of payment shall be issued by the State Election Commission upon a proposal by the State Audit Office. Against the decision an administrative dispute may be initiated. In addition to being imposed a sentence for criminal offenses prescribed by the Law on Financing of Political Activities, or if a political subject or a responsible person in a political subject is punished for offenses punishable by a fine of 200,000 to 2,000,000 RSD for a political party or a fine of 50,000 to 150,000 RSD for a responsible person in a political subject, political subject loses the right to receive public funding aimed at financing of political subjects as follows:

Serbia

1. The amount of funds cannot be less than the amount of funds obtained through the commission of a criminal offence or misdemeanour, up to a maximum of 100% of the amount of funds from public sources allocated for financing of regular work of the political entity for the coming calendar year. 2. If the amount of funds acquired through commission of a criminal offence and/or misdemeanour is less than 10% of the funds from public sources allocated for financing of regular work of the political entity for the coming calendar year, the amount of funds specified in paragraph 1 above may not be less than 10% of the funds from public sources allocated for financing of regular work of the political entity for the coming calendar year. The amount of funds referred to in paragraph 1 above is determined in proportion to the sanction for committed criminal offence or misdemeanour, pursuant to rules set forth in the previous 2 cases. After initiating criminal proceedings for criminal offenses prescribed by the Law on Financing of Political Activities, or if a political subject or a responsible person in a political subject is punished for offenses punishable by a fine of 200,000 to 2,000,000 RSD for a political party or a fine of 50,000 to 150,000 RSD for a responsible person in a political subject, at the request of the Anti-corruption Agency, the ministry responsible for finance or competent administrative authority of autonomous province or local government shall make a decision on the temporary suspension of transfer of public funds to the political entity until final decision is rendered in criminal or misdemeanour proceedings.

4.4

Practice

Although for years the audit reports point to violations of almost all the provisions of the Law, ranging from donations from prohibited sources, such as public corporations and institutions, through exceeding the limit on income from property, permissible limits of funds spent on the campaign, to non-reporting on favour donations, a particular problem is also the fact that these offenses do not result in appropriate sanctions. Even if sanctions are imposed, this happens mainly with large delays when the received funds have already served their purpose, and sanctions are imposed mainly in the form of low fines, which are negligible in comparison with the amounts collected in violation of the provisions governing political financing. Also, recommendations to the parties provided by CEC B&H in audit reports are generally not respected, and the same recommendations are repeated year after year.

Bosnia and Herzegovina

During 2012 the Central Election Commission imposed fines against 15 political parties in the amounts from 500 to 23,000 KM, while administrative measures were imposed against 8 parties. However, one of the problems is the fact that in recent years a large number of decisions of the Central Election Commission on sanctioning of parties were annulled by the Appellate Chamber of the Court of B&H. The most noteworthy examples are the cases of the Peopleâ&#x20AC;&#x2122;s Party Work for Progress and the Alliance of Independent Social Democrats Milorad Dodik. In the latter case, the CEC originally determined that the Alliance received illegal contributions and imposed a sanction against this party in the amount of 18,000 KM. Also, analyses of Transparency International B&H have shown, as also confirmed by CEC, that the Alliance failed to include in its reports show appearances of Svetlana RaĹžnatoviÄ&#x2021; during the campaign before the General elections in 2010, and sanctioned the Alliance for this with 5,000 KM fine. However, after the Appellate Division of the Court accepted the appeal of the Alliance, with no clear basis, and remanded the case to CEC for consideration, CEC suspended this case. In addition to the Alliance, originally imposed sanctions were also suspended in relation to SDA, Our Party, SDU, HSP B&H and SDA, also for failure to report contributions. Due to the above mentioned disadvantages of the audit and ad hoc approach defined by the rules of pre-election and post-election financial reporting, there is no detailed control over financial reporting, particularly in relation to election campaigns, so there is no adequate sanctioning for violations of the law.

Montenegro

Monitoring of implementation of LFPP indicates numerous irregularities in the work of political parties.

In 2012 the SEC filed 3845 misdemeanour charges against political parties for failing to submit within the prescribed deadline information, i.e. decisions on the amount of party membership 45 17 requests for initiation of misdemeanor charges were filed on the basis of failure to submit decisions on membership fees and 21 for failing to submit reports on assets

The system of sanctions

fee and the report on assets. In 2013 the SEC submitted 20 requests for initiating misdemeanour proceedings against political parties for failing to submit the decision on the amount of membership fee and the annual report on income, assets and expenses for 201247. Most of the proceedings are still pending and seven sentencing decisions were adopted in 2012.48 46

Revision of the State Audit Institution in 2011 indicated a number of irregularities in the reports of political parties. There has been no great progress in 2012 either. The State Audit Institution gave a qualified opinion “on compliance of financial operation with applicable regulations” to the Bosniak Party, as it was determined that municipal boards in Plav, Berane, Bijelo Polje and Pljevlja have not justified almost 19,500 € they spent. As stated in the Report, Bosniak Party has justified over 37,000 € on the basis of incomplete and inadequate documentation, and disbursed compensations in the amount of 14,800 € without calculating and paying tax liabilities. The State Audit Institution determined that in the reports of the Movement for Changes and Croatian Civic Initiative “there are no material misstatements or deviations, but there are irregularities and defaults”. The Report indicates that the Movement for Changes has not paid tax for disbursed royalties and lease contracts in the amount of 21,000 €, while the Croatian Civic Initiative has avoided tax liabilities in the amount of more than 13,000 €. The audit also showed that the Movement for Changes has disbursed compensations based on royalties and service contracts in the amount of 151,000 € in cash from the cash box, and the enclosed receipts do not include contract numbers on the basis of which the disbursement was made, date of cash takeover, nor personal information of the person who took the cash over. The Croatian Civic Initiative has done pretty much the same by paying expenses of nearly 55,000 €, or 60% of total expenses of the party, in cash from the cash box and then justifying those expenses with travel orders and decisions of party’s bodies. The control has also shown that the New Serbian Democracy has presented part of its expenses (about 11,000 €) and part of incomes (about 8,000 €) from the election campaign in its business books as incomes and expenses from regular operations, and disbursed about 151,000 € from the cash box of the General board, 141,000 € from the cash boxes of municipal boards, and over 7,000 € from the cash box of the group of citizens - Milan Knežević. The State Audit Institution also determined that in 2012 the Socialist People’s Party has justified part of its expenses paid in cash from the cash boxes of municipal boards (around 17,000 €) on the basis of inadequate documentation. Also, the audit of the Report on origin, amount and structure of funds collected and spent in 2012 election campaigns showed that the funds have not been paid to the submitters of electoral lists on the basis of seats won in some of the budget units of local governments in accordance 46 10 requests were submitted for failure to submit decisions on membership fees and 10 for failing to submit reports on annual income, assets and expenses for 2012 47 Information provided by the State Election Commission, decision no. 526/2 48 Fifth Report on the Implementation of Innovative Action Plan for the Implementation of the Strategy for Fighting Corruption and Organized Crime, the National Commission for the Implementation of the Strategy for Fighting Corruption and Organized Crime

with Article 10, paragraph 4 of the Law on Financing of Political Parties within the statutory deadline. Despite all the identified irregularities, there was no response of relevant institutions. In 2009 ENMO has reported that from 100 cases only 39 had been send to the prosecutor and zero result from the 2007 elections fraud. In 2010 there have been reported 454 cases to CEC for elections manipulation. The prosecutor has had 18 direct cases on which are involved only 125 people. The effectiveness of the work of the prosecutor is 38%.49

Kosovo

Out of 51 registered political parties only 14 submitted their annual financial report for 2012, while 9 submitted their report on donations for 2012. The number of parties which fulfil this obligation is almost constant through the years, but none of the parties which did not fulfil this obligation has ever been sanctioned. On the other hand, this could be seen as an indicator showing the real number of active parties, and the ones which do not have any activities, although they are still registered.

Macedonia

Out of these 14 parties, only 4 submitted the reports in the required form - the ruling parties in the Macedonian and Albanian bloc - VMRO-DPMNE and DUI, the largest opposition party â&#x20AC;&#x201C; SDSM and one of the minor parties which submitted the report without any incomes and expenses. As for the figures in the reports, there are some who indicate that there are eventual errors. Namely, VMRO-DPMNE reported less public funds received than SDSM and DUI. Having in mind that these funds depend on the number of MPs and municipal councillors the party has, it is obvious that VMRO-DPMNE should have received the highest amount of public funds since it has the highest number of MPs and municipal councillors. Regarding the reports from the financing of the election campaigns, one of the problems is the overspending of parties, as they often spend amounts that exceed the deposits on the specially opened bank accounts. The practice shows that these negative balances are covered from the funds of the general account, and although this practice is currently illegal, it is tolerated by the State Audit Office. The SAO has registered inaccuracies in the annual financial reports for 2011 and the financial reports for the elections in 2011 but it did not initiate proceedings against the responsible subjects. Up until now, not one political party has ever been sanctioned for irregularities in its financing, both general and for election campaigns and this is maybe the most obvious indicator of the efficiency of the party finances control system. Law on Financing of Political Activities, Law on the Anti-corruption Agency and relevant regulations have contributed to the introduction of financial transparency in the political life in Serbia. In May 2013 the Agency presented to the public the first report on the control of political entities related to the financing of 2012 election campaign. This report presents the financial data, comparative data on income and expenditure of political parties, as well as the instances indicating law violations. In preparing of this report the Agency faced certain obstacles in controlling the financing of political actors. Based on the report of the Anticorruption Agency on audit of political party financing in 2012 election campaign, a comparison

Serbia

49 See an article published by KIPRED, available at this link http://www.kipred.org/advCms/documents/62480_Denimi_i_ manipuluesve_te_zgjedhjeve.pdf

The system of sanctions

of income and expenses presented by political subjects shows that election expenses were greater than income for about 15% at all levels, which represents potential debts of political entities. If borrowings and loans are added to the debts, it can be concluded that 33% of the total expenditure is financed from real sources. Many parties and political entities did not submit the reports within the prescribed deadline. A number of political entities submitted reports on the election campaign costs which contain formal shortcomings, such as: incorrectly stating the title of elections (elections were held at all levels), incorrectly stating the name of the political entity, failure to state a name and provide a seal of the coalition partner when political subject is a coalition. These formal shortcomings were observed in the reports on electoral campaign costs of all political entities included in the analysis. In some cases, in submitted financial reports political actors failed to show income from public sources, contributions from legal entities and individuals and their own assets. Furthermore, certain costs of election campaign were not presented and thus the structure of expenditures does not include all public events (rallies and conventions) that were held. Also, not all political parties presented the costs of video commercials, advertising in electronic media (primarily on television and radio) and advertising on billboards and posters. In some cases there are none reported electoral activities and corresponding costs. At other times, certain types of costs were presented in much lower amounts compared to those specified in the contracts concluded between political entities and legal persons providing the service. There are examples when donors were mentioned in the reports of political entities, but their bank accounts for election campaign financing showed no sign of these contributions. In few cases public events were reported collectively by stating the cost for all of them together instead of individually, so additional facts are needed to determine the exact number of these events and costs associated with each event. Up to the date of filing of the report, some political parties failed to pay unspent funds of election campaigns to the budget of the Republic of Serbia, autonomous province or local government, or back to the account for regular work financing, which constitutes a misdemeanour offense. Certain political entities settled the costs incurred on the occasion of one election campaign from the account opened to raise funds and pay the costs of another election campaign. It was also established that the portion of costs incurred in an election campaign was settled from the account opened for regular work financing, which indicates the possible inappropriate use of funds and possible concealment of cash flows of a political entity during the election campaign. Research revealed that some political entities received contributions from legal entities which, at the time of giving contributions, had not settled obligations based on public revenues. Hereby, both the legal entity and the responsible person in that legal entity committed the offense by donating funds. A large number of political entities failed to pay their debts on the basis of costs related to the election campaign by the time of filing of financial reports. Following the funding of political entities, until mid-November 2013 the Agency submitted a total of 362 requests for initiating misdemeanour proceedings for violation of the Law on Financing of Political Activities. Misdemeanour authorities adopted their first sentencing decisions, in most cases for failure to submit annual financial reports and reports on the costs of election campaigns.