3.2.2 Preparing Reporting

A cornerstone in political finance transparency is the financial reporting system for political parties and election contestants, whether it relates to annual or ongoing party finance reports or to campaign finance reports submitted before or after an election. This Political Finance Implementation Toolkit covers various areas of your work with financial reporting – from strategic planning to receipt, review and publication of financial reports.

If you do not carefully consider how political parties and election contestants (and potentially others) should prepare and submit financial reports, there is a significant risk that your other activities will not be successful in achieving transparency and control over money in the political process. Naturally, even a perfect reporting system will not provide transparency if parties and electoral contestants can with impunity refuse to declare their income and spending, but if the reporting system is not well designed, even actors who wish to comply and be open about their finances may be unable to do so.

There is much that can be learnt from the experiences in other countries regarding financial reporting, as it outlined in this section. Ultimately however, the most suitable approach in your country will depend on the country context. Therefore, it is important that in-depth discussions are held with stakeholders ahead of the development of a reporting system.

It can certainly be argued that anyone wishing to form a political party or run as an election candidate must accept and comply with legislation and regulations on financial reporting. However, experience shows that when the reporting systems are not suited to the local context, the level of compliance will suffer and confidence in the entire system of political finance oversight may suffer.

The OSCE/OIDHR and the Venice Commission have recommended that, “The law should define the format and contents of the reports to ensure that parties and candidates disclose essential information” (see Article 259). However, some flexibility in reporting structures may be useful, as it allows you to engage stakeholders in an ongoing dialogue about the most effective form of reporting, and make minor changes, as required.

Of key importance is the holding of a dialogue with political parties and others who legislation requires to submit reports. If the reporting system does not take into account the way that political parties gather and maintain financial information, the risk of non-compliance with the reporting system increases. Also consider the capacity of candidates at all levels of elections to prepare and submit financial reports. Naturally, you retain the final decision on the system to be used (not least since the political actors may try to get out of reporting sensitive information). After each reporting deadline, gather representatives of the reporting entities and discuss reforms of the reporting system that may be desirable.

You should also bear in mind input from other stakeholders, including civil society groups and journalists who may use financial reports in their work and who may (formally or informally) assist your institution in controlling the accuracy of reports. Note, however, that such groups sometimes have an exaggerated opinion about the capacity of political actors to comply with reporting requirements. Outside groups may also wish to go straight to an advanced reporting system, bypassing the gradual adjustment to detailed reporting that may be needed in most countries.

As necessary, you may also wish to consult national auditing or accounting institutions to ensure that the reporting format is in line with legislation on financial accounting or auditing. This may be especially important in cases where reports have to be formally audited either before or after they are submitted.

In addition, in developing the financial reporting system you should consider the way that the financial reports are to be published by your institution. The preparations for reporting and for the publication of reports go hand in hand, and should always be considered together.

See here for an overview of reporting requirements and processes across Europe (IIIDEM case study reporting disclosure - unit5.pdf).

These are some of the things you need to carefully consider when preparing for financial reporting:

• What information should you require to be included in reports? 
• Should you require the inclusion of supporting documentation?
• What should be the format of the reporting? 
• What guidance do you need to provide to ensure compliance with the reporting system? 

3.2.2.1 What information should you require to be included in reports?

This text is taken (with minor modifications) from the IFES Political Finance Oversight Handbook.

Request All Information Required by Law

Where there are legal requirements regarding the information political actors need to submit, the regulator must ensure all such information is covered in the reporting forms. However, it is more common that legislation gives only overall information about the data that must be submitted. In such cases, you will need to develop more detailed political finance disclosure regulations, assuming it is within your legal mandate to do so. Such regulations may include the reporting forms themselves; if they do not, the forms should be developed in close coordination with the regulation.

Request Additional Information Necessary to Ensure Compliance with Legal Provisions

As mentioned, legislation often lacks detailed instructions regarding the information political actors must submit. Often, legislation does not even specify if financial reports need to reveal the identity of donors. In such cases, you must identify the information necessary for it to receive to monitor the accuracy of financial statements and compliance with political finance regulations.

For example, even if legislation does not require that political actors report the names of contributors, you must have access to this information if you are required to enforce a ban on anonymous donations or a limit the amount contributed over a certain period of time.

Do Not Request Information You Do Not Need

You should not require just any information through the reporting forms. A rule of thumb is that you must have a clear idea of how you would use each piece of information that is requested. That certain information could be useful is not a sufficient argument for requiring political actors to report it, given the administrative burden that reporting entails.

Ensure the Reporting Format Does Not Overburden Political Actors Who Must Report

An important principle is that the reporting system must be such that political actors can be reasonably expected to comply with the requirements without hindering their ability to run effective campaigns. As an example, reporting thresholds can be used to reduce the need for tedious reporting of unimportant transactions. This could mean that only expenses above a certain amount, or assets exceeding a certain current market value, should be reported. There is little point in demanding political parties to report on every single pencil in its possession. Demanding that receipts are given for every donation, signed by both the financial agent and the donor, can be a good way of tracking larger donations, but it is unreasonable to demand such records for donations of “pocket-money value.”

Some countries use thresholds for donations that have to be reported in detail. In the U.S., the threshold is $200 in a year, while in Australia the threshold is $14,500 CAD as of the middle of 2021. Of course, a threshold of this kind opens the risk that wealthy interests will sub-divide their donations to escape publicity. If the threshold is set low enough, donors will have to do a lot of work to get around reporting requirements.

The principle of not overburdening political actors also relates to the frequency of report submission and to the time between the closing of books for a report (for example, at the end of a calendar year or shortly after an election) and the deadline for submission.

Do Not Use More Reporting Forms Than Necessary

In line with the principle to not overburden the political actors, the reporting format should be as streamlined as possible. Actors should not be required to repeat the same information several times in different forms (in some cases, it can be possible to find solutions where information entered in one form is automatically used to populate parts of other forms). You should try to provide a logical sequence of forms so it is clear how the different forms and items therein relate to each other. For example, if a summary form asks for total value of donations in the form of real estate, the form listing individual contributions should require the actor to note the same information so it can be transferred to the summary form.

However, this principle does not necessarily mean that reducing the number of forms is always advisable. The reporting format should, above all, be easy to understand. Combining many items on the same form can cause confusion. Consider if different actors should use the same forms for their reporting, or if candidates and political parties (if both need to submit reports) should use separate forms. The former solution will reduce the number of forms in use, but could also lead to various sections of forms only applying to some actors (such as “constituency contested”). Consider also if it is possible to use the same forms for campaign finance and for annual reporting.

Avoid Terms and Concepts That are Not Clearly Defined

While it is tempting to ensure standardization through applying various terms and concepts, caution must be exercised to avoid confusion. Requiring political actors to break down their expenses into campaign and administrative costs, for example (and subcategories within each), may be a good idea, but unless clear rules are set for how expenses should be categorized, it will still be difficult to compare the information received. This principle goes beyond defined concepts in accounting. For example, in some countries, the regulator asks the profession of contributors. Assuming this inclusion is not a legal requirement, the purpose of the regulator in asking about the profession of the contributor is often that this information will make it easier for them to judge if individual contributors can be expected to own the amounts they are reported to have contributed. However, unless there are legally-defined professions, such a requirement is unlikely to enhance transparency. Anyone can for example call themselves a “businessman” or “entrepreneur”.

For Campaign Finance Reports, Consider Variations Depending on the Type of Elections

While the principle of campaign finance transparency is the same for all types of electoral processes, it may not be feasible to require the same level of reporting by presidential, parliamentary and local government candidates alike. In most countries, presidential candidates are likely to have a team of people overseeing their campaign finances, and it is reasonable to expect that a presidential campaign can provide detailed information about how they have raised and spent money. Take into account however that since in most presidential elections the entire country is part of the electoral area, it can take time for presidential campaign teams to gather, prepare and submit financial information about their activities.

Parliamentary candidates (where these are legally required to submit financial reports) may have less administrative capacity for bookkeeping and financial reporting than presidential candidates. However, in Single-Member-District electoral systems, parliamentary candidates have a significantly smaller electoral area to deal with, and regardless of the electoral system, parliamentary candidates are likely to have a significantly less complicated financial structure than presidential candidates. This should be taken into account when deciding on the reporting system for each type of election.

Assuming that candidates in subnational elections are required to submit financial reports to you as a national oversight institution, particular care is needed in considering what information that such candidates can be expected to collect and submit. The number of local government structures, and hence of candidates to such structures, may be significant (to take one example, by late 2021 there were 283,350 “local bodies” in India).

It is recommended that your institution engage local government bodies, political parties and past candidates in a discussion about what information that local government candidates can be required to submit, in what format and at what time.

The considerations noted above should also be considered as appropriately when it comes to campaign finance reporting by nominating political parties or other structures (such as citizen initiatives) in relation to different types of elections.

3.2.2.2 Should you require the inclusion of supporting documentation?

Legislation may specify in detail what if any supporting documentation that political parties and election contestants are required to submit together with their financial statements. When this is the case, your tasks as an oversight institution is to ensure that the reporting entities are aware of this, and as suitable and necessary assist them in how the relevant supporting documentation can be accessed and submitted to you.

In many countries however, legislation does not specify in detail (or at all) what if any supporting documentation that needs to be submitted. In such situation, it is important to carefully consider what should be requested.

Requiring the submission of detailed supporting information can assist your oversight institution in reviewing the accuracy of submitted financial statements. Indeed, without access to supporting documentation such controls and audits may be very difficult or impossible. Given this, you should carefully consider the implications for controls of audits of submitted financial reports if you require the inclusion of certain supporting documentation.

On the other hand, requiring masses of supporting documentation may prove unduly burdensome for the political parties and electoral contestants, and also for you as the oversight institution. The same principle as discussed above about only asking for information in reporting that you are likely to use also applies to supporting documentation. You may also wish to vary the amount of supporting documentation that electoral contestants are required to submit depending on the type of election, requiring less supporting documentation regarding local government elections than for presidential and parliamentary elections.

Naturally, you may require that those scheduled to submit financial reports maintain records of supporting documentation that they are not required to submit. In such cases, you may request the submission of such documentation at a later stage, in particular if a need arises for an investigation of the submitted financial records or other activities. Do not automatically assume that requiring the submission of supporting documentation is never necessary as long as it can be requested later, since requesting the later submission of such documentation can be a demanding and time-demanding process.

3.2.2.3 What should be the format of the reporting?

There are many different ways that political parties and electoral contestants can submit information about their financial activities to your institution. The main options are:

• Hardcopy (paper) format only
• Hardcopy (paper) format together with electronic submission (any of the options below)
• PDF documents
• Machine-readable documents such as Xls(x)
• Submission of reports via a dedicated software solution installed on the user’s computer
• Submission of reports via an online system

Hardcopy (paper) submission may be the most suitable where those required to submit information are unlikely to have access to a computer, or may not have the necessary experience needed to use an electronic submission system. This may apply for example to local government candidates in countries with limited computer penetration. Unreasonable IT demands must not threaten or limit the freedom to run for office, as described in the International Covenant on Civil and Political Rights. 

However, a legal requirement that financial reports must be physically signed does not immediately preclude a system of electronic reporting. A framework can be set up whereby the political party or candidate submits the financial report in a signed hardcopy (paper) format, but also submits the same information electronically, massively increasing the opportunities for control of the reports and for publication. While double-reporting should be avoided in general, this may be a suitable solution in case of legally required hardcopy signatures in contexts where submitted hardcopy reports are simply printouts from the party’s or electoral contestant’s computer system. Naturally, if a legally accepted system for electronic signatures is in existence, you should explore how that can be used to satisfy requirements of submitted reports being signed.

Whenever suitable, electronic submission is preferable, given the capacity of stakeholders, as it allows for easier review, analysis and publication of received information. A lot of information about electronic reporting is available in the report “Digital Solutions for Political Finance Reporting and Disclosure”. 

Demanding the submission of PDF documents is normally a substandard solution, as such documents are often not machine-readable, and the data can therefore not easily be transferred into a database for review and publication. Even such a basic tasks as summing up the amounts of donations made by the same person (required whenever there is a legal donation limit) can become very demanding if reports are only available in PDF format. There is an option of creating PDF forms that users can fill in – such PDF forms are (normally) machine readable.

A comparatively straightforward solution is to develop and share the reporting forms in a commonly used format such as Excel (xls(x)). Such forms can be modified on the computer of the reporting entity (if so preferred using free software), and submitted to you via email or (less desirable due to the risk of computer viruses) USB memory sticks. If you use this approach, consider electronically locking any parts of the document that you do not wish the users to be able to edit, so they do not intentionally or unintentionally make edits that may hinder the movement of data from the document into an online database. It is strongly advised that you consult an IT expert to make sure that the electronic reporting documents are suitable for filling in and for the data to be exported into a database that you control.

Providing a specific software for financial reporting is not a very common approach, but it is for example used by the Federal Election Commission in the United States. Their “FECFile” software is free to download, though it has the disadvantage that it can only be used on the computer on which it has been installed. A similar system is used by Elections Canada and by the Tribunal Superior Eleitoral in Brazil.

In most cases where political finance reporting systems are being reformed today, the preferred choice is to build a system where users upload information into an online system maintained and/or designed by the oversight institution. Such systems does not require software to be up to date, and they can be easily modified. There are many different options for online reporting, and it is again strongly advised that you consult an IT expert in the development of a system of this kind. For a list of online reporting systems, see Annex A in this document.

Many online reporting systems combine the direct entry of certain information with the uploading of electronic documents. Such an approach has many advantages, as it can be very time-consuming for users to enter large amounts of information directly into the system. The same considerations as discussed above regarding PDF, xls(x) files etc. also apply when political parties or electoral contestants upload files in an online system.

Online systems can also allow for political parties and electoral contestants to submit data according to the requirements that are related to each entity – for example, in Spain, certain parties are by law allowed to use a simplified reporting process, and both this and the full reporting system are accounted for in the Spanish online submission system.

Where reports are submitted electronically, consider how you can ensure that only eligible persons submit such information to you. Some countries have a national system for electronic reports, such as Iceland, or a national system for electronic bank-IDs, as in Sweden. In other countries, the political finance oversight institutions provide long-in details to relevant persons from political parties and election campaigns. This is for example the approach taken by the Central Election Commission in Bosnia and Herzegovina and by the Electoral Commission in the UK. 

As with any electronic systems, the development of an online submission system must include safety consideration, such as the risk that unauthorised persons may attempt to disrupt the process by uploading inaccurate information or deny access to the system for regular users. While most of the political party and campaign finance information that is submitted will be made available to the public, there can be cases where certain information that is submitted will not be published. This can for example include the full address of donors, or the identity of donors giving below a set threshold. In such cases, it is especially important to ensure that this information is protected from unauthorised. One final time, you are strongly advised to seek guidance from IT experts on the security aspects of the electronic system.

The National Agency for Corruption Prevention has provided a case study of the recently developed system for online reporting in Ukraine (UKR_NACP Launch of POLITDATA.pdf).

3.2.2.4 What guidance do you need to provide to ensure compliance with the reporting system?

In parallel with developing the system for reporting, make sure that you also develop clear guidance materials for those who will be required to submit financial reports. This can include written manuals, videos and infographics, combined with trainings and FAQs on your website. For more on the issue of guidance, see here. Here is a good example of a FAQ on how to use an online reporting system is published by the National Agency For Corruption Prevention in Ukraine. The Political Party Funding Act Regulations 2021 in South Africa includes information on how to submit financial reports in South Africa, though the use of a paper based system may seem a missed opportunity of making the provisions of the 2018 Political Party Funding Act (which came into force in 2021) truly effective.