Transparency in Campaign Finance
Association of Central and Eastern European Election Officials International Foundation for Election Systems Central Election Commission of the Russian Federation
Gisela Salas, IFES Consultant
What is Campaign Finance Disclosure?
What is campaign financing?
Campaign Financing, in the broadest sense, is the solicitation and use of money by candidates, political parties or political committees to promote their political candidacies.
Money is symbolic. Money is instrumental and its importance lies in how it is spent by people to gain influence, how it is converted in resources or used in combination with resources to gain political power.
Money is a must for nearly everything in a campaign. Just about any campaign technique can be used if there is money to pay for it. Money is not everything in politics, but when there is no state financing many campaigns fail for the lack of it. Many candidates spend much of their time and energy trying to get it.
Most useful is what politicians call «early money», that is, money available at the start for planning and purchasing ads and radio and television time. With such seed money, a candidate can gain visibility and credibility that will mobilize workers and attract more money.
Media access is crucial for the dissemination of party. When state laws allow for private purchase of media, candidates may utilize funds to acquire media time thus enjoying the right to express themselves freely. This is especially evident in countries in transition, where the government has long monopolized the press and control media access. Access and fair balanced coverage for candidates is one of the components in ensuring fair elections. Distinction should be made between media coverage given by the free media and time purchased by the candidate or other political entities. This may be done by including a political disclaimer informing the public who paid for the media coverage.
In-kind resources such as printing supplies from a local printer, wood from a lumberyard, food from a restaurant, etc. are just as valuable as money. They give a candidate exposure they would have to pay for otherwise. Support from a strong party machine or a powerful union may attract free publicity and volunteers. Large numbers of excited volunteers or skilled workers are also valuable.
By the same token, problems can also arise with the hidden use of in-kind resources such as those available to incumbent candidates. Incumbent candidates must be careful not to use their existing office, staff and supplies when running a campaign. Such misuse of their position can lead to public criticism as well as subject them to violations of campaign laws.
Public funding of candidates means that candidates receive funds from the government to pay for valid expenses of their political campaigns.
Private campaign funds can come from a multitude of sources ranging from individuals to the candidate himself. Private funds can be acquired from political committees, political parties, unions, and corporations.
It is important to see how money is divided among the candidates. Fiscally speaking, some candidates may be more equal than others. Although the American system is rooted in the assumption of political equality, « one person, one vote», the money amongst candidates is not distributed equally. Generally, incumbents attract more money than challengers do. Maybe this is because contributors who may want a return for their dollars in access or favors after the election consider them «better investments».
The ability to make decisions, propose policy, authorize government actions or spending that please specific constituencies and the ability to command media attention because of their position all attribute to an unmeasurable advantage on the part of the incumbent candidate.
What is a Candidate?
A candidate means any person to whom any one or more of the following apply:
1. Seeks to qualify for nomination or election by means of the petitioning process;
2. Receives contributions or makes expenditures, or gives his consent for any other person to receive contributions or make expenditure with a view to bringing about his nomination, election, or retention to public office;
3. Appoints a campaign treasurer and designates a primary depository; or
4. Files qualification papers and subscribes to a candidate's oath as required by law.
Who is a Treasurer?
A candidate must have one campaign treasurer. The campaign treasurer has the duty of keeping detailed accounts of all contributions received and expenditures made by or on behalf of the candidate. The accounts must be kept current of any contributions received or expenditures made.
After the campaign is over, the treasurer should preserve the accounting records for a specified period. In the State of Florida, the law requires that the records be kept for the number of years equal to the term of office to which the candidate seeks election. This is necessary in the event that the records need to be audited.
A campaign treasurer is responsible for filing regular reports of all contributions received and expenditures made by the campaign with the filing officer. These reports should be filed in accordance with the law on designated dates prior the election. All reports should be open to public inspection.
What is a contribution?
Both state and federal laws establish the definition of what is a contribution. A contribution is a gift, deposit, loan payment or distribution of money or anything of value, including contributions in-kind, having an attributable monetary value in any form, made for the purpose of influencing the results of an election.
A person, who makes an in-kind contribution to a candidate, must advise the candidate of the fair market value at the time of making the contribution. In-kind contributions must also be reported on the campaign treasurer's reports.
Loans are also considered contributions are subject to contribution limitations. Loans must also be reported on the campaign treasurer's reports.
Limits on contributions vary for Federal and statewide candidates. (Attachment 2- FEC A Guide for Citizens, Attachment 3 -State of Florida Statutes 106.08). In the United States, while on a Federal level an individual may contribute $1,000 per election, while at the state level, only $500 may be contributed to a statewide or local candidate. Candidates may accept the maximum amounts per person for each election they are involved in. A candidate may not accept contributions until he files the Appointment of Campaign Treasurer and Designation of Campaign Depository (Attachment 1/Form 1) with the filing officer before whom the candidate qualifies.
In the State of Florida, a candidate may not accept contributions after the date he withdraws his candidacy, is defeated, becomes unopposed or is elected. However, Federal law permits the candidate to accept contributions to repay any existing campaign debts.
In Florida the following exceptions apply to contribution limits:
1. Contributions from foreign nationals are prohibited. Foreign national has been defined by federal law to include individuals who are not United States citizens and who are not residents.
2. A candidate may contribute any amount of money to their campaign. Family members are limited to the $500 per election.
3. A candidate may not accept more than $100 per elections from an unemancipated child under the age of 18.
4. A candidate may not accept contributions, which in the aggregate exceed $50,000 form national, state and county executive committees of a political party.
A campaign fundraiser means any affair held to raise funds to be used in a campaign for public office. All monies and contributions received with respect to a fundraiser are campaign contributions. All such contributions are subject to the same campaign contributions previously mentioned.
What is expenditure?
Expenditure means a purchase, payment, distribution, loan, etc., made for the purpose of influencing the results of an election.
A candidate must pay for all campaign expenditures by a check drawn on the campaign account. This is important to maintain an audit trail of expenses.
This includes the payment of the qualifying fee for the candidacy. Only a candidate's campaign treasurer or deputy treasurer is allowed to sign checks drawn on the campaign account.
A candidate may not authorize any expenditure for the purchase of goods or services unless there are sufficient funds on deposit in the campaign account to pay the full amount of the goods or services. Final payment for such goods or services must be made upon final delivery or acceptance.
A candidate may establish a petty cash fund to be used by the campaign. To establish the fund, the campaign treasurer must write a check from the campaign account.
Who/What is a filing officer?
The filing officer is the election official named in the law as the person responsible for accepting and filing the qualifying documents and reports of candidates seeking to be elected.
What is the Parties' role?
In democracies, usually at least two competing political parties are involved in an election. In situations of transition, political parties often face difficulties in establishing themselves. The role of the parties cannot be discounted when discussing transparency in campaign financing. In establishing an open transparent election system, misunderstandings between parties can be avoided by providing a system of disclosure. By allowing competing parties access to the other parties' financial information, free and fair elections may be accomplished.
Why is campaign financing regulated?
Financial inequality between incumbents and challengers and between wealthy and poor donors has led to demands for legal controls. Reforms have been urged not just to clean up campaign financing but also, there is also a wish to shift political influence from those who rely on money donations and those who rely on other things.
For many years in the United States the system of disclosure as we know it today did not exist. The support mechanisms of many political candidates were not as apparent as they seemed. This led to a widespread belief that politicians were dirty; that is not upfront regarding their intentions for wanting to be elected to office. Public confidence in elected officials deteriorated since many felt they were only in office to serve the special interest groups, which were responsible for their financial backing and ultimately, their election.
In the wake of the Watergate scandal, the federal government and many state and local bodies passed broad finance laws which required disclosure of campaign financing. President Ford signed the Federal Election Campaign Amendments into law in 1974. Since then a variety of other campaign financing laws have been passed both at the Federal and State levels promoting transparency and thereby restoring public confidence.
The rationale for public funding of political parties and election expenses is linked to the desirability of establishing an equal playing field. Public funding may also help keep political parties independent of financial pressure in situations where the role of the parties is complex and controversial.
Several methods have been used to control the role of money in campaigns.
Primary among those are:
1. Controls on candidate spending.
2. Limits on individual contributions
3. Limits on party contributions
4. Free radio/TV time for candidates
5. Optional public financing for presidential and statewide candidates.
Who does campaign finance disclosure affect?
Campaign finance disclosure can have a «domino» affect. By disclosing where a candidate gets contributions he is essentially telling the public where he is getting his support. By making this information public, he is likely to influence other individuals, political groups and private organizations to either support or oppose him.
The principle of equal access to the media is widely accepted in established democracies. Those competing in an election should have a reasonable opportunity to get their message across. If there is a free media, the general public will be well informed of the candidate's financial dealings.
Why Have it?
An equitable campaign spending and financial disclosure system serves two main purposes:
An equitable law serves to promote fair and equal campaign conditions for competing candidates. The implementation of the law can help provide voters with information to help them make informed choices on Election Day.
Effective campaign finance regulation depends on disclosure. Disclosure begins with reporting requirements.
Who does it help?
Disclosure permits policing of the political system by an informed public. Information pertaining to the funding sources of candidates allows the voters to access their character, interests and perhaps even their intentions.
The persons, entities and interest which give money to candidates indicates who those candidates will listen to if they are elected.
How is it relevant to open and transparent elections?
The idea of disclosure is a primary concept to open and transparent elections. The effectiveness of campaign finance law cannot be measured strictly on the basis of technical enforcement of regulations regarding solicitation and expenditure of campaign funds. It must also be measured by the effectiveness of the reporting mechanisms available to expose violations. Public awareness requires the assistance of the news media and civic associations to examine and publicize the information reported by candidates.
Components of a Disclosure Law
An effective campaign finance disclosure process depends on the following three components:
Reporting: Laws, regulations and an election authority to enforce them that require a full accounting. Including receipts and expenditures of funds raised and spent to influence elections by candidates and electoral organizations, through reporting requirements during pre-election campaigns and after the election.
Access: Availability of the reported campaign funding information on a reasonable and ongoing basis to news media, civic associations, candidates (including opponents) electoral organizations and other interested persons.
Publicity: Monitoring, scrutinizing and publicizing of the reported campaign finance information by the news media to inform the public and to discourage improper funding and reporting activities on the part of candidates and electoral organizations.
When there is private funding, any donation is an investment in a candidate on the part of the contributor. Even a one-dollar contribution may signify that one more vote is committed. A contributor becomes personally involved in the campaign as soon as he makes his donation. Having given money he is also likely to give other support to the candidate by telling friends of his investment and by encouraging others to vote for the candidate.
As eager as a candidate may be in looking for funds, he must be careful about where the money comes from. Most political contributions are made in good faith but the candidate must be aware of what may be expected in return if elected.
There is no single reason why people donate money to political campaigns. Some give simply because they were asked to make a contribution. Others contribute due to a sense of civic duty or because they believe in the candidate's platform. Some contributors may give to a political action committee because of a sense of loyalty to their employer, union or group with whom they identify. Other contributors may seek the good will of elected officials and hope that by contributing to their campaigns, they may acquire the ability to speak with them directly. However, some contribute because of ego or self-esteem, for example, to be invited to a dinner at the White House, or to be present at a fundraiser where the President or some other dignitary will be at the reception line.
In situations where there is public funding, the parties may fund candidates based on allocations made from the state. Free and fair elections are less likely if government denies financial resources to its opponents while using all the resources at its disposal to place the opposition at a disadvantage.
Filing Requirements of Candidates
Fundamental to becoming a candidate, is the procedure that must be followed in order to become properly registered as a candidate. This enables all interested parties the right to ballot access.
The filing officer must ensure that information regarding the procedure is accessible to the public so that all may be informed as to what the requirements are for becoming a candidate. Secondly, the proper forms must be readily available to those desiring to file as candidates.
A person may declare as a candidate at any time prior to an election. However, the actual qualifying as a candidate is usually a limited period of time prior to the election with a closing date far enough in advance of the election date to allow for campaigning, ballot and voting equipment preparation.
What must be filed and Where
A form showing the name, address, party affiliation if the office is partisan, office sought, name of depository where bank account is to be opened and the name of campaign treasurer should be completed when the candidacy is announced.
A Statement of Candidate should filed showing that the candidate had read and understands the election laws.
A Financial Disclosure Statement showing the candidates sources of income, current assets and liabilities.
A loyalty oath is used as the candidate's sworn statement that they will abide by the federal and state laws and that they will accept the office which they are seeking if elected. This form is used to officially place the candidate's name on the ballot.
Most offices have a qualifying fee which must be paid when the candidate files the qualifying paperwork. The fee is usually based on a percentage of the salary of the office being sought.
When the candidate files for office, information pertaining to the testing of the tabulation equipment, a calendar of reporting dates, and a copy of the laws pertaining to placement and removal of political campaign signs should be given to them pursuant to the law. A receipt should be obtained from the candidate showing that they received this information.
CAMPAIGN FINANCE DISCLOSURE
After the candidate opens the campaign account, detailed reports of the contributions and expenditures must be filed in accordance with the law.
The filing of reports should be specified in the law. Generally, reports should be filed at least in quarterly intervals. When there are upcoming elections, reports may be filed as often as 2 weeks prior to the elections and just several days prior to the election.
How is it regulated?
It the filing officer's responsibility to ensure that reports are filed accurately, completely and in a timely manner.
Access to files
Maintenance of an open file system, free to public inspection is essential for free transparent elections. The filing officer may promote disclosure by:
Issuing press releases regarding availability of candidate reports.
Preparing reports containing summaries of candidate's reporting activities.
Whether or not a candidate filed required reports
Allowing media, candidates and the general public equal access to candidate files.
Why support Campaign Finance Disclosure?
Primary to promoting the concepts of campaign financing is a good public information and awareness program. Stringent regulations are of no benefit if the public is not well informed. Laws should be enacted which are clear and concise. Every effort should be made by election officials to ensure that the candidates and the campaign treasurers are aware of the laws. They should be provided with a good understanding of the laws and assisted to follow them.
A successful campaign finance disclosure system should include components, which inform candidates, media, and the general public of the laws.
Informing Candidates, Treasurers and the Media of the Laws
Candidates and Treasurers
A candidate information package (Attachment 1). This package should include a non-legalize summary of the laws related to the candidacy and all pertinent forms. The information should be presented in a fashion that is user-friendly and understood by a person with no previous knowledge of the law. The package should also include a summary of what disclosure requirements are required and the penalties if they are not met.
The availability of candidate workshops is an extremely useful tool. The target audience for these workshops may include persons who are interested in becoming candidates or simply interested in what laws regulate campaigns, such as students and news media. The purpose of the workshop is to walk through the candidate information package, discuss the election laws, review the proper filing method for campaign forms and answer any questions that the audience may have regarding campaign financing.
When a candidate files the first form stating that they are announcing as a candidate, acknowledgment of the receipt of the form is essential. Upon acknowledging that an individual has filed as a candidate, the filing officer should notify the candidate of the campaign reporting requirements that will be due for the duration of the campaign.
Media information packages may be prepared indicating the offices that will be on the ballot; list of persons who have announces their candidacy, calendar of reporting dates, etc. Such packages will inform the media of legal requirements of the candidates and allow them to become active participants by promoting public disclosure.
Educating the public
By allowing free access to candidate files the public may become educated as voters. By examining how candidates finance their campaigns, they may learn who is supporting the candidates and whether the candidate is using their own personal funds to finance the campaign. In cases where there is a free media, the public may choose to rely on media reports to obtain this information.
The law needs to address the issues of political ethics with regard to restricting the use of official resources on the part of incumbent office holders for political purposes. The use of office equipment and staff should be limited. Incumbent office holders must be careful to separate official business from campaigning. The law should impose penalties upon incumbent officeholders for violations. An election agency, such as the Federal Election Commission, can play an important role in such enforcement. If evidence of impropriety is actively pursued, it will assist the voters in deciding which officials are worthy of public trust.
It is the filing officer's responsibility to make sure that reports are filed by all candidates in a timely manner.
Upon receipt of reports, the filing officer will review the reports received from each candidate to determine that they are complete. The completeness is determined by following a checklist of the items required by law. Basically the reports must include a thorough record of:
Where each contribution came from (Including the date, full name, address of each contributor and their occupation).
To whom each expenditure was made (Including the date, full name, address to whom expenditure was made).
Purpose of expenditure
The responsibility of the candidates, treasurers and election officials should be clearly established in the law to encourage accountability and compliance. Imposing sanctions on candidates can be an effective first line of enforcement; punishing persons individually or imposing criminal liability should be reserved for the most serious, malicious and intentional conduct. Enforcement must be fully and uniformly carried out. Punishment should be certain for violators of the law to encourage compliance and deter violators.
Failure to file reports
When the filing officer determines that a report is late, they shall immediately notify the candidate of the failure to file and inform them that a fine is being assessed for each late day.
When the late report is received, the filing officer determines the amount of the fine which is due and notifies the candidate.
The fine is based on the earliest of the following:
Date the report was received by the filing officer
Date the report was postmarked
Date the candidate has a marked certificate of mailing from the post office
Date of receipt from an established courier company.
Reports to Elections Commission regarding violations
Upon notification of a fine, the candidate has a designated period of time to pay the fine or make an appeal to the Elections Commission. The candidate may appeal or dispute a fine based upon unusual circumstances surrounding the failure to file on the designated due date. The Elections Commission has the authority to investigate and determine violations of the election laws and act upon such violations. A violation is defined as the willful performance of an act prohibited by the election law and the willful failure to perform an act required by the election laws.
Additionally, the Elections Commission may impose fines to the candidate, campaign manager, campaign treasurer or deputy treasurer for failing to file a campaign report or filing an incomplete or inaccurate report in addition to the assessment of the fines due.
If a candidate fails to respond to «Incomplete Notices», «Failure to File Notices» or «Fine Letter» the Elections Department may report the candidate to the Elections Commission and allow the Commission to make the final determination on the case.
Any person who has information of a violation of election laws may file a sworn complaint to the Elections Commission. If the Commission determines that the complaint is complete and legally sufficient, it will investigate the alleged election violations.
Complaints and all attached documents are confidential and any person who discloses information pertaining to a complaint commits a misdemeanor of the first degree. A complainant however, is not bound by the confidentiality provisions. The person against whom the complaint is filed is bound by confidentiality, but may waive his rights by filing a statement with the Commission.
Problems encountered in implementation and enforcement of Campaign Financing
No system of campaign financing can be said to be without its share of problems. The following is a summary of the problems experienced by our office:
Large number of candidates makes it difficult to keep up with the pace of reports being submitted.
Insufficient funding results in insufficient staff to monitor and audit reports.
Inadequate enforcement powers.
Candidates do not fully understand the requirement of the law and therefore do not follow them. Cumbersome rules and regulations make interpretation difficult for the candidates.
Poorly designed and difficult to understand forms that must be complied with.
Candidates sometimes have difficulty in separating personal expenses from campaign expenses.
Honesty of candidates to properly report transactions.
An election agency should have adequate resources to compile and analyze the campaign finance reports submitted by the candidates. Such tabulations or summaries should be considered an integral part of an effective disclosure law.
1. Do you better understand the role of campaign financing in democratic elections?
2. Do you understand how financing and reporting provide transparency in elections?
3. Were these concepts presented in a clear manner?
4. Does the manual appear to be helpful to you for the development of laws and regulations pertaining to reporting and enforcing campaign financing disclosure?
5. Was enough time allowed to discuss the subject matter presented?
6. Would you like samples of laws, regulations, forms or other related materials?