Oversight of political party funding strengthens trust in the transparency of the funding

The fundamental purpose of oversight of political party funding is to strengthen trust in the transparency of the funding received by political actors.

The purpose of the oversight is to ensure that political actors disclose the financial and other contributions they have received and comply with the statutory restrictions on contributions. The oversight also covers the government grants awarded to political activities (party subsidies).

The aim of transparent political party funding is to ensure that all or at least the most significant financial contributions are entered into the public register maintained by the National Audit Office of Finland (NAOF), where the information is freely accessible. All significant contributions must be entered into the register and, in political party funding, annual contributions exceeding EUR 30,000 may only be received from affiliated entities reported to the NAOF. It is also laid down in the law that financial contributions may not be received from unidentified donors, public-sector organisations, or foreign companies.

Most political actors disclose the contributions they have received and comply with the restrictions and transparency requirements. The overseen entities have usually corrected any deficiencies detected immediately after the audits carried out by the NAOF.

However, the concept of ‘contribution’ has proved to be open to interpretation, and deficiencies have been discovered in the financial audits of party organisations and in the processing of government grants. In fact, the legislation should be specified by listing exceptions to the disclosure obligation in greater detail and by clarifying the conditions for the use of government grants. It has also been noted in the audits that all political parties have not concluded agreements on the use of party subsidies with the recipients of the subsidies, as required under the Act on Discretionary Government Transfers. Furthermore, it remains unclear whether government grants to political parties can be transferred to limited liability companies, foundations, and cooperatives, which are not mentioned in the Act on Political Parties.

Gaps in oversight and development needs

Foundations have traditionally been important donors of political parties. The supervision of foundations is the responsibility of the Finnish Patent and Registration Office. When a foundation has been reported as an entity affiliated to a political party, the NAOF also oversees and audits its financial operations and the appropriateness of the disclosure procedure concerning it. Combining the details reported to the Finnish Patent and Registration Office and the NAOF provides a comprehensive picture of the channels of political party funding.

The fact that most of the foundations and thousands of party associations remain outside the NAOF’s auditing right limits the transparency of political party funding. The NAOF does not have the right to audit local associations, youth organisations, or pensioners’ organisations of political parties. This issue has been highlighted in the audits of affiliated entities conducted by the NAOF. Under the Act on Political Parties, political parties must ensure that the associations and organisations belonging to their party family file up-to-date disclosures of the contributions that they have received. However, in practice it is difficult for them to oversee the activities of independent organisations. In fact, some of the political parties have announced that they will have closer contacts with the disclosers in order to enhance transparency.

Under the Foundations Act, foundations must also disclose the links with their related parties in their financial statements. This makes it possible to trace the donations given by the foundations, which may reveal many kinds of money flows. A foundation may have supported, for example, a local party association, which in turn has failed to file the statutory disclosure of the contribution it has received.

The financial statements and reports on operations prepared by foundations and affiliated entities are often of general nature and give no details of individual recipients of financial support. This has also been detected in the audits of political party funding carried out in affiliated entities, although in their case, the required itemisations can be obtained from the affiliated entities’ accounts.

The transparency of political party funding could be enhanced through legislative amendments: local associations, youth organisations, and pensioners’ organisations of political parties, as well as foundations should be obliged to publish their financial statements or submit them to the authorities. Furthermore, entities affiliated with political parties and foundations should itemise their donations in their financial statements, and foundations should also do this in their reports on operations. Entities affiliated with political parties should itemise the contributions they have received. The main sources of income for affiliated entities are investments and service tasks but also donations.

At present, political actors can receive government contributions from a variety of different sources. This is called multichannel funding. However, it causes a great deal of administrative work, which could be avoided if the grants to cultural and youth organisations and party archives were linked to party subsidies.

The oversight of political party funding is based on the Act on Political Parties and the Act on Discretionary Government Transfers.  Political party funding is also closely linked to election campaign funding, which in turn is based on the Act on a Candidate’s Election Funding.