Corrections made to party subsidy payment procedures – political party funding mostly transparent

In 2017, the political parties represented in the Finnish Parliament received more than EUR 29 million in party subsidies. In its audits last year, the NAOF noted a number of inadequacies in the party subsidy agreements and payment procedures required under the Act on Discretionary Government Transfers (688/2001). For example, party subsidies had also been paid to entities other than the associations referred to in the Act on Political Parties (10/1969). Moreover, the entities receiving party subsidies have not always been able to properly monitor the amounts of the subsidies that they have received and the amounts carried over from the previous year.

Political parties and other entities that had received party subsidies already made corrections to their payment procedures last autumn on the basis of the observations made by the NAOF. Furthermore, in January 2019, prompted by the audit carried out by the NAOF, the Government asked the Ministry of Justice to launch a legislative project aimed at removing the discrepancies between the Act on Political Parties and the Act on Discretionary Government Transfers.

“The oversight and audits by the NAOF help to make political party funding more transparent. Few errors were found in the disclosures after the additions had been made,” explains Klaus Krokfors, Principal Financial Auditor at the NAOF.

In addition to the party subsidy payments, the NAOF also audits political party funding each year by reviewing the financial statements and accounting of the audited entities over a period of several years. The purpose is to verify that the statutory funding disclosures are submitted correctly, comprehensively and at the right time to the public electronic funding register of political parties maintained by the NAOF.

“Again, most of the accounts of the audited entities had been properly managed, but there were some exceptions.  Moreover, under the Act on Political Parties, the entities’ auditors must report on the funding and party subsidies. However, the documentation produced by the auditors has not always been sufficiently explicit. This weakens the trust in the auditors’ work when it is assessed how the requirements specified in the law are taken into account and observed in the party organisations,” Krokfors adds.

Not all audited entities observe the NAOF’s recommendation under which the contributions made by MPs should also be disclosed. Political parties have justified this practice by for example saying that their parliamentary groups pay the contributions as a lump sum and that the contributions made by individual MPs each year remain under the disclosure limit of EUR 1,500.

“The total amounts paid are nevertheless substantial.  The law is not explicit and the differences between the payment and disclosure procedures make it more difficult to produce comparisons between large amounts of information. It is clear that this also goes against the transparency principle laid down in the law,” Krokfors notes.

In 2018, contributions totalling about EUR 2.8 million received by political parties, their district and women’s organisations, and other party associations and entities affiliated with political parties were reported to the electronic funding register maintained by the NAOF. This total is roughly the same as in 2017 but contributions for earlier years totalling about EUR 0.7 million were also reported to the register during 2018. A large proportion of the retrospective disclosures were submitted on the basis of the audit observations made by the NAOF.

The NAOF, which is responsible for the oversight of political party funding, carried out 31 audits last year in which the funding of the political parties represented in the Finnish Parliament and their affiliated entities and district organisations was examined. The NAOF audited all nine political parties represented in Parliament and their 13 affiliated entities. Of the entities, 11 were foundations, one was an association and one operated as a fund. The NAOF also audited nine district organisations of political parties (in Häme, Southeast Finland, Pirkanmaa and Savo-Karelia).

There are about 6,000 party associations in Finland and 150 of them are monitored by the NAOF. Since 2016, the NAOF has also been responsible for the oversight of the government subsidies received by the political parties represented in the Finnish Parliament (party subsidies). The audits of political party funding will continue in autumn 2019.

Study the publication: Report on the oversight of political party funding

Read more about good governance and the audits performed by the NAOF: VTV.fi