ICAC recommends more power for NSW Electoral Commission to strengthen election funding accountability

Wednesday 17 December 2014

The NSW Independent Commission Against Corruption (ICAC) recommends that the NSW Government makes legislative changes to increase the powers of the NSW Electoral Commission (NSWEC) to address deficiencies in how election funding is managed in the state, despite it having some of the most restrictive election donation and expenditure rules of any democracy.

In a report released today, Election funding, expenditure and disclosure in NSW: Strengthening accountability and transparency, the ICAC makes 22 recommendations to address deficiencies, including that the powers of the NSWEC be expanded to enable it to deregister a political party in extreme cases of non-compliance with the rules.

The Commission also recommends that the NSW Government amends the Parliamentary Electorates and Elections Act 1912 (the PE&E Act) and the Election Funding, Expenditure and Disclosures Act 1981 (the EFED Act) to attach criminal and civil sanctions to failures of senior party office holders to meet their internal party governance responsibilities. Failure to maintain effective internal governance would result in conditions being placed on the Administration Fund, which was set up in 2011 to reimburse eligible parties and independent members of parliament for their administration and operating expenses, with potential loss of public funding.

It is recommended that transparency be enhanced by increasing timeliness, accessibility and intelligibility of disclosures. This would include the NSW Government amending the EFED Act to require the recipients of donations to disclose a donor's occupation and employer (if applicable) in relation to reportable political donations, and by amending the PE&E Act and the EFED Act to require registered political parties and third-party campaigners to disclose complete audited financial statements annually, and for those statements to be published online. The NSW Government should also amend the EFED Act to require the terms and conditions of loans from donors to be disclosed, along with repayment transactions, and to require third-party campaigners to disclose all electoral expenditure and which (if any) political parties, candidates or issue agendas they are supporting or opposing.

The Commission recommends that the NSWEC adopts a mandatory electronic disclosure system, which allows for online, real-time reporting by political parties, candidates, groups, members of parliament and third-party campaigners in the lead-up to an election.

The report says that after nearly a decade of legislative amendments, NSW now has some of the most restrictive election donation and expenditure rules of any democracy. "But restrictive rules do not make regulation effective. If the framework of enforcement, scrutiny by civil society, incentives and penalties does not support compliance with the rules, then rules alone will be ineffective," the report notes.

The Commission has identified a need for a change in the NSWEC's focus and methods of regulation. The ICAC recommends that the NSWEC develops risks metrics and conducts regular risk assessment of political parties to determine potential areas of non-compliance with legislative requirements which require regulatory action. The NSW Government should also amend the PE&E Act and the EFED Act to require the NSWEC to make public the results of these risk assessments.
                    
It also recommends that the EFED Act be amended so that funding under the Administration Fund is converted from a reimbursement scheme to a grant, contingent on the internal governance capability of political parties. The EFED and the PE&E Acts should be amended to provide that, at the point of party registration and on an ongoing basis, agreement be reached between political parties and the NSWEC on how a given political party will demonstrate satisfactory governance standards and mechanisms.

The Acts also should be amended to make it a requirement for the roles and responsibilities of senior party office holders to be made public and updated on a regular basis.

The Commission recommends the Acts also be amended to empower the NSWEC to conduct comprehensive random audits of low-risk parties and targeted audits of high-risk parties. They should also be amended to provide a range of mid-level sanctions that can be imposed on political parties by the NSWEC, which currently allows for only low- or high-level sanctions.

The Commission's recommendations reduce the administrative burden on the NSWEC by removing the requirement for donor disclosures and administration fund reimbursements, effectively making recipient disclosure of donations the only disclosure required. The ICAC report notes that the focus on dual disclosure as a primary safeguard against non-compliance with election funding and spending laws is a time-consuming and inefficient process that few political funding regulators in other jurisdictions perform.

This research is being released to contribute to the Premier's review of political funding, expenditure and disclosure laws being conducted by the Panel of Experts, established by the NSW Government. As part of this research, the ICAC consulted widely with experts in the field of political funding, expenditure and disclosure laws, including the Panel. The Commission also undertook its own extensive research into the electoral laws of NSW and conducted comparative analyses between NSW and other jurisdictions at both a state and federal level including the United Kingdom, Canada and the United States.

Full report: Election Funding, Expenditure and disclosure in NSW: Strengthening accountability and transparency

Media contact: ICAC Manager Communications & Media, Nicole Thomas, 02 8281 5799 / 0417 467 801