Money and politics 6

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We are happy to present you the sixth issue of thenewsletter prepared by the Center for Democratic Transi-tion (CDT) in cooperation with partner organizationsfrom the region: Transparency International Bosnia andHerzegovina, Initiative for Progress from Kosovo, Citi-zens’ Association MOST from Macedonia and Center forDevelopment of Serbia. Publication of the newsletters wasenabled by the Balkan Trust for Democracy (BTD), whichhas provided financial support for implementation of theproject "Money and Politics in the Western Balkans".

In this issue, read about the European Commission’sreport on the fight against corruption in Serbia, financingof election campaigns in Kosovo, amendments to theElectoral Code of Macedonia, and reactions of the insti-tutions in Montenegro on irregularities regarding the fi-nancial operations of political parties. In this newsletteryou may also find information on the number of initiatedproceedings and imposed sanctions against political par-ties in Bosnia and Herzegovina and Croatia.

We invite you to continue to follow our work and ef-forts to improve the system of financing of political par-ties at the regional level.

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D uring the previous period, the Central ElectionCommission made a decision on initiating proceed-

ings against 33 political parties for violating the Law onFinancing of Political Parties in Bosnia and Herzegovinain 2011. According to the findings of the Office for Au-diting of Political Parties Financing, in 2011 the partieshave violated almost all the provisions of the Law on Fi-nancing of Political Parties, starting with not reportingdonations, receiving prohibited contributions, hiding in-comes, deficiencies in financial statements, and so on.

Unfortunately, all the abuses that occurred in 2011are to be considered only after more than two years. TheOffice for Auditing of Political Parties Financing of theCentral Election Commission of Bosnia and Herzegov-ina does not have enough resources to be able to quicklyand efficiently observe violations, and the Central Elec-tion Commission has no prescribed time limit withinwhich, after initiating the proceeding, it shall make a de-cision. Consequently, the parties have been allowed foryears to “reap the benefits” of not complying with theLaw, and sanctions that may be imposed on them underthe Law are so low (500 - 5000 BAM or amount threetimes greater than the amount received) that the parties,even if they get sanctioned, will not even feel them.

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• Introduction ------------------------------1• Transparency International --------------1• CDT ------------------------------------------2• INPO ----------------------------------------3• MOST ----------------------------------------4• Center for Development of Serbia --------5• Other sources --------------------------------6

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Money and PoliticsRegional legislation, practice and experienceOfxtmfuufs!Op!7

ISSN 2336-9515

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Money and PoliticsThis project is financed by BTD

Regional legislation, practice and experience

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General elections in Bosnia and Herzegovina areyet to take place in October 2014, whereas the

campaign has already begun. One year before theelections, the public speculates that ZlatkoLagumdžija, president of the Social Democratic Party(SDP) and Minister of Foreign Affairs, will engage forthe campaign Alastair Campbell, famous spin doctorand former advisor to Tony Blair. It is still not clearwhether Campbell will be engaged in a party cam-paign, or as a personal advisor to Mr. Lagumdžija,who was forced to confirm this information only afterit “leaked” to the media. Moreover, it is clear to everycitizen that Mr. Campbell’s fees are reaching theamounts which citizens of Bosnia and Herzegovinacan only dream of, hence this issue gets even greater

importance - whether the party will pay this fee fromits own accounts (and whether it will and in whatamount report it), and if Campbell is to be advisor toZlatko Lagumdžija, will he be paid a fee for advisingthe candidate in elections or for advising the Ministerof Foreign Affairs , in which case the fee will be pro-vided by taxpayers. In each of these cases, citizenshave a right to know all the details of this engagement,because the parties and candidates are by all meanslargely financed from the budget. Knowing the cur-rent practice of the parties, these details will surelyremain a mystery, and given that the Central ElectionCommission has no jurisdiction over auditing ex-penses, everything will remain “under the law” andwithout consequences.

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Although the State Audit Institution (SAI) determinedthrough control that most parties do not comply with

laws, as well as that financial statements of some parties"contain material misstatements", institutions have neitherresponded nor processed such violations.

There was no reaction in case of the Bosniak Party(Bošnjačka stranka - BS), which received a qualified opin-ion "on compliance of financial operation with applicableregulations ", because it was determined that municipalboards in Plav, Berane, Bijelo Polje and Pljevlja have notjustified almost EUR 19,500 they spent. The Bosniak Partyhas, as stated in the Report, justified over EUR 37,000 onthe basis of incomplete and inadequate documentation,and disbursed compensations in the amount of EUR14,800 without calculating and paying tax liabilities.

There was also no reaction in case of the Movement forChanges (Pokret za promjene - PzP) and the Croatian CivicInitiative (Hrvatska građanska inicijativa - HGI), by whichthe SAI determined that "there are no material misstatementsor deviations, but there are irregularities and defaults". TheReport indicates that the Movement for Changes has not paidtax for disbursed royalties and lease contracts in the amountof EUR 21,000, while the Croatian Civic Initiative has avoidedtax liabilities in the amount of more than EUR 13,000.

Audit of the SAI also showed that the Movement forChanges has disbursed compensations based on royalties andservice contracts in the amount of EUR 151,000 in cash fromthe cash box, and the enclosed receipts do not include contractnumbers on the basis of which the disbursement was made,date of cash takeover, nor personal information of the personwho took the cash over. The Croatian Civic Initiative has donepretty much the same by paying expenses of nearly EUR55,000, or 60% of total expenses of the party, in cash from thecash box and then justifying those expenses with travel ordersand decisions of party’s bodies. The control has also shown thatthe New Serbian Democracy (Nova srpska demokratija –NSD) has presented part of its expenses (about EUR 11,000)and part of incomes (about EUR 8,000) from the election cam-paign in its business books as incomes and expenses from reg-ular operations, and disbursed about EUR 151,000 from thecash box of the General board, EUR 141,000 from the cashboxes of municipal boards, and over EUR 7,000 from the cashbox of the group of citizens - Milan Knežević.

The SAI also determined that the Socialist People'sParty (Socijalistička narodna partija - SNP) has in 2012justified part of its expenses paid in cash from the cashboxes of municipal boards (around EUR 17,000) on thebasis of inadequate documentation.

Center for Democratic TransitionAddress: VII omladinske bb,

81 000 Podgorica, MontenegroTel: +382 20 207 070, +382 20 207 071Fax: +382 20 207 072E-mail: [email protected]: www.cdtmn.org

Transparency International Bosnia and HerzegovinaAdress: Gajeva 2, 78000 Banja LukaTel: +387 51 216 928, +387 51 224 520, +387 51 224 521Tel/fax: +387 51 216-369E-mail: [email protected], Website: www.ti-bih.org

IFINPO assumes that expenses of political parties during2013 local elections campaigns will be higher than re-

ported. Funding of political parties is of crucial importance

for transitional democracies such as Kosovo. There is anadvanced legal basis regarding the political parties fund-ing which unfortunately, has not been applied by polit-ical parties.

The legal basis consists of two main laws: Law onGeneral Elections, which regulate the financing of po-litical parties’ campaigns, and the Law on Political Par-ties Financing which governs regular financing ofpolitical parties.

In Kosovo, the amount of public funding for politicalparties cannot exceed 0.34 % of the state budget, as pre-scribed by the Law on Political Parties Financing.1

Thus, the ruling political party receives the highestamount from the public fund, or so-called „democrati-zation fund‟.

Based on our experience and also, the reports of thegeneral auditor, political parties in Kosovo have a ten-dency to report only expenditures made out of the statebudget and to avoid reporting on donations from com-panies and individuals.

However, the main problems INPO faced with re-cently have been political parties’ expenditures re-garding their electoral campaigns, since the partieshave been engaged in many activities including grass-roots voter mobilization, candidate recruitment, andadvertising. During the recent local elections cam-paigns INPO visited all political parties and carried

out semi-structured interviews with the heads of theelectoral staff in order to find out whether politicalparties have planned their expenses for the campaignand whether they registered donations in accordancewith the laws, which prescribe obligation of politicalparties, certified to participate in elections, to submitfinancial reports. Political parties are used to submittheir financial reports but during the elections cam-paign they tend to underestimate their expenses by re-porting less wages, less expenses, lower rents, andlower advertising expenses such as billboards and TVadvertisement.

Our research on the local elections finances of polit-ical parties in the south-eastern region of Kosovoshowed many irregularities. First of all, political par-ties haven’t presented any plan of electoral expenses.The only planned thing was how and for what pur-poses to spend the money received from the statebudget. Most of the political parties did not have anyinvoice for the expenses under 100 EUR. The socalled political party Alenca for Lipjan (Citizens ini-tiative) was the only political party in the Ferizaj re-gion which had invoices for the costs under 100EUR.

All political parties have declared income frommembership fees and some have also reported on indi-vidual donations or in-kind contributions as for examplewas provision of billboards free of charge. The partiescould not reveal the names of donors since they did notwant their name to be mentioned. Parties were not evenable to provide us with a list of expenses made duringthe two-week campaign.



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Although these findings suggest a number of irregu-larities in financial operations of political parties, there isno regulation that defines what shall be the next step afterthe SAI performs audit of parties’ reports and providesrecommendations. This was also pointed out by the Sec-retary of the State Election Commission (SEC) MilisavĆorić.

"The SAI acts according to a separate law and the SECcannot intervene there. It is not defined anywhere whatshall be done next with the recommendations of the SAI",said Ćorić for CDT.

This approach, after publication of the Audit Report,shows that there is no systematic action of institutions onpreventing abuses in the area of financing of political par-ties. Moreover, competent institutions refer to insuffi-ciently precise legal solutions and thus avoid furtherprocessing of parties by which they determine defaults. Inorder to prevent this kind of practice, CDT considers that,as soon as possible, amendments to the Law must clearlyspecify the roles and responsibilities of the SAI and theSEC, as well as who and how shall react in case of viola-tions of the Law.

1 Law No. 03/L-174 on Financing Political Parties, Article 7.3

Initiative for Progress – INPO Address: "12 Qershori", br. 52, 70000 Ferizaj, KosovoTel: +381 (0)290 329 400Addres: "Nëna Terezë", 30B H-1, br.2, 10000 Priština, KosovoTel: +381 (0)38 220 552E-mail: [email protected]: www.inpo-ks.org



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INPO’s conclusion regarding expenses of politicalparties during 2013 local elections campaigns is that ex-penditures will be higher than reported. Since politicalparties in Kosovo are obliged to submit their financialreports during the electoral campaigns and, in addition,to submit the annual financial reports outlining all fi-nancial activities during the year INPO will comparethese reports and check any inconsistencies.

The electoral reform has been one of the seg-ments of the High-Level Accession Dialogue

with the European Commission which acts as a kindof replacement for the negotiating process which can-not start due to the name issue with Greece. A work-ing group was created within the Ministry of Justicewith the task of preparing draft law amending theElection Code. The working group consisted of rep-resentatives from relevant state institutions, includ-ing MOST.

The aim of the amendment is to implementOSCE/ODIHR recommendations from the reportsfor the elections in 2011 and 2013. Here are the pro-posed provisions related to the financing of the elec-tion campaign:

• The bank loan has now been listed as one of thelegitimate sources for financing of the campaign.This was proposed because in 2011 the main op-position party (SDSM) used a bank loan to fi-nance its campaign and the Election Code doesnot say whether this is permitted or not, so thelegal experts had differing opinions on this ques-tion. This will clarify the issue, but then anotherquestion is raised: if the loan installments arepaid after the end of the elections (and this is themost probable situation) then another provisionshould be added which will allow financing of thecampaign from the general party account, sincethe account for the election campaign would beclosed.

• One of the recommendations was to change thenature of the limit for donations by legal persons.

In 2011, this limit was changed from 20.000 € to5% of the annual income of the companies. Thenew provision prescribes 30.000 € limit for legalpersons and is in line with international standardsregarding this issue.

• With the amendments in 2012 the provisions re-garding the bank account for the election cam-paign were changed and now there is no deadlinefor closing the bank account which leaves roomfor doubt about the financing of the elections.The new provision prescribes closing of the ac-count with the submission of the final financialreport for the campaign.

There was also proposal to add provision whichwill prohibit the media to give discounts to the polit-ical parties for the paid political advertising. Accordingto the current legislation the media are obliged to pub-lish a price-list for advertising and this price-list can-not be changed during the election campaign. Themedia are also obliged to provide equitable access topaid political presentation to all political subjects.However, in reality some media are giving discountsup to 90% to only one political party, while the otherparties have to pay the regular price. It is clear that thisprovision brings into question the price-list and un-dermines the right to equitable access to paid politicalpresentation. However, this was not accepted by theMinistry of Justice.

The Draft Law has not yet been submitted to theParliament, so we have to wait and see whether theproposed provisions will become part of the ElectionCode.

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Citizen’s Association MOSTAddress: Vanco Mickov 18b, 1000 Skoplje, MacedoniaTel: + 389 2 3099 384Fax: + 389 2 3086 430Website: www.most.org.mk

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The Progress Report of the European Commission forSerbia pays close attention to the fight against corrup-

tion, noting positive developments but at the same timepointing out deficiencies that need to be corrected in thefield. The Report attaches great importance to thoroughcontrol of electoral campaign financial reports, checkingaccuracy of declarations of public officials’ assets, resolvingconflicts of interest and implementation of integrity plans.

Positive assessments relate to adoption of strategic doc-uments in the fight against corruption, such as the NationalStrategy for the Fight against Corruption 2013 – 2018 andthe Action Plan for its implementation, including the state-ment that implementation of GRECO (Group of Statesagainst Corruption) recommendations has continued. In-vestigations into cases of corruption have intensified. TheAnti-Corruption Agency’s operations continued, mostlyin relation to the control of the financing of political par-ties. The Agency improved its methodology for investigat-ing targeted declarations of public officials’ assets. Themethodological changes introduced a mandatory step re-quiring verification and comparison of the data containedin asset and income declarations with the data held by: theMinistry of the Interior, the Tax Administration, the Busi-ness Registers Agency, and the Republic Geodetic Author-ity. The results of the Agency's activities are reflected in theincreased number of filed misdemeanor and criminalcharges against officials who had not submitted the reportof property and revenues within the deadline prescribedby law, or who had given false information about the prop-erty, with an intention of concealing facts about the prop-erty. Requests for misdemeanor proceedings weresubmitted on the grounds of inappropriate use of funds,untimely submission of annual financial reports and non-submission of electoral campaign financial reports.

On the other hand, in addition to the strong politicalmessage of "zero tolerance" to corruption and positive de-velopments in the fight against corruption, which are ex-pressed in the Report, the EC noted deficiencies that needto be improved in some fields, especially those related toimprovement of the implementation of the legal frame-work and the efficiency of anti-corruption institutions. Itis emphasized that proactive approach of the police andprosecution needs to be improved and result into finalconvictions, particularly in the area of misuse of publicfunds, including high-profile corruption cases.

The judiciary needs to gradually build up a solid trackrecord of convictions in this regard, particularly in cases

of misuse of public funds. The EC also noted "the possi-bility of political interference" in appointment and re-moval of judges and prosecutors from office and indicatesa lack of implementation of the accountability system.

The Anti-Corruption Agency needs to make full useof its capacity, in particular with the introduction of morestringent checks on the funding of electoral campaigns.Detection and resolution of cases of conflict of interest re-mains at an early stage since although more files than everwere processed, very few charges were filed during the re-porting period. The law enforcement bodies need to gainexpertise, in particular in financial investigations, and tobecome more proactive.

There is no efficient and comprehensive legal frame-work to protect whistle-blowers. There were no commentsin the EC report regarding the process of drafting the Lawon Protection of Whistleblowers.

Public administration reform remains hampered bythe lack of clear steer and coordination structures. Recruit-ment, particularly for managerial and middle-managementpositions, is an issue of serious concern, as a substantialproportion has been conducted through non-transparentprocedures and direct influence of political parties. Re-cruitment and promotion need to be further reformed anddeveloped to achieve a transparent, merit-based civil serv-ice system.

The EC specifically pointed to areas where supervisionneeds to be strengthened - public enterprises, privatiza-tion, and public expenditure. The EC expressed a positiveopinion in the field of public procurement brought by im-plementation of the new Law and further alignment of leg-islation with the EU acquis, but pointed out to a lack ofcapacities in this area, especially in the Public Procure-ment Office.

Parliament and the Government need to develop amore proactive approach to the consideration and follow-up of recommendations of Independent Regulatory Bod-ies. Serbia has not yet enacted changes to the electoralframework as recommended by OSCE/ODIHR. Half ofthe public authorities obliged to draft Integrity Plans didnot fulfill their obligations without any statutory sanctionsbeing provided.

The EC pointed out the main problems in the mediasector and implementation of the media strategy. Trans-parency in media ownership and financing of the sectorstill needs to be comprehensively analyzed, particularly asregards direct state financing.

Center for Development of SerbiaAddress: Desanke Maksimovic 2, 11000 Beograd, SerbiaTel: (+381 11) 24 33 587E-mail: [email protected]: www.razvojsrbije.org,

www.razvojsrbije.org.rs

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Misdemeanor courts pronounced nearly 200 convictionsagainst parties, independent deputies and independ-

ent members of local authorities for violating the Political Ac-tivity and Electoral Campaign Financing Act in 2011, asreported by the State Attorney's Office on its website.

The Organization GONG regards it is a positive situa-tion that proceedings against participants of elections arebeing instituted, but considers also that it must not hap-pen that proceedings are instituted only against independ-ent councilors or smaller parties who have notintentionally violated the Act, but perhaps out of igno-rance, while the "big fish" get away and go unpunished forserious violations.

Although the SDP was sanctioned in April for a rela-tively mild offense of delay in publishing the annual finan-cial report by quarterly loss of the right of regular fundingfrom the budget, it is however, as GONG noticed, an ad-ministrative rather than judicial sanction.

Due to offenses related to annual financial statementsin 2011 the State Attorney's Office has received 966 casesfrom the National Audit Office (NAO), while on the oc-casion of notifications of the State Election Commission(SEC) 117 cases were established.

Municipal State Attorney's Offices have initiated 885proceedings before misdemeanor courts, based on notifica-tions from the SAO, 197 of which ended in convictions. TheState Attorney’s Offices have informed the National AuditOffice that in 37 cases no proceedings were instituted, whilein other cases preliminary investigations are in progress.

More transparency - less corruption

On the occasion of notifications from the SEC, theState Attorney’s Offices have initiated 103 proceedings be-fore misdemeanor courts, and the courts have achievedtwo convictions. The State Attorney’s Offices have in-formed the State Election Commission that in 8 cases noproceedings were instituted, while in other cases prelimi-nary investigations are in progress.

Instituting proceedings, in the opinion of GONG, mayindicate the beginning of stronger law enforcement andtherefore more transparency and less room for corruption.

GONG considers, however, that the real test for lawenforcement will be oversight of financing of electioncampaign for the local elections, which, in their view, havebeen rife with examples of lack of transparency in financ-ing of election campaigns and sanctioning of parties andcandidates who have systematically violated the Act andwho have showed no credible reports.

GONG concludes that further work is necessary onstrengthening capacities of the SEC, which performs over-sight, but also on training of political parties and inde-pendent candidates regarding the new Act. GONGconsiders that there is still room for improving the Act bysimplifying procedures of financial reporting in order tohave more effective oversight.

Source: Hina (www.hina.hr)

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