Audit of Political Parties - Regional Experience

21 November 2014.
Audit of Political Parties - Regional Experience

In 2015, the State Audit Institution will commence audit of political parties in compliance with the Audit Program, which will be adopted by the Council by the end of the year, announced Mr. Radoslav Sretenović, Auditor-General. Opening the two-day regional conference of supreme audit institutions, titled "Audit of Political Parties - Regional Experience", he said that the current Law on the State Audit Institution already provides competences to the Institution to conduct financial statement audit of political parties, but it does not oblige the Institution to conduct such audit.

"Pursuant to the National Anti-Corruption Strategy in the Republic of Serbia for the period 2013-1018, Law on Financing Political Activities will be amended, so that the State Audit Institution will be obliged to include each year, in its Audit Program, appropriate number of political entities with representatives in the National Assembly", Mr. Sretenović said.

He added that the audit will be conducted by the existing Sector for Audit of the National Bank of Serbia, Public Agencies and Other Public Funds Beneficiaries.

Training of auditors is also planned for employees working in the Sector, but we will also have to employ new staff as well, Mr. Sretenović said.

According to him, there is a large public interest in audit of political parties in Serbia, but audits will take time as long as it is needed, in order to produce high-quality reports.

Mr. Veroljub Arsić, Vice-Chairman of the National Assembly and Chairman of the Committee for Finance, Republic Budget and Control of Public Funds' Spending, highlighted that the State Audit Institution will find it difficult to conduct audit of political parties, because certain political parties have behaved irresponsibly, took loans from business banks, and could not repay such loans afterwards.

Performing audits of financial statements of political parties would compel the parties to manage their funds properly during periods without any election campaigns, Mr. Arsić said.

Ms. Irena Vojáčková Sollorano, Resident Representative of the United Nations and UNDP to Serbia, emphasized that the organization will support SAI of Serbia in preparation of the first audit of political parties through project "Advancing Accountability Mechanisms in the Public Finances".

From the Republic Budget alone, parties received almost 10 million Euros in 2014 for their regular activities, while additional seven million Euros were distributed for the purpose of covering election campaign costs, Ms. Sollorano emphasized.

She added that transparent, legal and controllable political party financing is an extremely important issue both for democracy and for the fight against corruption

Auditors from Bosnia and Herzegovina, Montenegro, Macedonia and Slovenia spoke on their experiences within preparations for performing audits of financial statements of political parties in Serbia.

In Bosnia and Herzegovina, audit of political parties is not conducted by the Supreme Audit Institutions - Audit Office of Bosnia and Herzegovina, but by the Department for Auditing Financing of Political Parties of the Central Electoral Commission. This Department has conducted audit of political parties since 2004, and control of all political parties is conducted each year. So far, the Department has published 570 reports with audit findings and opinions on party financing, in compliance with the Law on Financing of Political Parties.

Audit of financial statements of political parties in Montenegro has been conducted since 2012, and parties at central and local level are included in the audit. Among other things, auditors review whether the party adopted general acts regulating their operations, number of employees in party for the audited year, whether the party established internal control system, whether the financial plan has been adopted in accordance with general acts, and whether financial plan includes all types of revenue and expenditures.

Mr. Milan Dabović, President of the Senate of SAI of Montenegro, emphasized that besides auditing state closing account, audit of political parties is the second most important legal obligation. He added that there was no harmonization between real and actually executed costs.

"From the first audit until present day, many things have changed and more efficient and high-quality records have been established, and parties took legal limitations very seriously", Mr. Dabović said.

As of 2010, State Audit Office of Macedonia has been conducting audit of political parties each year. Before that, starting from 2005, this Supreme Audit Institution audited only political parties that participated in election campaigns.

Ms. Tanja Tanevska, Auditor-General of the Republic of Macedonia, emphasized that the Audit Office conducts audit of all parties except those receiving less that 2,500 Eur from the Republic Budget annually.

"In 2013, we conducted audits of 46 parties, while eight parties were not audited", Ms Tanevska said.

She added that 0.06% of total budget funds are allocated to political parties, and that the largest financing sources of political parties are donations and membership fees.

"Audits of political parties have contributed to resolving systemic weaknesses, so that all laws governing this area are now harmonized", Ms. Tanevska highlighted.

In Slovenia, reports from election campaigns have been audited so far, and starting from next year audit of final statements of political parties will also be subjected to audit. Court of accounts will control amount of funds raised and used in election campaign; then, whether funds have been used in campaign in accordance with law, and whether data from reports, prepared by election campaign organizers, are accurate.

Practice in Slovenia says that if funds have been paid to political parties in Slovenia contrary to law, election campaign organizer shall transfer such funds to humanitarian organizations. According to the Law on Political Parties, Court of Audit conducts compliance audit of political parties receiving more than 10,000 EUR from the Budget. Also, that law prescribes that the Court of Audit must conduct audit of at least one third of parties during one year, and/or all parties in a four-year cycle.

Mr. Nemanja Nenadić, Director of Transparency Serbia, which will assist in capacity building of SAI of Serbia within preparations for conduct of audit of political entities, spoke on history of regulating party financing in Serbia, on private and public sources of party financing, competences of the State Audit Institution and Anti-Corruption Agency in the area of control of political parties.

He highlighted that in Serbia legislations regarding political parties are not consistent, and pointed to importance of clear separation of competences among different bodies, in order to avoid overlapping and failure to cover all areas.

Mr. Radojko Obradović, Director of the Public Finance Institute, highlighted that bigger attention must be given to audit of political parties that is not commensurate to amount of public funds allocated from the Budget to the parties.

"In order for SAI of Serbia to use its audit staff in the best manner, first it should conduct audit of Parliamentary parties. Also, it would be good to make a four-year plan, which would include audit of all political parties in Serbia", Mr. Obradović said.

He added that SAI of Serbia should treat all funds, available to parties, as public funds and to audit such funds, not to control only funds that parties received from the Budget.

"It is important that audit reports of parties present comprehensive structure of revenues and expenditure and, generally speaking, financing methods of parties", Mr. Obradović said.

He said that the public should not expect from SAI of Serbia to replace prosecutor offices, police or the Parliament, and that SAI of Serbia cannot replace those institutions if they do not perform their work properly.

Conference was also attended by the representatives of the Anti-Corruption Agency, who particularly emphasized the importance of cooperation with SAI of Serbia in this area.

All participants agreed that during the conference valuable regional experiences were exchanged in the audit of political parties, good practices were reviewed, and that issues are highlighted that the Supreme Audit Institutions are facing in this part of the Europe. All institutions agreed that financial, functional and organization independence of Supreme Audit Institutions is a prerequisite in order to respond to all challenges brought by audit of political parties, and that Parliamentary support is important for implementation of recommendations from the audit findings.

The conference was organized by the State Audit Institution, within activities of the Project "Advancing Accountability Mechanisms in the Public Finances', implemented by the United Nations Development Program (UNDP) and funded by the Government of the Kingdom of Sweden.

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