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7. Campaign Financing
The federal election code governing political finance for the 1996 Presidential elections and the 1995 State Duma elections offer more clarity and detail than the skeleton language in the 1991 law on election of President of the RSFSR and the 1993 decree on elections to the State Duma. While there is a relatively novel, albeit substantive, discussion among opinion leaders, select political figures, and political scientists in Moscow about the inadequacy of Russia's campaign finance laws, accompanied by calls for more legislation, insufficient emphasis is being placed on bringing the «practice» of political financing into line with legislation which is already in place. Gaps and inconsistencies do exist in the law and will need to be addressed. At the same time, however, policy makers must understand that a successful campaign finance disclosure system is not necessarily one exhaustive in its regulation, but rather one which facilitates -- to the greatest extent possible --compliance by political participants, which is enforceable by election authorities, and which exposes violations to the electorate.
Overview of Legal Provisions17
Campaign Finance Provisions in the Law on Basic Guarantees of Electoral Rights
The Federal Law «On Basic Guarantees of Electoral Rights of the Citizens of the Russian Federation,» establishes the system of campaign finance for federal offices in general terms. According to Article 12, the Central Election Commission, in cooperation with the subject election commissions, is charged with responsibility to distribute federal budget funds provided for financing preparation for and conduct of elections, and to audit use of such funds. The CEC is authorized to issue instructions related to the implementation of the law. In addition, the instructions adopted by the CEC are mandatory upon all election commissions. The origin of election funds to finance preparations and conduct of elections is stipulated by Article 27. According to its provisions funds are to be provided from federal, subject and local government budgets. Expenses of the Central Election Commission are to be specifically provided for in the federal budget, and the CEC is required to submit statements of expenses to the Federal Assembly.
Under Article 28 candidates are given the right to raise election funds of their own to finance their pre-election campaigns. In addition, the law gives similar privileges to electoral associations in elections to the bodies of state power and to local self-government bodies. (According to Article 2 of the Law on Basic Guarantees all rights afforded to electoral associations are also afforded to electoral blocs.) The law identifies the sources from which donations to these election funds may be accepted. They include:
- funds provided to candidates or electoral associations by appropriate election commissions;
- personal or existing assets of candidates or electoral associations (except those that are of foreign origin;)
- assets provided to candidates by electoral associations; and,
- voluntary donations by physical persons or legal entities.
Assets allocated to the election funds are to be used solely for purposes of pre-election campaigning. The law also identifies sources from which donations to the election funds are prohibited. They include contributions from:
- foreign states, organizations or citizens;
- Russian legal entities involving foreign participation unless the foreign partner's share is less than 30%;
- international organizations;
- governmental organizations and institutions;
- local self-government bodies; and,
- religious associations.
Separate laws governing the elections for particular offices at federal, subject and local levels specify limitations not only upon the amounts of total receipts and expenditures of election funds of candidates or electoral associations but also on the amount of funding that can be accepted from particular sources.
Prior to election day, election commissions are obligated to periodically publicize information from data received from candidates or electoral associations about amounts and sources of their election funds. Every candidate or electoral association is required to submit a report of receipts and expenditures to the appropriate election commission within 30 days after the election. In turn, the law dictates that election commissions are to publish the reports of candidates or electoral associations within 45 days after the date on which they were submitted.
Article 29 of the Law on Basic Guarantees of Electoral Rights of Citizens establishes the mechanism for receipt and distribution of election funds. Upon registering with appropriate election commissions, candidates or electoral associations are required to open special bank accounts into which all monies for their election funds are to be deposited. The law dictates that the Central Election Commission, by agreement with the Central Bank, is to establish procedures for the opening, maintaining and accounting for the funds deposited and expended from the special accounts, and for fulfilling the reporting requirements. Under the law, candidates or electoral associations maintain control over the disposition of election fund assets. Following the election, funds remaining in election accounts shall be transferred back to the organizations and persons who provided the funds in proportion to their donation.
Campaign Provisions in the Law on the Election of the President
Provisions of the Basic Guarantees Law are reinforced and elaborated upon in the Federal Law on Election of President of the Russian Federation. Article 9 earmarks federal budget funds for financing the preparation and conduct of the presidential elections and provides guidance for candidates fund raising for the purposes of financing their pre-election campaigns.
In accordance with Article 44, federal budget funds are to be provided to election commissions to cover their expenses in the preparation and conduct of the presidential elections and for their operating budgets; allocations are to be identified separately in the federal budget. The funds are to be transferred to the account of the Central Election Commission within 10 days after the day of setting the date of the election. Various financing procedures and contingencies are specified in the law. Among them is a provisions that if the funds are not deposited into the account of the CEC in the time frame stipulated, the Central Election Commission is entitled to apply to the Central Bank of the Russian Federation for credits. If the Central Bank refuses to allow the credits, the CEC is then entitled to apply to commercial banks for a credit on a competitive basis. Credited including interest is to be repaid from the federal budget not later than three months after the day of the election. The manner of financing repeated voting (second round elections) or repeated elections is to be performed similarly in event original resources exhausted.
Subject election commissions are responsible for distributing federal funds to subordinate election commissions. (It is noted that these kinds of explicit instructions are absent in the Law on Election of Deputies to the State Duma). Under the law election commission chairmen are charged with responsibility for disposal of commission funds in accordance with the decisions of the commission, and are responsible for record-keeping. Unexpended funds are to be maintained in special accounts after the election for later use by the election commission.
Article 45 identifies sources from which donations may be accepted by presidential candidates, and clarifies the upper limits which are applicable to each kind of contribution. The limits of contributions are defined relative to «minimum salaries» established by federal law and in effect as of election day. The sources from which contributions are authorized on by the Law on the Election of the president include:
- funds provided by the Central Election Commission;
- a candidate's own funds, not to exceed 1000 times the minimum salary;
- funds allocated to a candidate by the nominating electoral association or bloc or initiative group, not to exceed 50 thousand times the minimum salary;
- voluntary donations of natural persons, not to exceed 50 times the minimum salary; and,
- voluntary donations of legal entities, not to exceed 5000 times the minimum salary.
Based on these limitations, the total expenditures from a candidate's election fund may not exceed 250 thousand times the minimum salary.
Article 45 of the Law on the Election of President expands on the list of sources from which campaign contributions are prohibited. Under its provisions donations to election funds are not permitted from the following sources:
- foreign states, organizations and citizens;
- persons without citizenship;
- legal entities in which foreign investment exceeds 30% of their capital;
- international organizations or movements;
- bodies of local government;
- state and municipal enterprises, agencies and organizations;
- military units, institutions or organizations;
- charitable organizations; and,
- religious associations.
Contributions from impermissible sources or which exceed the limits established in law must be returned in whole or excessive part, and the reason for returning such contribution must be documented. Anonymous contributions are forfeited to the state.
Monies from all sources which are accumulated for the purposes of the candidate's campaign make up the candidate's «election fund» the disposition of which is controlled directly by the candidate. These funds must be placed in a special temporary account of the Savings Bank of the Russian Federation, which is to be opened pursuant to written authorization of the Central Election Commission.
Under the Law on the Election of President, banks are required to submit information about receipt of funds into candidate accounts to the Central Election Commission within three days of receipt. Additionally, the banks are required to provide information about expenditures from the account upon request of the Commission. Candidates may only use funds from their official election account to conduct their pre-election campaign. Transactions from candidate accounts shall conclude as of the day of the election.
The Central Election Commission may request the Supreme Court to cancel the registration of any candidate if it is determined that the candidate is using resources outside those in their electoral fund. Under these circumstances the Court is required to consider the CEC's request within five days, or immediately if the request is made less than five days before the election.
The procedure for accounting for election funds and submitting financial reports is established under Article 46. The Central Election Commission is authorized to determine procedures for accounting for candidate election funds and to establish forms of financial reports. Candidates must submit a financial report to the Central Election Commission within 30 days after publication of election results. The Commission is obligated to make the reports available to the mass media.
Article 47 stipulates that candidates' unexpended funds are to be returned within 30 days to the Central Election Commission proportionate to the amount received from the Commission. With the permission of the Central Election Commission, candidates' remaining funds are to be returned to persons and entities who contributed to such funds in proportion to their contributions.
A special auditing service is established within the CEC to monitor the appropriateness and accuracy of candidates' election fund receipts and expenditures in compliance with Article 48.
As for accounting for the expenses incurred by election commissions, polling site election commissions submit summary financial reports to their respective territorial election commission within 10 days from when election results are announced; territorial commissions submit reports to the subject commission within 30 days. Subject commissions, in turn, submit their reports to the Central Election Commission within 60 days after the election results are announced, and the Central Election Commission submits a report to the Federal Assembly within three months. The CEC's published report is to be made available to the mass media.
CEC Regulation of Election Funds
On 1 February 1996, pursuant to authority granted under Article 46 of the Law on the Election of President, the Central Election Commission issued regulations establishing procedures by which candidates for president would account for receipts and expenditures from their election fund accounts. Similar regulations had been issued in 1995 for candidates for State Duma, electoral associations and electoral blocs. The 1995 regulations divided responsibilities for monitoring campaign finance between the CEC for federal mandate (party-list) candidates, electoral associations and blocs, and district election commissions for single-mandate candidates. The regulations adopted by the CEC for the presidential elections reaffirm and expanded upon corresponding statutory prohibitions, requirements and conditions for financing campaigns. The CEC's authority to issue regulations in this area was specifically upheld against a challenge brought to the Supreme Court of the Russian Federation.
The regulations observe that accepting election campaign services paid for by a legal entity or natural person in a manner circumventing the election fund would be a violation of the prohibition upon use of monetary assets other than election funds in the special bank account imposed by Article 45. The regulations stipulate that donations to election fund accounts by individual persons are to be accepted by bank branches or communications enterprises only upon the presentation of proper identification by the contributor. According to the regulation donations from legal entities may be made only by wire transfer to the candidate's account. The Savings Bank is obligated to automatically return donations from individuals or legal entities to candidates' accounts transferred after election day. The regulation also mandates that monetary assets may only be accepted in rubles and that acceptance of donations in foreign currency is prohibited.
The regulations clarified that candidates can open only one special account for their election fund and reiterated the provision in Article 45 which states that candidates' accounts accrue no income and pay no interest. Under the regulation bank fees for opening these special accounts were waived. The regulations reaffirmed the candidates' obligation to be personally familiar with information about receipts into their accounts and the sources of such funds. The regulations also dictated that if a candidate voluntarily withdrew from the election, the CEC was authorized to deduct from the candidate's account those monies allocated to that candidate by the government.
Candidates were required to keep records of receipts and expenditures of their funds according to a prescribed form. Under the regulation all spending from candidates' accounts had to end on election day absent special permission; in the event of a «run-off» election, transactions of candidate bank accounts could be extended pursuant to written permission from the CEC.
The regulations clarified rules regarding goods and services provided by legal entities requiring that they had to be documented in writing by a contract or invoice which had to include specific information about costs and payments. Additional provisions required that payments to legal entities providing goods or services also had to be paid by wire transfer from candidates' accounts. The regulations dictated that contracts had to be formalized with individuals providing campaign management and consulting. In addition, the rules specified that orders for advertising from broadcasters and print media, printers and other legal entities had to be accompanied by documents confirming the consent of the candidate for the specific expenditure.
The CEC's regulations described purposes for which election funds could be used as well as the requirements and procedures for commercial transactions involving candidates' accounts. Under their provisions monetary assets could be used for:
- payment for production and dissemination of campaign materials (which were required to include complete information about sponsorship );
- announcements and statements of candidates in the mass media; and,
- expenses related to election meeting with voters, rallies, demonstrations and other special events related to election campaigns.
Reinforcing restrictions posed by the law, the regulations prohibit candidates and their agents from giving voters cash or gifts, conducting discount sales or disseminating free goods other than printed campaign materials.
The regulations gave candidates more detailed instructions for election fund accounting, including procedures for candidates to open the special temporary bank accounts, return impermissible or excessive contributions, or remit anonymous contributions. The regulations prescribed how legal entities were to wire transfer money to candidates' funds and attest to the share of foreign capital in their business. The regulations also included official forms for several phases of accounting for election funds. They included:
Form 1 -- For use by the Savings Bank to provide information to the CEC within three days of receipts into the candidates' special election fund accounts, including the date, source, amount, and explanatory notes about the source;
Form 2 -- For use by candidates to request the CEC notify a particular branch of the Savings Bank of their intention to open a special temporary account;
Form 3 -- For use by the CEC to notify a Savings Bank branch of authorization to open a special temporary account for a candidate;
Form 4 -- For use by candidates to notify the CEC an account has been opened and to give specific information to permit transfer of monetary assets allocated to candidates;
Form 5 -- For use by candidates to keep records of receipts (and returns) of assets and expenditures from their election funds;
Form 6 -- For use by the Savings Bank to provide information to the CEC (upon written request) about the date, recipient, amount and purpose of expenditures from candidate special election fund accounts;
Form 7 -- For use by candidates in submitting post-election reports to the CEC within 30 days of election results being published of the receipts and expenditures (according to «line code» categories) of their special election fund accounts.
The CEC's regulations specifically required candidates to submit financial statements by means of Form 7 within 30 days of when election results are announced. An accompanying statement completed on Form 5 and original supporting documentation also had to be submitted to provide information about receipts and expenditures. The rules reiterated statutory provisions about returning unspent election funds to the CEC and to individual and legal entity contributors in amounts proportionate to their allocation or contribution. The regulations also established the CEC's campaign finance Control and Auditing Service.
The regulations placed personal responsibility upon the candidate for the use of assets in the election fund and for timely and accurate submission of records and statements in conformity with the forms prescribed by the CEC. They reinforced the statutory provision permitting the CEC to request of the Supreme Court the cancellation of a candidate's registration if that candidate has used assets for pre-election campaigning other than those in the election fund account. The regulations made specific reference to Articles 40-11 and 40-12 of the Code of the RSFSR on Administrative Offenses, which places responsibility upon candidates under civil law for submitting required financial reports and information, and assigns liability for accepting prohibited donations from foreign sources.
Election System Performance
Since the 1993 parliamentary elections, the Central Election Commission has established an office for implementing the provisions of federal election laws regulating the political finance of candidates and electoral groups. This office has succeeded in executing the legal requirements of the law within its narrow jurisdiction and limited policy goals. Candidates for president in 1996 and for the State Duma in 1995, and the electoral groups recognized by the law to nominate and support them, have opened special temporary election fund accounts pursuant to the election laws to finance their pre-election campaigns. Funds from the federal budget have been provided to qualifying candidates and groups as available. Information about financial activity in those accounts provided by the Savings Bank have been monitored by the Central Election Commission (and by district commissions for single-mandate State Duma elections) and that information has been periodically published in national and local newspapers. Candidates and electoral groups have reported receipts to and expenditures from their funds in post-election reports required by the laws. On the surface, election commissions have functioned well and political participants have met their legal obligations.
The CEC has processed grievances, allegations or inquiries about violations in a relatively informal manner through the operation of a «working group» and by direct intervention of CEC personnel. Some 700 requests for investigation of alleged problems were said to have been examined by CEC staff during the 1996 Presidential elections. These generally involve persons bringing to the attention of the CEC campaign materials (flyers, posters, etc.) that favor or oppose a candidate but evidently have not been paid for from the official bank account of the candidate (or electoral group) sponsoring, distributing or benefiting from the material. Some of these examples appear fairly blatant. Yet these cases seem to be resolved through investigation and negotiations by the CEC to rectify the problem. Compliance, if retrospective, appears to be coaxed out of those raising or spending money illegally by threat of public exposure and perhaps further proceedings. In all cases where the allegations were found to be true, the offending campaign (or other responsible entity) was apparently persuaded to properly pay and account for expenditures through the official, reported account.
Unlike the experience in the United States, campaign finance regulation has not triggered official complaints by political opponents or from non-partisan «watchdog» organizations. Few stories have appeared in the news media documenting violations of campaign finance rules, although circumvention of the law is routinely described as widespread. Thus, despite the lack of formal complaints and apparent resolution of grievances by informal means, there exists a pervasive sense among election observers that campaign finance restrictions and reporting requirements are being ignored and avoided. That sense is largely based upon unmistakable signs of far greater activity and spending than the official accounts would explain and limitations under the law would allow.
Shortly before the Presidential elections, an article about funding of the presidential candidates' campaigns was published in the Russian language Newsweek. On the opposite page was a chart using a gambling slot machine as the graphic. It showed money going from the Central Election Commission to the candidate's election fund, and money from individuals and «clean» legal entities going to the candidate's election fund and to the political party fund. Assets from the candidate's election fund were used to pay TV, posters and campaign materials (such as buttons). Assets from party funds were used to pay for campaign materials and campaign workers. The other half of the slot machine, however, showed a tangle of money going from banks, factories and commercial enterprises either through mediators to «dirty money» cashiers to pay for signature collecting, rallies and other politically motivated cultural events and publishing activities, or more indirectly through other banks and mediators to launder the funds for a «clean firm» to pass on.
It is now widely believed this metaphor understated the level of unaccounted spending during the 1996 presidential election (and, to much the same extent, during 1995 elections for State Duma). Much election-related spending seems apparently to have been off the official books. As described above, the campaign finance rules prohibited such spending and provided for a more tightly controlled and reported official system. That system was implemented by the CEC. But, like the black market economy in Soviet times, the real action was outside the official system. The additional spending or use of assets outside official candidate or electoral group accounts occurred through several means.
Pre-Registration Activity
The jurisdiction of existing campaign finance laws for the Presidential and State Duma elections began operating when candidates were registered and the pre-election campaign began. However, enormous resources were devoted to pre-registration activity by political participants. Large amounts of cash and assets were collected by electoral associations or blocs and initiative groups prior to candidate registration. Evidence suggests that some apparently came from prohibited sources or in excessive amounts. Fundraising for this phase of election activity is not subject to either funding restrictions nor reporting requirements under the current election laws. Money collected before operation of the campaign finance rules was viewed as pre-existing assets and available for use during the pre-election campaign by the electoral groups and their candidates.
Funds were spent or resources accepted by these groups prior to operation of the law for organizational purposes, including for office facilities, equipment, salaries and material support. Electoral groups were active in the early candidate nomination period and, of course, during the difficult process of collecting signatures for petitions to meet candidate registration requirements. Paying workers and voters for signatures was widely reported and considered commonplace, sometimes at fairly exorbitant rates. Also, numerous complaints were filed during the Presidential elections alleging use of industrial facilities to collect signatures in a coercive atmosphere or by improper use of government resources. Again, political activity prior to registration of candidates was not subject to campaign finance regulation or disclosure since neither the Law on Basic Guarantees nor the Law on Election of President address the issue.
Supplemental Payment for Goods and Services
Although the laws are absent such guidance, the regulations of the Central Election Commission required written contracts and supporting documentation for agreements between candidates and political vendors for goods and services (such as publishing and TV air time). These contracts appear to have often understated the full extent and value of goods or services provided, and served instead as a cover for spending that was supplemented by persons and interests supporting such candidates who would otherwise have been prohibited or restricted by amount from giving such support directly. It is difficult to detect arrangements that are nominally accounted for but which involve significant yet hidden increases in candidate support.
Avoidance of Overt Political Purpose
Political systems find it difficult to distinguish between pure politically-related speech -- expressing points of view on issues of public concern or commenting about the performance of the government or officeholders -- and communications or activity clearly favoring the election of particular candidates and clearly fall under political finance rules. In the United States, after twenty years of its current campaign finance laws at the federal level, political debate and judicial challenges continue as to the meaning of the definitional phrase «expressly advocating the election or defeat of a clearly identified candidate.» Does «express advocacy» require the words «vote for» or «vote against,» or can the meaning be read into communications to the public that appear to have no other purpose or effect than to influence voters?
This definition problem was evidenced in recent Russian elections. Political supporters claimed election-related advertisements or seemingly electioneering activity was not really intended to be active support for any particular candidates. Financing of some communications on television or in newspapers was argued to be for political commentary and not for the purpose of influencing voters' support for or against any particular candidates, despite its occurring at the request or in cooperation with candidates, electoral groups or their agents. Thus, this activity was not regulated, reported or disclosed.
Advantages of Incumbency
It is impossible to exaggerate the impact of the power of incumbency upon the pre-election campaign and the voting outcome in the 1996 Presidential elections. Much of the influence upon the electoral process wielded by the executive authority of the administration of Boris Yeltsin flows naturally from the advantages of office: the ability to make decisions, propose policy and authorize government actions or spending that please particular demographic or geographic constituencies, or the ability to command news media attention for such activity. Incumbent administrations have an existing organization with a personal stake in maintaining the administration's power and authority all the way to the local level. Some of the pressure and control alleged to have been exercised by the Administration is beyond the direct jurisdiction of the laws and regulations for political finance, such as co-opting the support of the news media (unless, as sometimes reported, bribery was involved).
But beyond the natural advantages of incumbency or the exercise of political pressure is the use of official funds, resources, facilities, and personnel for purposes of favoring one candidate and influencing the election outcome. This abuse of power is flatly prohibited in developed democracies as unethical and illegal -- though sometimes still necessitating investigation and prosecution for violations in even the most advanced democratic systems. The recent elections for President left many observers convinced the Yeltsin campaign benefited directly from government funds and resources to augment the officially reported expenditures.
The circumstances of unofficial and unreported political spending were able to persist through a combination of factors, most notably:
- the intimidating influence of the power of incumbency;
- a conspiracy of silence among political participants who all feared scrutiny; and,
- at least tacit acquiescence of the news media.
The civic culture showed a complete lack of appreciation for the problem or need for self-monitoring by opposing electoral organizations and candidates through the news media.
Therefore, legal restrictions and reporting requirements appear to have been practiced on a formal level but widely ignored in practice in both the 1995 Duma and 1996 Presidential elections. Limitations upon source and amounts of contributions and upon total expenditures may have been widely circumvented by both deliberate avoidance and under reporting. As a result, financial disclosure was almost certainly incomplete. The information about political finance that was disclosed was not accessible to the public in a comprehensible manner and not scrutinized by the elements of the political culture that could have done so.
For Consideration
The development of sound campaign spending and financial disclosure systems serves two main purposes. First, an equitable law can serve to promote fair and equal campaign conditions for competing candidates. Implementation of such a law can also help to provide voters with important additional information on which to make informed choices on election day. Hopefully, as the democratic election process continues to mature in the Russian Federation, the public will come to recognize the significance of campaign funding and the potential influence of contributors, not only over their decisions as voters, but also over the decisions and official actions of candidates who may ultimately be elected.
Effective campaign finance regulation depends upon disclosure, and disclosure begins with reporting requirements. Disclosure is primarily a market solution rather than a regulatory solution to controlling the influence of money on politics and politicians. Disclosure of campaign finance activity permits self-policing of the political system by an informed public. Disclosure also provides information to assist voters in choosing which candidates to support. Information about private sources of support for candidates is particularly useful for voters to assess the character, beliefs and true intentions of candidates. Which persons, entities and interests give money to candidates indicates who those candidates will listen to if they are elected.
An effective campaign finance disclosure process depends upon three components.
Reporting: Laws and regulations (and an election authority to enforce them) that require full accounting of receipts and expenditures of funds raised and spent to influence elections by candidates and electoral organizations, through reporting requirements both during the pre-election campaign and after the election.
Access: Availability of the reported campaign funding information on a reasonable and ongoing basis to news media, civic associations, candidates and electoral organizations (including opponents) and other interested persons, both during the pre-election campaign and after the election.
Publicity: Monitoring, scrutinizing and publicizing of the reported campaign finance information by the news media, to inform the public and to discourage improper funding activity or false reporting by candidates and electoral organizations.
The effectiveness of a campaign finance law cannot be measured strictly on the basis of technical enforcement of complex regarding solicitation and expenditure of campaign funds. It must also be measured by the effectiveness of its reporting mechanisms to expose violations . Public awareness requires the assistance of news media and civic associations to examine and publicize the information that is reported by candidates and electoral groups to election authorities.
Therefore, the primary focus of revisions in the election system in the area of campaign finance should be directed to facilitate more thorough and effective pre-election reporting and public disclosure practices. The CEC (or subordinate election commissions as appropriate) should concentrate on demanding greater compliance with expanded reporting requirements by candidates and electoral organizations and making the information accessible to the public on a timely basis. Those goals should be advanced through the following specific changes in election laws and election commission practices.
9.1. Articles 45 and 46 of the Law on the Election of President, as well as relevant articles in other laws governing specific kinds of elections should be augmented to more clearly describe the scope of regulatory jurisdiction. To discourage circumvention and avoidance of campaign finance regulations, the election laws should be revised to more clearly identify the nature and type of political expenditures covered by the financial restrictions and reporting requirements. Terms need to be defined and examples given. Activities or spending with certain characteristics, particularly by persons or groups other than candidates or their nominating organization, could be treated as presumptively for the purpose of influencing the election and thus subject to regulation under the election laws (e.g., communications mentioning a candidate in an electoral context or within a certain time frame before the election, or the providing of goods or services that clearly benefit a particular candidate or electoral group or are clearly intended to do so). The concept of receipt by candidates of assistance from outside sources -- explicit or implied acceptance -- needs to be examined. Any effort to more clearly define the scope of regulatory jurisdiction of campaign finance regulation would benefit from a major public conference to gain the insights of political participants, journalists, academics and election officials. The goal would be to achieve legal standards based upon objective and reasonable criteria. It is better to clearly identify fairly narrow jurisdiction for campaign finance regulation than to have broad restrictions and requirements that are widely ignored in practice.
9.2. Under the current legal frame work encompassed in Articles 45, 46 and 47 of the Law on the Election of President only candidates are formally recognized as official campaigning entities. As such, the law imposes special requirements that they are toe create «election funds» to be maintained in special accounts. Candidates can accept contributions from electoral associations, blocs and voters' initiative groups to their election funds, but it is the candidate who remains at the center of the pre-election campaign function. The Law on the Election of President only superficially acknowledges that nominating organizations' participation in the campaign environment in Articles 40 and 41 which address their eligibility to use the broadcast and print media. The law fails to address the factual reality that electoral associations and other politically oriented organizations also participate in a broad scope of campaigning activities prior to the registration of the candidate as well as throughout the campaign period. However, none of their activities are governed by any rules, funding limitations or reporting requirements.
9.3. Lawmakers should affirmatively address the enactment of a separate law on electoral associations (»political parties») that includes a political finance regulatory structure. A comprehensive federal law to institutionalize and regulate electoral associations should be adopted for many reasons. Effective campaign finance regulation is a particularly significant benefit that could follow from enacting a «party law.» Jurisdiction of current campaign finance regulations doe not operate until after candidates are registered and the official pre-election campaign has begun. Considerable raising of funds and assets and making of expenditures for political purposes takes place prior to this time, however, especially in the difficult and expensive task of gathering signatures for candidate petitions.
A party law contemplates ongoing and stable electoral associations. It would include regulation and public disclosure of financial activity of electoral groups and their supporters between elections and during the critical time preceding candidate registration. Although the role of these groups can pose some problems in accountability and monitoring of financial support of candidates, they can have the positive effect of insulating candidates from direct involvement with contributors and special interests. A separate law which addresses the campaign financing and reporting responsibilities of nominating organizations and other political organizations would create a basis for distinguishing the campaign activities of specific candidates from those of organizations over which the candidate may have no direct control.
9.4. The laws need to address the issues of political ethics specifically with regard in its restrictions of incumbent executive and legislative officeholders from utilizing official resources for political purposes. Article 23 of the Federal Law on Basic Guarantees of Electoral Rights and Article 38 of the Law on the Election of President prohibits election commissions, governmental bodies and other official entities from participating in pre-election campaigning. Article 38 of the Law on Election of President provides similar limitations adding wording that also prohibits them from «distributing pre-election propaganda materials. This article also adds a prohibition against these activities by their officials «in the process of fulfilling their official duties. Article 45 of the Law on the Election of President also prohibits bodies of state power and state and municipal enterprises, agencies and organizations from making contributions to the election funds of candidates. However, the law is not specific enough in addressing issues related to their separate use of their own resources. A new ethics law must be carefully drawn and adopted to clearly more clearly define and prohibit uses of governmental funds, resources, facilities, equipment and personnel for purposes of influencing or affecting election outcomes. This law should apply to both executive and legislative officeholders and employees and impose personal liability upon such persons for violations.
9.5. The laws fail to address the issues related to non-monetary or «in-kind» contributions provided by a variety of sources in support of campaigns. For example, Article 45 only prohibits candidates from using «other monetary resources for conducting the pre-election campaign except for the resources received by them in their election funds.» Failure to address «in-kind» contributions such as printing, or campaign commodities provided «at no charge» or in exchange for non-monetary remuneration or trade provides a vast window of opportunity to circumvent not only funding limitations, but also reporting requirements.
It is recommended that the laws be augmented to impose absolute prohibitions upon receiving or spending funds for political purposes that are in the form of cash which is undocumented. The election laws should be amended to specifically prohibit, with particular and significant penalties for violations, the acceptance or spending of money, or «in-kind» contributions for political purposes (above specific minimal amounts) that is either in the form of cash or for which no paper audit trail is created. Legitimate contributions made by individual persons by documented means should be made easier under the law, however, and not demand physical presence at the candidate's depository bank.
9.6. It is recommended that any limitations upon political contributions and expenditures be set much higher. If the law continues to place limits upon contributions from persons and entities to candidates and electoral groups, and to place limits upon total spending by candidates and electoral groups during the pre-election campaign, those limitations should be established at amounts much, much higher than under current law. Current limitation amounts set by Article 45 of the Law on the Election of President, for example, are simply unreasonably low and encourage circumvention and avoidance of the entire regulatory system. During the 1996 Presidential elections, for example, a candidate was prohibited from spending in excess of approximately $11,550 (in U.S. dollars), electoral blocs or initiative groups were prohibited from providing their candidate any more than $577,500, donations from individual persons were limited to a maximum of $577.50 and $57,750 from legal entities, and, most impractically, a maximum of total expenditures by a Presidential candidate of $2,887,500. Similarly, during the 1995 State Duma elections, electoral associations were limited by law to total expenditures during the pre-election campaign of approximately $2,300,000 and single-mandate candidates limited to $93,000. Those low limits absolutely invite circumvention of the law. It would be far better to permit much higher levels of donating and spending (or even no limits at all) if receipts and expenditures of political participants were conducted within a system fully reported and publicly disclosed.
9.7. A more routinized pre-election financial reporting schedule should be established, requiring more direct candidate verification. The current law relies upon the depository banks to provide political finance information to election commissions. This approach is administratively convenient and avoids placing responsibility upon overwhelmed candidates or groups to directly produce reports during the pre-election campaign. It also reinforces the primacy of the special temporary election fund accounts. The election law should be changed, however, to require reports from banks regarding receipts and expenditures of accounts of candidates and electoral groups to be provided on a routine and established pre-election schedule, increasing in frequency up to the time immediately before the election, rather than a rotating «three days after receipt» for contributions to such accounts or merely upon request of election commissions for expenditure information. Discrepancies or inadequate information must be completely reconciled by the time of post-election reports, with serious sanctions for deliberate or grossly negligent misreporting. The entire political finance reporting system should be elevated to a more formal and systematic level. Related to this point, language in the Basic Guarantees Law and federal laws on election of the President and the State Duma should be made consistent with respect to the responsibility of candidate organizations and electoral associations/blocs to provide periodic reporting on the amount and source of donations.
9.8. Campaign finance authority should be transferred from election commissions to an independent agency or independent department of the CEC. Collecting, monitoring, and disclosing campaign finance information, and enforcement of legal requirements and restrictions upon political finance, should be conducted under the authority of a separate, independent and specialized governmental agency or CEC division (ideally with authority also over permanent political party finances and operations pursuant to a political party law). A campaign finance agency would clearly need improved manpower and other resources compared to the dedicated but severely underpowered office currently within the Central Election Commission. A new agency or department requires investigatory power and legal authority to bring cases of non-compliance to court, perhaps directly enlisting the help of the office of the procurator during election campaign seasons.
9.9. Designated personnel should be provided within both the regulating authority and the regulated political participants with responsibility and training to implement the disclosure system. Specially trained personnel of the government agency or department responsible for implementing and enforcing the campaign finance laws should be deployed to banks during the pre-election period to oversee and implement the reporting process. Although the laws already provide for the appointment of authorized representatives and attorneys to represent their general interests, the law should require appointment of «financial managers» of the candidates and electoral groups who form special election fund accounts to be legally responsible for compliance with the election law. The «financial managers» should be required to receive special training for this position provided by election commissions. These campaign representatives and officials should oversee preparation of the bank's reports of financial activity. Alternatively, candidates or the chairmen of associations or blocs should be required to personally attest, to the best of their information and belief, to the accuracy and completeness of these periodic bank reports about election funds of the candidates or electoral groups.
9.10. There should be created a structure of fines, penalties and punishments for election law violations that is clearly defined, graduated, proportionate and strongly enforced. Enforcement and liability provisions for campaign finance regulation and disclosure should be expanded in scope to identify more legal obligations and restrictions under the election law. To encourage compliance, the enforcement regime should target and emphasize essential elements of the process. A clear structure of civil fines and penalties and criminal punishments should be created that are proportionate to the seriousness of violations. Enforcement must be fully and uniformly carried out; punishment should be certain for violators of the law to encourage compliance and deter violations.
Personal responsibility of candidates, electoral group officials or their financial representatives should be clearly established under the law to encourage accountability and compliance. However, imposing sanctions on candidate campaigns and electoral groups should be the first line of enforcement; punishing persons individually or imposing criminal liability should be reserved for the most serious, reckless or intentional conduct.
Simple fines should be imposed for relatively minor infractions of funding restrictions or mistakes or tardiness in reporting. Penalties should be gradually more severe as violations are more serious or deliberate. Penalties must be appropriate to the offense; imposition of the most severe penalties and criminal punishment should be reserved for only the most serious, reckless or intentional conduct. Sanctions should not be candidacy-based; it makes no sense to threaten cancellation of registration of candidacy for violating the law if the violations cannot be determined or liability upheld in court until after the election. Although enforcement of campaign finance regulations should generally not depend on whether the violations arguably affected the election outcome, imposing of the sanction of cancellation of a candidate's election should be reserved for those circumstances or, perhaps, deliberate or grossly negligent conduct.
9.11. Mechanisms should be created for research access to official campaign finance information during the pre-election campaign and for post-election reports. Current practice is for political finance information to be periodically published under the auspices of appropriate election commissions: the Central Election Commission for nation-wide election contests such as President or federal party-list State Duma seats, district election commissions for single-mandate seats or, presumably, subject commissions for republic-level executive or legislative elections. This procedure is admirable but not enough. The CEC and lower commissions should develop software and data base capacity for inputting and making available by computer the political finance information reported by banks during the pre-election campaign and provided by candidates and electoral groups in post-election reports.
9.12. Ongoing work must be undertaken to develop a civic culture that supports disclosure and monitoring of campaign finance information. Creating a reasonable regulatory system that is clearly understood, enforced and respected by those regulated is an essential prerequisite for popular confidence and participation. Political participants, the news media and general public must be persuaded that monitoring campaign finance information through election commission records is important. Political scientists should also be stimulated to conduct long-term post-election research in this area. Political participants must also be educated how to do the monitoring. Encouraging a civic culture that effectively participates in political finance disclosure will require a long term effort of public education.
9.13. Funding from the federal budget for election commissions and for electoral participants must be transferred in a timely and reliable manner. Subsidies from the public treasury to candidates (and electoral groups as authorized) must be provided early in the pre-election campaign and in full. The law should include a deadline for the transfer of authorized allocations of campaign funds within a specific time frame based on the date of registration of the candidate. For example, the deadline that could be prove beneficial might be within 2 days after the date of registration. Even more importantly, election commissions must receive their full allocation for administering elections. While the budget problems of the federal government are understandable, sufficient money to conduct elections must be segregated and guaranteed.
17 SEE ALSO: Code of the RSFSR on Administrative Offenses (Art. 40-11 and Art. 40-12 establish candidate's responsibility under civil law for submitting required financial reports and information, and candidate's liability for accepting prohibited donations from foreign sources).
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