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1 Introduction Transparency International CDT INPO MOST Center for Development of Serbia Other sources Ofxtmfuufs!Op!7 ISSN This project is financed by BTD Efbs- We are happy to present you the sixth issue of the newsletter prepared by the Center for Democratic Transition (CDT) in cooperation with partner organizations from the region: Transparency International Bosnia and Herzegovina, Initiative for Progress from Kosovo, Citizens Association MOST from Macedonia and Center for Development of Serbia. Publication of the newsletters was enabled by the Balkan Trust for Democracy (BTD), which has provided financial support for implementation of the project " in the Western Balkans". In this issue, read about the European Commission s report on the fight against corruption in Serbia, financing of election campaigns in Kosovo, amendments to the Electoral Code of Macedonia, and reactions of the institutions in Montenegro on irregularities regarding the financial operations of political parties. In this newsletter you may also find information on the number of initiated proceedings and imposed sanctions against political parties in Bosnia and Herzegovina and Croatia. We invite you to continue to follow our work and efforts to improve the system of financing of political parties at the regional level. Tjodfsfmz- Esbhbo!Lpqsjwjdb- Fyfdvujwf!Ejsfdups!DEU Cptojb!boe!Ifs{fhpwjob;! Upp!mjuumf!boe!upp!mbuf! During the previous period, the Central Election Commission made a decision on initiating proceedings against 33 political parties for violating the Law on Financing of Political Parties in Bosnia and Herzegovina in According to the findings of the Office for Auditing of Political Parties Financing, in 2011 the parties have violated almost all the provisions of the Law on Financing of Political Parties, starting with not reporting donations, receiving prohibited contributions, hiding incomes, deficiencies in financial statements, and so on. Unfortunately, all the abuses that occurred in 2011 are to be considered only after more than two years. The Office for Auditing of Political Parties Financing of the Central Election Commission of Bosnia and Herzegovina does not have enough resources to be able to quickly and efficiently observe violations, and the Central Election Commission has no prescribed time limit within which, after initiating the proceeding, it shall make a decision. Consequently, the parties have been allowed for years to reap the benefits of not complying with the Law, and sanctions that may be imposed on them under the Law are so low ( BAM or amount three times greater than the amount received) that the parties, even if they get sanctioned, will not even feel them. Follow us on: Citing and using the information contained in this newsletter shall be allowed upon a mandatory stating the source there of and the copyright owner 2 Opwfncfs!3124
2 Cptojb!boe!Ifs{fhpwjob;! Tqjoojoh!pg!uif!cvehfu!ps!uif!cvehfu!gps!tqjoojoh General elections in Bosnia and Herzegovina are yet to take place in October 2014, whereas the campaign has already begun. One year before the elections, the public speculates that Zlatko Lagumdžija, president of the Social Democratic Party (SDP) and Minister of Foreign Affairs, will engage for the campaign Alastair Campbell, famous spin doctor and former advisor to Tony Blair. It is still not clear whether Campbell will be engaged in a party campaign, or as a personal advisor to Mr. Lagumdžija, who was forced to confirm this information only after it leaked to the media. Moreover, it is clear to every citizen that Mr. Campbell s fees are reaching the amounts which citizens of Bosnia and Herzegovina can only dream of, hence this issue gets even greater importance - whether the party will pay this fee from its own accounts (and whether it will and in what amount report it), and if Campbell is to be advisor to Zlatko Lagumdžija, will he be paid a fee for advising the candidate in elections or for advising the Minister of Foreign Affairs, in which case the fee will be provided by taxpayers. In each of these cases, citizens have a right to know all the details of this engagement, because the parties and candidates are by all means largely financed from the budget. Knowing the current practice of the parties, these details will surely remain a mystery, and given that the Central Election Commission has no jurisdiction over auditing expenses, everything will remain under the law and without consequences. Npoufofhsp;!Xifo!qbsujft!nblf!njtublft-! jotujuvujpot!bsf!tjmfou! Although the State Audit Institution (SAI) determined through control that most parties do not comply with laws, as well as that financial statements of some parties "contain material misstatements", institutions have neither responded nor processed such violations. There was no reaction in case of the Bosniak Party (Bošnjačka stranka - BS), which received a qualified opinion "on compliance of financial operation with applicable regulations ", because it was determined that municipal boards in Plav, Berane, Bijelo Polje and Pljevlja have not justified almost EUR 19,500 they spent. The Bosniak Party has, as stated in the Report, justified over EUR 37,000 on the basis of incomplete and inadequate documentation, and disbursed compensations in the amount of EUR 14,800 without calculating and paying tax liabilities. There was also no reaction in case of the Movement for Changes (Pokret za promjene - PzP) and the Croatian Civic Initiative (Hrvatska građanska inicijativa - HGI), by which the SAI determined that "there are no material misstatements or deviations, but there are irregularities and defaults". The Report indicates that the Movement for Changes has not paid tax for disbursed royalties and lease contracts in the amount of EUR 21,000, while the Croatian Civic Initiative has avoided tax liabilities in the amount of more than EUR 13,000. Audit of the SAI also showed that the Movement for Changes has disbursed compensations based on royalties and service contracts in the amount of EUR 151,000 in cash from the cash box, and the enclosed receipts do not include contract numbers on the basis of which the disbursement was made, date of cash takeover, nor personal information of the person who took the cash over. The Croatian Civic Initiative has done pretty much the same by paying expenses of nearly EUR 55,000, or 60% of total expenses of the party, in cash from the cash box and then justifying those expenses with travel orders and decisions of party s bodies. The control has also shown that the 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 campaign in its business books as incomes and expenses from regular operations, and disbursed about EUR 151,000 from the cash box of the General board, EUR 141,000 from the cash boxes of municipal boards, and over EUR 7,000 from the cash box of the group of citizens - Milan Knežević. The SAI also determined that the Socialist People's Party (Socijalistička narodna partija - SNP) has in 2012 justified part of its expenses paid in cash from the cash boxes of municipal boards (around EUR 17,000) on the basis of inadequate documentation. Transparency International Bosnia and Herzegovina Adress: Gajeva 2, Banja Luka Tel: , , Tel/fax: info@ti-bih.org, Website: Center for Democratic Transition Address: VII omladinske bb, Podgorica, Montenegro Tel: , Fax: cdtmn@t-com.me Website:
3 Although these findings suggest a number of irregularities in financial operations of political parties, there is no regulation that defines what shall be the next step after the SAI performs audit of parties reports and provides recommendations. This was also pointed out by the Secretary of the State Election Commission (SEC) Milisav Ćorić. "The SAI acts according to a separate law and the SEC cannot intervene there. It is not defined anywhere what shall be done next with the recommendations of the SAI", said Ćorić for CDT. IFINPO assumes that expenses of political parties during 2013 local elections campaigns will be higher than reported. Funding of political parties is of crucial importance for transitional democracies such as Kosovo. There is an advanced legal basis regarding the political parties funding which unfortunately, has not been applied by political parties. The legal basis consists of two main laws: Law on General Elections, which regulate the financing of political parties campaigns, and the Law on Political Parties Financing which governs regular financing of political parties. In Kosovo, the amount of public funding for political parties cannot exceed 0.34 % of the state budget, as prescribed by the Law on Political Parties Financing. 1 Thus, the ruling political party receives the highest amount from the public fund, or so-called democratization fund. Based on our experience and also, the reports of the general auditor, political parties in Kosovo have a tendency to report only expenditures made out of the state budget and to avoid reporting on donations from companies and individuals. However, the main problems INPO faced with recently have been political parties expenditures regarding their electoral campaigns, since the parties have been engaged in many activities including grassroots voter mobilization, candidate recruitment, and advertising. During the recent local elections campaigns INPO visited all political parties and carried Lptpwp;!Qpmjujdbm!qbsujft! xjuipvu!fmfdupsbm!fyqfotft!qmbot! This approach, after publication of the Audit Report, shows that there is no systematic action of institutions on preventing abuses in the area of financing of political parties. Moreover, competent institutions refer to insufficiently precise legal solutions and thus avoid further processing of parties by which they determine defaults. In order to prevent this kind of practice, CDT considers that, as soon as possible, amendments to the Law must clearly specify the roles and responsibilities of the SAI and the SEC, as well as who and how shall react in case of violations of the Law. out semi-structured interviews with the heads of the electoral staff in order to find out whether political parties have planned their expenses for the campaign and whether they registered donations in accordance with the laws, which prescribe obligation of political parties, certified to participate in elections, to submit financial reports. Political parties are used to submit their financial reports but during the elections campaign they tend to underestimate their expenses by reporting less wages, less expenses, lower rents, and lower advertising expenses such as billboards and TV advertisement. Our research on the local elections finances of political parties in the south-eastern region of Kosovo showed many irregularities. First of all, political parties haven t presented any plan of electoral expenses. The only planned thing was how and for what purposes to spend the money received from the state budget. Most of the political parties did not have any invoice for the expenses under 100 EUR. The so called political party Alenca for Lipjan (Citizens initiative) was the only political party in the Ferizaj region which had invoices for the costs under 100EUR. All political parties have declared income from membership fees and some have also reported on individual donations or in-kind contributions as for example was provision of billboards free of charge. The parties could not reveal the names of donors since they did not want their name to be mentioned. Parties were not even able to provide us with a list of expenses made during the two-week campaign. 1 Law No. 03/L-174 on Financing Political Parties, Article 7.3 Initiative for Progress INPO Address: "12 Qershori", br. 52, Ferizaj, Kosovo Tel: +381 (0) Addres: "Nëna Terezë", 30B H-1, br.2, Priština, Kosovo Tel: +381 (0) info@inpo-ks.org Website: 4 Opwfncfs!3124
4 INPO s conclusion regarding expenses of political parties during 2013 local elections campaigns is that expenditures will be higher than reported. Since political parties in Kosovo are obliged to submit their financial reports during the electoral campaigns and, in addition, to submit the annual financial reports outlining all financial activities during the year INPO will compare these reports and check any inconsistencies. The electoral reform has been one of the segments of the High-Level Accession Dialogue with the European Commission which acts as a kind of replacement for the negotiating process which cannot start due to the name issue with Greece. A working group was created within the Ministry of Justice with the task of preparing draft law amending the Election Code. The working group consisted of representatives from relevant state institutions, including MOST. The aim of the amendment is to implement OSCE/ODIHR recommendations from the reports for the elections in 2011 and Here are the proposed provisions related to the financing of the election campaign: The bank loan has now been listed as one of the legitimate sources for financing of the campaign. This was proposed because in 2011 the main opposition party (SDSM) used a bank loan to finance its campaign and the Election Code does not say whether this is permitted or not, so the legal experts had differing opinions on this question. This will clarify the issue, but then another question is raised: if the loan installments are paid after the end of the elections (and this is the most probable situation) then another provision should be added which will allow financing of the campaign from the general party account, since the account for the election campaign would be closed. One of the recommendations was to change the nature of the limit for donations by legal persons. Nbdfepojb;! Fmfdujpo!Dpef!Bnfoenfout! In 2011, this limit was changed from to 5% of the annual income of the companies. The new provision prescribes limit for legal persons and is in line with international standards regarding this issue. With the amendments in 2012 the provisions regarding the bank account for the election campaign were changed and now there is no deadline for closing the bank account which leaves room for doubt about the financing of the elections. The new provision prescribes closing of the account with the submission of the final financial report for the campaign. There was also proposal to add provision which will prohibit the media to give discounts to the political parties for the paid political advertising. According to the current legislation the media are obliged to publish a price-list for advertising and this price-list cannot be changed during the election campaign. The media are also obliged to provide equitable access to paid political presentation to all political subjects. However, in reality some media are giving discounts up to 90% to only one political party, while the other parties have to pay the regular price. It is clear that this provision brings into question the price-list and undermines the right to equitable access to paid political presentation. However, this was not accepted by the Ministry of Justice. The Draft Law has not yet been submitted to the Parliament, so we have to wait and see whether the proposed provisions will become part of the Election Code. Citizen s Association MOST Address: Vanco Mickov 18b, 1000 Skoplje, Macedonia Tel: Fax: Website: 5 Opwfncfs!3124
5 Tfscjb;!Gjhiu!bhbjotu!dpssvqujpo!jo!uif!FD t!3124! Tfscjb!Qsphsftt!Sfqpsu!! The Progress Report of the European Commission for Serbia pays close attention to the fight against corruption, noting positive developments but at the same time pointing out deficiencies that need to be corrected in the field. The Report attaches great importance to thorough control of electoral campaign financial reports, checking accuracy of declarations of public officials assets, resolving conflicts of interest and implementation of integrity plans. Positive assessments relate to adoption of strategic documents in the fight against corruption, such as the National Strategy for the Fight against Corruption and the Action Plan for its implementation, including the statement that implementation of GRECO (Group of States against Corruption) recommendations has continued. Investigations into cases of corruption have intensified. The Anti-Corruption Agency s operations continued, mostly in relation to the control of the financing of political parties. The Agency improved its methodology for investigating targeted declarations of public officials assets. The methodological changes introduced a mandatory step requiring verification and comparison of the data contained in asset and income declarations with the data held by: the Ministry of the Interior, the Tax Administration, the Business Registers Agency, and the Republic Geodetic Authority. The results of the Agency's activities are reflected in the increased number of filed misdemeanor and criminal charges against officials who had not submitted the report of property and revenues within the deadline prescribed by law, or who had given false information about the property, with an intention of concealing facts about the property. Requests for misdemeanor proceedings were submitted on the grounds of inappropriate use of funds, untimely submission of annual financial reports and nonsubmission of electoral campaign financial reports. On the other hand, in addition to the strong political message of "zero tolerance" to corruption and positive developments in the fight against corruption, which are expressed in the Report, the EC noted deficiencies that need to be improved in some fields, especially those related to improvement of the implementation of the legal framework and the efficiency of anti-corruption institutions. It is emphasized that proactive approach of the police and prosecution needs to be improved and result into final convictions, particularly in the area of misuse of public funds, including high-profile corruption cases. The judiciary needs to gradually build up a solid track record of convictions in this regard, particularly in cases of misuse of public funds. The EC also noted "the possibility of political interference" in appointment and removal of judges and prosecutors from office and indicates a lack of implementation of the accountability system. The Anti-Corruption Agency needs to make full use of its capacity, in particular with the introduction of more stringent checks on the funding of electoral campaigns. Detection and resolution of cases of conflict of interest remains at an early stage since although more files than ever were processed, very few charges were filed during the reporting period. The law enforcement bodies need to gain expertise, in particular in financial investigations, and to become more proactive. There is no efficient and comprehensive legal framework to protect whistle-blowers. There were no comments in the EC report regarding the process of drafting the Law on Protection of Whistleblowers. Public administration reform remains hampered by the lack of clear steer and coordination structures. Recruitment, particularly for managerial and middle-management positions, is an issue of serious concern, as a substantial proportion has been conducted through non-transparent procedures and direct influence of political parties. Recruitment and promotion need to be further reformed and developed to achieve a transparent, merit-based civil service system. The EC specifically pointed to areas where supervision needs to be strengthened - public enterprises, privatization, and public expenditure. The EC expressed a positive opinion in the field of public procurement brought by implementation of the new Law and further alignment of legislation with the EU acquis, but pointed out to a lack of capacities in this area, especially in the Public Procurement Office. Parliament and the Government need to develop a more proactive approach to the consideration and followup of recommendations of Independent Regulatory Bodies. Serbia has not yet enacted changes to the electoral framework as recommended by OSCE/ODIHR. Half of the public authorities obliged to draft Integrity Plans did not fulfill their obligations without any statutory sanctions being provided. The EC pointed out the main problems in the media sector and implementation of the media strategy. Transparency in media ownership and financing of the sector still needs to be comprehensively analyzed, particularly as regards direct state financing. Center for Development of Serbia Address: Desanke Maksimovic 2, Beograd, Serbia Tel: ( ) razvojsrbije@razvojsrbije.org Website: Opwfncfs!3124
6 Misdemeanor courts pronounced nearly 200 convictions against parties, independent deputies and independent members of local authorities for violating the Political Activity and Electoral Campaign Financing Act in 2011, as reported by the State Attorney's Office on its website. The Organization GONG regards it is a positive situation that proceedings against participants of elections are being instituted, but considers also that it must not happen that proceedings are instituted only against independent councilors or smaller parties who have not intentionally violated the Act, but perhaps out of ignorance, while the "big fish" get away and go unpunished for serious violations. Although the SDP was sanctioned in April for a relatively mild offense of delay in publishing the annual financial report by quarterly loss of the right of regular funding from the budget, it is however, as GONG noticed, an administrative rather than judicial sanction. Due to offenses related to annual financial statements in 2011 the State Attorney's Office has received 966 cases from the National Audit Office (NAO), while on the occasion of notifications of the State Election Commission (SEC) 117 cases were established. Municipal State Attorney's Offices have initiated 885 proceedings before misdemeanor courts, based on notifications from the SAO, 197 of which ended in convictions. The State Attorney s Offices have informed the National Audit Office that in 37 cases no proceedings were instituted, while in other cases preliminary investigations are in progress. Dspbujb;! #Cjh!Gjti#!nvtu!opu!hp!voqvojtife! More transparency - less corruption On the occasion of notifications from the SEC, the State Attorney s Offices have initiated 103 proceedings before misdemeanor courts, and the courts have achieved two convictions. The State Attorney s Offices have informed the State Election Commission that in 8 cases no proceedings were instituted, while in other cases preliminary investigations are in progress. Instituting proceedings, in the opinion of GONG, may indicate the beginning of stronger law enforcement and therefore more transparency and less room for corruption. GONG considers, however, that the real test for law enforcement will be oversight of financing of election campaign for the local elections, which, in their view, have been rife with examples of lack of transparency in financing of election campaigns and sanctioning of parties and candidates who have systematically violated the Act and who have showed no credible reports. GONG concludes that further work is necessary on strengthening capacities of the SEC, which performs oversight, but also on training of political parties and independent candidates regarding the new Act. GONG considers that there is still room for improving the Act by simplifying procedures of financial reporting in order to have more effective oversight. Source: Hina ( 7 Opwfncfs!3124
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